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Trade Talks Mask Growing Tensions Between India and Russia

02 May 2023
By Professor Ian Hall
The Secretary of the Russian Security Council, Mr Nikolai Pastrushev calls on the PM in New Delhi, March 29, 2023. Source: Office of the Prime Minister Photo Gallery/

Talk of a new free trade agreement between India and Russia should not distract from the unravelling of their strategic partnership. Russia is becoming steadily less useful to India as their strategic interests diverge.

In mid-April 2023, Russia’s deputy prime minister and trade minister Denis Manturov spent two days in New Delhi. Ostensibly, the purpose of his visit was the 24th meeting of the India-Russia Inter-Governmental Commission on Trade, Economic, Scientific, Technical and Cultural Cooperation, which labours under the long acronym IRIGC-TEC and serves to coordinate their bilateral relationship. But Manturov also had other concerns, not least stepping up Moscow’s India-focussed charm offensive, intended in part to dissuade New Delhi from taking a more critical position on Russia’s assault on Ukraine.

Past and present

India and Russia once enjoyed a close strategic partnership. In the early 1970s, facing threats from both China and Pakistan, New Delhi turned to the Soviet Union for economic and diplomatic support, as well as a reliable source of arms. Moscow delivered on all fronts, building long-lasting reserves of goodwill in India.

However, the economic and diplomatic ties that bound India and Russia together during the latter part of the Cold War have long since frayed. Moscow’s ability to provide what New Delhi wants – especially capital, markets, and technology – is much diminished. In 1991, India’s economy was roughly half the size of Russia’s. Today, it is twice as large, the fifth biggest in the world, growing at the fastest rate of any major economy. This scale and momentum have allowed India to find new partners for trade and investment – and allowed New Delhi to let the economic relationship with Russia wither. And wither it has. By 2021, the value of bilateral trade between India and Russia was only US$11.3bn, about a tenth of India’s trade with the United States (US).

Over the past thirty years, India and Russia’s broader strategic interests have also diverged. In the 1970s, both saw China’s unpredictability and belligerence as a threat and both perceived value in cooperating to manage it. Today, the two see things quite differently. Moscow views the US as Russia’s pre-eminent strategic challenge, while New Delhi is increasingly concerned about Beijing’s ambition. For these reasons, Russia has forged a “no limits” near-alliance with Beijing to counter the West, while New Delhi has constructed a more tentative, but substantive, partnership with Washington to help manage China.

The Ukraine effect

The Ukraine war has highlighted these points of divergence and generated new tensions. The early stages of the crisis pushed up energy, grain, and fertilizer prices, threatening India’s economic recovery after Covid-19 and forcing New Delhi to implement some emergency measures to maintain stability.

At the same time, Moscow’s reckless aggression put India in an unwanted diplomatic and strategic quandary. For three decades, India’s leaders have tried to avoid making a choice between improved relations with the US and European states and cordial ties with Russia, hoping in part to prevent Moscow from becoming Beijing’s “vassal.” The invasion threw this approach into disarray, with the Europeans in particular calling on India to disavow Russia.  So far, New Delhi has resisted those demands, pointing to the greater challenge to global security posed by China and suggesting that the West should resolve its differences with Moscow and focus on that bigger issue.

This stance could change as the Ukraine conflict drags on. The war is eroding away Russia’s usefulness to India. Before the invasion, aside from a diplomatic hedge, Russia provided India with three things: weapons, nuclear technology, and hydrocarbons. The conflict has already disrupted deliveries of arms, including the S-400 anti-aircraft systems, and accelerated New Delhi’s efforts to expand and upgrade India’s local defence industry. Sanctions are yet to be imposed on Russia’s civilian nuclear industry, but it is likely that its ability to honour contracts, including those with India, will also be impaired for some time to come by the restrictions now in place on financial transactions.

To be sure, India has increased purchases of Russian oil since the war began, taking advantage of significant discounts. These cheap supplies have helped keep the economy going amid surging inflation and boosted bilateral trade to almost US$40bn in 2022-23. It is unlikely, however, that India will remain so dependent on Russian supplies in the medium to long term, given the relative proximity of the Middle Eastern producers on which it has traditionally relied.

Promises and proposals

Manturov’s recent mission to New Delhi should be seen in this wider context of a slowly deteriorating relationship. He came bearing gifts – or, at least, the promise of gifts – for good reason. To shore up the partnership he pledged Moscow’s commitment to a free trade deal with India complete with unspecified measures to ensure Russian exports did not exceed imports, as they have done for years. He called for a bilateral investment protection pact and declared Russia would explore opportunities to invest in India’s infrastructure and boost the frequency of flights between the two countries.

Tellingly, New Delhi’s response to these proposals was lukewarm. In public remarks made during Manturov’s visit, India’s external affairs minister Subrahmanyam Jaishankar did not even mention the idea of a bilateral free trade deal, instead referring to stalled talks for a broader agreement with the Eurasian Economic Union. At the same time, Jaishankar complained that Moscow needed to improve market access for Indian goods and work harder to overcome barriers to financial transactions, including Russian reluctance to accept rupees for anything other than defence exports.

Growing tensions

It is not hard to detect the irritation in Jaishankar’s remarks, nor the implication that India is now the dominant partner in the bilateral relationship, able to set the terms of engagement. Exactly what the relationship will look like five years from now remains, however, uncertain. New Delhi is actively seeking alternative suppliers of defence and nuclear technology. Indian demand for Russian oil will likely subside once the present crisis is resolved. Moscow’s diplomatic clout – much diminished by the Ukraine debacle – could well be left as the only Russian commodity in which India has a sustained interest.

Whether New Delhi will still be able to make use of Moscow’s influence, given their diverging strategic interests, is also unclear, but the signs are not positive. In recent months, Russia has begun to do and say things that undermine and embarrass India. At the Group of 20 (G20) foreign ministers’ meeting in March 2023, Sergei Lavrov stymied India’s attempt to obtain consensus on a joint communique. And at the Shanghai Cooperation Organisation (SCO) defence ministers’ meeting the following month, Russia’s Sergei Shoigu pointedly criticised the Quadrilateral Secuity  Dialogue, of which India is a member, and accused the partners of attempting to “contain” China. Neither set of remarks would have been well received by a New Delhi keen to ensure India’s chairing of the G20 and SCO boost its global standing.

Ian Hall is the acting director of the Griffith Asia Institute at Griffith University. His research focuses on India’s foreign and security policies.

This article is published under a Creative Commons License and may be republished with attribution.