Article

From Russia With Invoices

Pramit Pal Chaudhuri January 2, 2013

The Russian President recently made his annual visit to India, and it was with difficulty that the local media roused itself to pay attention. In theory, there was every reason to watch closely: Indo-Russia trade always has big multi-billion dollar deals, generally about the kind of headline-worthy stuff media love — nuclear reactors, big weapons platforms, and oil and gas; and there is little geopolitical conflict between the two countries.

But it doesn’t click. Likely because there isn’t much more to it than exactly what’s listed above.

Indo-Russian trade is a pittance for two trillion-dollar-plus economies. Indian exports to Russia tallied $1.1 billion, with $4.3 billion of 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.

Russian and Indian officials admit the trade is lumpy. There’s the odd billion-dollar deal among 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 defense 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 that there is almost no private corporate sector trade; the big deals are government-to-government (G2G) sales. So it’s 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, only because of a push from New Delhi, 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 which the Indian government can just order things to be better. Moscow does very little to encourage Indian private trade or investment. For Indian firms, getting visas and overcoming financial and regulatory hurdles is a nightmare. This is not hostility, just indifference.

Some who have analyzed Russian behavior 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.

Cases 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 party of the Indian military basket, but in a decade or two it will be merely one among many, no longer primus inter pares.

If global oil and gas prices enter a cyclical downturn in the coming decades, Russia, which experienced nearly 7% 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 the future.

This short-termism can also be seen in other aspects of its diplomacy. Moscow pushed the original Russia-India-China triangle, then lost interest in it, then pushed for it to 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.