Switching to Russian Oil Fits Into India's Strategy to Curb Dependency on OPEC, Professor Says

Gulshan Sachdeva, a professor of European Studies and chairperson at the Centre for European Studies at Jawaharlal Nehru University, spoke to Sputnik about the agreements reached at the 21st India-Russia summit.

Enhancing bilateral trade and investments figured prominently during the talks between Indian Prime Minister Narendra Modi and Russian President Vladimir Putin on 6 December. After the summit, the two governments pledged to increase bilateral trade by $30 billion and $50 billion in investment by 2025.

Sputnik: Bilateral trade between India and Russia has been around $10 billion for many years. Do you think the 21st annual summit has provided some direction to boost the business at desired level?

Sachdeva: Limited bilateral trade is perhaps the weakest link of otherwise robust India-Russia ties. One of the important pillars of the old Indo-Soviet friendship was strong commercial ties. The USSR used to be India's largest trading partner. In comparison, the current expansion of the Indian economy is based on Asian markets and the West.

Although India Russia relationship has survived this weakness, policymakers have been struggling to overcome this challenge for years. The problem areas are well known. These include lack of information about each other's markets, visa problems, logistic issues, etc. Attempts have been made in recent years to address some of these issues.

Now, a new trade target of $30 billion by 2025 has been set. Targets have been set earlier also. But now it seems the leadership is committed to follow some of these promises.

Sputnik: The joint statement has added many promises on the trade front, such as a $30bn trade target by 2025, International North-South Transport Corridor (INSTC), and the all new Vladivostok Chennai maritime route. Are the issues that have been slowing the progress on these fronts identified? If not, what should be the steps to remove them?

Sachdeva: Trade and connectivity are linked. Large connectivity projects may be of limited value if trade turnover is limited. At the same time, connectivity can also lead to more trade.

To a large extent, INSTC has not really taken off because India-Russia trade was supposed to provide volumes, which has not happened. It is good that now Chabahar port built by India in Iran has been added within the INSTC framework.

The Vladivostok-Chennai maritime corridor has both commercial and geopolitical dimensions. India can import crude and LNG from Russia through this route. It can provide opportunities for India to invest in Russian Far East. This can also be linked with India's Indo-Pacific strategy as well.

But the forthcoming feasibility study results of this route will be able to provide some useful information about its relevance. The implementation of these initiatives really have to be speeded up. Otherwise, we will keep repeating these points for many years.

Sputnik: Energy finds a lot of attention in the summit. How do you see progress and promises made in the joint statement?

Sachdeva: Energy (including nuclear) is one of the core areas of India-Russia partnership. Joint statement has rightly acknowledged policy initiatives and the collaborations of Indian and Russian companies. This is only because of investments made by Indian and Russian companies in each other's economy, we have been able to achieve investment targets.

Many more investments are likely to happen in the coming years. This sector has played a useful role in bringing our companies closer in the last twenty years.

Now India is seriously preparing itself for the energy transition. Apart from hydrocarbons and nuclear, we need to prepare for more cooperation in hydro, renewables, hydrogen economy and energy efficiency for the next twenty years.

Although these points have been mentioned in the joint statement, we may hear more and more these issues in the coming years.

Sputnik: The two sides agreed to continue joint work on promoting the 'mutual settlement of payments in national currencies, which will help reduce cost and time and risks involved in payments.' What are the implications of this? Will it help in averting US Sanctions in carrying out significant transactions?

Sachdeva: It may be useful if both agree to settle payments in national currencies. But I think, to some extent, this is a hangover of the old Indo-Soviet trade relations when two non-convertible currency countries used to trade with each other in non-convertible currencies. This was the time when exchange rates were fixed by the governments rather than by the markets.

Now both India and Russia have more than sufficient foreign exchange reserves. The discussion on the issue has been there for quite some time. But it has been less to do with the US sanctions. It is more of trying to facilitate economic transactions.

Sputnik: India has vowed to increase sourcing of Russian crude oil and gas under long-term contracts. Will this help India in saving energy import bills since New Delhi has been expressing its concerns about opportunistic pricing by OPEC?

Sachdeva: India is seriously dependent on energy imports. In the last 25 years, its high economic growth has happened amid high and volatile energy prices. As a part of its long-term diversification strategy, India plans to import more and more crude oil and LNG from Russia in the coming years. The connectivity initiatives will become important to implement this strategy.

The idea is to increase dependence on non-OPEC countries through long-term contracts. Within this context, Russian energy and long-term contracts fit well within the Indian strategy.

Sputnik: Joint statement promises to begin negotiations for a Free Trade Agreement with Russia-led Eurasian Economic Union (EAEU) soon. What are the roadblocks, and do you think the two countries will compromise on their interests?

Sachdeva: High-level consultations on the issue have been going on since 2015. Indian industry, by and large, supports the initiative. Initial studies have shown that it will be favourable to India. It can also improve the Indian economic presence in Central Asia.

When India is starting Free Trade Agreement negotiations with the European Union and the UK, this is the right time to put India-Eurasian Economic Union negotiations also on the fast track. This by itself may not resolve all the problems. But it can definitely provide a new momentum to trade relations in the Eurasian region.