The US Treasury cautions Indian banks against business dealings with Russia

A US Treasury official cautioned Indian banks about repercussions for doing business with Russia’s military-industry base in a letter on Wednesday, July 24, according to a report by Reuters.

The letter was sent to the Indian Banks’ Association and to the industry associations.

The letter underscored that financial institutions that engage with Russia’s military sector risk losing access to the US financial system.

“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.

Even though the letter does not point to any specific issues with Indian banks, it is worth noting that India has maintained a stance of not distancing itself from Russia, despite mounting pressure to do so since the beginning of the Ukraine-Russia war in 2022.

Earlier this month, Prime Minister Narendra Modi met President Vladimir Putin in the Moscow Kremlin. The Indian delegate sought to boost exports to Russia.

This letter follows an executive order issued by US President Joe Biden in December. The order authorises sanctions against financial institutions that do business with the Russian military-industry base. Adeyemo mentioned further that the US Treasury has recently expanded its definition of entities part of Russia’s military-industrial operations.

Adeyemo wrote that the US is keen on strengthening its economic ties with India, while highlighting the 110% surge in trade between the two countries over the past ten years. He further noted that the two economies remain each other’s largest trading partners.

Regardless, the US, along with a global coalition of countries, is committed to ending Russia’s “unprovoked war” by cutting off the country’s “financial and material means to fight,” Adeyemo said, quite in view of the sanctions and export control levied on Russia since 2022.

The official gave the Indian banking group 30 days to respond, along with outlining the steps they could take with the Treasury to make Indian financial institutions and companies aware of the consequences of the US executive order.

"Any foreign financial institution that does business with Russia's military industrial base risks being sanctioned itself, and it could lose access to the US financial system, and likely other financial systems," Adeyemo said.