September 21, 2024: After Russia invaded Ukraine in 2022, Russia was subject to international economic sanctions. This had some unfortunate side effects for other nations, like India, which has long been a major customer for Russian weapons. That trading relationship is another casualty of the Ukraine War.

India dramatically increased its purchases of Russian oil after the Ukraine war started because Western sanctions made it much more difficult for Russia to sell to its usual customers. That made Russia willing to significantly reduce the price of oil to customers willing to accept covertly delivered oil (smuggling). India was happy to do so and reduced its purchases of higher-priced Persian Gulf oil. This had drawbacks in paying Russia but India and Russia got around that by using China’s currency (yuan). India had few products which Russia wanted, but sometimes barter deals could be worked out. The Russians were happy to accept Chinese yuan from India because they needed it to buy Chinese products, notably goods capable of being used for peaceful or warlike goods which were not subject to sanctions.

These improvisations are now much less useful because Chinese banks have stopped supplying Russian banks with yuan on credit, though yuan paid by India for smuggled Russian oil are still getting through. The Chinese fear that economic sanctions imposed on Russia will also be applied to China because of its continued trade with Russia. The Chinese trade has indirectly helped the Russian war effort and nations that support Ukraine, especially the United States, wanted to cut off all external trade with Russia that it could. China was the only remaining major trading partner Russia had and the loss of Chinese yuan means Russia now must barter for goods it needs. Without dollars or yuan, Russia cannot pay for imports or receive cash payments for the oil exports. Smuggling is still an option, but that means much less Russian oil is exported and far fewer foreign goods are getting in.

Since the 1950s until the end of the Cold War in 1991, Russia was a major supplier of weapons for India. This trade began to fade after 2014 when India decided to develop its own weapons industries and import more weapons from the United States and European suppliers. India’s unhappiness with increasingly shoddy Russian weapons and spare parts was involved too. 2022 economic sanctions imposed on Russia accelerated this process. China withdrawing access to the yuan was the last straw for an increasingly desperate Russia. With the Indian business gone and access to yuan on credit gone, Russian arms exports and imports have been reduced to not much at all.

This is fine with India, which has found their western supplied weapons superior and the western suppliers easier to do business with, especially when it came to co-production deals where western forms set up factories inside India.