Russia, India Strengthen Bilateral Ties as Putin and Modi Meet in Sochi
Prime Minister Narendra Modi met Russian President Vladimir Putin last week for an ‘informal summit’ in Sochi, a resort city located in southern Russia, on the shores of the Black Sea.
A statement released by India’s Ministry of External Affairs (MEA) stated that the meeting presented an opportunity for both Putin and Modi to “exchange views on international matters in a broad and long-term perspective with the objective of further strengthening our Special and Privileged Strategic Partnership”.
The absence of a firm agenda for the Russia meet has led to widespread speculation by experts with regards to what issues might be discussed at Sochi. An informal summit can serve either of two purposes – the participant’s wish to reaffirm their commitment to agreements signed in the recent past or discuss an issue that could become a bone of contention in the near future. Prevailing assessments suggest that India and Russia are attempting to converge their positions on several international platforms – a meeting of the Shanghai Co-Operation Organisation is scheduled to take place in Qingdao next month.
Bilateral trade, investment relations remain stable
After the summit, Russian Foreign Minister Sergei Lavrov observed that the talks “paid special attention to the economy” and noted the “steady growth of trade turnover”. India-Russia bilateral trade reached US$7.5 billion in 2016-17. There remains, therefore, much room for growth.
Traditionally, trade between the two countries is dominated by Russian exports in the energy and defense sector, tilting the balance of trade in Russia’s favor. Indian imports have now diversified to include gems and jewelry; with Indian gem dealers also investing in the Eurasian Diamond Exchange in Vladivostok.
Russia has also begun to import large quantities of pharmaceutical products from India.
Russian investments in India, in recent years, have focused on brownfield projects in telecommunications, iron and steel production, and the automotive sector – a marked divergence from the conventional investments in energy and defense.
Indian investments, on the other hand, are centered on the upstream sector (exploration and production) of the oil and gas industry in Russia.
The two countries have attempted to strengthen their trade and investment relations through building regional partnerships, infrastructure development, and improving connectivity.
In 2016, India began negotiations for a free trade agreement (FTA) with the regional Eurasian Economic Union (EAEU), which includes Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia.
In 2017, a US$1 billion Joint Development Fund was established by India and Russia with equal financial contributions from both partners. The fund, managed by the Russian Direct Investment Fund (RDIF) and India’s National Investment and Infrastructure Fund (NIIF), provides financial assistance to projects developed jointly by India and Russia.
India and Russia are also important partners in setting up the International North-South Transport Corridor (INSTC). The INSTC is a 4,474-mile long land and sea trade route, through Iran and Central Asia, connecting the Indian market with those in Europe and Russia. The renewed threat of US-led sanctions on Iran, however, endangers the success of this project.
“There is plenty of room for growth in both the Russian and Indian markets for each other’s products”, says Chris Devonshire-Ellis of Dezan Shira & Associates. “Local research and consumer preferences need to be taken into account; however, there is a lot that is complimentary between the two countries in terms of trade”.
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