India-Russia ties

NANDAN UNNIKRISHNAN

back to issue

IT is a cliché to state that India and Russia have a time-tested relationship. Nevertheless, it is a cliché worth recalling in 2015, considering that both countries face new challenges – both internally and externally. These challenges may significantly strain the relationship, which is why a careful analysis of the nature of bilateral ties in a changing geopolitical environment is essential. This article attempts to recap the current state of the relationship and outline some of the probable challenges and pressure points.

Any attempt to analyze the current state of India-Russia relations would be incomplete without separately considering the developments in the two countries over the past year. This article, however, will focus more on Russia than India. The past year has been a roller coaster ride for the Russians, starting with the joy about the return of Crimea, but forced out of their euphoric state by what appears to be a long-term, full-blown economic crisis caused by falling oil prices and western sanctions over Ukraine.

Russia’s confrontation with the West appeared to begin with the western backed ouster of then Ukrainian President Viktor Yanukovych in February 2014 after protests engulfed the capital Kiev. His postponing the signing of an agreement with the European Union (EU) provoked the protests. The subsequent takeover of Crimea by Russia, a full-blown civil war in eastern Ukraine, followed by western sanctions against Russia has led many to suggest that we are witnessing the return of the rivalry between Russia and the West – the start of Cold War 2.0. However, the roots of Russia’s disenchantment with the West lie elsewhere and the Ukraine crisis is merely a formal winding up by Moscow of the attempts to develop a partnership with the Euro-Atlantic alliance.

Noted Russian scholar Dmitri Trenin offers the following explanation as to why Russia has abandoned any efforts to seek accommodation with the West:

‘Russian-Western relations have palpably deteriorated since the last failed attempt at rapprochement during President Dmitry Medvedev’s term, in 2009-2011. Ukraine is the main geographical locus and symbol of the new rivalry, but not its primary cause.

‘To Putin, the West’s approach to Russia barely respects Moscow’s interests and views. Russia’s failed rapprochement with and perceived humiliation at the hands of the West have opened the way to a more nationalist domestic and foreign policy course that replaces the remnants of Russian liberalism and internationalism.

‘The centrepiece of this approach is winning full sovereignty for Russia by eliminating foreign political influence in the country and ensuring that Moscow’s special interests in its former borderlands are recognized. Fundamental to this vision are conservative values, rooted in the Orthodox Christian tradition.’1

 

The unravelling of the economic crisis and the desire to re-establish the sphere of Russian interests are what will be the prime drivers of Russian foreign policy for the near future. The Russian government could use the economic crisis to implement long delayed reforms that would move the economy away from its dependence on export of raw materials, mainly hydrocarbons. If carried out in conjunction with measures to tackle rampant corruption and steps to arrest demographic decline, the reforms could lead to significant changes in the composition of the ruling elite, possible social upheaval, and maybe some dilution of the power currently vested in the President. There can be no doubt that if this course is adopted, Russia in a few years will emerge a dramatically different country with a modern, vibrant economy even if somewhat authoritarian.

If history is any indicator, it appears more likely that the ruling elite will take the politically easier route of trying to ride out the crisis with the help of Russia’s substantial financial reserves, particularly now that the Rouble is stabilizing and oil prices appear to be settling at around 60 dollars a barrel.

However, given the new trends in global developments, particularly in types of energy production and consumption, this will only be a short-term solution. If the Kremlin leaders do not deal with the skewed nature of its economic and political system, it will eventually lead to Russia’s further decline. Any long-term decline of Russia will result in fundamental geopolitical shifts, which cannot but affect the Indo-Russian relationship – a possibility New Delhi should not dismiss.

Further, to successfully ride out the crisis, Russia must seek to prevent worsening of ties with the West. Critical to this would be to prevent an escalation of the conflict in the Ukraine. The Minsk II agreement, if properly implemented, would be a good basis to start this process. However, any substantial progress on Ukraine is only possible if the West agrees to take the problem of Crimea off the agenda and recognize that Ukraine cannot be stabilized economically without Russian help.

