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Mainstream, VOL LV No 25 New Delhi June 10, 2017

St Petersburg Summit: Boosting Indo-Russian Economic Cooperation

Saturday 10 June 2017, by Arun Mohanty

The Indo-Russian annual summit, taking place alternatively in each other’s capital, was this time held in St Petersburg, the northern capital of Russia and President Vladimir Putin’s home town. This is the first time when an Indo-Russian annual summit was held in summer, as India for the first time was invited to the St Petersburg International Economic Forum as the guest of honour. The St Petersburg Economic Forum, Russia’s most prestigious business platform, widely regarded as the Davos of the East, was attended by entrepreneurs, captains of industry, experts and journalists from 143 countries, making it one of the most representative business forums of the year in the world. This year’s Forum was attended by a record number of more than 1400 foreign delegates and it witnessed the signing of 386 documents worth 2 trillion rubles.

India and Russia enjoy a robust and time-tested strategic partnership. India has many strategic partners, and so has Russia, but we are a special and privileged strategic partner for each other. There remains a national consensus in both countries regarding their abiding friendship. There is continuity in our strategic partnership and change of government in either country does not bring any change in this time-tested friendship. Though we enjoy excellent political cooperation, this is not reflected in our trade and economic relationship. Bilateral trade, standing at US $ 7.5 billion, indeed witnessed a downward trend, which is a matter of serious concern for both nations, and which is why the 18th Indo-Russian Summit was held at St Petersburg coinciding with the flagship Economic Forum.

The focus was clearly on bolstering economic cooperation between our two countries. Leaders of both countries at the Forum got a unique opportunity not only to attract attention of captains of global industry but to invite potential investors to invest in their respective countries. If all previous Indo-Russian summits were famous, first of all, for their political content, the St Petersburg summit would be famous for the impetus that it is expected to provide to the sagging trade and economic relations. All together 12 documents, including the St Petersburg Vision Declaration for 21st Century, would give a strong impetus to trade and investment between the two countries in the coming years.

These documents include intellectual pro-perty right protection, finalisation of the frame-work agreement to begin construction of 5th and 6th reactors at Kudankulam, Nagpur-Secunderabad train line modernisation, agree-ment between Heavy Engineering Corporation Ltd and joint stock company Cascade—Techno-logies for a special purpose, Memorandum of Understanding between SREI Infrastructure Finance Limited and State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’ on Russian export support and participation in the development of India-Russia capital goods financing/leasing business, agreement on cooperation between ‘JITF Urban Infrastructure Services Limited’ (Republic of India), ‘Jindal Rail Infrastructure Limited’ (Republic of India), Joint Stock Company ‘Russian Export Centre’ (Russian Federation), and Limited Liability Company Management Company ‘RailTransHolding’ (Russian Federation), Memorandum of Under-standing between National Investment Pro-motion Agency ‘Invest India’ and the Business Council for Cooperation with India concerning the promotion of investment in India, and Cooperation Agreement between National Investment Promotion Agency ‘Invest India’ and the Roscongress Foundation.

Both nations are now talking about an Energy Bridge between our two countries, and expanding bilateral cooperation in all areas of energy cooperation including nuclear, hydro-carbon, hydel, renewable energy sources and in increasing energy efficiency. Implementation of the strategic vision in the nuclear energy sector and growing partnership in this vital area has opened up opportunities for developing and augmenting nuclear manufacturing capabilities in India, in line with the Government of India’s ‘Make in India’ initiative. In 2013 the first nuclear power plant was put into operation. The second reactor was transferred to the Indian side in October 2016, and construction of the third and the fourth reactors have begun. All this contributes to the implementation of the plans to develop nuclear energy in India involving the construction of at least 12 power units in its territory by 2020. There is a plan to build 20 reactors with Russian technology in India. The Russians committed themselves to earnestly implement ‘’the action programme for locali-sation in India”. There was some unpleasant uncertainty regarding the finalisation of the 5th and 6th reactors of Kudankulam until the eve of the 18th summit and their finalisation raises their confidence as strategic partners. Nuclear power generation is one of the four pillars of our strategic partnership. Our cooperation in this sector stands out clearly showing an advantage over other partner countries. While the US and France are still negotiating terms and conditions of the Liability Law, Russia has already completed construction of four reactors and the general agreement for construction of the fifth and sixth has been finalised at the last Indo-Russian summit. Two more advantages of cooperation with Russia are that Russia would manufacture nuclear energy equipments and Delhi and Moscow would launch strategic cooperation in nuke reactor construction in third countries, which would be in line with India’s ‘Make in India’ programme.

Advancing the comprehensive development of India-Russian relations is an absolute priority of the foreign policy of both states. We will continue to widen our scope of cooperation by launching large-scale initiatives in different spheres and enhance and enrich our bilateral agenda so as to make it more result-oriented.

The economies of India and Russia complement each other in the energy sector. We will strive to build an “Energy Bridge” between our states and expand bilateral relations in all areas of energy cooperation, including nuclear, hydro-carbon, hydel and renewable energy sources and in improving energy efficiency.

India and Russia note that wider use of natural gas, an economically efficient and environmentally friendly fuel, which has become an integral part of the global energy market, is highly significant for reducing greenhouse gas emissions and will assist in fulfilling the provisions of the Paris Agreement on Climate Change, as well as achieving sustainable economic growth. Cooperation in the peaceful uses of nuclear energy has emerged as one of the hallmarks of the strategic partnership between the two countries, contributing to India’s energy security and energising broader scientific and technological cooperation. With concerted efforts on both sides, there has been a series of steady and demonstrable achieve-ments in our civil nuclear partnership, including advancing nuclear power projects at the Kudan-kulam site and transforming it into one of India’s largest energy hubs. Both countries have welcomed the conclusion of the General Framework Agreement and Credit Protocol for Units 5 and 6 of the Kudankulam Nuclear Power Plant. Both sides have resolved to work towards the implementation of the Strategic Vision for Strengthening Cooperation in Peaceful Uses of Atomic Energy signed between the two countries on December 11, 2014. The future of India-Russian cooperation holds great promise across a wide spectrum covering nuclear power, nuclear fuel cycle and nuclear science and technology.

The growing partnership in the nuclear power sector between India and Russia has opened opportunities for developing advanced nuclear manufacturing capabilities in India in line with Government of India’s ‘Make in India’ initiative. India and Russia have commited themselves to earnestly implement the “Pro-gramme of Action for Localisation in India”, signed on December 24, 2015, and to encourage their nuclear industries to engage closely and foster concrete collaborations.

Both countries are interested in launching joint projects on exploration and exploitation of hydrocarbons in the Arctic shelf of the Russian Federation. Strategies are being developed to harness the potential for mutually beneficial cooperation in the field of deep sea exploration and development of hydrocarbon resources and other marine resources utilising the strengths in the area of maritime resources and training.

They have decided to develop joint strategies to harness the potential for mutually beneficial cooperation in the fields of deep sea exploration and development of hydrocarbon resources, polymetallic nodules, and other marine resources utilising the strengths in the field of maritime research and training to develop mutually beneficial cooperation.

The two sides have welcomed cooperation among energy companies of both states in modernising the existing power stations and building new ones in the territory of India. They are determined to endeavour to develop joint projects in each other’s countries through sharing of technologies, experience of working in different terrains and climatic conditions, and use of energy efficient technologies for the creation and propagation of cleaner, climate-friendly and affordable energy resources.

The two states’ major economic objectives include expanding trade and investment and diversification of trade in goods and services, in particular increasing the share of high-technology products in bilateral trade, fostering industrial cooperation, improving the environ-ment for entrepreneurship and investments and developing cooperation in banking and financial matters between them. As the next stage of their strategic partnership, they are to extend bilateral technical, economic and scientific coope-ration to third countries by undertaking joint development projects in mutually agreed sectors.

The two countries coordinate their efforts to promote settlement of India-Russian trade in national currencies to reduce dependence of our bilateral trade on other currencies. They will jointly encourage their business communities to use the existing workable schemes and mecha-nisms for settlements in national currencies elaborated by the Reserve Bank of India and the Bank of Russia.

They have agreed to coordinate their positions in order to develop a credit rating industry that is transparent for the market participants and independent of the political conjuncture. In this sense they support the work aimed at exploring the opportunities of harmonisation of their legislations in the area of credit ratings as well as the recognition of ratings of their local credit rating agencies.

Acknowledging the importance of developing economic cooperation at the regional level, both countries will facilitate an early commencement of negotiations on a free trade agreement between the Eurasian Economic Union and the Republic of India.

Both sides appreciated the compelling logic of regional connectivity for peace, progress and prosperity. They believe that connectivity must be strengthened. It should be based on dialogue and consent of all parties concerned with due respect to sovereignty. The Russian and Indian sides, being guided by the principles of transparency, sustainability and responsibility, reiterated their commitment to build an effective infrastructure for the International North South Transport Corridor and implementation of the Green Corridor, which will provide a clear advantage in terms of transit time and transport costs. The two countries take note of the fact that both states are committed to building knowledge-based economies, on the basis of latest scientific advances and innovation. They have decided to broaden cooperation in designing, developing, manufacturing and bringing to foreign markets high technology products and strengthen scientific collaboration in areas such as space technology, aviation, new materials, agriculture, information and communi-cation technologies, medicine, pharmaceuticals, robotics, nanotechnology, supercomputing technologies, artificial intelligence and material sciences. Establishment of the High Level Committee on Cooperation in High Technologies between the two countries is a highly welcome step.

They have agreed to work together to step up joint efforts aimed at modernising infrastructure, explore ways to jointly respond to urbanisation challenges, address issues related to ensuring food security, preserving water and forest resources, and share experience in carrying out economic reforms and national programmes for the development of small and medium enterprises and in skill development.

A decision has been taken to work together to further develop the potential for cooperation in the diamond industry with an objective to take full advantage of the existing strengths and resources of both the countries in this area. Both countries will also intensify joint efforts to counter undisclosed synthetic stones entering the diamond market and to support the development of generic marketing programmes for diamonds.

Recognising the strength of Russia in ship-building, river navigation and desalination technologies, they have decided to work together to develop joint projects through transfer of technology and experience-sharing for developing inland waterways, river embankments, ports and cargo containers towards effective utili-sation of the extensive river systems in India.

They have agreed to work together in the development of high speed railways, dedicated freight corridors, and application of newer technologies for efficient rail transport through joint development and sharing of technologies, and training of personnel to benefit from each other’s competences in the railroad sector.

They have also decided to work together to improve market access for agriculture and food commodities in each other’s country and develop joint strategies through research and develop-ment for utilisation of the existing potential in the agriculture and food processing sector covering an entire spectrum of activities from farming, harvesting, production, processing to marketing strategies. We will work together to explore joint projects for effective use of natural resources in each other’s country through application of existing technologies and develop-ment and sharing of newer technologies for search in the field of mining and metallurgy for affordable and climate friendly utilisation of natural resources.

They noted that India will become the third largest aviation market by 2020 and in this connection, recognised that the Regional Connecti-vity Scheme of the Government of India provided an opportunity for strengthening cooperation in joint production and setting up of joint ventures in India in the field of aviation manufacturing to serve the demand created and for export to third countries.

Indo-Russian bilateral defence cooperation is built on strong mutual trust and is based on a $ 20 billion programme covering the period up to 2020. BrahMos missile, MI226 helicopters, fifth generation military aircraft, T-90 tank up-gradation and a host of other items are in the pipeline under the ‘make in india’ programme. India is opening its private sector for high tech military cooperation. But here the Indian private sector’s close ties with Western private sector is an issue of serious Russian concern. Russia exports its modern military technologies to India. They have promised to upgrade and intensify this cooperation through joint manu-facture, co-production and co-development of military hardware and military spares, with increasing reliance on the adoption and sharing of future technologies, in compliance with the obligations of the sides under the existing agreements on military-technical cooperation. The intellectual property right document would safequard the interests of both countries.

They have decided to work towards a quali-tatively higher level of military-to-military cooperation. Both sides will continue holding regular joint land and sea military exercises, and training in each other’s military institutions. This year will see the first ever Tri-services exercise INDRA-2017.

President Vladimir Putin offered concessions, tax benefits, long-term land lease etc. to Indian businessmen, which could be a game-changer in bilateral economic cooperation. “We intend to enhance and actively promote greater coope-ration between our regions and states, with a particular emphasis on the Far East region of Russia,” said President Putin.

There is convergence of views between India and Russia. As special and privileged strategic partners, both share identity of views practically on all regional and international issues of mutual concern. The St Petersburg Vision Declaration once again demonstrated that both countries have identical opinions in all international and regional subjects, and Modi’s quip that ‘mi govorim na odnom yazike’ (we speak in one language) indeed displayed it vividly.

Prof Arun Mohanty, the Director of the Delhi-based Eurasian Foundation, belongs to the Centre for Russian and Central Asian Studies, School of International Studies, Jawaharlal Nehru University, New Delhi.

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