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India Announces it Will Pay for Russian S-400s in Rubles and Rupees, Not Dollars

Last month, Washington issued a threat of sanctions against India if it were to move forward in purchasing the Russian s400 missile defense system.

US President Donald Trump warned India that if it went ahead with the $5 billion deal to purchase S-400 Triumf air defense systems from Moscow, that certain repercussions would soon follow and “India will find out. Won’t they?”

Trump has the authority under the Countering America’s Adversaries Through Sanctions Act (CAATSA) to issue a presidential waiver on sanctions in order to mitigate the situation with its ally India, but it would be a politically sensitive move; firstly because it might set a precedent which other countries might also lobby for, and secondly, the last thing this President wants is to appear weak or exposed at home in relation to any issue which concerning Russia. In that sense, this latest move by India provides an ‘easy out’ for Washington, who can side-step this problem for the time being.

Zero Hedge reports…

After facing down US threats of possible economic sanctions should it follow through with its plans to purchase nearly $5.4 billion in Russian S-400 anti-ballistic missile systems, India has successfully called the US’s bluff.  After India stood its ground and insisted on moving ahead with the arms deal, the White House said it would consider giving India a waiver on the deal, according to RT.

For anybody who has followed our coverage of the growing mutiny against the dominant dollar-based trade paradigm – a rebellion that’s being led by Russia and China – the US’s reasons for granting the concession should be self-evident. After the US threatened to block the deal via SWIFT, the supposedly “politically independent” system for international payments over which the US Treasury exercises de facto veto power via economic sanctions, Russia and India found a viable workaround: Carry out the transaction in rubles and rupees.

As a quick refresher, here’s a rundown of our recent posts about Russia’s efforts to bypass SWIFT as US economic sanctions, first imposed after the annexation of Crimea in 2014, threaten to cut off the country’s largest banks from the global financial system. As the US prepares to reimpose sanctions on Iran, even purported US allies like the European Union are beginning to contemplate alternatives to circumvent the Treasury’s authority.

New Delhi and Moscow officially agreed on the deal during a summit earlier this month, where they also pledged to work toward closer military and economic ties, much to the chagrin of the US. In addition to the S-400s, India is also reportedly planning to buy Russian T-14 Armata tanks and guided-missile frigates, and could even pursue the development of next-generation submarines and fighter jets in cooperation with Moscow.

By deciding to tolerate the deal, the US is, in effect, acknowledging that Russian President Vladimir Putin had a point when he said earlier this month that the US’s willingness to impose economic sanctions is a “colossal strategic mistake.” 

That’s because sanctions, as Putin argued, will only further incentivize countries to pursue an alternative to the dollar-based trade system. And as China and Russia increasingly conduct more of their bilateral trade in yuan and rubles, while also pursuing alternatives to paying for oil in dollars, the US may finally be starting to realize that this small mutiny represents a real threat to the dollar’s global hegemony.

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