From Russia With Invoices

Vladimir Putin made the annual Russian president’s visit to India and it was with difficulty that the local media roused itself to pay any attention.

In theory, there was everything worth paying attention to the visit. Indo-Russia trade always has big multi-billion dollar deals. They are generally about the kind of stuff media like to headline with: nuclear reactors, big weapons platforms, and oil and gas. And there is little geopolitical conflict between the two countries.

But it doesn’t click. I would argue it doesn’t because there isn’t much more than exactly what is lifted above.

Indo-Russian trade is a pittance for two trillion-dollar plus economies. Indian exports to Russia were $ 1.1 billion exports and $ 4.3 billion imports in 2008-09. In 2011-12 these figures were $ 1.8 billion and $ 4.6 billion. Russia is India’s 36th largest export market, an inconsequential ranking.

As Russian and Indian officials admit, the trade is lumpy. It consists of the odd big billion-dollar deal and then long periods of nothing. And the areas where such deals happen – energy and reactors – are places where Russia is facing stiff competition.

The same is true for military sales, which don’t appear in the trade figures. Russia has a shrinking pie of Indian defence deals. And much of what they sell is effectively shells – airplanes with Russian wings and engines, but avionics and software from Israel or France.

The reason for these dismal figures is obvious. There is almost no private corporate sector trade. The big deals are G2G, government to government, sales. So it is Indian state-owned enterprises like ONGC Videsh, Gas Authority of India or the Nuclear Power Corporation of India which buy Russian – and sometimes one suspects because of some push from New Delhi which wants to keep the figures looking good.

Personally, I don’t think Moscow quite gets the new India. Putin and other Russian leaders still see the relationship through a Soviet prism in the sense they believe the Indian government can just order things to be better. Moscow does very little to encourage Indian private trade or investment. Indian firms have a nightmare time getting visas, finance and regulatory hurdles. This is not hostility, just indifference.

Some other governments who have analysed Russian behaviour towards India believe it fits in with a larger disintegration of Russian strategic thinking. Moscow and its kleptocracy basically think short-term. The tendency is to simply make hay while the Indian system is willing to pay. Thus Putin put Sistema, the telecom firm whose investment in Russia has become tied up in the 2G telecom scandal, at the top of his Indian agenda. Sistema, by all accounts, is important because it happens to be part of his personal corporate circle. But banging on about a single business deal is poor diplomacy – and indicates a lack of strategic thinking.

Events like the Admiral Gorshkov, an Indian-purchased carrier whose price has kept rising geometrically while its arrival date keeps getting delayed arithmetically, have soured the Indian military. Russia will always be part of the Indian military basket, but in a decade or two it will be merely one among many not primus inter pares as it has been.

If global oil and gas prices enter a cyclical downturn in the coming decade, Russia, which experienced nearly seven per cent growth for much of the past decade, will start to hurt. Its failure to develop an entrepreneurial culture and commercialize its many technological capabilities during the Putin years means it will, I suspect, be even more pushy about billion-dollar quick fixes in future.

This short-termism can also be seen in other aspects of its diplomacy. Moscow pushed the original Russia-India-China triangle and then lost interest in it. Then it pushed for it be expanded to include Brazil and, to India’s irritation, borrowed the Goldman Sachs report label to brand it. But today, Russia is the least constructive and most passive member of the BRICS.

But, as mentioned, there are no differences in the foreign policies of the two countries. Russia remains the most dependable vote among the United Nations Security Council permanent five when it comes to India’s interests. But keep an eye on Russia’s attempts to play footsie with Pakistan as the US withdraws from Afghanistan. On this, New Delhi may find it hard to look the other way.

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