I haven't noticed the hands at 1st glance but yes it is rust, and there is good chance the whole movement is more or less a block of rust. I'm afraid you are reacting 2 years too late, when something like that happens, it's a race against corrosion, you have to act immediatly.
That said, some people can do miracles with a watch like this but professionals will not lose their time if it is too rusty.
It will perhaps be a better move to change the movement or to sell the watch for parts.
Anyway you have to open the watch to have an idea of the damages, perhaps you will have a nice surprise ....
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