 

Additionally, a reduction of hostilities between Russia and the West is possible because Russia can make positive contributions in tackling international terrorism, resolving some of the problems in West Asia, helping reach an agreement with Iran, stabilizing Afghanistan and Central Asia. However, this does not mean that there will be reconciliation any time soon between Russia and the West.

Simultaneously, it is essential that Russia compensate its economic losses with the West by improving ties with Asia, Africa, Latin and South America. That Russian leaders are aware of this dimension is evident from their emphasis on developing economic ties with the Asia-Pacific region, pushing ahead with trying to institutionalize BRICS, seeking to expand the Shanghai Cooperation Organization, strengthening ties in West Asia, and developing them in Africa and South America. This briefly is the outlook for Russia.

 

India too has had its share of momentous events, primary among them being the election of a BJP government in May 2004. On assuming power, Prime Minister Narendra Modi immediately began taking steps to end the hiatus that had apparently engulfed the UPA government’s foreign policy in the last three to four years of its reign. There was engagement with the neighbourhood, an outreach to the great powers – USA, China, Russia, and Japan – apart from an array of bilateral meetings on the sidelines of multilateral events like the UN General Assembly, BRICS summit and the G-20 meet.

It is not surprising that given India’s domestic compulsions the overwhelming emphasis of Modi’s foreign policy currently appears to be economic. The new slogan is ‘development, development, development’. Therefore, it is again natural that India would want to eschew any conflict or tension not only in its immediate neighbourhood, but also with countries that might contribute to its economic development and security. Normally, this should have given a fillip to strengthening of Indo-Russian relations, but, Russia’s confrontation with the West and economic crisis has considerably complicated the scenario.

Before arriving at any definitive conclusions about the challenges facing the Indo-Russian relationship, it is necessary to take a brief look at the main aspects – military, political, and economic – of the ‘special, privileged strategic partnership’. Military-technical cooperation has emerged as the main pillar sustaining the bilateral relationship and lending it a strategic dimension.

India has been a traditional buyer of arms from the Soviet Union and then Russia. It began in 1962 with the purchase of MiG-21 fighter aircraft and later their licensed production in India. The reluctance of the West to sell weapons to India during the Cold War and the financial constraints then faced by India, led to a nearly 90% dependency of the Indian armed forces on Russian military hardware.

Practically until the collapse of the Soviet Union, this was a buyer-seller relationship, which the world saw as mainly beneficial to India. However, the critical role that India played in shoring up the Russian military-industrial complex came to the fore in the 1990s. It is now evident that Indian military purchases helped Russia tide over the general collapse of the Russian economy, particularly in the aeronautical sector.

 

However, several new developments are likely to challenge the stability of military-technical cooperation between the two countries in the coming years. First, India’s decision to diversify its sources of arms procurement. This will significantly shrink Russia’s dominance of the Indian arms market. The Russian share of the Indian market has reportedly already dropped to 70% and is likely to fall further. Also, India’s improved financial power will ensure that price is not the primary consideration for arms purchases.

Second, India’s policy of indigenization, announced by the previous government, requires foreign vendors to offset 30% of their orders, i.e., 30% of the weapons platform must have components made in India. Prime Minister Narendra Modi’s exhortation for ‘Make in India’ further emphasizes this policy, and is likely to pose a significant challenge to the Russian military-industrial complex.

Although Russians have some experience of producing in India, they are likely to face significant challenges. Russian arms companies have so far primarily dealt with their counterparts in the state sector. But, they do not have the capability to rapidly enhance their capacity to absorb new technologies or boost production.

 

These are generic problems for all weapons manufacturers wanting to enter the Indian market. To overcome this, foreign companies will have to seek joint ventures with Indian private sector companies. What makes the Russian case a little more complicated is that Russian companies have little experience working with Indian private companies and the inherent preference of Indian private sector players is to work with their western counterparts.

