An In-Depth Understanding Of The Important India Russia Business Relation

An In-Depth Understanding Of The Important India Russia Business Relation

As Indians, when we think of trusted allies of our country, the first name that comes to our mind is the Soviet Union, a nation that stood by our side in all ups and downs. And today, when the world is facing a crisis and Russia has a big involvement in it, it is very important for us to clear some hazy facts and also educate our readers on the India Russia business relation. 

This understanding will help you to unravel several layers of the world economy and will also clear your doubts on whether the prices of oil and commodities increase, and if they do, why will it happen.

India Russia Business Relation: From When It Began?

In 1971, when India and Pakistan went to war over the humanitarian crisis of East Pakistan (now Bangladesh) the forces arrayed against India were formidable. Aircraft from Iran, Jordan, France, and Turkey were boosting the Pakistani military. The US and the UK were both offering moral and naval support. They both dispatched war ships to the Indian Ocean. It was a coordinated plan to intimidate  India. British ships would target India’s Western Coast, Americans would make a dash in the Bay of Bengal. 

To counter this multi dimensional threat New Delhi sent out an SOS call. It urged global powers for support, and there was only 1 nation that listened, the Soviet Union. It dispatched a fleet of naval vessels from Vladivostok, a number of nuclear arm ships, and atomic submarines. They encircled the American and British war ships, stopped them from entering India’s territorial waters, and prevented a direct clash between India and the United States-United Kingdom combined. 

Moscow was a reliable partner for New Delhi when no one else was. As Washington consistently ignored India’s issues and integrated with Pakistan. 

Today the story from 1971 may be a little more than a fond memory, but it’s geopolitical underpinning still remains intact. Yes! There have been some small hiccups and interruptions but Moscow remains India’s one of the most dependable partners. 

The India Russia business relation began with history. It is hard to put a date but India and Russia have known each other for centuries. All the way back to the 4th Century, Russia used to be a transit trade route between Europe and India. Indian merchants would frequently visit Moscow. Russian travelers would visit Indian cities, document the culture and the people in their tales. 

In the 18 Century, Russia’s last empress Catherine The Great published the first Russian translation of the Bhagavad Gita. In the 19th Century Russian Tsar Paul, I planned to invade British India to weaken the British empire. The Tsar was assassinated and the plan was canceled.

India-Russia Relation: During And After Stalin

Now for the most important history, relations between India and Russia remained tempted. Even after the formation of the Soviet Union in 1922 and this was large because Stalin did not think very highly of India, or should we say the leaders of the Indian Independence Movement. He thought of them as “‘running dogs’ of imperialism”, “‘tools’ of British and Capitalist forces”, he considered Mahatma Gandhi and Jawaharlal Nehru as ‘agents’ of counter revolutionary forces. A communist revolutionary, Stalin viewed their struggle for Independence as a conspiracy of the bourgeoisie, aimed at keeping monopoly capitalism alive. 

So in 1947, when India gained Independence from British rule, Stalin reacted with open hostility. Something he maintained till his death in 1953. The relationship between India and Russia remained cold until then. The ice broke in 1955, under the leadership of Nikita Khrushchev. He visited India that year and laid the foundation of an economic partnership and for the next six years, Russia embarked on Destalinization, a process that brought India closer to Russia. Moscow upheld Indian sovereignty in Kashmir.  They did this also over Goa which used to be a Portuguese enclave. Around the same time. A rift emerged between China and Russia. The Chinese started viewing the Soviets with suspension. They regarded the policies of Khrushchev as a revisionist version of communism. Mao planned to disengage with Moscow. 

So it was no surprise that in 1962, when India went to war with China, the Soviet Union maintained neutrality and by doing so, it exceeded expectations, it was never meant to be. The refusal of Moscow to back China was extremely significant. India began to trust Russia more. 

In 1970 when India conducted its first nuclear test, Washington lectured India. In contrast, Moscow stressed the peaceful aspect of the test. And India replied in kind. When the world slammed Moscow over his involvement in the Chez Republic and Hungary, India stayed quiet. Even after the Soviet Union disintegrated, bilateral ties did not suffer. Yes, there were some ups and downs, but at the end of the day, the idea of geopolitics prevailed.

India Russia Business Relation: Bilateral Trades

Today it manifests itself into every sphere. Take the economy for example. The bilateral trade between India and Russia stands at $8.1 billion where Indian imports amount to $5.48 billion and Indian exports amount to $2.6 billion. By 2025, they aim to take bilateral trade to $25 billion. 

