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Re-energizing the Relationship for the 21st Century

Discussions of the India-Russian partnership in policy circles are too often shrouded in the mist of nostalgia for the close diplomatic, military, commercial, and cultural ties of the Cold War years and contain few pragmatic prescriptions for re-energizing a relationship that, while truly privileged, is showing signs of structural problems and inertial thinking. What are the challenges and prospects for the partnership of the two nations as they mark the 40th anniversary of the Indo-Soviet Treaty of Peace, Friendship and Cooperation (9 August 1971), a milestone that cemented the Russo-Indian friendship in the twentieth century?

At the level of diplomatic prose, the relationship is as warm as it has been in years, upgraded in 2010 to a ‘Privileged Strategic Partnership.’ Yet, its raisons d’être are not new and can be traced to the defense industry, where approximately 70% of the installed base of Indian equipment is still Russian-made —a situation rife with oft-reported problems— and to the energy sphere, where Russia’s dominant position intersects with India’s fast-growing appetite for oil, gas, and nuclear power. Despite some joint successes such as the BrahMos supersonic missile system and the Fifth-Generation fighter aircraft, the two countries have rarely broken new ground in their interactions since the fall of the USSR. Bilateral trade, notwithstanding steady progress and perennial joint commission meetings to review key barriers, is still below the level of Indo-Soviet trade in 1990. Their 2009 civil-nuclear agreement was an important breakthrough, but followed on the heels of a similar deal between India and the United States.

Relations with Russia have to be set against the broader strategic landscape of India’s security issues and geopolitical priorities. Forming better ties to its Eurasian ally is crucial in the context of India’s struggle to forge better relations with its neighbors and its quest for a firmer diplomatic foothold in the region. Russia can lobby for India’s full membership in the Shanghai Cooperation Organization (SCO), which has eluded India so far largely due to the negative influence of founding member China. Furthermore, the Russia-India partnership is crucial in ensuring stability in the Afghanistan region as the war winds down. India’s aims to prevent Islamic extremism and narco-trafficking there correspond to Russia’s. Especially given its fraught relationship with Pakistan, India needs to work with Russia, whose Pakistan ties have been steadily improving, on making sure that Afghanistan does not become a sanctuary for the Taliban in the future. And, finally, a more constructive partnership with Russia based on mutual profit and gain can help India remove some of the mistrust that has been building between the two powers in the brewing “Great Game” in resource-rich Central Asia.

As is increasingly recognized, the deficiencies in most of the pillars of the India-Russia relationship are linked to the overly heavy involvement of the state—and the absence of energetic engagement from the private sector, which accounts for 70% of the economy in both countries. The state sector alone cannot influence the development of trade, defense, energy, science and technology, or soft power in a globalizing, increasingly competitive market. Gone are the days of the state-controlled rupee-rouble exchange rate and governments dispatching business delegations, of state-funded academic exchanges and cultural propaganda initiatives. A case in point is the stalling of the Comprehensive Economic Cooperation Agreement (CECA) between the two governments, which would ensure special economic zones and lower import/export tariffs. While the state can and should provide the necessary structure for bilateral interaction, it needs to first and foremost encourage greater vitality and cooperation in the corporate sphere.

We propose a new paradigm that would make private sector activity the key to a reenergized bilateral relationship across all its major areas. Initially, India and Russia need to provide incentives and channel dynamism by reinforcing and building on existing state mechanisms. One possible new solution is a Russia-India Innovation and Modernization Fund, jointly financed on a 50-50 basis, which would provide seed capital for collaborative projects with a distinctive joint development, research, and commercialization component. In the future, multiple models for driving corporate incentives are possible, including a venture fund that relies on matching contributions from the private sector. While the financial backing would come from the two governments, businesses would receive subsidies to help get their collaboration off the ground. The resultant increase in private sector initiatives and linkages will ensure greater cooperation in the years to come.

Here are more short- to medium-term ideas around the main areas of bilateral cooperation:

1. Military/Defense – These ties should be transitioned from the traditional importer model into a more symbiotic relationship through joint defense Research & Development and manufacturing, e.g. with the Indian defense industry selectively outsourcing manufacturing or joint projects to bring down the costs of provision of India-made parts and accessories for the Russian military. More private sector cooperation should be encouraged for defense materiel development under the new Defence Production Policy (DPrP) policy in India.

2. Energy – Russian and Indian private companies need to invest in joint nuclear projects beyond reactor construction in India that can combine the engineering expertise of both countries. One could be a private Indo-Russian consortium, set up on the initiative of the two governments, to construct nuclear power plants in third nations, particularly in Africa, that are seeking inexpensive civilian nuclear power. Opportunities also exist for India and Russia to jointly mine uranium and produce low-cost renewable energy on Indian soil.

3. Trade and Investment – Bilateral trade would benefit from the introduction of new mechanisms to promote private investments and businesses, in addition to the ones already in place. To add to the Russia-India Innovation and Modernization Fund, the two governments should jointly set up an Entrepreneurs’ Council to encourage cooperation between medium-sized yet fast-growing businesses.

4.  Science and Technology – The two governments should create a set of initiatives and a preferential environment for the exchange of practices and driving of collaboration between mid-sized businesses in target sectors like IT, pharmaceutical research, and nano- and biotecnology. India’s Ministry of Science and Technology should also devise more robust ways of scientific cooperation with Russia, such as setting up a Bangalore-Skolkovo (Russia’s up-and-coming innovation city) hub for joint research and technology development, followed by hubs in India’s other IT centers.

5. Culture and Education – India’s Ministry of Human Resource Development should encourage private sponsors, especially those already active in the two markets, to set up branches of Russian higher-learning institutions here. Additionally, sponsors should provide greater funding for Russian-language courses within Indian educational establishments.

The stimulation of the private sector, given ample incentives and privileges by both governments, is an essential part of revitalizing a strategic relationship that, while positive, shows great scope for improvement along its every parameter. By joining forces, the two countries can fulfill their potential in becoming key regional, and world, players.

Dr. Katherine Foshko is the Russia Studies Fellow at Gateway House: Indian Council on Global Relations. This Op-Ed is was written as a part of her research paper, titled ‘Re-energising the India-Russia relationship.’

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