Third, there is disillusionment in India with some aspects of the Russian military-industrial complex that result in delayed delivery of products and spare parts, defective products, and price renegotiations. Russia’s reluctance to participate in tenders is another impediment. Some of these issues afflict India’s military procurement from other sources as well. However, the recent airing of these problems with Russia in the public domain has adversely affected public opinion. Nevertheless, what might enthuse the votaries of enhanced Indo-Russian cooperation in current times are the positive signs in the military-technical relationship.

First, the relationship is moving away from the buyer-seller mode to joint development and production. Russia and India are collaborating on the fifth generation fighter aircraft. The BrahMos supersonic cruise missile systems, developed under a joint patent, are being inducted into the Indian armed forces. In addition, these weapons may be marketed worldwide. Fourteen countries have reportedly already evinced interest in acquiring the missiles.2 India and Russia are jointly developing a Multi-Role Transport Aircraft (MTA), which could be sold to third countries. Additionally, in August 2012, India and Russia signed a MoU for a joint venture to produce ‘SMERCH’ rockets in India.3

Another set of positives is that sales to India account for 40% of Russia’s annual defence sales and this is likely to increase to over 50% in the next few years given the current pipeline of contracts.4 Moreover, Russia is likely to remain India’s largest defence partner for at least the next few years as the two countries have already signed arms deals worth about $11 billion in future transactions and established several important joint ventures.5

 

Critically, what has really strengthened the foundations of the strategic partnership is Russia’s willingness to provide weapons platforms and expertise that India would be hard put to acquire from anywhere else. The leasing of nuclear powered submarines and help for India’s efforts to build them are some examples.

An important consideration for India is that Russia does not supply weapons to India’s potential adversaries that could tilt the balance in their favour. However, this may change depending on how Russia’s relations with the West, particularly the USA, evolve. There are already signs that a qualitatively new defence relationship with China is developing and this will cause concern in New Delhi. Similarly, growing Indo-US military ties are bond to arouse suspicions in Moscow. President Barack Obama’s recent visit to India would have only strengthened these suspicions. The visit clearly demonstrated India’s intent and inclination in international relations, even if nothing of great significance was announced during the visit.

 

Given that economic ties between the two countries are unlikely to emerge as the main foundation for the bilateral relationship in the near future, sustaining defence sector ties assumes even greater significance in maintaining a robust strategic partnership. Therefore, both governments will have to weigh the significance of defence cooperation in bilateral ties, carefully assess what is feasible, and manage expectations.

Another pillar of the bilateral relationship is political cooperation on the global stage. There is practically no difference between the two countries on matters of international importance – the changing nature of the global balance of power, the need for greater say in agenda setting (security and financial) for emerging powers, and restructuring the architecture of global governance.

Russia has traditionally cooperated with India in various global organizations – United Nations, BRICS, SCO, and Russia-India-China trilateral – and supports India for a seat in the UN Security Council, membership in the Nuclear Suppliers Group (NSG), Shanghai Cooperation Organization (SCO) and the Asia Pacific Economic Community (APEC). Similarly, they have virtually identical views on regional issues – Afghanistan, Central Asia, Iran and West Asia – now that India has readjusted its views on Iran and Syria.

 

Russia’s growing estrangement from the West could undermine all this. The Ukraine crisis and linked sanctions combined with the fall in oil prices has had a disastrous effect on the Russian economy. Naturally, Russia is looking elsewhere to compensate for the losses it has suffered because of Western efforts to isolate Moscow. This inevitably will push Russia closer to China. Nevertheless, a deep and long-standing alliance between Russia and China is unlikely to emerge in the near future because there are many historical and strategic divergences that need to be dealt with. For one, Russia would be reluctant to become China’s ‘younger brother’, having just rejected being a junior partner of the West, despite its natural affinity with western culture. In addition, it does not appear as if China wants a formal strategic alliance with Russia. Some Chinese scholars have said that relations with Russia were important in terms of mitigating some of the risks China faces in the emerging multipolar world. They ‘are vital, though not decisive’, according to the Global Times.6

