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Mainstream, VOL LIV No 45 New Delhi October 29, 2016

Goa Summit Strengthens Indo-Russian Special and Privileged Strategic Partnership

Sunday 30 October 2016, by Arun Mohanty

No Indo-Russian summit was held in such an anti-Russian media hysteria stemming from the Russia-Pak military exercise, yet no other summit in recent years has been so successful as the 17th Indo-Russian Summit taking place on October 15 at Goa. The Russia-Pak military exercise was held as per schedule in the wake of the terrorist attack on the Uri military base that took 19 lives. Delhi expected its special and privileged strategic partner, Moscow, to postpone, if not cancel, the first ever military exercise between our time-tested friend, Russia, and long-time adversary, Pakistan. There was great disappointment, even anguish, on the part of India when the exercise went ahead just on the eve of the Goa Summit that came under serious cloud. The exercise cast serious doubt over the success of the Summit. Nonetheless, the Goa Summit became one of the most successful summits in terms of its outcome in recent years. As many as 16 documents worth billions of dollars were signed and these would bolster our cooperation in defence, energy and economic spheres in the coming years. Russia would be virtually the first country to provide a strong boost to India’s flagship programme ‘Make in India’.

Prime Minister Narendra Modi, vociferous in acknowledging Russia’s crucial contribution to India’s industrial development, technological progress and defence requirements since the second half of the last century making India self-reliant in many areas, reiterated that Russia would remain India’s major defence and strategic partner and their time-tested partnership would “remain an anchor of global security and stability”. Lauding the Summit, Modi said the “highly productive outcomes of our meeting clearly establish the special and privileged nature of our strategic partnership”. 

President Putin reaffirmed Russia’s continued commitment to the special and privileged strategic partnership with India noting the commonality of positions of both countries on such issues as war on terrorism.

Prime Minister Modi, perhaps in an attempt to dispel the perceived pro-US tilt in India’s foreign policy in recent years, invoked a Russian proverb which emphasised that one old friend is better than two new ones. The informality of a one-to-one conversation of the leaders over lunch also showcased the intimacy of relations.

Pillars of Strategic Partnership

Productive bilateral cooperation in areas of defence, energy, nuclear, science and technology are four pillars of Indo-Russian strategic partnership, one of the oldest and enduring strategic partnerships in the contemporary world. Both countries formalised their strategic partnership in October 2000 during President Putin’s first ever official visit to India by signing the historic Delhi Declaration, and this partnership has grown into a “special and privileged strategic partnership” over the years, enriching our relations in many fields.

Defence

The three defence-related agreements covered acquisition of S-400 “Triumph” air defence system, three frigates, joint manufacture of Kamov KA 226T helicopters; these are perhaps the most notable among the 16 agreements concluded in course of the Goa Summit. Cash-starved Russia has been offering to build the air defence system for India by the Almaz-Antei company, Russia’s most famous construction bureau in the area, for a long time. However, India did not show much interest in it in the past. In the wake of the tremendous success demonstrated by the Russian air defence system in Syria, India displayed keenness to purchase this system, a state-of-the-art technology that Russia is reluctant to share with anybody. Given the strategic nature of our relationship Russia has finally agreed to sell it to India for apparently US $ 5.5 billion.

Observers consider these long-awaited defence deals as significant as these have been clinched soon after India signed the Logistics Exchange Memorandum of Agreement (LEMOA) with the US. The LEMOA provides conditional US access to military bases in India, giving a perception that it was drifting away from Russia.

It is expected that by 2020, Russia will start delivery of S-400s to India. It is considered one of the most advanced long range missile systems in the world and can tackle all incoming airborne targets at ranges of up to 400 km.

The Hindustan Aeronautics Limited (HAL) and Russia’s Rostec State Corporation will set up a joint venture to manufacture 200 Kamov-226 helicopters, at the location of HAL’s choice. Of the four improved Krivak or Talwar class stealth frigates, two will be built in Russia and the other two in India with Russian assistance.

These defence deals are estimated to cost India a total of around $ 10 billion. While the cost of S-400s will be about $ 5 billion, the deals relating to the Kamov-226 helicopters and the stealth frigates will be worth $ 1 billion and $ 3 billion respectively.

