President Mededev's Visit

President Medvedev’s recent visit to India (December 21-22) has contributed to retrieving some of the ground being lost in India-Russia ties. A perception has been growing that the relevance of Russia to India has declined in the context of the changed international situation, India’s growth needs and Russian priorities, not to mention its diminshed capacities following the collapse of the Soviet Union and subsequent financial blows in 1998, and in 2008 when the global economic crisis struck Russia severely, breaking the momentum of its resurgence.

The obsession of the Indian political and economic circles, as well as the media, with our relationship with the US has also contributed to drawing attention away from our Russia relationship, even though the practice of regular summits between the leaders of the two countries has continued and substantial defence deals have been regularly announced. The summits have served to reiterate shared interest in maintaining a close relationship, and to mark the similarity of views on many international issues. The value of nurturing stable and productive ties with Russia, whatever the current limitations in expanding them all round, and whatever the irritations and frustrations that surface in implementing current programmes, is well recognized by Indian policy makers. Even if to the general public the Russian relationship does not appear as exciting in terms of its potential as the US relationship, the goodwill toward Russia in India runs deep, as it is seen as a steady, reliable, trustworthy and time-tested friend.

If the ties with Russia do not stir the public as much as the US relationship, it is because, for one thing, media coverage of India-US relations is enormous, even excessive, whereas that of India-Russia relations is limited. Apart from higher levels of interest in the US and its policies, because of their larger global and regional impact, the US cultivates contacts with the Indian media much more effectively. The growing convergences between India and the US in many areas and the narrowing down of vexing differences on several issues, provides a wealth of material for the press to report and comment on. With Russia, the tenor of the relations being generally smooth, the “news value” of the relationship is less, unless problems surface. The Russian media has limited interest in India, and vice versa.

The large number of Indians in the US in business, scientific, professional and political positions, with connections back home at the political, bureaucratic, professional, entrepreneurial and other levels, covering sizable swathes of the middle class, sustain public interest in the US, despite negative sentiments in large sections of Indian opinion-making circles toward the US because of the damage it has done over decades to India’s strategic interests at the global and regional levels. There is no such bond at the level of the people, of opinion forming segments of society, between India and Russia.

Our relationship with Russia is essentially state driven, with limited spontaneous people to people exchanges. Tourist flows have picked up, especially from Russia to India, with Goa as a major attraction. About 5000 Indian students follow courses in Russia, largely medical, unlike over 90,000 in the US. Russia has a restrictive visa regime, making travel difficult. Interest in Indian culture, especially yoga and Indian classical dances, can be further developed, but here too the effort is essentially confined to government initiatives and funds. The commercial circuits are absent for the time being. Hindi films were a big draw in Soviet times; they still attract interest, but here again, commercial distribution alone can expand interest and the market, not government sponsored periodic film festivals. Interestingly, Hindu spiritual leaders have a following in Russia which can grow, but beyond a point this spread can become socially sensitive as elements in the Russian Orthodox Church view negativley the dissemination of such philosophies and recourse to spiritual solace outside the established religion.

The biggest structural weakness in India-Russia ties is the economic relationship. In the past, the Soviet Union played a leading role in laying the foundations of heavy industry in India. Today the Russians are missing from India’s industrial scene. Russia’s industrial sector is in dire need of modernization, needing access to western technology. The share of maunfactures in Russia’s export basket has declined to about 3%. Russia actually is not figuring much in India’s economic growth story, much of which is about the phenomenal growth in the services sector, especially IT and ITES. The most dynamic sectors of our economy are not looking at Russia for markets or technologies. Even China is scoring great gains in the Indian market, with, for example, our major private sector companies in the power and telecom sectors placing large orders on Chinese firms.

Both India and Russia accept the need to reinvigorate commercial ties. Cognizance has been taken at government level of the importance of addressing bottlenecks through appropriate policy and administrative changes. India proposed a Comprehensive Economic Partnership Agreement with Russia over four years ago, but after an initial joint report progress has stalled. The business communities have been spurred to explore avenues for greater economic cooperation through various mechanisms such as the India-Russia Business Forum and the CEOs Forum, but these have not produced the expected results so far. Russian business is finding it daunting to operate in India’s competitive market, the scale of returns they expect is not realistic in market conditions in India, the tendency still is to rely on the government to create openings for them and preconceived ideas about each other are an impediment. This is to be contrasted with the range of interest that US companies have in the Indian market and the efforts they put in to make headway into it.

In the energy sector, there are obvious complementarities between energy surplus Russia and energy deficit India, but India’s effort to secure a greater foothold in Russia’s energy sectore have had no tangible success after OVL acquired a share of Sakhalin 1 in 2001 and took over Imperial Energy- a British asset- more recently. Several MOUs have been signed in recent years between ONGC/OVL and Russian state owned companies such as Gazprom and Rosneft, but despite expressions of goodwill at the political level, results on the ground have not materialized so far. This contrasts with the inroads China has made into Russia with the opening of a spur to China from the new pipeline that will transfer Russian oil to its Pacific coast. China had also provided $ 6 billion to the Russian government to take over Yukos, against which they have been getting oil from that hugely productive acquired asset on highly advantageous terms until now as the relevant contract has expired. India does not have such deep financial pockets as China, and lacks geographical contiguity with Russia, but the oil market is so highly developed that contiguity is not a problem and Indian companies have been willing to invest sizable sums in Russian assets.

