US government officials are sensitising Indian companies and exporters to deter them from supplying Russia with items and technology that could end up being used in Russian missiles and other defence equipment, which would attract Western sanctions, a government official said on condition of anonymity.

This follows reports of sanctions on Bengaluru-based Si2 Microsystems in November last year for its alleged role in supplying dual-use technology to Russia.

Electronic components, machine tools, drones, and software for drones are some of the dual-use items that can be used for both civil and military applications and are included in the sanctions list imposed by the West in the backdrop of the Ukraine war.

“They (US government officials) are leading consultation and sensitisation meetings with the industry to make Indian companies more aware of the importance of not exporting specific types of products, such as chemicals, aeronautic parts, and components that can be used in missile systems and other defence equipment,” the official said.

Moreover, a US Treasury official had also warned India’s banks that financial institutions that do business with Russia’s military industrial base risk losing access to the US financial system, Reuters had reported in July this year. “We know that the Russian military relies on importing sensitive goods, like machine tools and microelectronics, and it looks to foreign financial institutions to facilitate these transactions,” Deputy Treasury Secretary Wally Adeyemo said in the letter to the Indian Banks’ Association, as per the Reuters report

Also, US Treasury Secretary Janet Yellen in June this year had expressed concerns over Chinese exports of dual-use goods. By placing over 300 companies on an export blacklist, the US said that China is the top supplier of machine tools, microelectronics, and nitrocellulose, which are critical for manufacturing munitions and rocket propellants, as well as other dual-use items that Russia is using to bolster its defence capabilities.

The Ministry of Commerce and Industry in January 2024 had said that the government is working to liberalise export norms for certain products with dual-use applications. However, the official clarified that the items identified by the US are not Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) items, which require licensing for trade. Dual-use goods are categorised under the SCOMET list in India. “There are many items that the US is scrutinising. They are not SCOMET items, but the US believes they are entering the (Russian) defence manufacturing system. The two or three firms identified by the US do not export SCOMET items,” the official clarified. India’s exports of machines, auto parts, steel and aluminium products, internal combustion (IC) engines, pumps, and other items to Russia are on the rise.

Official data from the ministry showed that India’s total exports to Russia in 2023 surged by 40 per cent to exceed $4 billion, largely driven by engineering goods, which nearly doubled to $1.32 billion in 2023 from $680 million in 2022. Significant gains were also seen in the drugs and pharmaceutical category, as well as in organic and inorganic chemicals.

This increase in exports comes as Russia has ramped up its defence investments. In July, the World Bank reported that economic activity in Russia was influenced by a significant increase in military-related activity in 2023. Russia’s military spending grew by 24 per cent in 2023 to an estimated $109 billion, as per Stockholm International Peace Research Institute (SIPRI) states.

After the initial recessionary impact of sanctions in 2022, the (Russian) economy returned to growth in 2023, supported by fiscal stimulus, including military spending and credit expansion, and by successfully mitigating the impact of the sanctions. Restrictions on trade and financing from the G7 countries and the EU resulted in trade diversion to China, India, Türkiye, Central Asia,and the South Caucasus, as well as investment in new infrastructure and logistics,” the World Bank noted. A query emailed to the Ministry of External Affairs on Monday evening remained unanswered till press time.