“The agreements on manufacturing of Kamov- 226 T helicopters, constructions of frigates, and acquisition and building of other defence platforms are in synergy with India’s technology and security priority. They also help us achieve the objectives of the Make in India programme,” Modi stressed.

Two other decisions could have a far-reaching impact on India-Russia defence cooperation: the holding of a ministerial-level Military Industrial Conference later in 2016 to identify new projects and resolve pending issues, and establishment of a Science and Technology Commission to facilitate development and sharing of cutting-edge technologies. The Indo-Russian Military Industrial Conference will address military equipment-related issues including spares, repair and maintainance of Russian supplied equipment and co-production. The bilateral Science and Technology Commission would focus on matters relating to R &D collaboration in such high-tech areas as IT, communication, cyber security, medical engineering, outer space cooperation, remote sensing etc.

These agreements consolidate Russia’s position as India’s principal military hardware supplier, a position that Russia would retain, as emphasised by Prime Minister Modi himself. In the past decade, Russia met 70 per cent of India’s defence requirements; the US was next with 14 per cent. About 70 per cent of our weapons and equipment are of Russian or Soviet origin. Diversification of defence acquisitions will necessarily be an extended process. The Russian partnership has a role even in this process: it can be leveraged to increase benefit from other partnerships. Whether it is technology or other support, the Russian benchmark is what other partnerships will be pressed to match. The more we raise this benchmark, the more we benefit.

Technology Transfer 

India and Russia are developing their defence cooperation under a framework agreement, extending up to 2020, worth of US $ 20 billion. Our defence cooperation over the years has been transformed from a buyer-seller relationship to that of joint research, joint design and joint development. An increasing hall-mark of this relationship is technology transfer and licensed production, which make our partnership in the area unique and distinct from our relations with other countries in this sensitive sphere.

Energy Cooperation

Energy has been the traditional sector of productive Indo-Russian cooperation for decades. The former Soviet Union played a major role in hydro power, thermal power generation in India and built the foundation of India’s oil and gas industry. After a pause in our bilateral engagement in this sector in the aftermath of Soviet disintegration, cooperation in the hydrocarbon and nuclear sectors has received a strong impetus. Russia is poised to play a major role in strengthening our energy security in the coming years. If our cooperation in the hydrocarbon sector in the past was concentrated in building India’s oil and gas industry, now this engagement has spread into areas of Indian acquisition and investment in the Russian energy sector. Indian state-owned ONGC’s investment of US $ 2.7 billion in Russia’s Sakhalin oil and gas project is India’s largest foreign investment so far and one of the largest FDI in Russia’s energy sector. India has purchased the Imperial Energy Company in West Siberia for US $ 1.6 billion. Indian acquisitions in East Siberia in the last few months have been quite significant.

India and China have been eyeing for the Vancour energy field in Krasnoyarsk Krai belonging to Russia’s oil major, Rosneft, for the last several years. Finally, Russia sold 15 per cent of Vankourneft for $ 1.27 billion to ONGC which was followed by the sale of another 23.9 per cent to a consortium of Indian companies consisting of Oil India, Indian Oil and Bharat Petroleum for approximately US $ 2.02 billion. Thus in just few months India has purchased 49 per cent of Vankourneft for US $ 4.22 billion through a series of transactions, defeating China in the bid. Vankourneft has been developing as the largest energy field in Russia in the last quarter of the century. As of January 2016, its oil reserves are estimated at around 265 million tonnes of oil and condensate and 88 billion cubic metres of gas. India has purchased 29.9 per cent stakes in another East Siberian company, TASS-Yuriakh, Neftegazodobycha, belonging to Rosneft for $ 1.12 billion.

Both countries have started cooperation in the gas sector as well. Gazprom CEO Alexey Miller and Managing Director of Engineers India Sanjay Gupta signed a Memorandum of Understanding, which reflects the interests of both sides to jointly study the routes of delivering pipeline gas from Russia to India. Both countries will very soon set up a working group for the implementation of the MoU. Both sides have discussed not only gas supply through pipeline but also liquefied natural gas from the second stage of the project ‘Arctic LNG-2’. Russia has invited Indian companies to participate not only in the capital of ‘Arctic LNG-2’, but also in supplies of LNG to India.