India and Russia have had longstanding and productive science and technology cooperation, but this substantial cooperation has not been market oriented as in the case of the US and, therefore, has lacked commercial spin-offs. Attempts in the past to identify, with the involvement of the Indian private sector, technologies that have market potential and develop prototypes through arrangements that protect intellectual property have not been succesful so far. The proposal to set up an India-Russia Technology Centre has dragged on. Some ideas proposed by us on cooperation in developing cutting edge technologies through a joint funding mechanism have not been treated with earnestness.

Russia was the first country to support India’s permanent membership of the UN Security Council, but it is the equivocal US support during President Obama’s visit to India that has drawn the most commentary. Russia, anyhow, lost some credit when, after extending initially unqualified support, it began diluting it by emphasizing the need to build a large, near total, consensus on the Council’s expansion, rejecting the idea of a decision by vote as envisaged in the UN charter, showing receptiveness to the arguments of the so-called Coffee Group led by Pakistan, Italy and Mexico, with their agenda of opposing the candidature of India, Germany and Brazil, respectively. Russia has strong reservations about Japan’s candidature. We have had difficult negotiations in the past to steer Russia back to its original, undiluted endorsement of India’s claim.

Defence remains the core of the India-Russia relationship, and this is one area in which ties have grown even after the collapse of the Soviet Union. Large Indian orders for high value defence platforms and equipment built to our specifications helped the Russian defence industry survive during the very critical post-Soviet period. Large Chinese orders likewise helped Russia to navigate through those difficult years. India still receives top of the line equipment from Russia, as well as access to some sensitive technologies that are not available from other countries. The case of the nuclear submarine on lease and technical assistance in developing Arihant are examples of this. Nevertheless, there have been problems with regard to adherence to delivery schedules, price escalation and inadequate product support, leading to calls for reducing our overdependence on Russia and diversifying our sources of defence procurement. The Gorshkov case has reinforced such thinking. Until recently, Russia has believed political reliability, price advantage and technology access guaranteed its hold on the Indian market, and this made it inadequately responsive to our complaints. However, with the steady expansion of the India-US defence ties, including important defence acquisitions, its concerns about the erosion of its privileged position are surfacing.

India tries to set at rest Russia’s fears that its improved relationship with the US will be at its expense. As tangible proof of this, India continues to place large orders for Russian equipment, and is entering into new long term projects of cooperation with its old partner. Russia cannot realistically look at a quasi-exclusive defence relationship with India. The competition over the 126 multi-role combat aircraft- eyed by the Americans avidly- is being viewed by Russia as a political test case of India’s loyalty to its Russian connection, with Russian lobbies expressing concern about a possible denial of this contract to Russia. These are the lobbies that advocate improved ties and an arms supply relationship with Pakistan, citing strengthening India-US defence ties despite US military aid to Pakistan as justification, besides arguing generally why Russia should implicitly accept an Indian veto on Russia-Pakistan military deals.

Russia, like India, views terrorism and the return to power in Afghanistan of the Taliban as major security threats. This meeting of minds does not get translated, however, into public support for India’s Pakistan problem with regard to terrorism. While cognizant of Pakistan’s role in this regard, it avoids pronouncing on Pakistan’s involvement in terrorist activities against India. Russia is chary of impeding the prospects of a resumed India-Pakistan dialogue, which it wants to be seen as encouraging in view of the nuclear weapon capability of the two countries. The reasons for this careful posture are complex. Russia wants to keep its lines with Pakistan open, and so prefers not to take sides publicly. It wants to be seen as playing a constructive role in South Asia, with US interests in the region in mind. It is reluctant to cross wires with the US and NATO in this area. It is possible that an insufficiently analysed reason could also be that it may not want to send uncomfortable political signals to China by exhibiting a gap between its position on Pakistan and that of the latter, especially any impression that there were two axes developing in South Asia- the India-Russia one and the China-Pakistan one, reminiscent of the 1971 situation that led up to the break-up of Pakistan.

It stands to reason that, taking into account the Indo-US nuclear deal, the stepping up of India-US military exchanges, US rhetoric about its relationship with India being an indispensable one for the 21st century, the perceived- but denied- shared concern about China’s rise underlying such rhetoric, the encouragement to India to engage itself more with Asia, the etc, Russia should query India’s real allegiance to multi-polarity, or the Russia-India-China dialogue that was supposed to buttress it.

