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Mainstream, VOL LVI No 23 New Delhi May 26, 2018

Putin - Modi Summit at Sochi: New Informality in India-Russia Relations

Saturday 26 May 2018

by Ajay Patnaik

The following article has been written against the backdrop of the summit meeting between Russian President Vladimir Putin and Prime Minister Narendra Modi in Sochi on May 21, 2018.

Key developments in India-Russia relationship

India has had very close relations with the Soviet Union, which continues with its successor state Russia. Today the relationship is called “Privileged Strategic Partnership”. The Russian vector also helps India to contest some of the negative trends in the international order in the post-Cold War era. The friendship continued unabated even if both the countries were diversifying their relations towards the West, particularly with the United States in the 1990s.

There are qualitative changes in the nature of defence relations between the two states. From being a market of Soviet arms, today both are jointly producing military hardware and intend to sell it to third countries. The BrahMos Missile System and the licensed production in India of the SU-30 aircraft and T-90 tanks are examples of such new trajectory of cooperation. Russia agreed to supply latest weapons like S-400 air defence systems and construct frigates. Both sides also agreed to form a joint venture to manufacture Ka-226T helicopters in India.1

Of course, India still uses Russian origin tanks, aircraft, helicopters, aircraft carrier, ammunition and other systems. However, programmes such as the joint development or outright purchase of the Fifth Generation Fighter Aircraft and Multi-role Transport Aircraft, as also the up-gradation of the Su-30 MKI aircraft, are the new ones that would take the defence relations to a new level.2

Since 2003, the Indian and Russian naval forces have been alternatively involved in a military exercise called the Indra. The 2017 exercises in October-November involved all three branches of the military in Vladivostok, Russia. India and Russia also held a separate counterterrorism exercise under the Indra framework involving land forces of both countries with about 500 military personnel near Vladivostok in October 2016.3 The regular joint military exercise ‘Indra 2016’ was held in the Ussiriysk district in Vladivostok from September 22 till October 2, 2016.

India is part of some multilateral organisations in which Russia is a leading or founding member. SCO and BRICS are examples of such cooperation. In fact, Russia has been instru-mental in drawing New Delhi to those organisations. India has also shown interest in a Comprehensive Economic Partnership Agreement with the Eurasian Economic Union (EEU), led by Russia in the post-Soviet space. Being a major energy importer, India attaches great significance to Russia. There have been improve-ments in relations in this sector since the ONGC-Videsh Limited acquired 20 per cent stake in the Sakhalin-I oil and gas project in Russia in 2001. Major investments by Indian companies in the Russian energy sector, apart from the Sakhalin-I ($ 2.2 billion), include acquisition of the Imperial Energy (US $ 2.1 billion) of Russia. Given the priority both countries give to their relationship, India’s investment is picking up momentum as was demonstrated in the second and third quarters of 2016, with Indian companies investing close to US $ 5.5 billion in Russia’s Oil and Gas sector.4

During the 17th Annual Summit between the Russian President and Indian Prime Minister in 2016, both sides agreed on a joint study for a possible gas pipeline from Russia to India. Engineers India Limited and Gazprom were identified for this purpose. Other agreements included: Education and Training programmes between India’s ONGC Videsh Limited and Rosneft Oil of Russia; Programme of Cooperation (PoC) in the Field of Oil and Gas for the period 2017-18; and the Sale and Purchase Agreement between Rosneft and Essar of India for acquisition of 49 per cent stake in Essar Oil Limited. According to the Ministry of External Affairs of India, both countries are working towards “realisation of an ‘Energy Bridge’ between the two countries, which is based on robust civil nuclear cooperation, LNG sourcing, partnership in the Oil and Gas sector, and engagement in renewable energy sources”.5

Trade between Russia and India has been an area of concern, though both are strategic partners and long-standing friends. Given the level of trade, it was natural that leaders of both countries would talk about it and set some targets. Russian President Vladimir Putin highlighted this during his visit to India in December 2012, when he announced that the goal is to take the bilateral trade from $ 10 billion to $ 20 billion by 2015. In December 2014, the trade target of US$ 30 billion by 2025 was set when the leaders of both countries met. Yet, bilateral trade during 2015 amounted to US$ 7.83 billion, with Indian exports amounting to US$ 2.26 billion and imports from Russia amounting to US$ 5.57 billion. Bilateral trade even declined by 2016. Though the Strategic Partnership between Russia and India was upgraded to “Privileged Strategic Partnership” during Putin’s visit to New Delhi in 2010, trade incidentally has not kept pace with the qualitative changes in the political and strategic relations.6

However, both countries need to go beyond the trade issues to global and regional issues that would be of long-term concern. The current US Administration brings back memories of unilateral invasions and sanctions that were seen at the beginning of this century.