Moreover, Rosneft and the expanded consor-tium, now consisting of Indian stateowned companies Oil India, Indian Oil Corporation, Bharat Petroresources, ONGC and Hindustan Petroleum Corporation, have announced their intention to expand cooperation in Russia. They plan to start negotiations on the possible acquisition of shares in the Suzun, Tagul, Lodochnoe fields, belonging to Rosneft.

The real game-changer in the bilateral energy cooperation would be Rosneft’s acquisition of Essar Oil that controls the second largest refinery in India at Vadinar. This transaction creates ‘unique opportunities for supplies to Asia’, emphasised Rosneft CEO Igor Sechin.

Rosneft, Dutch oil trader Trifigura (one of the largest sellers of its oil) and the UCP Fund of Ilya Scherbovich, who was a member of the Rosneft’s Board of Directors, signed an agreement on purchase of 98 per cent in Essar Oil from Essar Energy holdings and its affiliated companies owned by the Ruia brothers. The transaction was announced in the presence of President Vladimir Putin and Prime Minister Narendra Modi during the Goa Summit. Essar Oil owns India’s second largest private oil refinery with a capacity of 20 million tonnes per annum, controls nine per cent of the local market, a world class oil storage, a post and a developed infrastructure for import and export of oil and oil products as well as a network of 2.7 thousand filling stations in India. The Essar Oil acquisition has taken place at a cost of $ 12.9 billion, which is going to be a game-changer in Indo-Russian energy engagement. With acquisition of a stake in Essar Oil by Rosneft, considered to be an ‘unprecedented event’, the Russian oil giant enters one of the most promising and fastest growing markets in the world. Rosneft under the deal would supply 10 million tonnes of heavy oil annually for processing in the Vadinar refinery over a period of ten years.

Nuclear Energy

Expressing satisfaction over the collaboration in the hydrocarbon sector, long-term LNG sourcing interest, work on the hydrocarbon energy pipeline, cooperation in the renewable energy sector, both sides emphasised their robust cooperation in nuclear energy. Delhi and Moscow have reaffirmed their intention to further expand cooperation under the Strategic Vision to Strengthen Cooperation in the Peaceful Uses of Atomic Energy, signed in 2014. In this context, some positive developments have taken place with the Kudankulam unit-1’s attainment of full power capacity, the integration with the electricity grid of the Kudankulam unit-2, commencement of the site work for units 3 and 4 of the Kudankulam plant, and the progress in negotiations on the general framework agreement and credit protocol for the Kudankulam units 5 and 6 with a view to conclude these documents before the end of 2016.

It has to be noted that Russia is the only country which has already constructed nuclear reactors in India after the passing of the liability law by the Indian Parliament. The two other contenders for the Indian nuclear market—France and the US—have been allotted sites, but have started no work at all in the nuke plant construction. India is working towards early allocation of the second site for construction of the Russian-designed nuclear reactors. Delhi and Moscow have appreciated the progress made in the execution of the programme of action between Russia’s Rosatom and India’s Department of Atomic Energy with active engagement of the Indian nuclear manufacturing industry for local manufacturing in India of equipments and components for the upcoming and future Russian-designed nuclear power projects in the context of the serial construction in India of Russian-designed reactors.

A new direction in the bilateral energy cooperation is the commitment to work together towards development of energy efficiency and renewable energy sources. A decision has been taken to expand cooperation in the field of solar energy.

Both countries during the Summit have decided to take steps in order to boost bilateral trade and investment, so far a weak link in the otherwise vibrant strategic partnership. Steps have been contemplated to liberalise the visa regime for businessmen in order to strengthen bilateral trade. A call has been given to Indian and Russian companies to finalise new and ambitious investment proposals in different fields, including pharmaceuticals, chemicals, mining, machine building, aircraft construction, cooperation in the railway sector, infrastructure building and diamond trade.

Russia has also agreed to invest $ 500 million in the Indian infrastructure, along with an equal investment by the newly formed National Infrastructure Investment Fund (NIIF) to form a $ 1 billion “Russian-Indian Investment Fund”. An MoU has been signed to set up a bilateral investment fund by the NIIF of India with the Russian Direct Investment Fund (RDIF) to facilitate high-technology investment in both the countries.

