Video Summary

[RSTV The Big Picture] India’s Far East Policy

Recently, Prime Minister of India visited Vladivostok in Russia as the Chief Guest for the Fifth Eastern Economic Forum and participated in the 20th India-Russia Annual Summit. Two interesting features that stand out in this visit are: first, a new approach to India-Russia relations through the Indo-Pacific, and second, reinvigorating a time-honored bond with Russia.
By IT's Video Summary Team
September 13, 2019

Contents

  • Introduction
  • IT’s Input
  • How investment in Russia’s Far East region will benefit India?
  • Areas in which India look forward to engage
  • Is India trying to expand relations with Russia in other dimensions?
  • India’s aim to reach 30 billion dollars by 2025
  • Challenges
  • Conclusion

[RSTV The Big Picture] India’s Far East Policy

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Introduction:

  • Prime Minister of India launched the ‘Act Far East’ policy to boost India’s engagement with Russia’s Far East region during his recent visit to Russia. He became the first Indian prime minister to visit to the Russian Far East Region.
  • He announced a 1 billion dollars’ line of credit, which is India’s first region specific line of credit, for the development of Russia’s Far East region.
  • He expressed confidence that this step will add a new chapter in India-Russia economic diplomacy while addressing the plenary session of the 5th Eastern Economic Forum as the chief guest.

IT’s Input

Far East Region of Russia

Region-of-Russia-iastoppers

  • Russia’s Far East region is extension between Lake Baikal – world’s largest freshwater lake and deepest lake, and the Pacific Ocean.
  • It is situated in the cold Siberian climate and shares borders with China, Mongolia, North Korea and Japan (maritime).
  • It is the eight largest in terms of area and fourth least densely populated country.
  • It borders two oceans: The Pacific and the Arctic.
  • It constitutes over one-third of Russia’s territory. It is home to major natural resource deposits and essential to maintaining increasingly valuable Asian trade routes.
  • Although traditionally considered part of Siberia, the Russian Far East is considered separate from Siberiain Russian regional schemes.

Significance of the Far East

  • About 1/3rd of all coal reserves and hydro-engineering resources of the Russia are in Far East region.
  • Forests of the region comprise about 30% of the total forest area of Russia.

How investment in Russia’s Far East region will benefit India?

  • The region of Far East region is extremely rich in mineral and resources. It is located in Indo-pacific region with important maritime borders, thus, having its own geostrategic significance.
  • The investment of India in this region will give India a chance to play a bigger role in a region which is very strategic (Indo-Pacific).
  • Getting access to the Far East region’s resources will be hugely beneficial for Indian economy.
  • The interest of India in Russia’s Far East region will result in some concrete opportunities for Indian investors and the 1 billion dollars’ line of credit will surely help towards his step.
  • The problem with the Indo-Russian relationship is that it was only centered around Indo-Russian history and strategic conversions between them and was missing economic dimension. Hence, 1 billion dollars’ line of credit is significant step in this context.
  • With increased investments, India’s profile will increase in a hugely in the Far East region and as a result, countries like China, Japan, Vietnam and ASEAN will look at India positively.

Vladivostok port

India and Russia, during recent visit of India PM to Russia, agreed to open a maritime route between the ports of Chennai and Vladivostok.

Significance of Chennai-Vladivostok route

  • The region of Vladivostok has become more attractive today because of the melting of ice capes, making the arctic ocean more navigable. So, evacuation of Russian investment became easier today as compare to 15 years ago when India first opened a consulate in Vladivostok.
  • Secondly, from this port, India have an arctic route to Europe through the sea which is earlier was closed due to the ice.
  • Also, through International North–South Transport Corridor, with the help of river routes in Russia, India can send goods to Russia, Arctic and then to Far East region.

