How Russia Secured Nvidia AI Chips Through an Indian Pharma Company

The recent revelation by Bloomberg that a Mumbai-based pharmaceutical company enabled the shipment of Nvidia chips to Russia is a direct violation of sanctions imposed by Western nations, restricting advanced technology consumption by Russia in the wake of its war with Ukraine. The company in the spotlight is Shreya Life Sciences

The Bloomberg report has served as a wake-up call regarding how Russia is leveraging intermediaries to circumvent sanctions and evade compliance.

According to news reports quoting data from Bloomberg, Shreya exported around 1,111 units of Dell’s PowerEdge XE9680, an advanced range of servers optimized for high-performance computing tasks. These servers are specifically designed for AI, machine learning, and HPC applications. Reports also suggest that these servers were imported from Malaysia between March and August 2024 and then shipped to Russia. The deal size is estimated to be around $300 million, with shipments sent to Russian entities Main Chain Ltd. and IS LLC.

While this event raises many red flags, at the same time it is difficult to pin culpability to Shreya, given that India is not a party to the Western sanctions. Shreya has diversified out of the pharmaceutical business and will legitimize this as a commercial shipment between a seller and buyer, as it did not ship directly to the Russian government.

As a result, Western nations can only raise concerns and urge the Indian government to be more cautious in curtailing such proxy business transactions. It's interesting to note that a CNBC report states that Promsvyazbank, a state-owned bank in Moscow and the company's primary creditor, has repeatedly postponed Shreya's loan repayments.

There are many loose ends and numerous dots to be connected. It also exposes how intelligent intermediaries can bypass sanctions and create alternative dubious supply chains involving non-Western companies.

Why Russia Needs Nvidia Chips?

The driving force behind this need is the hunger for computing power. High-performance computing (HPC) capability is essential for the military for several reasons. The Russian military, like any other, requires advanced GPUs (graphics processing units) designed for large-scale data processing, machine learning, and neural network training. Russia needs such chips to power its:

• AI development integrated into military applications
• Security and surveillance
• Expansion of its supercomputing capabilities

Clearly, Western sanctions have put a significant stop to these Russian technological advancements, and Russia is keenly looking for non-Western counterparts to keep its tech engines well-oiled. It is indeed strategic to use non-tech intermediaries to avoid scrutiny and detection.

Will it Impact India’s Relations with Its Western Counterparts?

Certainly, this situation creates friction. This event comes at a time when India is seen as a key player in brokering peace between Russia and Ukraine, as well as an influencer in diffusing tensions between the two countries. This incident will lead to a trust deficit regarding India’s pro-Russia stance and how Ukraine looks at India.

India needs to delicately balance its economic ambitions with its global relations, moving beyond its neutral stance to avoid straining ties with Western nations, which are also significant trade partners. While Russia will likely rely on many such intermediaries from other countries, India must reevaluate its regulatory frameworks to prevent such exports in the future, especially given its own ambitions in AI and its position as a tech hub in its own right.