India extends line of credit to Russia’s Far East

India extends line of credit to Russia’s Far East

Updated on 6 September, 2019

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In News Speaking at a plenary session of the 5th Eastern Economic Forum (EEF) in Vladivostok on Thursday, Prime Minister Narendra Modi said India would walk shoulder-to-shoulder with Russia in its development of the Far East for which it would extend a $1 billion line of credit. Background

  • Last month, Commerce and Industry Minister Piyush Goyal led a delegation to Vladivostok that included 4 Chief Ministers and representatives from about 140 companies.
  • During 20th India—Russia Annual Summit India that was held recently India, Russia agreed to step up trade to $30 bn by 2025.
  • India-Russia bilateral merchandise trade was about $8.2 billion during 2018-19
What is the EEF?
  • According to its website, the EEF was established by a decree of the President of the Russian Federation, Vladimir Putin, in 2015, with the aim of supporting the economic development of Russia’s Far East, and to expand international cooperation in the Asia-Pacific region.
  • The ongoing EEF Summit at the Far Eastern Federal University is the fifth in its history.
  • Among the participants in the Summit are India, Malaysia, Japan, Australia, and South Korea.
  • According to the EEF website, the 2018 Summit was attended by more than 6,000 participants from over 60 countries, and over 220 agreements worth over RUB 3.1 trillion were signed. (Each Russian ruble is almost exactly worth 1 Indian rupee.)
  • The Summits have roundtable conferences, panel sessions, business breakfasts, besides business dialogues and bilateral talks and agreements.
Significance of Far East region of Russia
  • Russia’s Far East is a huge land mass which is rich in resources but is sparsely populated and underdeveloped .For example, 98 per cent of diamond and 50 per cent of gold are mined in this region.
  • In 2018 trade turnover of the region with India increased by 20 per cent and amounted to more than $42 million.
  • India's largest state-owned companies as well as private companies have been investing in the Far East, For example ONGC’s investments in oil and gas projects, the development of coal and gold deposits by Tata Power and Sun Group, diamond polishing factories set up recently by KGK group.
  • The Far East has created a system of preferences with the lowest level of taxation in the Asia-Pacific region.
  • There are several preferential regimes similar to special economic zones known as “territories of advanced development” apart from that, the government also provides all the necessary infrastructure such as water, gas, roads.
  • Russia has introduced e-visa option for business people travelling to the Far East (More than 130 residents of India have already used e-visa)
Briefing on other important topics related to this News About Vladivostok
  • In Russian, Vladivostok is ‘Ruler of the East’. Located on the Golden Horn Bay north of North Korea and a short distance from Russia’s border with China, it is the largest port on Russia’s Pacific coast, and home to the Pacific Fleet of the Russian Navy.
  • It is the eastern railhead of the legendary Trans-Siberian Railway, which connects the Far East of Russia to the capital Moscow, and further west to the countries of Europe.
  • At Vladivostok’s massive port, shipping and commercial fishing are the main commercial activities.
  • Automobiles are a major item of import at the port, from where they are often transported further inland.
  • A Memorandum of Intent was signed to open a full-fledged maritime route between Russia’s eastern port city and Chennai on India’s eastern seaboard bypassing Europe during Russia –India Annual summit.
  • This would enable to transfer cargo between Chennai and Vladivostok in 24 days in comparison to over 40 days currently taken to transport goods from India to Far East Russia via Europe.
About India - Russia Relations Bilateral Trade
  • India’s economic ties with Russia have been struggling with bilateral trade hovering around $10 billion mark. Energy is one area which has the potential to provide stimulus to their ties.
  • On 20th India—Russia Annual Summit India,
  • Russia agree to step up trade to $30 bn by 2025.
  • They also agreed to speed up preparations for signing of the India-Russia Intergovernmental Agreement on Promotion and Mutual Protection of Investments.
  • It was also agreed to intensify work for eliminating trade barriers. Which would be facilitated by the proposed Trading Agreement between the Eurasian Economic Union (EAEU) and the Republic of India
Cooperation in energy sector
  • After having invested around $10 billion in acquiring stakes in hydrocarbon assets in Russia, Indian energy companies are keen to invest in Russia’s upstream sector.
  • A consortium of Indian oil companies are reportedly interested for a significant stake in the eastern cluster oil fields in Russia.
  • Russia’s Rosneft in 2017 completed a $12.9-billion acquisition of Essar Oil to enter India, the world’s fastest-growing energy market.
  • Russia and India are also becoming more ambitious by pursuing projects in third countries such as the Rooppur nuclear power project of Bangladesh.
  • India is building nuclear power plants with Russia’s collaboration in Kudankulam on the sea coast in Tamil Nadu’s Tirunelveli district.
  • Roadmap for cooperation in Hydrocarbons for 2019—24 was also signed during the Summit.
  • Defence ties, of course, remain the cornerstone of India-Russia bilateral engagement.
  • New Delhi’s decision to go ahead with the purchase of S-400 missile defence system, worth over $5 billion, despite the threat of US sanctions, underscores the importance India continues to attach to its defence engagement with Russia.
  • Prime Minister Modi wants India and Russia to take advantage of the low production cost in India to produce military equipment under joint venture framework at cheaper rates for the third-world nations.
  • This will have to be the future of India-Russia defence engagement for them to become sustainable.
  • There are also reports of a possible military logistics support agreement, the Agreement on Reciprocal Logistics Support (ARLS), aimed at facilitating access to each other’s military facilities.
Cooperation in International matters
  • Despite concerns in India about growing closeness between Russia and Pakistan, Moscow stood by India on the issue of Jammu and Kashmir, arguing that India’s decision on Jammu and Kashmir is a sovereign decision.
  • After initially ignoring India, Russia also made a course correction on Afghanistan, recognising that India’s involvement in Afghanistan remains necessary if the war-torn nation is to see long term stability.
Way Forward The challenge in front of India and Russia is that they need to transform a 20th century partnership and make it fit for the 21st century. Global trends are evolving rapidly and major powers are re-defining their ties with each other to match their contemporary requirements. New Delhi and Moscow cannot be fixated on the past and can’t expect exclusionary bilateral ties from each other. The good news is that the top leadership has recognized the challenge and is ready to take corrective measures. The challenge is that this can’t be a one off measure. It will have to be a continuous engagement to sustain the momentum created by regular outreach between the top leaders.  

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