What is happening?

On October 27th, Bloomberg reported that a Mumbai-based pharmaceutical company, Shreya Life Sciences, had shipped large batches of AI capable servers to Russia. Significantly, these servers contain advanced NVIDIA and AMD chips that the US are attempting to prevent from falling into the hands of its geopolitical adversaries.

Between April and August 2024, Shreya Life Sciences oversaw the delivery of 1,111 Dell PowerEdge XE9680 servers to Russian buyers Main Chain Ltd. and I.S. LLC. For context, the technical floor needed to start training a large AI model, when paired with cutting edge GPUs, is around eight, while access to such GPUs is also highly restricted, this signals the magnitude of this breach in sanctions. While Indian authorities have been clear in emphasising that these activities don't violate any domestic laws, the $300m (£231,598,531) shipments were in direct contravention of Western sanctions designed to restrict Russia's access to dual-use technologies with potential military applications.

In response to the revelations, on October 31st the US Departments of Treasury, State and Commerce collectively unveiled a new raft of sanctions against nearly 400 companies from ‘third countries’, such as India, China, Switzerland, and Turkey. Shreya Life Sciences is among the newly sanctioned entities.

This case exemplifies a significant geopolitical trend: Bloomberg identifies India as Russia's second-largest supplier of restricted technologies, trailing only China. This trade flow is facilitated by India’s significant purchases of Russian oil, creating a pool of large pool of Rupees that Russia has deployed strategically to secure sensitive Western technologies from Indian intermediaries.

What is in it for you?

Readers should stay attuned to how these sanctions evasion networks signal broader shifts in geopolitical power and technological competition, with India's position in this landscape being particularly noteworthy. These developments were evident at the recent 2024 BRICS summit in Kazan, Russia, where President Vladimir Putin flaunted his resilient global standing in the face of Western pressure, by hosting the heads of state of nearly half the world’s population.

Among the world leaders in attendance in Kazan was Indian Prime Minister Modi, who scored a diplomatic victory with a military disengagement deal with China before the summit. While the BRICS is often coined as the rising geopolitical counterbalance to Western hegemony and institutions, readers should bear in mind despite their recent détente, India and China have deep mutual distrust and their contentious relationship is representative of hidden divisions beneath the surface of pomp and ceremony in Kazan.

Readers should also follow how recent leaps in AI capabilities have transformed the industry into a new domain for geopolitical competition. While the United States and China maintain something of a duopoly in commercial AI development, the technology's transformative applications both economically and in terms of military and security, have made it a strategic priority for other powers. Russia's ability to access cutting edge training technologies, despite Western restrictions, suggests that compartmentalising technology markets is of limited effectiveness in an interconnected global economy.

What happens next?

In the face of the imminent result of the US Presidential election, one underappreciated area of foreign policy that a new administration will have to reckon with is the continuing utility and sustainability of sanctions regimes. As evidenced by the US's recent expansion of the sanction’s regime against Russia, casting a yet wider net and literally excluding more entities from Western markets and financial mechanisms, may become of questionable strategic value.

Despite the extensive Western sanction regime imposed after its invasion of Ukraine in 2022, Russia's economy is projected to grow by 3.5-4% in 2024, suggesting a level of fundamental economic resilience. Besides Russia, the efficacy of sanctions against Cuba, Venezuela or Afghanistan have also come under scrutiny. The current, bigger-is-better sanctions paradigm might risk both exacerbating humanitarian challenges and creating diplomatic tension for the West with important strategic partners. This poses a structural challenge that a Harris or Trump Administration might look to reformulate, to make it more conducive to long-term Western, or American geostrategic interests.

In terms of technology access, Russia has likely secured sufficient technical capabilities to develop its own AI systems for key areas such as military applications, security systems, and governance operations, though in consumer-facing AI development, it may continue to lag behind the dominant US firms. But the deeper lesson of technological resilience, enabled by opaque, diffuse supply chains, suggests a future where control over critical technologies becomes increasingly unrealisable.

Lastly, India's strategic position will continue to evolve as it maintains its balanced approach, leveraging relationships with both Western and global powers. This diplomatic flexibility could translate into increased economic leverage on the global stage and build real domestic resilience against any forms of external pressure. Moreover, India's role as a potential bridge between competing power blocs could become increasingly significant as a new American President seeks to navigate global tensions.

This current saga with Shreya Life Sciences ultimately signals a broader shift in global economic and technological power dynamics. The West’s effort to weaponise the interdependence of the global economy has shown signs of diminishing effectiveness and perhaps even backfiring. The case shows that the BRICS countries have seized the initiative opened by sanctions to build, in more than just rhetoric, an economic system free from the dominance of the US Dollar and western hegemony more broadly.

The Polis Team in Helsinki