Against the backdrop of the US withdrawal from the Iran nuclear deal, the visit of the Indian Prime Minister to Russia on May 21, 2018 could not have been at a more critical time. Following President Trump’s declaration of withdrawal from the Iran nuclear deal on May 8, his Secretary of State Mike Pompeo threatened Iran with ‘strongest sanctions in history’. The unilateral withdrawal from the deal is symbolic of what the current US Administration thinks about the global order. Not just unilateralism, the agenda of regime change is being aggressively pursued. On every pretext and on the basis of unverified claims, Syria is being bombed. The leaders of North Korea and Iran have been conveyed that their survival may be at stake if they don’t carter to the US list of demands.

It appears that there is again a strong push to create a unipolar world order under American leadership. In this context, the Indian Prime Minister’s visit to Russia for informal talks makes sense. On many issues, formal talks would possibly create difficulties in relations with the United States. On some other issues, China might feel unhappy. In any case, India-Russia relations needed to move on to a higher level to really call it ‘privileged and strategic partnership’.

Global Order 

The beginning of this century saw emerging major regional players like Russia, China and India feeling uncomfortable with the unipolar world order and unilateralism that was being pursued by America and its allies in the 1990s. Following the US invasion of Afghanistan, other countries have been subjected to forced regime changes—Iraq and Libya for example. The same attempt is being made in Syria as well. The emerging powers have been against unilateral actions without the sanction of the United Nations. One of the major outcomes of the failure of the US-led global order was the coming together of emerging powers in the form of a global organisation called BRICS.

Since its first summit, BRICS has reiterated its commitment to build a multipolar world order. It has been highly critical of the unilateral moves by Western powers to remove leaders of sovereign states. BRICS opposes Western attempts to place new limits on sovereignty and is highly suspicious of Western claims that sovereignty can be trumped by so-called universal principles of the humanitarian and anti-proliferation variety.

In short, Russia and India along with other BRICS members are natural allies in their search for a new world order where the voices from the South would carry weight without fear of reprisals from the West or their actions in the international arena would be free from any fear of Western reaction.

The other issue that brought the BRICS countries together was their growing frustration at the lack of reforms in the Bretton Wood institutions and the UNSC, and at the attempt to impose a hegemonic unipolar global order. The BRICS countries have been taking steps to develop alternative institutions like the New Development Bank (NDB) and Contingency Reserve Arrangement, which will be giving loans without resorting to conditionalities, in contrast to what the IMF and World Bank do.

At the same time there are differences between emerging powers. For example, India is keen to become a permanent member of the UNSC and NSG, but is unable to find support from China. Beijing has blocked New Delhi’s bid even though a majority of the NSG members back India’s entry into the organisation, which controls nuclear commerce between member-states. India hopes Russia as a close friend of China should help India in this regard.

Regional Order

Russia and India are plagued by the dangers of terrorism and extremism, which threaten their social stability and territorial integrity. This is an area of cooperation, and in this sphere Russia and India have been cooperating within the framework of the Shanghai Cooperation Organi-sation. One of the main reasons for India’s interest in the SCO has been multilateral cooperation in the fight against terrorism. India joined the Shanghai Cooperation Organisation (SCO) as an observer. It applied for full member-ship in 2014 and became a full member at the Astana Summit of the SCO on June 8-9, 2017.

However, on the issue of terrorism as well, India-China differences are visible. From India’s perspective China has a double standard when it comes to Pakistan-based terrorists targeting India. New Delhi’s efforts to get some individuals like Masood Azhar, based in Pakistan, to be named as terrorists by the United Nations have faced resistance from China. Beijing has blocked every move by India in the UN Security Council. From India’s point of view, China has been ignoring Pakistan-backed terrorist activities in Kashmir. Though Russia supports India’s case on the issues of UNSC reform and Kashmir, it has so far not been able to bring one of its key partners, China, on board regarding India’s security concerns.

