Mumbai terror strikes have cast Dmitry Medvedev’s maiden visit to India in a new light.
Russian President Dmitry Medvedev will be the first world leader to travel to India after the Mumbai tragedy. In a telephone call to Prime Minister Manmohan Singh earlier this week, Mr. Medvedev proposed focussing during their talks in Delhi on the rising terrorist threat and concerted efforts to counter it. The summit is an opportunity for India and Russia to jointly promote a global strategy for combating terrorism that would be free from double standards and self-servin g interests, and would unite the world rather than divide it.
Russia sees the attack on India’s financial centre in the wider context of a geopolitical shift of power from the West to the East accelerated by the global financial crisis. Economic gurus forecast that the BRIC nations — Brazil, Russia, India and China — will counter the current slump faster than developed countries thanks to stronger consumer demand, and emerge as the world’s new centre of economic growth, financial power, and political influence. The BRIC nations plan to institutionalise their four-angle forum next year when Russia hosts the first standalone BRIC summit to jointly deal with the global crisis and build a new international financial system. “The terrorist attacks in Mumbai is an act of intimidation against not only India but also the other BRIC nations,” said Russia’s Upper House Speaker Sergei Mironov.
India and Russia can best respond to the challenge of terrorism by strengthening all-round strategic partnership. A Kremlin-connected expert says Mr. Medvedev, just as his predecessor Vladimir Putin, fully appreciates the role of India as Russia’s trusted partner. “Strategic ties with India make Russia a stronger global player and Mr. Medvedev is well aware of India’s importance for Russia,” says Dr. Iosif Diskin, co-chairman of the National Strategy Council, an influential Russian think tank. Under Mr. Medvedev, Russia has embarked on a major shift in its economic policy from the West to the East.
Georgia’s U.S.-sponsored attack on pro-Russian South Ossetia, U.S. missile defence plans for Eastern Europe and the West’s foot-dragging over Russia’s membership of the World Trade Organisation have hastened the revision of Moscow’s foreign policy priorities. “We now understand that without diversifying the country’s development to the East, our economy has no future,” Mr. Medvedev said at a Valdai Club meeting with foreign scholars earlier this year.
Russia’s socio-economic strategy through 2020, approved last month, calls for reorienting the country’s foreign trade gradually from the European markets to India and China as Russia seeks to double the share of its engineering exports from 6-7 per cent today to 14 per cent by 2020. “The role of trade and economic ties with China and India will be defined not only by Russia’s potential for expanding its foreign trade, but also by the growing geopolitical role of these two nations in world affairs,” said a government commentary on the 2020 strategy, which has not been published. “In this connection, Russia is faced with the need to build a matching export potential in the Asian direction and to draft a set of measures to do so,” the document said.
While China has already emerged among Russia’s top trade partners, with bilateral commerce expected to touch $50 billion this year, India is somewhere near the bottom of the list. Whereas the Soviet Union was India’s biggest trade partner, Russia today accounts for 1 per cent of India’s foreign commerce. The same is true for Russia. The foreign trade of both India and Russia has grown manifold since the break-up of the Soviet Union, but their bilateral trade has stagnated at $2-3 billion, and has only started rising in the past year or two. An intergovernmental agreement for the construction of four nuclear reactors at the Kudankulam plant in Tamil Nadu, which will be the highlight of Mr. Medvedev’s visit, may help the two countries attain the declared trade target of $10 billion by 1010, but that will still be a tiny fraction of either country’s foreign trade.
Strategic partnership India and Russia declared in 2000 is like a tripod whose two legs — political interaction and defence ties — are strong, whereas the third leg — trade — is so fragile that may cause the entire structure to flip over.
It has been a standing refrain at annual Indo-Russian summits to lament the meagre volume of bilateral exchanges, but efforts to increase it along the traditional trade patterns have only brought limited results. Fertilisers and metals still make the bulk of Russia’s exports to India, while the Indian exports comprise low-value agricultural commodities like tea, coffee, tobacco, dry fruits and rice. India’s big companies are conspicuously absent from the Russian market; about 400 Indian entities registered in Russia are mostly small and medium businesses specialising in import/export operations.
Meanwhile, Indian businessmen working in Russia say the local market offers tremendous opportunities. “You cannot beat Russia for the profit margins,” said Shankar Mukherji of Termax Limited, which sells boiler equipment and energy saving technologies. He sees extra opportunities for Indian business in Russian during the current global crisis. “Indian goods sell 20-30 per cent cheaper in Russia than western brands of similar quality,” Mr. Mukherji said.
Indian entrepreneurs blame the governments of the two countries for the failure to promote business-to-business contacts. “Indian businessmen are afraid to set up shop in Russia because they do not know local laws and have no information on investment opportunities,” Mr. Mukherji said. “The two governments just lack the will to push things on the ground.” Two years ago India and Russia set up a Joint Study Group to identify bottlenecks to bilateral trade and offer solutions. The group produced a 150-page report, but it has neither been published nor made available to the business community through the internet. The information gap is depressing. Despite repeated pledges to create online web resources of legal and commercial information to help businessmen of the two countries there is still no functional Indo-Russian website.
Many hopes have been generated by the establishment earlier this year of the India-Russia CEO Council, a forum of business tycoons, co-chaired by Reliance Industries Chairman Mukesh Ambani and Russian IT conglomerate Sistema head Yevgeny Yevtushenkov. Experts say India and Russia need to take a fresh look at their economic ties and come up with new bold ideas. “It is necessary to work out a roadmap for Russian-Indian economic relations that would draw on the mutually complementary character of the two economies and would be harmonized with the two countries’ long-term economic strategies,” said Dr. Diskin of the National Security Council. The council has recently teamed up with India’s Observer Research Foundation to launch an Indo-Russian forum on bilateral and international affairs. Energy and defence would still be the pillars of bilateral strategy, but they need to rest on a strong fabric of trade relations. In the absence of ramified commercial exchanges, any hiccups in defence deals, such as the row over the cost escalation for the Gorshkov aircraft carrier, tend to create unnecessary political wrinkles.
Joint development and commercialisation of new technologies could become a strong platform for expanding trade and economic cooperation. India and Russia have unique experience of scientific collaboration under the Integrated Long Term Programme (ILTP) of cooperation in science and technology. Over the past two decades scientists of the two countries have carried through over 500 joint research projects. However, while the scientific part of the programme has been an unmitigated success, industrial application of research has lagged behind. “What is needed today is to create an organisational and financial mechanism for turning results of joint research over to industry, some kind of a foundation for advanced technologies,” said Dr. Diskin. Another promising area of cooperation is the export of Indian workforce to Russia. Indian labour would be a welcome alternative to the creeping Chinese migration to Russia, which Russian experts fear could one day result in a loss of territory.
“Indians easily integrate in local societies, do not create ethnically-denominated criminal groups and pose no strategic risks for Russia,” Dr. Diskin says. “With proper logistics work Russia could absorb up to 200,000 Indian workers a year.” It is to be hoped that the first India visit of Russia’s new President will create momentum for building a wider economic basis for Indo-Russian strategic cooperation.