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Rediff.com  » News » Trade, key to Indo-Russian ties

Trade, key to Indo-Russian ties

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December 02, 2005 20:05 IST

Prime Minister Dr Manmohan Singh's forthcoming visit to Russia for the annual summit meeting with President Vladimir Putin will be his second trip to Russia within the calendar year, underscoring the closeness of Indo-Russian relations.

During the visit, Dr Singh will discuss a wide-range of issues with Putin. While the current international situation -- the war in Iraq, the Iran question, the fight against global terrorism, restructuring the United Nations, etc -- will be high on the agenda of the talks at the summit, there is little doubt that the focus of the discussions will be on how to improve bilateral economic relations.

On the political front, India and Russia have a virtually identical outlook on international affairs and these have not undergone any significant change since Putin's visit to India last year. The two leaders also had the opportunity to exchange views during Dr Singh's May 2005 visit to attend the Victory Day celebrations in Moscow.

Manmohan to ink 4 agreements in Moscow

There are, of course, some irritants like the Indian embassy in danger of losing land allotted during the Soviet Union days to build a school and residences. A strange way, to say the least, to treat a 'strategic partner.'

But the ties in the defence sector are also flourishing, having undergone a qualitative shift from the earlier buyer-seller relationship to partnership of jointly developing high-tech military equipment.

The Sukhoi 30 MKI deal and the Brahmos project are examples of this successful collaboration. There are several new joint projects on the anvil -- the multi-role IL-214 transport airplane, a fifth-generation fighter aircraft, maritime platforms, etc.

Russia is also keen to get a slice of the forthcoming 120-odd combat aircraft deal. Russia's MiG Company will compete with the French Mirage and the US F-16s.

The cooperation in science and technology is also progressing well. The only lacuna is the tardiness in commercialising the new technologies and products that developed under this programme. The two countries are also keen on further developing cooperation in the peaceful uses of nuclear energy and space research.

However, there is one area, which is the cause for great concern -- the economic ties, which are nowhere near being commensurate with the level of the political relationship.

Despite the agreements arrived at during Putin's December 2004 visit to India, there appears to be little improvement in bilateral trade. The original roadblocks -- transportation, banking, and lack of private investment -- are still to be overcome.

There is great interest in development of the South-North corridor via Iran and the Caspian Sea. Cargo will go overland from Iran's Indian Ocean port of Bandar Abbas to the Caspian Sea port of Bandar Arzali and then by sea to the Russian Caspian Sea port of Astrakhan.

Over a dozen countries, from Sri Lanka to Bulgaria, have evinced interest in using the corridor, which significantly cuts down transportation time and costs to Europe and Central Asia.

Expansion of this route is of great interest to India, not only because of quicker and cheaper access to Russia and Europe, but also because it helps overcome the current inability to send goods via Pakistan to Central Asia. However, as of today, little has been done to enhance the capacities of this route to make it viable and overcoming complex customs problems to make the route more efficient.

On banking links, the SBI-Canara Bank joint venture has opened a branch in Moscow (there may be a delay, however, before the joint venture can start retail banking operations because of current Russian laws) and ICICI Bank has purchased a Russian bank giving it a footprint in Russia.

Creation of a joint venture between two or more blue chip banks from the two countries to finance private sector trade and investment would go a long way in kick-starting the economic relationship.

For bilateral trade to expand significantly it is also necessary to create an information bridge that would dispel the existing prejudices among businesspersons in both the countries.

Russian executives are still not fully aware of modern India's capabilities, while Indian businesspersons are not yet conversant with the recent positive changes in the Russian business environment. In fact, inexplicably the CII has shut down its Moscow office less than two years after opening it.

Another significant obstacle in the path of developing economic ties is Russia's tough visa procedures, which make it very difficult for Indian businesspersons to visit the country. Dr Singh must forcefully take up this issue with Putin, particularly after having last year conceded to Moscow's request to sign a visa agreement that, in effect, has proven to be most one-sided in favour of Russia.

However, whatever the figures and reasons, it is evident that this volume of trade is abysmally low for two countries that claim to enjoy a 'strategic partnership.' (India's trade with China is several times higher. India's exports to Bangladesh are almost three times higher than to Russia.)

It is amply evident that in this era of globalisation a 'strategic partnership' will not endure without an underpinning of substantial and significant economic links between the private sectors of the two countries.

The author is Senior Fellow (Eurasia), Observer Research Foundation.

Nandan Unnikrishnan
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