The China-Pakistan nexus has always come in the way of bilateral and multilateral engagement between New Delhi and Beijing. This could affect negatively India’s relations with Russia as well. Russia’s interest in the China-Pakistan Economic Corridor (CPEC) may not go down well with India. Instead, India would like Russia to do more on the International North-South Transportation Corridor (INSTC), which is progressing at a slow pace, while CPEC is moving on a faster track. India, like China, has also shown interest in a Comprehensive Economic Partnership Agreement with the EEU, but for years nothing has come about on this. If China manages to break a deal between its BRI and EEU, India has reasons to feel aggrieved with Russia.7

India also has serious misgivings about Russia’s efforts to rope in Pakistan to negotiate with the Taliban for keeping the ISIS out and move towards a peace settlement in Afghanistan. In the last two years, Russia has been hosting talks to resolve the Afghan crisis, including the Moscow-Islamabad-Beijing summit in December 2016 and a multi-nation conference involving the Central Asian states, Iran, India and Afghan representatives in April 2017. In the process, Pakistan has not only received diplomatic prominence but also military equipment from Russia.

Already the first joint military exercise by Russia and Pakistan called Druzhba 2016 from September 24 till October 7 and supply of four helicopters to Islamabad had raised hackles in Delhi. Though in the face of mounting concerns in India, Russia announced that no such exercise would be held in future, the whole episode did introduce some irritants in the relationship. (Pakistan is set to receive four Mi-35 attack helicopters from Russia for $ 153 million in 2017.) Russia’s interest in the CPEC and Gwadar port, both being built and operated by China, is fuelling speculation in India that the Russia-China geopolitical synergy may be at the cost of India.

India and China’s Silk Road Strategy

On May 8, 2015 Putin and Xi Jinping, in a joint statement in Moscow, agreed on the cooperation between the Eurasian Economic Union (EAEU) and the economic belt of the “Silk Road”. In this document, Beijing actually supported the activities of the EAEU.8

The One Belt, One Road (OBOR) initiative, also known as Belt and Road Initiative (BRI), is supposed to cover 60 countries over the world and China plans to invest $ 890 billion into more than 900 projects in these countries. Of this amount, $ 40 billion is to be invested in infrastructure for trade routes from western China through Central Asia and Russia to the Middle East and Europe.9 Russia also attaches great importance to the Belt and Road Initiative and it would like to further link it with Russia’s Eurasian Economic Union.10

India’s reluctance to join the OBOR is mainly because of the CPEC, which violates India’s sovereignty as the project covers the Pakistan-occupied Kashmir (PoK) region. The OBOR would massively strengthen China’s economic, political and security influence in India’s neighbourhood.

The disconnect between Russia and India on this issue is quite clear. Putin attended the BRI Forum on May 14, 2017 and Russia has shown interest in connectivity through the CPEC and wants closer cooperation between China’s BRI and the Russia-led Eurasian Economic Union. Since the CPEC riles India more than anything so far as China’s activities in the region are concerned, New Delhi expected a less enthu-siastic response from Russia to such Chinese moves.

India’s Silk Road Strategy

The India-Pakistan-China triangular dynamics also impact on India’s policy towards Eurasia. Many Indian specialists believe that Chinese efforts have been to tie India down to South Asia so that India is less able to purposefully engage with Central Asia or other regions outside the subcontinent. China’s clandestine help to build Pakistan’s nuclear and missile capability is cited as an example of this Chinese strategy. Two other major projects, the Kara-koram highway and Gwadar deep-sea port, are also seen as China’s attempt to create a win-win situation for itself and Pakistan. The recent Chinese statement on the Silk Road (BRI) includes these projects, which is why India is not keen on participating in China’s BRI/OBOR project.

India’s engagement with the Eurasian region has faced obstacles due to lack of land access routes, competing interests of China and the US hostility towards Iran. To overcome the accessibility problem, two routes are becoming very important for India. New Delhi has invested in two projects that have placed it well to take advantage of a larger Eurasian market. These two projects are the International North-South Transport Corridor (INSTC) and the Chabahar Port project. This will open up two access routes for India, which may constitute part of “India’s Silk Road Strategy”. India needs to focus on a “Act North Policy” to better articulate its Eurasian strategy.

The International North-South Transport Corridor (INSTC) is a multi-nation transport project that would radically reduce the cargo transportation time and cost between India on one side and Central Asia and Russia on the other, with Iran being the pivot. In 2000, Russia, Iran and India signed an agreement in St. Petersburg to develop this route. Today it has thirteen members and one observer.

