The Russia-India relationship: big bucks, many irritants

The rapport between Prime Ministers Vladimir Putin and Manmohan Singh has not translated into better trade, manufacturing, cultural and person-to-person relations between India and Russia

by Ajai Shukla

Business Standard, 15th Mar 2010

Prime Minister Vladimir Putin’s 5th visit to India, superficially a success, in fact highlighted the one-way structure of the Russia-India relationship. The four pillars on which the relationship rests --- strategic congruence; defence and space partnership; nuclear power generation; and hydrocarbons --- remain biased in favour of Russia. Putin’s visit gives little hope that this is about to change.

But the strategic partnership remains strong, despite Russian dismay about the US-India tango. Moscow shares New Delhi’s concerns on terrorism. The Kremlin, scarred from Chechnya, worries that a radicalised Afghanistan or Pakistan could spread extremism to Russia’s Central Asian underbelly. Secondly, like Washington, Moscow too has deep concerns about the rise of China; India and Russia compare and discuss their perspectives on China. Finally, Moscow would like a powerful Indian Navy patrolling the Indian Ocean, leaving lesser space for the US and Chinese navies.

Based upon this strategic congruence, India and Russia have extended their “Long-term military and technical agreement” for the period from 2011-2020. Indian defence purchases have long been, and still remain, an important driver of Russian defence R&D and defence manufacture. While the MEA has stated that Russian equipment, which used to constitute 70% of India’s military hardware, is now climbing down towards 60%, that is still 35-40% of Russia’s annual defence exports.

Russia’s readiness to supply India strategic platforms and technology that no other country will part with --- such as a nuclear submarine on lease and assistance in designing an Indian nuclear submarine and underwater-launched missiles --- maintains for that country a niche in a lucrative strategic sphere.

In the emerging field of joint aircraft development, the progress is slower than anticipated. It had been hoped that a $600 million joint venture would be set up during Putin’s visit, between India’s Hindustan Aeronautics Limited (HAL) and Russia’s United Aircraft Corporation (UAC), to develop a Medium Transport Aircraft (MTA) for the Russian and Indian Air Forces to transport 18.5 tonne payloads over 2500 kilometres. This expectation was belied, and Business Standard has learned that both sides continue to bargain hard in ongoing negotiations.

Also mired in negotiations is the proposed HAL-UAC joint venture to develop and manufacture 250 fifth-generation fighters each for the Russian and Indian Air Forces. This even after the prototype fighter, named the Sukhoi T-50 or the PAK FA, has already taken to the skies in January 2010.

These disappointments notwithstanding, Russia drew satisfaction from the culmination of two years of negotiations over the price of the aircraft carrier, Admiral Gorshkov (INS Vikramaditya, once it joins the Indian Navy in 2013). In supplementary agreements to the original contract, India undertook to pay US $2.33 billion for the Gorshkov, instead of the US $974 million that had been agreed upon in 2004. India also signed a US $1.6 billion deal to buy 29 MiG-29K and MiG-29KUB fighters, over and above the 16 already purchased for operating from the aircraft carrier INS Vikramaditya. The additional fighters, India’s most technologically advanced, will operate from the Indigenous Aircraft Carrier (IAC) that is being built in Cochin Shipyard.

Russia’s multi-billion dollar defence signings were echoed in the realm of nuclear power production (NPP) equipment. The NSG waiver on nuclear trade with India has triggered a Russian campaign to sell reactors in India, co-opting Indian engineering companies in order to bring down costs. With India’s current generating capacity of 4000 MW slated to reach 20,000 MW by 2020, the coming decade could see the procurement of at least 12 nuclear power reactors from foreign suppliers. According to Alexander Kadakin, Russia’s ambassador to India, Moscow hopes to bag orders for at least 6 of those reactors.

During this visit, Moscow and New Delhi signed two documents relating to NPP: a broad “Agreement on Cooperation in the use of Atomic Energy for Peaceful Purposes”, and a specific “Road Map for the Serial Construction of Russian Designed Nuclear Power Plants in the Republic of India.” This road map, sources tell Business Standard, involves adding four more reactors to the existing two reactors at Kudankulam, and then developing another reactor site at Haripur in West Bengal.

Despite these initiatives, Indian officials complain bitterly that Russian officials, particularly in the important middle rung, are simply not interested in implementing Vladimir Putin’s vision of a close Russia-India relationship. Putin has recognised corporate India’s wish to invest in Russia and do business there, but little has been done to facilitate that.

“The relationship was far better during the Soviet era, because when a leader declared something, it was implemented faithfully by officials down the chain”, said a top-ranking government official to Business Standard. “But today, Putin’s genuine warmth is simply not translated into action.”

The unhealthy lopsidedness of the trade relationship will tilt further in Moscow’s favour after India’s purchase of nuclear reactors and supplies of nuclear fuel. The visa regime remains a major hurdle for business.

“Getting a business visa, even for an industrial head like Ratan Tata, involves delays and all sorts of procedural requirements; and Moscow does absolutely nothing to ease that”, says a senior official in the Prime Minister’s Office. “Russian officials are focused entirely on Europe and America. They simply don’t see India as a priority.”