Russia and India: An Enduring Relationship
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PhD in Law, MGIMO University
India is Russia's longstanding and trusted partner. The relationship has been tested by time, developing with both dynamism and consistency. Of course, there are problems that require balanced assessment and integrated solutions. This article, which focuses on the key issues facing this bilateral dialog, and its future development prospects, is particularly timely as Russia's President Vladimir Putin is currently in India on a state visit.
India is Russia's longstanding and trusted partner. The relationship has been tested by time, developing with both dynamism and consistency. Of course, there are problems that require balanced assessment and integrated solutions. This article, which focuses on the key issues facing this bilateral dialog, and its future development prospects, is particularly timely as Russia's President Vladimir Putin is currently in India on a state visit.
Russia and India have a very special relationship. Relations between the two states are rooted in the stable foundations of their unique interaction, with particularly rapid progress visible in the economy, investment, science and culture. Their future seem to immense, asthe sides replace their traditional seller-buyer model with more advanced forms of close industrial cooperation integrating the two countries’ scientific, resource and human potential.
Bilateral trade turnover has been steadily positive even throughout the crisis period – 6.9 billion dollars in 2008, 7.4 billion dollars in 2009, 8.5 billion dollars in 2010, and 8.9 billion dollars in 2011. This year it is expected to grow by 30 percent, testifying to the predominance of trade in goods that are independent of fluctuations in the global market, and boasting both stable price and demand. For example, in 2011, machines and equipment accounted for about 40 percent of Russian exports to India.
However, in 2010 turnover failed to reach the 10 billion dollars set by Russian and Indian leaders in 2009, and the two countries now hope to hit this target this year.
Military-Technical Cooperation
Cruise missile "Brahmos"
Military-technical cooperation is a clear priority, the engine of the broader Russian-Indian relationship. India is the only country that has a long-term collaboration program with Russia over arms. The strategic document covers the period from 2011 to 2020, securing
Russia’s presence in the Indian market and launching joint R&D projects, although Indians prefer to diversify their military imports.
Several projects are of landmark significance, i.e. the production of fifth-generation aircraft, development of Brahmos cruise missiles, sale of INS Vikramaditya aircraft carrier, and the lease of the Nerpa nuclear submarine. The main trend involves license transfer for the manufacturing of Russian weapons in India, as with the SU-20MKI multipurpose fighter and T-90 main battle tank. Joint projects cover both the modernization of the two forces and sales to the thirds parties. The Brahmos has already become the focus of international attention, with orders worth 13 billion dollars already coming in from Brazil, South Africa, Chili and elsewhere.
Military-technical cooperationthe engine of the broader Russian-Indian relationship. India is the only country that has a long-term collaboration program with Russia.
In 2012, India’s defense budget grew 17 percent to exceed 42 billion dollars, with Delhi planning to purchase some 40 billion dollars worth of weapons abroad. Experts have suggested that 36 percent of these contracts will go to Moscow. Although Russia is still the country’s “arms supplier number one,” its share is facing a steady downturn, since over the period 2004-2007 it reached 54 percent. The Center for Analysis of World Arms Trade believes that the United States will dominate the Indian arms market as soon as 2013, chiefly due to the coming year’s major aircraft supply deals, a further indication that the Indian market is really heating up.
Among other things, the rapid development of the Indian armed forces, their modernization and re-tooling are all fuelled by complications along the country’s national borders. Militarization bordering on an arms race is gaining momentum in South Asia, which remains one of the world's most volatile places. In 2011, India was the world's largest weapons importer, just ahead of Pakistan. The border dispute with China, another country that takes a very particular approach to developing its forces, also remains unresolved.
Trade and Economy
Platform "Orlan", "Sakhalin-1"
Russia and India are launching a series of encouraging initiatives to develop the minerals, metallurgy, processing, jewelry, and chemical industries, as well as in the aircraft and machine building, space and communications sectors. Indian firms are involved in the development of the Sakhalin-1 oil and gas field; the OGNC has invested about 2.7 billion dollars and has a 20-percent share. The same company works in the Tomsk Region, and is planning a 10-fold rise in oil production, up to 5 million tons a year. India faces a serious hydrocarbon shortage, which drives its corporations to participate in the development of large deposits in Russia. The transportation of oil and LNG seems possible only by sea, which is one reason why the Zvezda-DSME shipyard for large tankers will be built in the Far East.
The Indian SAN group of companies is one of the 20 entities represented in the Russian governmental Foreign Investment Advisory Council. Its total investments exceed one billion dollars, covering hydrocarbons and the mining of gold, platinum and other rare-earth metals. Indian firms are working with RusHydro to build a network of hydropower stations in the north of India.
Rapid development of the Indian armed forces, their modernization and re-tooling are all fuelled by complications along the country’s national borders. Militarization bordering on an arms race is gaining momentum in South Asia, which remains one of the world's most volatile places.
Pharmaceuticals are one highly promising area, especially since medications account for as much as one-third of all Indian imports into Russia . According to UN data, India is one of the world’s 15 leading medicine exporters, with a 1.44 percent share. In 2010, Russia adopted a federal targeted program for the development of the pharmaceuticals and medical industry. Given their significant experience in producing inexpensive, high-quality drugs, Indian companies could take a role in the modernization and re-equipment of the Russian pharmaceutical sector.
