Event ReportsPublished on Sep 27, 2018
India, Russia should infuse life into North-South transport corridor

“Relations between India and Russia are unique, but our trade lags behind. Bilateral trade of $10 billion is not enough,” said Consul General of the Russian Federation in Mumbai Andrei Zhiltsov during an interaction at ORF Mumbai on 18 September 2018.

The interaction with the Russian Consul General was organised in the backdrop of the forthcoming New Delhi visit of Russian President Vladimir Putin for the annual India-Russia Summit early October. The summit comes at a critical juncture in the time-tested history of bilateral relationship between the two countries – the looming threat of US sanctions, the unending strife in Afghanistan and Syria, and the growing influence of China over both the Eurasian landmass and the Indo Pacific.

In conversation with Nandan Unnikrishnan, Distinguished Fellow, ORF, Zhiltsov said “India and Russia must go beyond the military technical partnership and explore new areas of economic, political and social cooperation.”

Zhiltsov suggested that both countries must infuse life as well as momentum in the proposed International North-South Transport Corridor to give the much-needed push in their mutual trade. He complained about the “sluggish progress” on the project and also expressed caution about the emerging ‘special circumstances’ concerning Iran.

The interaction was organised by the ORF to understand the Indo-Russian relations in the current global context and to go beyond speculation.

In his opening remarks, Unnikrishnan gave an overview about the capabilities of the trillion-dollar economies of both the countries. He stated that despite close political ties, it was quite surprising that bilateral trade between India and Russia has remained negligible and has always hovered around a mere $10 billion, which is significantly low in comparison with India-China trade which is nearly nine-fold – despite the volatile bilateral relationship between the two Asian giants. He said that there is a need for “analysis from both the sides to address the existing gaps in infrastructure, connectivity and bottlenecks that creates hurdles in the growth of Indo-Russia bilateral trade.

“Russia is a trusted friend and there are many avenues of cooperation in the sectors of energy – including renewable energy – and liquefaction of coal, and the potential of exploring ‘swap-deals’ for fossil fuels. Both countries should stress on redirecting the oil India receives from the Russian Sakhalin project to Japan or South Korea and swapping them with their oil imports from West Asia,” Unnikrishnan suggested. Describing the military tactical cooperation between the two countries as “deep”, he said that Indian armed forces are comfortable with operating Russian military hardware and weaponry.  “Such is the expertise of Russian military hardware among Indian security forces that new Russian military hardware is easier to absorb into our existing arsenal,” he said.

Unnikrishnan said the bilateral relationship between the two countries will rely on both leader's ability perceive the complementarities in each other’s world views. “When Prime Minister Narendra Modi and President Putin meet in New Delhi, there will also be a looming presence of two “elephants” – the US and China – in the room. “Trump’s actions as well as the role of China can effect Indo-Russian relations,” he said.

Recounting his conversations with India’s business leadership, Zhiltsov rued the “lack of information about business opportunities, the fear of the bureaucracy and the ever-looming threats of sanctions as factors contributing to the reservations among the business communities of both countries. He expressed anguish regarding the absence of direct cargo flights between India and Russia and suggested that just introducing direct cargo flights can facilitate a marginal increase in trade ties. “A cargo flight dropping military parts to India could pick up pharmaceuticals on its way back,” he said.

Zhiltsov blamed the actions of the US to be also adding to the strain on India-Russia trade relations. “The weaponisation of the dollar and the use of sanctions as a coercive tool by President Trump have also become the biggest cause of concern for businessmen and also for India’s banks, who have renounced Russia as a prospective business and investment destination. “A large number of Indian businesses already have interests or are seeking business opportunities in the US and any adventure with Russia can cause them harm owing to America’s behaviour,” he pointed out, adding that many senior officials of the Reserve Bank of India and the State Bank of India have confided in him about this concern.

Terming such fears as unfounded, Zhiltsov said, “However, it is highly unlikely that the Americans will assert sanction against India. If they did, it would suicidal, as America cannot take any long-term adversarial position against India, which was one of the world’s biggest emerging markets”. He also suggested ways to circumvent this issue, if both countries agreed to use of either national currencies or the Euro or Singapore dollar as the currency for bilateral trade instead of relying on the American dollar.

Besides the obvious impact of the US’ attitude, inadequate push by the respective governments to encourage greater people-to-people contact among their citizens was also responsible for low trade volumes. “Russian businessmen are highly suspicious of India’s bureaucracy creating hurdles and the Indians think that Russia is an unsafe place, where anybody would be robbed in broad daylight,” he said, explaining how such “wrong perceptions” about each other had hampered the growth of bilateral trade. He urged both the countries to use their “soft power” through the celebrations of festivals in each other’s countries at a larger scale and introducing Russian media, music and films to Indians as an approach for changing perception. He expressed happiness over the rising numbers of tourists from India. He also mentioned the government's plan to make travel into Russia easier by introducing a visa-free regime.

Exalted by the high level of political engagements between the two countries, Zhiltsov referenced the annual summit and the fact that the leaders meet at least three times a year as “benchmarks” in the bilateral relations. He urged the private actors, non-governmental organisations and educational institutions to follow the example set by their leaders to foster greater engagement at the lower level.

During discussions with the audience, diverse topics of potential cooperation in the fields of fashion and transportation infrastructure, specifically maritime transport; the role Shanghai Cooperation Organisation in India-Russia relations and the prospects of skill development and vocational education between the two countries came up.

This report is prepared by Navin Narang, Research Intern, Observer Research Foundation, Mumbai

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.