New Delhi (CNN) India could soon be faced with the threat of US sanctions following a controversial $5 billion weapons deal with Russia, a move analysts say poses more of a headache for Washington than it does Delhi.

Indian Prime Minister Narendra Modi finalized the deal, which will see India take possession of a high-tech S-400 missile defense system, during a bilateral meeting with Russian President Vladimir Putin in the Indian capital New Delhi on Friday.

The deal could potentially open India up to US sanctions under legislation known as Countering America's Adversaries Through Sanctions Act (CAATSA).

The law, signed by President Donald Trump last August, is designed to punish Moscow for its "malign activities." Last month , the US imposed sanctions against China for its purchases of Russian military equipment, including the S-400, under CAATSA legislation.

But whereas China is an emerging rival power, India is seen as an important US strategic ally.

US defense chiefs have worked hard to increase cooperation with Delhi in a range of areas in recent years, amid shared concerns over Chinese military expansion in the Indo-Pacific region.

India's purchasing of the Russian weapons system effectively forces the Trump administration to choose between punishing Delhi -- and destroy the fledgling defense relationship -- or granting the country an exemption, weakening the effect of the sanctions and opening up the US to accusations of favoritism.

Following the completion of the deal Friday, the US embassy in Delhi told CNN that CAATSA legislation was not intended to "impose damage to the military capabilities of our allies or partners."

Asked whether the India-Russia deal would qualify for a potential exemption, the spokesperson said the embassy was unable to "prejudge any sanctions decisions."

"There are strict criteria for considering a waiver," said the spokesperson, adding that waivers would be considered on a "transaction-by-transaction basis."

Speaking to CNN, Peter Layton, from Australia's Griffith Asia Institute, said the problem for the US is that if it allows India to purchase the S-400 there is no reason why it should not also allow other countries, such as Turkey to do so too.

"The CAATSA will appear a rather subjective sanction program if it only applies to some nations and not all," said Layton.

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What is the S-400 Triumf?

India and Russia have been in talks over the purchase of the S-400 since 2015.

The high-tech system is considered the most effective surface-to-air system in its class, surpassing the capabilities of the aging US Patriot missile system, according to experts.

It can engage targets, including manned and unmanned aircraft, cruise missile and ballistic missiles at a range of up to 400 kilometers, while remaining beyond the reach of standard radar jamming equipment.

"The S-400 being so capable and at a relatively affordable price is hard for US arms manufacturers to compete against," said Layton, who described the missile system as offering superior value-for-money to comparable US options.

Unsurprisingly the S-400 is a big export priority for Russia. Friday's deal with India follows a similar deal with Turkey, which despite being a NATO ally, signed a provisional agreement to buy the Russian-made system in December.

The Turkey deal has caused consternation in Washington, where a bipartisan group of lawmakers have attempted to block the transfer of the US' F-35 Joint Strike Fighters to Turkey, citing security concerns.

US defense officials believe once operational, the S-400 could be used to gather technical data on US designed fighter planes and that critical information could be passed to Moscow either intentionally or unintentionally through a back door in the Russian designed system.

India's purchase of the S-400 may result in the US refusing to sell "advanced fighter aircraft types" to Delhi in the future, said Layton.

"It is important to note that other parts of the US-India relationship would not be impacted, simply the sale of advanced military aircraft," added Layton.

Russian President Vladimir Putin, Chinese President Xi Jinping and Indian Prime Minister Narendra Modi pictured on the sidelines of the 2017 BRICS Summit in Xiamen, southeastern China.

Potential get out

India is considered among the world's most lucrative markets for arms exporters. According to a 2017 report by the UK's Royal Institute of International Affairs , India was responsible for 10.3% of global arms imports between 2000 and 2016, with Russia supplying 72% of those imports.

The US though is catching up fast, becoming India's second largest arms supplier , ahead of Israel.

"If you look at the numbers and where India has been buying from, you see a trend where America stands heads and shoulders above everyone else, and there's more in the pipeline," said Harsh V. Pant, a professor in International Relations at King's College London, referencing India's increased defense cooperation with the US.

Last year, US defense company Lockheed Martin offered to move its production of F-16 fighter jets to India, if the Indian government granted it a contract to supply fighter jets to the country's air force.

It is those future deals, coupled with the need to maintain a strategic regional relationship with India, that will force Washington to overlook India's purchase of the S-400, argued Pant.

"There have been enough signals that India's case will be considered sympathetically. Of course, we don't really know given the Trump administration and Mr. Trump being Mr. Trump," said Pant.

Washington has previously appeared open to discussing a potential sanctions exemption for India.

"We are working to impose CAATSA Section 231 in a way that is appropriate and lawful and to exercise that waiver authority only where it makes sense," said Pompeo adding that the US and India would look to reach an "outcome that makes sense for each of our two countries."

Speaking to CNN, Ajai Shukla, a former colonel in the Indian Army and defense specialist, said the US would be unlikely to risk destabilizing its strategic alliance with India.

"That's why they (US Congress) passed the waiver sanction. India will almost certainly come under that waiver because the United States understands that stakes with India are far too high to jeopardize relations," Shukla said.

Ties between Russia and India date back to the Cold War, but evolving priorities and alliances have taken a toll.

"India sees it as a normal strategic hedging strategy but with Russia, there is a deep concern. That's what makes Putin's visit so important," said Shukla, adding that Russia likely sees the deal as a test of India's friendship during a period of heightened hostility from the US.

"Russia has signaled that it's not happy with India, so it's gone ahead to forge relations with China, Pakistan and Afghanistan."