In politics both Russia and India collaborate at platforms like U.N, G20, BRICS, S.C.O. In  fact, it is often said that Russia brought India into the S.C.O in a bid to counter China. 

India Russia Business Relation: Sectors Where These Nations Share A Cordial Relationship

History of India Russia business relations have shown that these two nations have come far with their bilateral trade despite several ups and downs. Today, India and Russia share their economic relation on several grounds that include space, technology, oil, and defence. Let us now have an in depth look into the India Russia business relation in several sectors.

Free Trade Agreement By Both Nations (FTA)

Governments of both the nations have seen their bilateral trade well below its utmost potential, with the only long term strategy of rectifying this via the FTA (Free Trade Agreement). Both the governments have established a joint study group (JSG) to mediate the specifications of an agreement, where a final agreement would be signed between India and the EEU (Eurasian Economic Union) of which Russia is a part. Hence, the Indo-Russian FTA would bring an outcome in a much broader free trade agreement that includes India, Russia, Armenia, Kyrgyzstan, Kazakhstan, and Belarus. It is anticipated once an FTA is in place bilateral trade will raise manifolds, thereby prominently increasing the cruciality of economics in bilateral ties.

The table below shows the India Russia bilateral trade performance.

Year
Trade Volume (Billion $)
Annual Change
2009
$7.46
-
2010
$8.53
+14.34%
2011
$8.87
+3.98%
2012
$11.04
+24.50%

Relation Between Russia And India In Energy Sector

Energy sector is a crucial portion in India Russia business relation. In 2001, ONGC-Videsh acquired a 20 percent stake in the Sakhalin-I oil and gas project in the Russian Federation, and it has invested nearly US$1.7 billion in the project. Gazprom, the Russian entity, and the Gas Authority of India have integrated into joint development of a block in the Bay of Bengal. Kudankulam Nuclear Power Project with two units of 1000 MW each is a good instance of Indo-Russian nuclear energy association. Both sides have shown interest in increasing cooperation in the energy sector.

In December 2008, India and Russia signed an agreement to create civilian nuclear reactors in India at the time of a visit by the Russian president to New Delhi.

Space Cooperation By Both Countries

If we trace back to India-Russia relations history, there has been a long history of cooperation between India and the Soviet Union in space. Instances include Aryabhata, which was the first satellite of India. It was named after the Indian astronomer of the same name. 

It was launched by the Soviet Union on 19 April 1975 from Kapustin Yar by using a Kosmos-3M launch vehicle. The only Indian who visited space, Rakesh Sharma, was also launched by Russia under the Interkosmos space program. When President Vladimir Putin visited India in December 2004, two bilateral agreements related to space were signed. viz. Intergovernmental umbrella Agreement on cooperation in outer space for peaceful aims and the Inter Space Agency Agreement on cooperation in the Russian satellite navigation management GLONASS. Soon after that, a number of follow up agreements on GLONASS have been signed. 

In November 2007, the two nations signed an agreement that was about a joint lunar exploration mission that was proposed by the RKA (Russian Federal Space Agency) and ISRO (Indian Space Research Organization) and had an estimate of ₹4.25 billion (US$90 million). The mission was scheduled to be launched in 2017 by GSLV (Geosynchronous Satellite Launch Vehicle) that included a lunar orbiter and also a rover that was made in India along with one lander created by Russia.

Russia & India On Science And Technology

The prevailing collaboration in the area of science and technology, under the ILTP (Integrated Long-Term Programme of Co-operation) is the biggest cooperation program in this area for both Russia and India. ILTP is associated with the Department of Science and Technology from the Indian side and also by the Ministry of Science and Education, Academy of Sciences, and Ministry of Industry and Trade from the Russian side. Development of SARAS Duet aircraft, semiconductor items, supercomputers, laser science, poly-vaccines, and technology, seismology, software & IT, high-purity materials, and Ayurveda have been some of the primary areas of co-operation under the ILTP.

Under this same scheme, eight joint Indo-Russian centers have been created to aim at joint research and development operations. Two other Joint Centers on Non-ferrous Metals and Accelerators and Lasers are being created in India. A Joint Technology Centre that is based in Moscow to bring cutting-edge technologies to space is also being processed. An ILTP Joint Council conducted a meeting in Moscow on 11–12 October 2007 to review the co-operations and provide further direction. In August 2007, an MoU was signed between the Department of Science and Technology and also the Russian Foundation of Basic Research, Moscow to carry on with scientific co-operation.

