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Sample Article: In Russia, a Warm Welcome for India

Sample Article: In Russia, a Warm Welcome for India

In Russia, a Warm Welcome for India

December 24, 2015 | 00:20 GMT
In Russia, a Warm Welcome for India

(Stratfor)

The cool rains and icy winds blowing over Moscow on Wednesday evening did not dampen the warm welcome Indian Prime Minister Narendra Modi received as he disembarked from his jet in the Russian capital. Modi is in Russia to meet with Russian President Vladimir Putin for the 16th annual Russo-Indian bilateral talks. The leaders of two of Asia’s largest economies — India and Russia’s combined gross domestic product is $4 trillion — will discuss expanding energy, trade and defense ties.

Modi’s two-day visit is his first state visit to Russia since his election in May 2014. Before he left, the social media-savvy prime minister posted a message on Facebook saying “History is witness to the close ties Russia and India have had over the decades. Russia remains one of India’s most valued friends in the world.” Russia and India’s historical connection stretches back to the Soviet era, when Jawaharlal Nehru, India’s first prime minister, adopted five-year plans inspired by the Soviet Union. The countries remained allies throughout the Cold War, and after the fall of the Soviet Union, India and Russia formed the India-Russia Inter-Governmental Commission on Trade, Economic, Scientific, Technological and Cultural Cooperation. Russia and India began military technical cooperation in 1997, and for the past 16 years, the two countries have held an annual summit. The current meeting carries with it the force of a long and enduring history — even if Modi waited 19 months to make his first visit to Russia.

During his summit with Putin, Modi will try to gain more access to Russia’s ample oil and natural gas deposits. India is the world’s third-largest consumer of energy, trailing only China and the United States. Previous deals between Russian energy firm Rosneft and India have progressed faster than those between Rosneft and China — often seen as India’s rival in the global contest to secure access to energy sources. Allegedly, Russia and India are discussing a part-crude and part-cash deal for Rosneft to purchase a 49 percent stake, worth $1.5 billion, in the oil division of Indian energy company Essar. Rosneft wants to expand its relationship with Essar, building on a 2014 deal to supply oil for Essar’s Jamnagar refinery complex. This would position Rosneft — and by extension, the Kremlin — in a crucial area of India’s domestic petroleum market and give it options for exporting. This notion likely will be the topic of Putin’s Dec. 24 meeting with the leaders of Rosneft, LUKoil and Sistema before their meetings with Indian business leaders.

Modi and Putin are also expected to discuss military equipment deals. Most of India’s military hardware comes from Russia, and in the past decade the two countries have initiated several joint ventures. Notably, the countries are developing the BrahMos cruise missile and the T-50 stealth multi-role fighter. The newest version of the BrahMos system should come out in 2017, and Putin and Modi will be discussing the development of the T-50 during their summit.

India is interested in acquiring nearly 60 T-50 platforms for $3.7 billion (discounted from $6 billion) as well as three prototypes. The joint venture has been ongoing since 2007, yet India’s Hindustan Aeronautics Limited has been repeatedly sidelined in the development phase. The proposed purchase order is a notable portion of India’s final tally of 130-145 single-seater and 45-50 dual-seater (trainer) planes. The T-50 is supposed to handle the BrahMos cruise missiles, thus tying the futures of Russia’s and India’s air forces closely together.

Modi appears ready and willing to finalize the $7 billion procurement deal to expand India’s military capabilities. This deal reflects India’s 2016 budgetary breakdown of defense spending, with the army taking 53 percent while the air force gets 23 percent and the navy gets 16 percent. With part of that $7 billion, India is looking to acquire two diesel-electric submarines, 48 military transport helicopters, 150 armored fighting vehicles and three frigates. Yet Modi is more excited about the potential of landing five S-400 surface-to-air missile systems for $2.5 billion; only Russia and China currently operate this platform. Russia is likely taking this opportunity to curry favor with India, given the United States’ continued support of Pakistan’s F-16 program. India will also seek to solidify its $1 billion agreement to build 200 Kamov 226T light-utility helicopters in India with Russian help and expand the production of components for the Sukhoi 30MKI airplane. By appealing to Modi’s “Make in India” program, Russia may be able to gain the upper hand in negotiating other purchase orders for materiel that India is not yet ready to manufacture itself.

Back in 2012, Russia agreed to a 10-year lease-to-own contract with India for the Nerpa, an Akula-class submarine. Since then, Russia has been hesitant to discuss leasing either the Iribis submarine, which is 60 percent complete, or the Kashalot submarine. However, under the “Make in India” program, India seems likely to settle a deal to refit the Iribis in India and follow up on the Kashalot as well. Under the 2016 Indian Defense Procurement Procedure, the country wants to increase domestic sourcing from 30 percent to 40 percent, and completing these submarines would move India toward that goal.

However, Russia has begun stipulating that leasing more Akulas will require India to purchase more frigates and possibly a few deep-sea rescue vehicles (the latter of which are in demand by India’s navy anyway). Russia’s insistence on this is meant to secure a continued revenue flow for the Yantar shipyards, which are vital to the production of the Krivak frigate, which is a priority for Moscow as it modernizes its navy. Builders at the Yantar shipyards have been unable to complete the Krivaks since Ukraine stopped exporting the necessary engines. India is rumored to be interested in purchasing these frigates and finishing the construction in Indian shipyards — another move that would help support Russia’s shipbuilding industry.

As 2015 comes to a close, Modi and Putin seek to reinvigorate ties between their countries. However, keeping with New Delhi’s policy of non-alignment, India will continue to strengthen military ties with Washington as well. Just this week, India sent a request to Washington for an order of 100 surveillance and attack drones. As it has done for decades, New Delhi will find a delicate geopolitical balance between Washington and Moscow.

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