What Happened 

India and Russia have finalized a payments mechanism for the $5.2 billion purchase of the Russian-made, state-of-the-art S-400 air defense missile system, according to Vladimir Drozhzhov, an official with Russia's Federal Service of Military-Technical Cooperation. Though specifics regarding the payment mechanism are scant, Moscow and New Delhi have previously floated the possibility of handling their transactions in local currencies, a measure aimed at sidestepping the secondary sanctions Washington has threatened to levy against Russian arms customers — including India — under its Countering America's Adversaries Through Sanctions Act (CAATSA).

Why It Matters 

India's deepening defense partnership with the United States, which views it as a regional ally against China, makes New Delhi subject to greater pressure from Washington over its traditionally cozy ties with Russia. India, the world's largest arms importer, counts Russia as its biggest arms supplier and has enjoyed a strong relationship with the Kremlin dating back to the Cold War. But U.S. pressure has forced India to weigh the costs of incurring CAATSA sanctions against the benefits of enhancing its air defense with the Russian system, which it intends to use as part of a shield against China across their disputed Himalayan border. The United States has offered to help India solve its dilemma by selling it the Terminal High-Altitude Area Defense (THAAD) and Patriot air defense missile systems.

Background 

The U.S.-India relationship has grown more fractious over disagreements on trade. Already, India has caved in to U.S. demands over another set of sanctions — those targeting companies purchasing Iranian oil — by halting its purchases of Iranian crude. But India will try to maintain defense procurements from Russia even as it tries to buy more U.S. weapons systems as part of its long-running campaign of diversifying its sources of armaments — and its goal of reducing its arms imports by entering joint partnerships with global arms suppliers to make arms domestically.