Government ‘examining’ Indian tech company in EU, U.S. sanctions list

Government ‘examining’ Indian tech company in EU, U.S. sanctions list

Si2 Microsystems named by EU for Russia dealings, is also a partner with MEITy for Chennai project

The government is examining details of an Indian tech company involved in semiconductor research, that was sanctioned by the European Union on Friday for its dealings with Russia. The company is a partner of the Ministry of Electronics and Information Technology (MeitY) for a very recent “Atmanirbhar Bharat” (Make in India) collaboration, officials confirmed to The Hindu

The company, Bengaluru-based high-tech firm Si2 Microsystems, has a complex history as it has been banned by the U.S. from “dual-use” technology transfers as well, and its directors had been placed on Lookout Circular (LOC) notices by Indian authorities over debt defaults. A few years ago, a director had approached courts for a waiver of the LOC so as to travel to Russia, his lawyers confirmed, indicating that the company had urgent and close ties with Russian counterparts.  However, the company and its directors remained unavailable for comment on the latest sanctions, that were announced to mark two years of the Russian war in Ukraine.

The Ministry of External Affairs declined to comment on the announcement, but officials told The Hindu all three Ministries concerned – the MEA, Ministry of Commerce and Industry (CIM) and MeitY – were aware of the announcement, as well as the links to the government.

“This is a known company that is an industry partner for a project to research fabrication of chips, that was announced in collaboration with Indian Institute of Technology-Madras,” an official said, confirming the government tie-up that was announced by the Press Information Bureau (PIB) last year. 

The official said that the government is examining the EU’s sanctions announcement and whether it should contact the EU to protest the decision. 

“India has done nothing illegal. It is their [the EU’s] interpretation that ties with Russia are a problem. As far as the government is concerned the sanctioned company is an industry partner and MeitY’s research partner,” the official said, reiterating India’s traditional position of close ties with Russia, and that it doesn’t recognise non-UN, unilateral sanctions.

When asked if any “due diligence” had been done with regard to the company, given its legal complications, the official said that the choice of partner had been made by IIT-Madras, where MeitY had set up the Centre for Programmable Photonic Integrated Circuit and Systems (CPPICS) in 2020. 

“CPPICS is forging critical partnerships, including a collaboration with M/s Si2 Microsystems in Bangalore, to deliver state-of-the-art System-in-Package solutions for silicon photonic processor cores,” the PIB statement dated October 20, 2023 read, outlining initiatives inaugurated by MeitY Secretary S. Krishnan and IIT-Madras Director V. Kamakoti for the research facility focusing on so-called “photonic chips”, an emerging technology that promises increased data transfer and computing speeds.

When asked for a comment on how the EU and U.S. sanctions might affect the plans for the project, the IIT-Madras Director’s office said they were reviewing the situation and would revert shortly.

Incorporated in 1993, Si2 Microsystems, which had an authorised share capital of ₹60 crore, says on its official website that it is a “preferred solutions provider for the Indian armed forces and public sector companies”, as well as foreign defence companies, listing companies like Indian Space Research Organisation (ISRO), GE and IBM amongst its clients.

In November 2023, Si2 Microsystems had been added to the U.S.’s restricted “Entities List” for supplying “U.S.-origin integrated circuits” to the Russian military despite the transfers being banned after the Russian invasion of Ukraine, without the required licence. On Friday, the EU’s latest list named Si2 Microsystems India as “Entity number 624”, that was part of the additions to its sanctions that began after the Russian annexation of Crimea in 2014. Apart from the Indian company, several entities in China, as well as Turkey, Serbia, Kazakhstan and Thailand, were also on the EU list of sanctions.

All companies on the banned list are prohibited from any transfers or engagement within the EU jurisdiction as they have been found to “ form part of Russia’s military and industrial complex or which have commercial or other links with or which otherwise support Russia’s defence and security sector.” In retaliation to the EU’s statement on February 23 of the 13th package of sanctions against Russia which included Si2 Microsystems, Russia’s Foreign Ministry said on Monday it had expanded its list of European entities and persons denied entry to Russia, calling the unilateral sanctions “illegitimate” and undermining the UN’s position.

“In view of the key enabling role of electronic components for use by Russia’s military and industrial complex in supporting the war of aggression against Ukraine, Decision (CFSP) 2024/746 includes on that list certain entities in third countries other than Russia which support indirectly Russia’s military and industrial complex in its war of aggression against Ukraine by trading in such components,” the EU’s notification, issued over the weekend, read.

The Hindu reached out to Si2 Microsystems directly but did not receive a response to the EU sanctions. Calls to their lawyers, who represented them in a bankruptcy matter where the company’s headquarter building was attached by the Debt Recovery Tribunal in Mumbai in September 2022, went unanswered. Lawyers involved in the case to suspend the LOCs against Director Sanjay Soni in 2021 and 2022, on the plea that he needed to travel to Russia and other countries to sign international contracts, also declined to comment .

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