Reviving the old trade pact

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The traditional camaraderie between India and Russia is getting a new lease of life, this time as equal partners in trade, says INDRANIL BANERJIE

More biz Russian PM Vladimir Putin (right) seeks increased business with Indian companies
Photo: PIB

ONCE IT was our version of ‘the special relationship’, but after the collapse of the rupee rouble trade in 2005, it stagnated somewhat. India and Russia still met, but it was with the scent of nostalgia strong in the air. Now, after several years of political drift, Moscow and New Delhi are seeking to reinvent their relationship. The new emphasis, however, is on business and on steadying Asian geopolitics, which seems in rapid change mode.

In recent months, there’s been a flurry of activity, with high-level exchanges of ministers and business delegations. In September, India’s Commerce and Industry Minister Anand Sharma was in Moscow. He was followed by Defence Minister AK Antony. Just after, External Affairs Minister SM Krishna was off to Moscow for parleys. And in December, Prime Minister Manmohan Singh will head there as well.

Trends In Indo-Russian Two-Way Trade
Year US$ Billions
2008 7
2009 8.4
2010 10
2012 15
2015 20

The idea is to drive home the message that India’s rapidly improving relations with the United States will not be at the cost of the country’s “strategic relations with Moscow”. This was something that Sharma was explicit about on his return. “I expressed the need to enhance cooperation in core and critical sectors like atomic energy, space sciences and defence, apart from expanding partnership in the oil and gas sector,” he said.

Russian Prime Minister Vladimir Putin is also believed to have expressed a personal interest in shoring up ties with India. Earlier this month, he appointed his Deputy Prime Minister, Sergey Sobyanin, as the co-chair of the India Russia Inter-Governmental Commission (IRIGC). Sobyanin is a key aide to Putin and his appointment suggests a new urgency on the part of Moscow to pull closer to New Delhi.

Moscow is also beginning to be reassured about India’s role in Asian geopolitics and does not view New Delhi as a source of instability. “The Russians are no longer perturbed about our ties with the US,” says New Delhi-based strategic analyst Subhas Kapila, adding: “Our defence links with Russia have endured and our economic ties are looking up after a long period of stagnation following the collapse of the rupee-rouble trade.”

Tough buy Talks are still on to acquire Admiral Gorshkov, an aircraft carrier
Photos: Reuters

Kapila feels that today, despite huge business deals with China — mainly on the energy front — Russia does not see China as a strategic partner in Asia. India remains the traditional friend in this part of the world while the Russian economy seeks closer integration with Western Europe.

RUSSIAN DEPUTY Prime Minister Alexander Zhukov recently pointed out that trade between Russia and India has been soaring as well. “Trade is forecast to reach $8.4 billion in 2009 and this is expected to rise to $10 billion in 2010,” Zhukov said at the third Russian-Indian Trade and Investment Forum last month in Moscow. Trade between India and Russia grew at 30 percent annually since 2005, despite a 10 percent decline worldwide. Of course, these trade figures pale before Russia-China trade, which has surged from $21 billion in 2004 to $56 billion in 2008.

Also present on the occasion were a clutch of Indian industrialists excited about doing business with Russia. The focus was on manufacturing, sharing technology and looking at opportunities in the IT, aerospace and nuclear industries.

Currently, though, India has a presence in just one oil project in Russia: ONGC Videsh has a 20 percent stake in the Sakhalin-1 Project on the northeast shelf of Sakhalin island. Its total recoverable reserves are estimated to be 2.3 billion barrels of oil and 17.1 trillion cubic feet of natural gas. Oil began to flow to India from Sakhalin in 2007 and it is ultimately expected to provide India 2.4 million tonnes of oil per year.

Other big-ticket items are in the pipeline. In mid-October this year, the Indian government indicated that Russians would get to build two more nuclear reactors at Kudankulam. Russia’s largest gas company, Gazprom, will partner in development and exploration of off-shore gas deposits in the Bay of Bengal. Russian collaboration in Korba, Obra and Sipat thermal plants, and the Lower Subanshiri hydel project, constitute another part of the growing ties.

Despite the smaller trade volume, Russia sees India more than China as a regional ally

Oil thirst ONGC Videsh has 20 percent stake in the Sakhalin-1 project

Russian tycoons are also beginning to look at the huge Indian market for opportunities. One of the most successful is Vladimir Yevtushenko, whose multi-billion dollar conglomerate, the Sistema Group, is a major communications player in India. The group has tied up with the Shyam Group to set up Sistema Shyam Teleservices that has been adding five lakh new customers a month and looks set to become an all-India provider of 3G voice and data services next year.

“Today, we are the biggest foreign investor in India,” says Yevtushenko. Sistema Shyam has also offered the Indian government to build a national crisis management centre, set up a “safe city” programme for Delhi and plans to diversify into space communication services.

Experts say India’s sustained growth and the rapid shrinkage in Western markets has forced Russia to take a more serious look at India again. Information is beginning to flow and money is expected to follow. The Moscow-Delhi relationship is getting back on the rails but this time, it is economics rather than politics that is the engine of growth.

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