In this backdrop some results of President Medvedev’s visit are particularly noteworthy. Some of the positive changes in Russian articulations on issues important to us were no doubt primed by the very supportive positions taken by President Sarkozy during his visit on Pakistan related terrorism issues and India’s UNSC permanent membership, and some initiatives announced by President Obama, such as those relating to India’s membership of international non-proliferation regimes. In the Joint Statement Russia reverted to its earlier unqualified support for India’s UN Security Council permanent membership as a strong and deserving candidate. It endorsed India’s membership of the NSG, MTCR and the Wassenaar Arrangement, leaving out the Australia Group, of which it is itself not a member. For the first time Russia joined India in asking for the perpetrators, authors and accomplices of the Mumbai attack to be brought to justice expeditiously by Pakistan, discarding the earlier caution in not specifically addressing the demand to Pakistan by name. Russia went further in implicitly castigating Pakistan by noting, along with India, that states that aid, abet and shelter terrorists are as gulity of acts of terrorism as the actual perpetrators. The joint statement also asked for the elimination of safe havens and violent extremism in Afghanistan and Pakistan, picking up in part the language used in the India-US joint statement. All this is a significant and welcome change of political line, making more open Russia’s support for India. This helps to set at rest misgivings that Russia was opening lines to Pakistan that could be at india’s expense eventually.

On the economic side, the Inter-Governmental Agreement(IGA) in the hydrocarbon sector is an important breakthrough as it formally concretizes Russia’s greater willingness to develop the energy relationship. Earlier, the Russian political leadership expressed support for Indian participation in Russia’s hydrocarbon sector on a commercial basis, but the IGA marks acceptance of a government role in promoting this. Indian companies have long identified Russsian assets of interest to them for participation. In this connection the Framework Agreement between ONGC and Sistema, a private company looking for an Indian partner, holds promise, as it pertains to fields of interest to the Indian corporation. The proposal of a Comprehensive Economic Partnership Agreement(CECA) has been revived, and a target of achieving a bilateral trade figure of $20 billion by 2015 has been set. This would be achievable if some of the recommendations made earlier by the report of the joint committee set upto examine the feasibility of CECA are implemented. Areas where there are possibilities of enhancing trade volumes are known. MOU’s in sectors like IT and ITES and pharmaceuticals etc that were signed during the visit could, if implemented, boost bilateral trade. The document signed between the concerned Ministries on both sides could enable Indian pharmaceutical industries to enter the Russian market. On the issue of commercialization of technologies, a long awaited step was announced during the visit with the decision to set up a new India-Russian S&T centre and joint R&D centres in Delhi and Moscow for commercialization of joint research outcomes. On the investment side, the joint venture integrated steel plant in Karnataka and several agreements in the telecom sector in which Russia’s Sistema is investing large sums denote welcome Russian interest in our industrial and services sectors.

In the area of space, the agreement that was signed on access to military signals from the Russian GPS equivalent system Glonass to India is of strategic importance, considering that neither the US owned GPS and the European Galileo give access to such signals. The public announcement of this agreement is important, given its military implications. It is significant also in terms of projecting a level of maturity reached in India-Russia defence ties, besides an expression of confidence in the context of any international reaction.

President Medvedev’s visit failed in tying up the last threads that would have enabled the two sided to sign the technical-commercial agreement on Kudakulam 3 and 4. The Joint Statement mentions review of progress in setting up these additional units. If this agreement had been signed, Russia would have got a head start over others once again, but our civil nuclear liability legislation is problematic for the Russians too, as was evident from President Medvedev’s public comments. The Russians, like others, await clarifications on the legal scope of the legislation as well as the envisaged period of liability that they hope will be incorporated in the rules and regulations to be framed under the Act. However, an agreement on cooperation between the atomic energy establishments of the two countries on joint research and development on reactor technology was signed. Of potential significance is the reference in the Joint Statement to cooperation in the nuclear power sector in third countries, given plans in our neighbourhood to set up nuclear power plants. This also denotes acceptance of an international role for India in setting up nuclear power plants beyond its borders, an ambition nourished by our atomic energy establishment. As a logical extension of this, Russia has recognized in the Joint Statement India as a supplier state for multilateral approaches to the nuclear fuel cycle in the IAEA, consolidating India’s position over the reality of its mastery over the full nuclear cycle.

On the defence side, India and Russia signed the preliminary design contract for the Fifth Generation Fighter Aircraft, of which India would eventually acquire 200 to 250 in number, manifesting India’s commitment to a durable defence relationship with Russia even as we explore advantageous options with others. This agreement is important as it will give India access to aircraft design technologies. So far India has been engaged in licensed production of foreign aircraft, which has hampered it from building a veritable indigenous defence production base.

India and Russia also agreed during the visit to make travel easier between the two countries, removing a bottleneck in expanding business and other public contacts between them.

Russia was the first country with which we established a strategic partnership. We have such a partnership with many other countries. The Joint Statement issued after President Medvedev’s visit refers to a “special and privileged strategic partnership”- an elevation of status compared to others. For that not to remain at the level of rhetoric the positive outcomes of this visit need to be built upon assiduously.

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Published in Indian Defence Review