Areas in which India look forward to engage

  • Russia has range of areas where India can invest in from basics like agriculture to sophisticated like diamond
  • Moreover, Russia wants to diversify its partnership due to the major influence of china in Far East region. India become most important country in this regard as India’s emerging economy can bring expertise to Russia’s Far East region.
  • Economy driven relationship must be there in the 21st century partnership. The Indo-Russian relationship was missing the economic dimension since it talked about history and strategic conversions only.
  • There is also a chance of naval collaboration in making ships in Vladivostok port.

Export of skilled man power

  • Skilled man power is one of India’s assets. So far India has looked skilled man power in IT domains, but there are diamond polishers, precious stone cutters, infrastructure project settlers and many others.
  • Indian labors will have many opportunities in that region, including in India’s own project in Far East region.
  • Traditional items like diamond and precious stones need special skills. Hence, India can send labors there to extract and process the diamonds and then export them to India. This could deepen ties as India can show that it is doing something like ‘Made in Russia’ in Russia through Indian labour.

Can India achieve its 30 billion dollars aim by 2025?

  • In the recent visit of Indian PM to Russia, both the countries decided to reach the target of $30 billion in trade by 2025 through various energy deals.
  • The target is challenging for India, however, if the shipping line between Vladivostok and Chennai works out, India will get access to the resources of Far East region of Russia.
  • Moreover, India has experience in shipping line as India has been sourcing oil from the Sakhalin oil fields of Russia for the last 2 decades.
  • Also, a few Indian companies have been already in Far East region. Tata Power has invested in the coal mine in the Far East. However, to achieve $30 billion target, India have to scale up towards this direction. India can invest more particularly in heavy resources like oil, gas and coal.
  • So, if the regions open up, investments increase and if India show some appetite for risk, this trade target can be easily achieved.

Is India trying to expand relations with Russia in other dimensions?

  • Yes, India is creating a new strategic partnership based on economy rather than based on the military and civil nuclear.
  • Trade between the countries have been languishing but it has been picked up in last 2-3 years as a result of cross investment.
  • However, India already achieved this target through cross investments.
  • In this context, India carefully crafted its strategy, in terms of energy deals, with Russia to diversify its energy security due to the uncertainty in gulf and major oil exporting countries (i.e. Venezuela, Libya etc.) having their own domestic problems.
  • Earlier India was investing in oil bearing oil fields and now it has moved towards riskier gas exploration by investing in Russian Far East region.
  • India has shown intent to re-quantify India-Russia relationship and shows that economy is in command rather than technology related relationships.

Challenges

Asia- Pacific approach of Russia

  • Russia does not accept the Indo-Pacific strategy of India. The main concern of Russia is to just developed the Far east region. Hence, as far as Russia is concerned, it does not matter for India whether it consider Russian investment as part of Indo-Pacific or Asia-Pacific strategy.
  • So, in operational terms, both the countries realize to move beyond the discursive elements of Indo-pacific policies and just want to get the mutual benefits irrespective of the policies.

Sanctions on Russia

  • International Economic sanctions on Russia were imposed during the Ukrainian crisis by a large number of countries following the Russian military intervention in Ukraine, which began in 2014. This sanctions might impact the $1 billion line of credit given to Russia.
  • Under sanctions, when a large credit line is given in dollars, exposure to dollars of Indian banking systems in dealing with the country under sanctions will be a big challenge for India.
  • In the past, line of credit has been given to Russia from bank to bank. But it is never utilized because the interest rate was a bone of contention.
  • However, it is still not clear whether the $1 billion is a government to government credit or commercial credit form PSU or other banks. If it is commercial credit, then it will not have government guarantee which will impact the line of credit adversely.

Conclusion

  • India has been gradually escalating itself with Eastern Economic Forum from its establishment in 2015. India’s interest in the Far East region has grown and also Russia’ interest in bringing India into that geography has grown.
  • So, making economic partnership a strong pillar of the bilateral relationship is a key priority for both the countries. If economic dimension has been added to the relation than it will really become contemporary and forward looking relation.

 

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