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From Russia with profit

Indo-Russian relations are crippled by the absence of a private corporate facet. The Medvedev visit sought to overcome this missing link. Pramitpal Choudhuri writes.

delhi Updated: Dec 23, 2010 01:13 IST
Pramitpal Choudhuri

No other country evokes as much nostalgia and goodwill among Indians, especially those in their fifth decade and above, than Russia. Yet, no other Indian strategic relationship falls so far short of potential and requires constant resuscitation by officialdom.

New Delhi and Moscow see the world in pretty much the same light. So, why do they have to keep chasing away shadows?

The joint statement issued by Russian President Dmitry Medvedev and Prime Minister Manmohan Singh speaks of a never-quite-defined "special and privileged strategic partnership."

But what ails the relationship is clear in the subsequent clause, when the two countries speak of a bilateral trade target of $20 billion (Rs 92,000 crore) in five years. This is beyond modest: Russia's bilateral trade with China today is nearly $50 billion (Rs 2.3 lakh crore) and with the European Union nearly $250 billion (Rs 11.5 lakh crore).

Other issues bedevil relations as well.

The Indian Navy and Air Force have been increasingly vocal about what they see as a Russian model of selling weapons cheaply and then charging exorbitant prices for spare parts afterwards.

Russians complain that India continues to believe it should get weapons at throwaway prices as it did in Soviet days. From Moscow's standpoint, Admiral Gorshkov is about New Delhi squeezing them to get an aircraft carrier for less than a billion dollars.

The other barrier is geography. Russia is an economy overly dependent on oil, gas and mineral exports. India's appetite for such minerals is a fraction of, say, a China's or Japan's.

A look at a map makes it clear why oil and gas exports from Russia to India are not a viable proposition, especially when gas-guzzling China sits next to Russia and the oil-rich Persian Gulf is a stone's throw from India.

"Investments like Sakhalin gas are a one-off," says Hari Vasudevan, author of Shadows of Substance, a study of Indo-Russian trade.

Finally, there is almost no civil society engagement between the two countries. A study by Igor Y. Kotin of St Petersburg State University estimated the entire Indian population in Russia to be about 40,000 - most of them medical students who return home. Russia has fallen off the map for a generation of Indians - and vice versa.

This feeds into a minimal private corporate sector engagement between the two countries. India Inc is the spearhead of the country's overseas presence - and it avoids Russia. Indian businessmen say Russia is a hostile investment environment. Russian complain corruption in India beats their homegrown variety.

This lack of trust has meant missed opportunities. Russia offered in 2006 to send its huge diamond output to India's polishers, says Vasudevan, but India failed to find the capital to make the trade work.

The Medvedev visit laid out a vision that seeks to fill this gap. Agreements on visas, trade credit and facilitating energy investment have been signed. One of the most striking developments has been Moscow's open door to Indian pharmaceutical firms. Russia's drug industry imploded in the 1990s and, according to Russian figures, today imports half a billion dollars of drugs from India. If nurtured, this could provide the corporate link that continues to elude India and Russia.

It is important to realise that modernising the Russian economy is now that country's overriding strategic imperative. Russian foreign policy, said a Bloomberg analysis earlier this year, is all business.

Moscow knows it needs to wean itself off raw material exports. That is why Russian leaders today visit software parks and woo Indian executives rather than meet military brass when they come here.

"The major task is to place the existing (economic) potential at the service of economic modernisation…These issues were the focus" of the Medvedev visit, said Ambassador Alexander Kadakin.

It is not that Russia does not have a strategic interest in India. But these interests are much more diffused than the balance of power agenda of the Cold War. "Russia wants India to maintain an independent foreign policy and not completely end up in the Western camp," says Nandan Unnikrishnan of the Observer Research Foundation.

But Moscow is also worried about the spreading influence of China in Central Asia and its own Far Eastern region. Russia will remain India's veto-on-request in the Security Council and among its strongest supporters in any multilateral fora.

However, Moscow is no longer prepared to subsidise India's security. Russians have been far more blunt in saying the two countries need to jettison Soviet-era nostalgia and get on with building a new relationship.

The audience that would understand this the best and the one that would usher in the sort of ties that Moscow wants are India's corporate bosses -and so far they are the ones who have eluded Russia's grasp. Promise versus potential