Russian-Indian business ties should be boosted by Russia's accession to the WTO. Lower import tariffs (first of all, on industrial goods) will boost bilateral trade considerably. For example, the 10-percent cut in duties on new cars will surely help Indian automakers increase their share of the Russian market.
New opportunities will also arise from the Eurasian integration projects. The Customs Union and the Common Economic Space of Russia, Belarus and Kazakhstan, with their free movement of capitals, goods and services, unified technical rules and dynamic 165-million-population market, is sure to attract external trade partners – including India.
Kudankulam Nuclear Power Plant is a nuclear
power station under construction in Koodankulam
in the Tirunelveli district of the southern Indian
state of Tamil Nadu. Сonstructed by the
Nuclear Power corporation of India Limited
(NPCIL) and Atomstroyexport.
In terms of India, Russia’s investment focal points are nuclear power, machine building, the energy sector, infrastructure, and communications, and the two countries are now working on a large-scale project involving the expansion of Kudamkulam nuclear power plant to eight power units. Boasting up-to-date, proven and, importantly, safe technologies, Russia could become an important player in the development of India's nuclear power sector. Delhi plans to spend about 150 billion dollars on the program which it hopes will raise electricity production from the current 4.7 GW to 60 GW in 2035. The United States and France, major players on the nuclear market, are also eager to win ground in India, a desire that even prompted Washington to soften the sanctions imposed on Delhi after its nuclear tests, and sign the “nuclear deal” in 2008.
By late 2013, India should boast 1.159 billion SIM-cards, overtaking China, which will have a meager 1.106 billion. Mobile communications are booming in India: in 2009 there were only 508 million SIM-cards. Naturally, Russia’s major players are also keen to seize this opportunity, with AFK Sistema eager to invest 5.5 billion dollars in setting up an Indian national mobile phone operator under its MTS brand. Currently, the company is facing bureaucratic hurdles that are likely to be negotiated soon.
One more major project is underway in the metals sector – Russia’s Severstal and India’s NMDS are investing about two billion dollars in a new
Indian steel plant, which is to have an annual output of two million tons. The manufacturing of Russian Ural trucks is already in full swing.
True and Reliable Friends
Dmitry Medvedev and Manmohan Singh
G20 summit in Seoul in 2010
Russian-Indian international cooperation is virtually trouble-free. The two countries interact productively within various global platforms, including the UN, G20 and BRICS, and their key approaches either coincide or are very close. Russia supports the Indian approach to settling the Kashmir conflict, even though it deprives Russia of flexibility as any attempt to expand Russian-Pakistani contacts will meet a rigid response from Delhi.
Cultural cooperation also carries great significance: the two peoples are bound by long-standing traditions of friendship and mutual respect, as well as by a genuine interest in each other's culture, religion and arts.
Outlook
It, perhaps, goes without saying that the level of bilateral trade and economic interaction that we see today are far behind the two countries’ potential. With traditional sources of growth exhausted, bilateral trade should gain the impetus to rise to a qualitatively new level.
First, the Indian arms market has become highly competitive. India is gradually cutting the imports of ready-made models, demanding modern technologies and participation in their development. To this end, Russia should focus on joint projects, the fifth-generation aircraft seeming to offer the most reassuring template.
The further development of the Indian forces hinges on the parallel deployment of high-tech systems, meaning that increasingly Delhi purchases only the best models. In order to meet India's demands, these suppliers-cum-competitors have to cooperate. For example, the SU-30MKI is equipped with Russian, Israeli and French electronics. Moscow should display greater flexibility in international cooperation, while of course ensuring it in no way compromises national security.
Above all, Russia must do its best and not to lag behind its competitors and Indian demands. Great hopes are pinned on the large-scale 20-trillion-ruble state rearmament program that runs to 2020, which envisages impressive allocations for the modernization of the national defense industry and is aimed at strengthening Russia’s leading position in the global arms market.
The level of bilateral trade and economic interaction that we see today are far behind the two countries’ potential. With traditional sources of growth exhausted, bilateral trade should gain the impetus to rise to a qualitatively new level.
Second, bilateral trade and economic cooperation also require updating. The delivery of Russian export goods to India is complicated and unacceptably expensive. Any pipeline from Russia to India remains a utopia. Hence, the focus should be on the “new economy,” i.e. high-tech and science-intensive products. We should eliminate excessive administrative barriers to trade flows, improve the lending environment and broader financial infrastructure, switch over to settlements denominated in national currency, improve the investment climate for Indian businesses, launch technological alliances and integrated production chains in areas rich in human and resource potentials, such as the nuclear sector, infrastructure construction, communications and joint space exploration programs.
Third, Russian-Indian international collaboration should continue to develop, along with a strengthening of BRICS, which has become a major global actor. India is a partner known for its balanced and thought-out stance. Its foreign policy is very flexible and virtually free of ideology. Delhi carries significant international weight and prestige, making it influential among Asian countries, especially those wary of China's rise. Therefore, India seems an ideal partner for settling hot conflicts and burning international issues, as well as in the joint endeavor to improve the global financial and economic architecture. Notably, Delhi's role has become even more important in view of Russia's G20 presidency in 2013.
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