The North-South Transport Corridor can link Mumbai to St. Petersburg, with reduction in cost and time.11 A dry run was conducted by India with the help of Russia, Iran and Azerbaijan in August 2014 to test the route’s readiness and cost-effectiveness. Following this an Indian delegation visited Iran in January 2015 to assess the progress made after the dry run. The delegation was reportedly happy to see the progress including the turnaround time for vessels, which is now 24/48 hours at Shahid Rajaee Terminal in Iran. It is reported that the INSTC would reduce the transit time by 40 per cent and cost by 30 per cent to the CIS and Russia as compared to the traditional route via St. Petersburg. This means movement of goods from India to Russia would take 16-21 days at competitive freight rates.12

There is another route to Eurasia that is being promoted by India through the Chabahar port in Iran to Afghanistan and then onward to Eurasia. India and Iran had agreed to develop this port in 2003. Chabahar Port in Iran is meant to give India access to Afghanistan and Central Asia bypassing Pakistan and also give Afghanistan access to warm waters.

In October 2014, India approved the frame-work of an inter-governmental Memorandum of Understanding (MoU) for setting up an US$ 85.21 million joint venture firm for equipping two fully constructed berths at Chabahar port Phase-I project for a period of ten years, which could be renewed by ‘mutual agreement’. The same year, a Joint Venture was created involving two Indian entities, Jawaharlal Nehru Port Trust and the Kandla Port Trust. An annual revenue expenditure of $ 22.95 million to support operational activities of the Indian Joint Venture was also approved.13

The port will be developed through a Special Purpose Vehicle (SPV), which is a joint venture of the Kandla Port Trust (KPT) and Jawaharlal Nehru Port Trust (JNPT). The SPV will invest US $ 85.21 million to convert the berths into a container terminal and a multi-purpose cargo terminal. The port will be also used to ship crude oil and urea, saving India transportation costs. It will also cut transport costs and freight time for India to Central Asia and the Gulf by about a third.14

 During the visit of the Indian Road Transport and Highways Minister to Iran in May 2015, both countries signed an MoU that enables Indian and Iranian commercial entities ‘to commence negotiations towards finalisation of a commercial contract under which Indian firms will lease two existing berths at the port and operationalise them as container and multi-purpose cargo terminals’.15

During Indian Prime Minister Modi’s visit to Tehran in May 2016, there were several agreements, which included the extension of a credit line by India for the development of infrastructure related to Chabahar, an agreement to establish a trade transport corridor, further Indian assistance in building the rail infras-tructure to improve Afghanistan’s connectivity via Iran. The problem of market-size in Eurasia is being addressed through the creation of a Eurasian Economic Union/Customs Union, which could open up a much bigger market for India in that region.16 India and Russia have been trying to plug the gaps to overcome low bilateral trade for a number of years with modest success. A common Eurasian market would address that problem by creating a rich and diverse market of larger size.

India initiated a study to work out a Comprehensive Economic Partnership Agree-ment (CEPA), an omnibus free trade agreement with the Customs Union. India and Russia have decided to jointly study the possibility of India joining the grouping. Before the visit of President Putin to Delhi to attend the 15th annual India-Russia summit on December 10-11, 2014, a Russian-Indian working group was established in November 2014. This was to help the process move forward within the Eurasian Economic Commission, which is the permanent regulatory agency of the Customs Union and the Eurasian Economic Community.17

India plans to link the INSTC with other projects in the region, such as the 2011 Ashgabat Agreement to develop a transit corridor initially connecting Uzbekistan, Iran, Turkmenistan and Oman.

For India’s energy security and connectivity with Eurasian countries, Iran is a pivotal country. Iran is the third largest exporter of oil to India in 2017-18. In April 2018, and India remains after China the largest oil market for Iran. Because of the terms offered by Teheran, New Delhi had planned to double its crude oil imports for oil refineries in India.18 Even during the earlier sanctions regime against Iran, oil imports from that country continued and payments were made through sale of goods from India and Iran was allowed to have rupee account against its exports to India.

Today, when the sanctions again loom large against Iran, India’s interests are going to be severely dented. It cannot just give up on oil imports, nor can it look away from transportation corridors through Iran. Russia has been one of the key powers instrumental in the signing of the nuclear deal with Iran. US actions against Iran would be a huge geopolitical negative for Russia in West Asia.

Conclusion

Though there are areas of concern, like on the issues of Sino-Pak nexus, China’s position on India’s entry into certain multilateral organi-sations, China’s Silk Road Project in disputed areas etc., New Delhi would lean heavily on Russia to address some of these issues. In fact, the recent visit of the Indian Prime Minister to Russia is like a reset after leaning too heavily on the US under the Trump Administration. The threat of ‘strongest sanctions in history’ might bring together countries like India, Russia and China to resist this latest American move. Their commitment to a multipolar world order is going to be severely tested and India’s Prime Minister’s visit to Moscow augurs well for emerging countries. The informality of the discussions makes one conclude that contentious issues concerning some of India’s neighbours on which New Delhi feels that Russia can play the role of a catalyst may have been part of the dialogue. More important, the immediate issue of potential sanctions against Iran and its impact on both Russia and India would have been also taken up.

