Beyond a bear hug

G2G relations still the ballast for India-Russia ties

It is a sign of the times that the visit of a head of state or government is increasingly viewed in terms of the billions of dollars of business it generates. So, not surprisingly, even reports on the visit of Russian President Dmitry Medvedev have focused on the $10-billion business generated by it. The number stands in contrast to the abysmally low bilateral trade of $5 billion. Understandably, much of the existing and new business is still between state entities in both countries, with a focus on defence and energy cooperation. Despite considerable diversification by India in sourcing defence supplies over the past decade, Russia remains the largest supplier of advanced weaponry to the Indian armed forces. Continuing delays in delivery of contracted defence equipment, sudden price escalations and unreliable supply of spares have begun to raise new questions about Russia as a defence equipment supplier. However, the still enduring nature of the strategic relationship between the two countries was underlined by two co-development agreements for the Fifth Generation Fighter Aircraft (FGFA) and the Medium Lift Military Transport Aircraft being signed during the visit. Russia’s technical assistance to the Indian nuclear submarine programme continues to be invaluable.

The Indo-Russian energy relationship is also evolving qualitatively on a wide range of fronts. However, while Russia has signed an agreement to supply two more reactors to augment the two being built at Kudankulam in Tamil Nadu, movement forward on expanded civil nuclear energy cooperation remains stymied by ambiguities with respect to India’s nuclear liability law. Russia has not yet made the mental transition to the post-nuclear liability Bill era, given the comfort it enjoyed within the special dispensation extended to it in the past. However, intense competition from France is perhaps exerting pressure on Russia to come to terms with India’s new law. The issues of safety and reliability of Russian reactors vis-à-vis US and European Pressurised Water Reactors will now get closer examination than before. The questions raised by Russia on the implications of the civil nuclear liability Bill once again underline the fact that what came out of the wash in Parliament was a sub-optimal law that most nuclear power equipment suppliers are still not very comfortable with.

India’s footprint in oil and gas exploration in Russia is increasing and ONGC-Videsh Limited’s decision to acquire a 20 per cent stake in the Sakhalin-3 oil field is welcome. Indian power companies have made a beginning in acquiring coal mines in Siberia for high grade thermal coal. With the world’s second-largest coal reserves, the opportunities in Russia are endless and must be vigorously pursued. India’s export basket to Russia is dominated by primary products such as tea and rice, with pharmaceuticals and low-end machinery comprising the only value-added products. Russian exports to India are similarly low value-added and the absence of complementarities between the two economies precludes a dramatic surge in the bilateral trade numbers. Mr Medvedev quite understandably focused attention on people-to-people (P2P) contacts with his visits to Bollywood and IIT-Mumbai, since Russia lags behind the US in this area. Government-to-government (G2G) links remain the ballast for the bilateral relationship, given convergence of strategic interests in the Eurasian region and shared concerns about a rising China and Islamic radicalism. Increased business-to-business (B2B) links could help.