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WEDNESDAY DECEMBER 17, 2014

Business Report RUSSIA&INDIA THE ECONOMIC TIMES IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA

DIPLOMACY: Focus on correcting imbalances, signed pacts encompass diverse areas, including oil and gas, nuclear energy, trade and investment, diamonds

New energy, new horizons: India-Russia ties set to move into a higher trajectory The Modi-Putin summit meeting has firmed up an ambitious vision for intensifying bilateral cooperation across the spectrum.

VLADIMIR PUTIN Russia’s President

“A consistent strengthening of cooperation with our friends in India is definitely a foreign policy priority for Russia. Our bilateral relations have already reached the level of a privileged strategic partnership and continue to develop dynamically.”

BORIS VOLKHONSKY Specially for RIBR

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NARENDRA MODI India’s Prime Minister

“President Putin is the leader of a great nation with which we have a friendship of unmatched mutual confidence, trust and good will. We have a strategic partnership that is incomparable in content.”

GETTY IMAGES/FOTOBANK

he annual Russia-India summit, which took place in New Delhi on December 11, was truly a milestone. Many of the announcements at the summit were made for the first time, pushing the Russia-India strategic partnership to a qualitatively new level. In all likelihood, it will only be possible to accurately evaluate the results of the meeting between Russian President Vladimir Putin and India’s Prime Minister Narendra Modi only after some time, when the plans that have been announced start being implemented. But it is already possible to say that the summit’s results really do open up fundamentally new perspectives for cooperation. And it is not just about the 20 documents that were signed. This is perhaps for the first time in recent years that the documents encompassed such a wide range of issues that they should eliminate some of the imbalances that have characterised bilateral cooperation in the recent past. It is no secret that bilateral relations between Russia and India, as in the past between the Soviet Union and India, have always been characterised by the highest degree of understanding. However, the main problem in relationships always was, and unfortunately remain to this day, is the underperforming economic component. The current bilateral trade of around $11 billion per annum clearly is far below potential. Compared to it, India and China, despite serious political problems, are managing bilateral trade of $70 billion, and the Russian-Chinese trade has almost reached $100 billion. Furthermore, the main feature of economic ties has always been military and technical cooperation. The summit confirmed that Russia and India will further develop their fruitful cooperation in this area, but it is necessary to consider several factors. Firstly, India has for a long time followed a policy of diversification in sourcing its armaments. In recent years, Russia has relinquished its leading position as the main supplier of arms to the US. Secondly, the new Modi government has announced the ‘Make

20 pacts Russia and India signed in diverse areas, including in the peaceful uses of nuclear energy.

10mn tonnes a year Russia’s Rosneft will supply to India’s Essar Group over 10-years. Supplies could begin as early as in 2015.

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new nuclear reactors will be constructed in India with Russia’s help by 2035.

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advanced twin engine Kamov helicopters a year will be assembled in India.

A report on what binds diverse strategic ties between Moscow and Delhi and what stands in the way of a stronger partnership.

in India’ programme with its prime focus on indigenous manufacturing, which will create fundamentally new conditions, including in the militarytechnical sphere. This will change the nature of the relationships from the purchaser-consumer to partners in joint manufacturing. Finally, despite the importance of military-technical cooperation, it should not overshadow other areas where there is great potential, but the results are still below expectations. Probably, the main document which was accepted at the summit was the Joint Statement entitled “DruzhbaDosti: A Vision for Strengthening the Indian-Russian Partnership” over the next decade. This document shows that both sides intend to correct the imbalance in bilateral cooperation. The statement comprises 35 points, of which only one is directly related to the military-technical cooperation. Significantly, the main section of the statement is dedicated to energy technology. Last year, the first unit of the Kudankulam Nuclear Power Plant was successfully launched and reached its peak power generation in the summer of this year. At the summit, agreements were signed on the construction of the

third and fourth units. Furthermore, Russia and India agreed to the construction of another 12 nuclear power plants, and this is not a limit, as President Putin observed in an interview with the Indian media before his visit. Russia is prepared to build up to 25 nuclear power plants in India. An agreement was also signed by Russian oil giant Rosneft, which will deliver 10 million tonnes annually to India for 10 years. This, of course, will

economic relations is the geographical distance between the two countries and the lack of a common border. And here it is important to note that the joint statement clearly shows the readiness of both sides to make joint efforts to ensure that the long-cherished project of an international “North-South” transport corridor finally starts working fully. If this project is implemented, it will give a new impetus to the integration processes in the vast area covering

The joint statement shows the shared goal of scaling up economic and energy cooperation to the level of military-technical relations.

