India is not able to settle the bill in US dollars due to concern about secondary sanctions and Russia is unwilling to settle the payment in rupees

Russian arm sales to India have reportedly slowed down as the two countries struggle to find a payment mechanism that does not violate US Sanctions, news agency Bloomberg reported citing officials with knowledge of the matter.

Payments amounting to $2 billion have been stuck for a year after sanctions were imposed on Russia following its invasion of Ukraine and and Russia has stopped supplying credit for a pipeline of about $10 billion worth of spare parts as well as two S-400 missile defence system batteries that is yet to be delvered, Bloomberg report said citing the officials.

India is not able to settle the bill in US dollars due to concern about secondary sanctions and Russia is unwilling to settle the payment in rupees due to exchange rate volatility. India also doesn't not want to complete the deal in Russian roubles due to concerns about purchasing enough roubles from the open market.

The government has proposed Russia to accept rupees for the sale of weapons system to invest in Indian capital and debt markets to avoid stockpiling of rupees, the Bloomberg report added saying that Vladimir Putin's government does not find India's proposal appealing.

Meanwhile, the government is also working on a solution to make payment in dhirams or euros, the currencies used to pay for Indian imports of Russian crude oil. But using these currencies for making payment of Russian weapons could invite scrutiny from US over sanctions.

India currently operates more than 250 Su-30MKI Russian made fighter jets, seven Kilo class submarines and more than 1,200 Russian made T-90 tanks which will be operational for next 10 years and need spare parts from Russia.

Indian Air Force which operates a large fleet of Russian fighter and helicopters is among the worst hit from the disruptions in supplies of spare parts from Moscow, the Bloomberg report said.