Both sides welcomed initiatives to promote direct trade in diamonds between India and Russia and gave positive assessment of the work of the Special Notified Zone at the Bharat Diamond Bourse, noting active support of this project from Alrosa. Direct trade in diamonds has a huge potential to increase the volume of bilateral trade, as Russia possesses one-fourth of rough diamonds and India has the largest diamond cutting industry in the world; however, Russian diamonds came to India for processing through third countries in the past.

Russia is the first country in the world to extend cooperation with Delhi in order to implement India’s ambitious ‘Make in India’ programme. A decision has been taken to manufacture 200 KA 226T helicopters in India through a joint venture. This is a new big step to boost the ‘Make in India’ programme. Russia has proposed to manufacture civil aircraft under this programme, apart from the joint production of military hardware in India with Russian assistance.

Russia has embarked on a huge plan for accelerating economic development of its Far East and has welcomed India’s intention to focus on the opportunities there, particularly to participate enthusiastically in the Eastern Economic Forum in 2017, organise a round table between the Governors of the Far Eastern regions of Russia and the Chief Ministers of different States of India, explore trade and investment opportunities in agriculture, mining, shipping etc. Given the immense potential for inter-regional cooperation which will bolster bilateral relationship, it has been agreed to further strengthen and increase
the effectiveness of bilateral inter-regional cooperation.

Political Cooperation

The Joint Statement issued at the end of the Indo-Russian Summit reflected convergence of views of both sides on all international and regional issues of mutual concern. The Joint Statement, expressing solidarity with Delhi on the terrorist assault on India, strongly condemned terrorism in all its forms and manifestations and called for comprehensive international collaboration in order to ensure its eradication. It stressed the need to deny safe haven to terrorists and the importance of countering the spread of the terrorist ideology as well as radicalisation leading to terrorism. The two sides have called upon the international community to make sincere efforts towards the earliest conclusion of the comprehensive convention on international terrorism.

Expressing concern over the deteriorating security situation in Afghanistan, India and Russia recognised the need for resolute action against the menace of terrorism and threats of illicit drug-production and drug-trafficking, including the elimination of terror sanctuaries, safe havens, and other forms of support to terrorists. Both sides reiterated their support for the Afghan Government’s efforts towards the realisation of an Afghan-led and Afghan-owned national reconciliation process based upon the principles of international law.

On the Syrian conflict, both sides were of the opinion that it should be peacefully resolved through comprehensive and inclusive intra- Syrian dialogue based on the Geneva Communiqué of June 2012 and relevant UNSC resolutions. India, extending support to Moscow, recognised Russian efforts towards achieving a political and negotiated settlement of the situation in Syria.

Russia has reiterated its support to India’s candidature for the expanded UN Security Council’s permanent membership and its application for the NSG as well.

India highly appreciated the role played by Russia in India’s accession to the Shanghai Cooperation Organisation (SCO); both sides reaffirmed their intention to work together closely in order to enhance the SCO’s efficiency and performance in different spheres.

Expressing satisfaction over the development of cooperation in the BRICs grouping, Delhi and Moscow underlined the importance of further strengthening the strategic partnership among the member-states on the basis of openness, solidarity, equality, mutual understanding, inclusiveness and mutually beneficial cooperation. They welcomed the progress in the functioning of the New Development Bank of BRICs and its decision to disburse the first set of loans for projects in the area of green and renewable energy.

Recognising the importance of cooperation between India and Russia for global security and stability, the Joint Statement reflected their mutual desire to work together to promote a multi-polar international system based on the central role of the United Nations and international law, common interests, equality, mutual respect and non-interference in the internal affairs of countries.

By all accounts, the 17th Indo-Russian Summit held at Goa was a landmark event in the history of their bilateral relations, dispelling the doubts that Indo-Russian special and privileged strategic partnership has lost its steam. The success of the Summit in the back-drop of adverse media coverage stemming from the Russia-Pak military exercise has rather demonstrated the time-tested nature and maturity of this enduring relationship.

Prof Arun Mohanty is a Professor, School of International Studies, Jawaharlal Nehru University, New Delhi. He is also the Director of the Delhi-based Eurasian Foundation.