Druzhba-Dosti statement is deeply symbolic as it indicates the desire of India and Russia to intensify relations in all spheres.

not satisfy all the needs of India, but will allow hedge against situations like the one that occurred in 2012. Then, under pressure from the US, India was forced to reduce the oil imports from Iran, which led to higher prices not only for fuel, but also for all consumer products. One of the main barriers to the development of Russia-India trade and

Northern Eurasia, the Caucasus, the Middle East, and Central and South Asia. The same goals should also drive India to get full membership of the Shanghai Cooperation Organisation -Russia’s readiness to contribute to this was also confirmed in the statement. To list all the innovative aspects contained in the documents adopted

THE BIG PICTURE

How to lift bilateral ties, up and up PETR TOPYCHKANOV Foreign Policy Analyst

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at the summit is hardly possible - they really cover a wide range of topics, from innovative technology to cut diamonds. But I would like to note the profound symbolism of the summit and the documents that were signed, which is evident even in the wording. Symbolically, the two previous meetings between President Putin and Prime Minister Modi were in some way connected with the BRICS - the first meeting took place on the margins of the grouping of emerging powers in Brazil in July. This was followed by another meeting in November on the sidelines of the G20 summit in Brisbane, which was also linked to a meeting of the BRICS’ leaders. Thus, the Russia-India cooperation goes beyond the scope of bilateral relations, and is becoming one of the cornerstones on which the new world order is being established, which challenges any attempt to preserve a unipolar world order. The name of the joint vision document is also deeply symbolic: DruzhbaDosti. Even the English version of the statement uses these words from Russian and Hindi, which speaks about the two countries’ intention to build their relations in all spheres (from cut diamonds to financial payments) directly, not turning to third parties or paying attention to criticism which detractors are ready to make (or have made already).

resident Vladimir Putin’s 24hour visit to India was a success. This was clear from the impressive package of signed documents and an eventful schedule. But that is where the eulogies must end. To develop Russian-Indian cooperation further, the results of the visit need to be analysed in the clear light of day. Half of all the documents signed were MoUs. Of the 16 signed documents mentioned on the Kremlin website, only one is a contract and two are agreements. The contract is on the training of Indian soldiers in institutions under the Russian Ministry of Defence, while the agreements are between the Skolkovo Foundation and Electronics and Software Export Promotion Council of India, and ITAR-TASS and PTI. These practical arrangements were supplemented

by other agreements, not mentioned on the Kremlin website, in the fields of nuclear energy and diamonds. There was also a much-hyped deal between Rosneft and Essar to supply 10 million metric tons of oil a year for a period of up to a decade. The deal still represents just an agreement on the basic terms and conditions of a future contract. The package of signed documents due to different reasons bypassed military-technical cooperation, with the exception of the aforementioned contract and declarative statements. And the agenda included virtually no humanitarian issues, and no documents were signed or meetings held on cultural, scientific, educational, youth or religious cooperation On the whole, the visit was important and necessary for bilateral ties, but can’t be called sensational. There

are good and bad sides to this. On the one hand, given the already high level of cooperation between Russia and India, it is increasingly difficult to achieve breakthroughs in bilateral relations, of which there have been many in the past. Kudankulam NPP, the Su-30MKI multi-purpose fighter, the BrahMos missile, the aircraft carrier Vikramaditya, and the Arihant-class nuclear submarine are just some of the many success stories of the RussianIndian cooperation. Against this backdrop, the agreement to commence work on the second and third units of KNPP is remarkable. After India’s adoption in 2010 of the Civil Liability for Nuclear Damage Act, Russia was India’s first partner to reach an agreement to continue cooperation in the field of nuclear energy. Analysing President Putin’s visit, one cannot but agree with Alexander Kadakin, Russia’s ambassador to India, who said in February this year: “At present, relations between Russia and India are at the peak of their development.” There is a sense that, having reached the peak of bilateral relations, Russia and India may be about to embark on a descent. There are ample reasons for this. I will cite just two of them. First, the Russia-Indian relations are becoming ever more inertial and less innovative. This latest visit showed that Moscow and Delhi’s attention is focused in several areas: military-technical coopera-

tion, the peaceful atom, hydrocarbons, space, and now diamonds. Too little attention is being paid to other areas, where breakthroughs are more likely to occur. Second, the multichannel communication between Moscow and Delhi is showing signs of faltering. Why else would an Indian journalist have posed a question about potential military-technical collaboration between Russia and Pakistan directly to President Putin? This means that Russia has yet to assuage India’s fears over the statements made by Sergei Chemezov, CEO of Rostec Corporation, in summer about the alleged lifting of the embargo on arms supplies to Pakistan, followed by Russian Defence Minister General Sergei Shoigu’s visit to Islamabad in November. No arguments were put forward either publicly or privately that might have reassured the Indian authorities and the public. The growing trend for inertia in Russia-India relations and the breakdown in communication between the government and society in Russia and India could be overcome if these and other issues are given close attention. That is what Moscow and Delhi must do if they want to bring Russian-Indian cooperation up, not down.

Read the author’s blog in.rbth.com/south_ asian_outlook

Russia and India Business Report  
Russia and India Business Report  

December, 2014

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