10 December 2014

For a warmer Russian bear hug

Srinath Raghavan

New Delhi may be gearing up to roll-out the red carpet for Russian President Putin but if the relationship between India and Russia is not to flounder in the near future, it needs a sense of purpose and momentum

The symbolism of the moment was unmistakable. The new Indian Prime Minister was whisked to the head of a long queue of waiting foreign dignitaries and introduced to the Russian leader. The first handshake between Rajiv Gandhi and Mikhail Gorbachev — at Konstantin Chernenko’s funeral in March 1985 — said a great deal about the strategic relationship between their countries. As President Vladimir Putin arrives in India, Moscow and New Delhi should recall that meeting.

Then, as now, leaders on the top were keen to strike a personal rapport and emphasise the significance of their ties. Didn’t Prime Minister Modi tell Mr. Putin that “every child in India knows that our closest friend is Russia?” Yet, a couple of years after the warm encounter between Rajiv Gandhi and Mikhail Gorbachev, bilateral relations were turning cold. This was largely because the two countries were unable to calibrate their ties in a time of change. To be sure, the situation today is very different from the late 1980s. Still the relationship between New Delhi and Moscow needs a sense of purpose and momentum, if it is not to flounder in the near future.Ukraine crisis

Mr. Putin’s visit comes against the backdrop of a challenging strategic and domestic context. The crisis in Ukraine continues to simmer. Contrary to accusations of Russian “revanchism” or “imperialism,” the evidence suggests that Mr. Putin was taken unawares by the events leading to the overthrow of Viktor Yanukovych. His subsequent moves to annex Crimea and support rebels in eastern Ukraine were aimed at preserving Russia’s security interests. The Russian President is being no more — or no less — hypocritical than the United States when he couches his actions in the language of humanitarianism or religious piety. This is how great powers behave.

The fact, however, remains that the continuation of the crisis is yielding diminishing returns to Moscow. Worse, Russia is also absorbing higher costs. A slew of tailored sanctions — aimed at Russia’s energy, banking and defence sectors — is beginning to bite. The sanctions are slowly choking off access by Russian companies to American and European financial markets and technology. A wider menu of sanctions is also under consideration. Akin to those used against Iran, these would preclude the possibility of Russia turning to other countries by threatening to impose costs on foreign companies dealing with Russia. At this moment, such wider sanctions seem unlikely to be invoked — not least because the Russian economy is much larger and more integrated than that of countries like Iran. Even so, Moscow’s best hope is that the Europeans will pull in different directions over the existing sanctions. The burden of sanctions, after all, falls disproportionately on countries that export the most to Russia: Germany, Netherlands, Italy and Poland.Oil and financial instability

Meantime, the economic impact of sanctions has been considerably accentuated by a coincidental trend: the collapse in global oil prices. The combined upshot of these has been a substantial drop in Russia’s net foreign earnings and a rush to convert roubles into dollars and other hard currencies. In consequence, Russia’s international reserves are depleting and the value of the rouble has tumbled. After initially attempting to prop up the rouble, the Russian central bank has had to retreat. The economic prognosis is grim: inflation and economic slowdown loom on the horizon.

Financial instability could have serious domestic political consequences. Mr. Putin’s ratings remain high, but the fall in oil prices and inaccessibility of foreign capital could erode his standing. After all, the model of “managed democracy” instituted by Mr. Putin was made possible by the world market for Russia’s natural resources. As Gleb Pavlovsky — erstwhile adviser of Mr. Putin — bluntly put it: “We have completely financialized politics. The authorities exist only within the boundaries of their ability to give credit.”Looking to China

Against this backdrop, it is hardly surprising that Russia is leaning heavily towards China. During Mr. Putin’s visit to Shanghai earlier this year, the two countries signed a contract worth nearly $400 billion whereby Russia would supply gas to China over the next 30 years. The Chinese Premier’s subsequent trip to Moscow resulted in an array of agreements in energy, banking and transportation among other areas. Cut off from American and European capital markets, Russian energy companies such as Rosneft are hankering after Chinese investment. Russian banks have turned to China’s Exim Bank for lines of credit worth at least $4 billion to finance Chinese imports. The defence relationship between Moscow and Beijing also looks set to deepen — if only because Russia would want to reduce China’s dependence on Ukraine’s defence industry.

Mr. Putin, however, is keen to avoid excessive reliance on China. In his recent annual address to Parliament, Mr. Putin suggested that Russia was facing another round of “containment policy.” Yet, he added: “Our goal is to have as many partners as possible, both in the West and in the East … Under no conditions will we curtail our relations with Europe or America.” It remains to be seen whether the Russian President can have his cake and eat it too.

What does all this mean for India? On the one hand, the international and domestic challenges confronting Russia provide an opportunity to deepen the relationship. On the other hand, it is important to ensure that these challenges do not compel Russia to act in ways that might impinge on India’s interests. New Delhi is gearing up to roll-out the red carpet for Mr. Putin. It has minced no words in stating that India and Russia share similar views on a range of issues, including the “need to defuse cold-war like tensions”. This may be music to Russian ears, yet three issues need to be kept firmly in focus.

First, unless economic relations are enhanced, strategic ties cannot be strengthened. Bilateral trade between India and Russia currently stands at around $6 billion. To put it in perspective, this is less than a fifteenth of the annual trade between Russia and China. It is also less than one per cent of India’s total foreign trade. An inter-governmental commission examined a range of measures to redress this state of affairs. Yet, we have gotten no further than thinking of setting up a joint study group to look into the feasibility of a Comprehensive Economic Cooperation Agreement. This process needs to be given a push at the highest levels. A gas pipeline deal — amounting perhaps to $40 billion — is also in the works and may be announced when Mr. Putin is in India. All these are essential to ensure that our economic ties with Russia go beyond the purchase of military hardware.Afghan factor

Second, the future of Afghanistan must be an area of common concern. Even as the Americans are pulling out, Afghanistan has embarked on a model of coalition politics that has few precedents. Both India and Russia are concerned about portents of instability, but their emphases tend to be different. India is keen to ensure that Afghanistan does not become a hub for terrorists from the region and beyond. Russia is more concerned about the problem of drugs flowing from Afghanistan. Given its troubled history vis-à-vis Afghanistan, Moscow’s narrower approach is understandable. Even then, Russia has an important role to play in the stabilisation of Afghanistan. New Delhi is already sourcing weapons from Moscow to supply to Kabul. At the same time, Russia has announced sale of helicopters to Pakistan. India has rightly refrained from raising a fuss, but it will have to aim at a convergence of views on Afghanistan.

Finally, there is China. It is worth recalling that the strategic partnership between New Delhi and Moscow came into being during the Cold War owing to their shared concerns about Beijing. The triangular relationship has since undergone major changes. For one thing, both India and Russia have significantly improved their bilateral ties with China. For another, the balance of power between Russia and China has tilted in the favour of the latter. If anything, the downside risk for India is a Russia-China entente facilitated by the West’s determination to isolate Moscow.

The challenge for New Delhi is not just to preclude this possibility. As a Eurasian power of some standing, Russia is uniquely positioned to weigh in on the continental as well as maritime geopolitics of Asia. India must work to ensure that Moscow plays its role in facilitating the emergence of a balanced security architecture in Asia.

(Srinath Raghavan is Senior Fellow at the Centre for Policy Research, New Delhi.)

Printable version | Dec 10, 2014 5:30:01 AM | http://www.thehindu.com/opinion/lead/for-a-warmer-russian-bear-hug/article6676864.ece

© The Hindu

No comments: