India-Russia: thorny issues in the relations

Russian President Vladimir Putin’s visit to India should dispel speculation about hiccups in bilateral ties. When Moscow unexpectedly rescheduled Mr. Putin’s visit from October-end to December-end, media and analysts in both countries attributed the delay to unresolved problems. There were reasons for such conjectures:

v     Russia was unhappy with India’s refusal to waive civil liability for units III and IV of the Kudankulam Nuclear Power Plant (KNPP)

v     Failure to secure Russian telecom company Sistema’s massive investment in the joint venture, Sistema Shyam TeleServices Ltd (SSTL)

v     India was concerned over a year-long delay in the delivery of the Vikramaditya aircraft carrier.

However, as time went by, it became clear that contentious bilateral issues had little to do with the postponement. Mr. Putin had cancelled all foreign trips and stopped travelling for eight weeks in October and November because of reported problems with his back.

Kremlin spokesman Dmitry Peskov admitted that his sports-loving boss had pulled a muscle while exercising, but denied he had serious health problems. Whatever problems the Russian leader may have had, he seems to have brought them under control and in December resumed his usual hectic travel schedule.

Mr. Putin’s visit to India will be his first as Russia’s President in five years. He returned to the top Kremlin job earlier this year after serving as Prime Minister for the past four years. It was Mr. Putin who restored the warmth of Indo-Russian relations when he succeeded Boris Yeltsin 12 years ago, and bilateral ties have been on the rise ever since.

India’s Ambassador to Russia Ajai Malhotra said that, “political-level relations as well as government-to-government and people-to-people contacts have never been as close as they are today”. Russia remains India’s most trusted and valuable defence partner.

Ø     Russia reaffirmed its readiness to share cutting-edge weapons technologies

Ø     Russia leasing out the nuclear submarine Chakra

Ø     Russia offers to jointly develop the fifth-generation fighter aircraft.

Ø     The summit (Dec 24, 2012) seen the two sides seal multi-billion deals for the supply of Su-30MKI fighters, Mi-17 helicopters, aircraft engines and tank missiles.

Mr. Putin is also expected to endorse India’s efforts to expand its involvement in the Russian energy sector, with talks currently focusing on the development of new oil and gas fields in Russia’s Far East, Siberia and the Arctic region.

The perceived irritants in the relations have been blown far out of proportion by the media and interested parties. Informed Russian sources said the liability issue for Kudankulam III and IV will be resolved by somewhat raising the price tag for the Russian-built reactors. Problems with boiler insulation on the Vikramaditya are unfortunate, but should not obscure the fact that overall, the aircraft carrier demonstrated admirable seaworthiness, manoeuvrability and aircraft takeoff and landing capacity during the trials.

Serious problem:

The cancellation of Sistema’s licences for CDMA services is a more serious problem. The company’s $3.1-billion investment, including $700 million of government funds, should have been a trail-blazing example of a successful foray by Russian business in India, but may end up discouraging other potential investors.

If the disputes over Kudankulam and Sistema have been pushed to the forefront of the bilateral agenda, it is only because of an unacceptably low level of commercial links: trade hardly exceeds the combined price of two reactors for Kudankulam, plus Sistema’s investment in Shyam Telecom.

This year, trade has posted a robust 30 per cent growth, but still amounts to just $11 billion, and, with some luck, could hit the $20-billion target set by the two governments for 2015. By that time, India’s and Russia’s trade with China will be well above $100 billion for each.

Achieving a quantum jump in trade and economic ties will be the biggest challenge for Mr. Putin during his five-year term till 2018 and for India. Without a solid economic foundation, the two countries would find it hard to sustain the current high level of their “special and privileged strategic partnership”.