Nevertheless, if the West continues to reject Russia and pursue its isolation, Moscow may face a situation where in order for the regime to survive, it may have to enter into a dependent relationship with China. In other words, if the current regime in Moscow does not undertake wide-ranging economic reforms, then the relevant question is: when does the survival interest of the narrow elite supporting the regime trump the rhetoric of national interest? Whatever the answer to that question, substantially and strategically closer Sino-Russian ties are a matter that would cause considerable consternation in the corridors of power in New Delhi.7

Economic ties are the weakest link in Indo-Russian relation. It is a truism to say that in the modern globalized world economic ties constitutes the underpinning of any successful strategic relationship. Indo-Russian ties appear to belie this truism. Bilateral trade stands at about 11 billion dollars, barely double of what it was 30 years back in 1985. By comparison, India’s trade with the US is nearly 100 billion dollars and with China, around 80 billion dollars. Similarly, mutual investments are well below potential with Indian investments in Russia at about 6.5 billion dollars (mainly in the energy sector) and Russian investments in India at around four billion dollars (mainly in telecommunications and infrastructure).

 

There are some objective factors for this abysmal state of economic ties. The first constraint is the transport bottleneck. Given Pakistan’s refusal to allow Indian goods to traverse through its territory, India does not have a land route to Russia. The North-South transport corridor via Iran is an option that will take time to fructify as a commercially viable option. The sea routes are inordinately long whether taken directly to a Russian port or if goods reach Russia via ports in other countries.

The second reason business is stymied is the lack of proper banking links. The third is that the business elites in both countries do not find it attractive to do business with each other. This is partly because they do not know each other’s markets and because they find the processes not adequately transparent, thus requiring heavy investment in political liaison. A lack of private sector engagement is one of the main reasons for stagnating trade. In addition, it is difficult for businesspersons to travel to each other’s country, particularly Indian business people to Russia. Language is yet another barrier.

Now with Russia gripped by a serious economic crisis, it is not hard to imagine that this will further adversely affect bilateral economic ties. However, in every crisis there is an opportunity and leaders of both countries should seek innovative solutions to break the economic deadlock. One of the ways to rejuvenate the economic relationship would be to focus on mutual investments and specific areas of cooperation. Some indications of this innovative thinking can be gleaned, albeit in an embryonic form, from the visit of President Vladimir Putin to India in December 2014. Nuclear energy, military equipment, pharmaceuticals, hydrocarbons, diamonds and agriculture are among the areas identified for increased cooperation.

Promising as this appears, given India’s domestic imperative, enhanced Russian involvement in India’s development story will require Russia to be able to divert significant funds away from dealing with its internal crisis. This appears highly unlikely.

So, given all of the above, it is apparent that the political leaderships of both countries face significant challenges to keep the strategic partnership going. That India and Russia need each other is a no-brainer. But the question remains whether they will successfully navigate the churn in current geopolitics, keeping in mind their long-term stakes, and without succumbing to immediate vested interests.

 

*This article draws on two earlier pieces written by the author for the ICWA and ORF.

Footnotes:

1. http://carnegie.ru/2014/12/22/russia-s-breakout-from-post-cold-war-system-drivers-of-putin-s-course/hxsm

2. Nandan Unnikrishnan, ‘India-Russia Relation: Looking Ahead’ in India and Russia: Deepening the Strategic Partnership. ICWA, Delhi, 2014, p. 6.

3. Interview with Indian Ambassador to Russia, Ajai Malhotra, 15 January 2013, available at http://indrus.in/articles/2013/01/15/indo-ussian_ties_based_on_substance_not_ rhetoric_ajai_malhotra_21633.html

4. Katherine Foshko Tsan, ‘Re-Energizing the Indian-Russian Relationship: Opportunities and Challenges for the 21st Century’, Jindal Journal of International Affairs 2(1), August 2012, p. 150.

5. Richard Weitz, ‘The Maturing of Russia-India Defence Relations’, Journal of Defence Studies 6(3), 2012, p. 90.

6. http://www.globaltimes.cn/content/900304. shtml

7. Nandan Unnikrishnan, ‘Russia in 2015’, Observer Research Foundation Primer, p. 22, http://orfonline.org/cms/export/orfonline/modules/report/attachments/Primer2015_ 1422616443588.pdf

top