Endnotes

1. “India-Russia Relations”, Ministry of External Affairs of India website, https://www.mea.gov.in/Portal/ForeignRelation/India_Russia_Relation_DEC2016.pdf~

2. Amit Cowshish, “India’s Defence Trade with Russia”,

Institute of Defence Studies and Analysis (IDSA), December 22, 2015, http://www.idsa.in/idsacomments/indias-defence-trade-with-russia_acowshish_221215

3. Franz-Stefan Gady, “India, Russia to Upgrade Joint Military Exercise”, The Diplomat, Eurasia Institute, May 9, 2017, http://thediplomat.com/2017/05/india-russia-to-upgrade-joint-military-exercise/

4. “Overview Of India-Russia Economic Cooperation”, Embassy of India in Moscow, http://indianembassy.ru/index.php? option=com_content&view=article&id=705 &Itemid=705&lang=en

5. “India-Russia Relations”, Ministry of External Affairs of India website, https://www.mea.gov.in/Portal/ForeignRelation/India_Russia_Relation_DEC2016.pdf~

6. The Hindu, December 24, 2012.

7. For a detailed analysis of India’s Silk Road Strategy, see, Ajay Patnaik, Central Asia: Geopolitics, Security and Stability, Routledge, Abingdon/New York, 2016.

8. Alexander Lukin, “Rising China and the future of Russia”, Interviewed by Andrei Zavadsky, 29/6/15, available on MGIMO website archives, http://old.mgimo.ru/news/experts/document275870.phtml

9. Cholpon Orozobekova, “Can China’s Ambitious OBOR Mesh With Russian Plans in Eurasia?”, The Diplomat, November 9, 2016. http://thediplomat.com/2016/11/can-chinas-ambitious-obor-mesh-with-russian-plans-in-eurasia/

10. “China, Russia agree to further expand investment, energy cooperation”, Xinhua, April 13, 2017, http://news.xinhuanet.com/english/2017-04/13/c_136206684.htm

11. Rajeev Sharma, “Transport Corridor offers many opportunities for Indo-Russian trade”, Russia & India Report, November 29, 2012. http://indrus.in/articles/2012/11/29/northsouth_transport_corridor_offers_many_ opportunities_for_indo-ru_19421.html)

12. “Indian Delegation visit’s Iran on International North South Transport Corridor Study for new potential routes to Russia and CIS destinations”, Daily Shipping Times, January 16, 2015. http://www.dailyshipping-times.com/news-upload/upload/fullnews.php?fn_id=9490; “India starts testing North-South water transit corridor”, SvobodnayaPressa, August 26, 2014, cited in Russia & India Report. http://in.rbth.com/economics/2014/08/26/india_starts_testing_north south_water_transit_corridor_37813.html)

13. ‘India, Iran sign pact on developing Chabahar port’, Press Trust of India, cited in IBN Live, May 6, 2015. http://ibnlive.in.com/news/india-iran-sign-pact-on-developing-chabahar-port/544113-3.html

14. ‘India-Iran Strategic Chabahar Port to be Operational by December 2016, Will Give Access to Afghanistan, Central Asia’, NDTV, India, May 24, 2015. http://www.ndtv.com/india-news/india-iran-strategic-chabahar-port-to-be-operational-by-december-2016-wii-give-access-to-afghanistan-765599

15. ‘India, Iran sign pact on developing Chabahar port’, Press Trust of India.

16. The Eurasian Union came into existence from January 1, 2015. With a total population of almost 200 million people and a (PPP) GDP of over $4trillion, the Eurasian Union would be a strong economic bloc. “The Eurasian Union: Putin’s Answer to the EU”,

The Huffington Post, February 2, 2015. http://www.huffingtonpost.com/christopher-atamian/the-eurasian-union-putins_b_6585578.html?ir=India&adsSite-Override=in

17. Shruti Srivastava, “FTA with Customs Union on the table during Putin visit”, The Indian Express, December 9, 2014.

18. “India plans to nearly double oil imports from Iran: Sources”, The Times of India, April 6, 2018.

Prof Ajay Patnaik, who is a specialist on Russia and Central Asia, is the Dean, School of International Studies, Jawaharlal Nehru University, New Delhi.

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