India Russia Business Relation In Defence

When we come to defense, India is the second largest market for the Russian defence industry. Russia accounts for 68 percent of India’s military hardware import followed by the US and Israel. The Indo-Russian InterGovernmental Commission is among the largest and the most comprehensive governmental mechanisms that India associates with the nation. Always every department from the Government of India attends it. 

The foreign secretary of India recently stated that

“Without Russian spare parts, our ships won’t sail and our planes won’t fly.”

Together these two nations have launched several military programs. Programs develop States of the art weapons like the Brahmos Cruise Missile Programme, the Sukhoi Su-30MKI, the Ilyushin II-276, and the Kamov KA226. India has also purchased and leased all types of military hardware from Russia. Like the T-90S Bhishma tank, the Akula – II Nuclear Submarine, the INS Vikramaditya, and how could we miss the S-400. 

In 2018, India struck a $5.5 billion deal with Russia to purchase the S-400 Air Defence System. The first unit is anticipated to be functional by this year. What is the S-400? It is one of the most advanced and ported air defence systems in the world. It has the ability to repel almost all sorts of air attacks. India needs the S-400 in order to protect itself from the increasing threats from China and Pakistan.  

Oil Imports By India From Russia

The increasing Russia-Ukraine issue could have ripple impacts on the fuel market of India, as experts anticipate that the prices of crude oil could rise, now that the Uttar Pradesh elections are done. The global prices of oil shot past the $100 (Rs 7,527) a barrel (159 liters) mark following the prevailing crisis which is the highest that has been recorded since 2014. As the scenario escalates between the two nations, the process could further increase throughout the world. 

However, India has not witnessed any surge in price recently, but the price hype to hit India is not far. But in order to shield the economy from the negative effects of the latest surge in crude oil prices, India is exploring the chances of importing added oil at discounted rates from Russia, which is encountering sanctions and global backlash because of  the Ukraine conflict. As per the commodities data and analytics firm Kpler, the import of crude oil from India from Russia in March this year so far is nearly four times greater in comparison to the corresponding period of the previous year. India’s import of crude oil from Russia stood at nearly an average of nearly 360,000 barrels each day in the first half of March 2022. As per the present shipment schedules, the average oil trade between the two nations is predicted to be nearly 203,000 barrels each day.

There is no government-to-government (G2G) management for oil trade between Russia and India. Most of the crude oil purchase from Russia for India has been done by Indian Oil Corporation.

Russia is the second biggest exporter of crude oil behind Saudi Arabia. Approximately three-fourth of the crude oil exports of Russia go to OECD member nations. Major European nations like France, Germany, and Italy, who are also members of the NATO (North Atlantic Treaty Organization), are heavily relying on the Russian for the supply of oil. If the NATO member nations prevail to import Russian oil because of the economic reasons, India must also give primacy to the economic aims.

Challenges India Will face On Oil Imports From Russia Now

One big challenge in the India Russia business relation of oil trade is the payment mechanism. As per sources, the two nations have been exploring the chances of setting up a rupee-rouble trade system for paying for oil and other commodities. Apart from the payment system, there are several other problems that are required to be worked out. It involves freight and insurance. In the time of military clash, the insurance cost increases substantially. The import of India’s oil from Russia has traditionally been low because of the high freight costs.

Union Minister for Petroleum and Natural Gas Hardeep Singh Puri stated in the Rajya Sabha lately that the Indian government was discussing the Russian offer of crude oil import at discounted prices. He said,

"Discussions are currently underway. Several issues are required to be gone into, like how much oil is available either in Russia or in new markets or with new suppliers that may be coming into the market. Also, there are issues relating to insurance, freight, and a host of other issues, including the payment arrangements."

The Closing Lines

Russia has been so far among the closest and most trusted allies of India. It is by far its largest arms supplier to India. As per the data available with the Ministry of External Affairs, Russian Investments in India stand at nearly $18 billion while the Indian investments in Russia stand at $13 billion. The trade balance is in favor of Russia. 

The imports of India from Russia stood at $7.75 billion while the exports of India to Russia stood at $3.22 billion in 2018. In spite of the threats of US sanctions, the Narendra Modi government in 2018 entered into a $5.43 billion deal with Russia to purchase the S-400 defence system. The delivery of the missile system started in 2021. However, India is required to take cautious actions. The United States and other western allies are also equally crucial. Considering the cordial India Russia business relation, and tracing back to history, it can be assured that both these nations will be most trusted allies like they were before.

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Niccolo Romano

Niccolo Romano is an Italian writer who holds expertise in business, and startup related articles. He has a love for business news and is best in his niche.

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