From Russia with… a bill

by Ajai Shukla
Business Standard, 20th Nov 2007

With collective eyes glued on the warming relationship with the USA, and the talked-up contest with China, most watchers have brushed off the icicles forming on the India-Russia partnership. But the foreign ministry rhetoric of “historical ties” and “strategic partnership that has stood the test of time” cannot paper over the widening cracks as a resurgent India and a resurrected Russia find themselves growing in different directions. The embers in the relationship have turned to ashes and things could get worse.

The politics are no longer right. New Delhi’s dance with Washington is timed in sync with Moscow’s adoption of a hard line towards the west. The trilateral Russia-China-India talk shop is an ineffectual band-aid over a deep sword cut, because Moscow has few expectations from either India or China. Russia’s Ministry of Foreign Affairs complains that both Asian giants pay lip service to multi-polarity, and the primacy of the UN, while actually aligning their foreign policies to the US in order to gain short-term objectives like the lifting of sanctions, preferential trade relations, and an easier visa regime.

Prominent foreign policy analysts in Moscow complain about “the inertial foreign policy thinking of Russia’s potential allies… including China and India.” Russian realists, who now make policy, know that Russia, even with its new hydrocarbon wealth, cannot match the US in dealing with China and India. Moscow, conclude these analysts, would do better to concentrate on its own back yard --- the Central Asian Republics and the Caucasian Republics of the former Soviet Union.

If this changing political dynamic is the invisible cause, its most visible symptom is the crumbling of the arms relationship. With Russia no longer shipping in subsidized weaponry, South Block has not yet fully accepted the purely commercial nature of Moscow’s arms sales to India. The acrimony over Russia’s insistence on renegotiating the price of the Gorshkov aircraft carrier, and the Sukhoi-30 fighters, symbolises the new relationship.

New Delhi’s irritation partly rests on its perception that Indian arms purchases have bankrolled Russia’s defence industry for the fifteen years after the Soviet Union melted down into a bankrupt Russia. When three quarters of Russia’s famous military design bureaus ran dry from lack of funding, putting a million defence scientists on the streets, India bankrolled Moscow’s defence production estate, placing orders for warships, fighters, missiles and avionic upgrades that kept Russian factories rolling. That Russia now wants to renegotiate the prices that were agreed upon then is seen in New Delhi as not just breach of contract but also breach of faith.

But India’s importance for Russia’s defence industry has diminished and that is due not just to the petrodollars flowing into Moscow’s treasury, enabling Russia to place large orders of weaponry for its own military. In addition, a new group of customers who are signing up for Russian weaponry have made Russia less dependent on sales to India. First China supplanted India as Moscow’s top buyer; in 2006 and 2007 a host of smaller countries have knocked China off the pedestal. Amongst the $14 billion worth of arms deals signed by Russia in 2006-07, the biggest customer was Algeria, with a $7.5 billion order for a range of defence systems. Venezuela placed a $3 billion order, while Malaysia, Indonesia and Vietnam ordered more than a billion dollars worth of Russian arms. Russian strategists exult at having broken out of “the China-India arms sales ghetto”.

But India remains dependent on Russian arms, for several reasons. With 70% of India’s military carrying Russian weaponry, switching to another supplier entails a cost in terms of inter-workability. Another reason is that Moscow remains either the only vendor willing to give India sensitive systems like nuclear powered submarines and strategic bombers, or to jointly develop futuristic equipment with India. Finally, in India’s fractured polity, Russia remains a politically acceptable supplier. New best friend, America, has signalled its willingness to sell India one of its front-line nuclear-powered aircraft carriers, the Kitty Hawk. But one has only to recall the furore from the Left when the Kitty Hawk came to the Bay of Bengal for exercises in September to realise that, like the US-India nuclear deal, India’s communists would vehemently oppose a Kitty Hawk purchase.

With the political logic and the arms relationship now entering a new trajectory, Russia and India cannot look towards trade and commerce to prop up their relationship. Bilateral trade is actually falling; from an insipid $5.2 billion in 1991, it has halved to $2.5 billion today. Without the proposed north-south corridor, through Iran, which is touted as the magic bullet for boosting Russia-India trade, the Prime Minister’s target of $10 billion by 2010 is thoroughly unrealistic.

Like in every relationship that changes over time, New Delhi must be nimble rather than nostalgic in reaching a new equation with Moscow. The energy relationship must be evaluated in a hard-nosed manner. Russia has already made it clear that future sales of nuclear reactors will take place only after India obtains exemptions from the NSG. And while India would like to be allocated oil exploration blocs in Russia as a favoured partner, Moscow would rather allocate them to western buyers, creating dependencies that could be leveraged later.

As India transforms into a regional, and then a global power, managing changing relationships will be a key challenge. Forging a mutually beneficial and more equal relationship with Russia is a high priority.