Modi Is Shoring Up Russia Ties as Putin Deepens China Embrace

Modi Is Shoring Up Russia Ties as Putin Deepens China Embrace

Worried by deepening China-Russia relations, Indian Prime Minister Narendra Modi is heading to Moscow next week for talks with President Vladimir Putin, his first visit to the country since the Kremlin’s 2022 invasion of Ukraine.

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(Bloomberg) — Worried by deepening China-Russia relations, Indian Prime Minister Narendra Modi is heading to Moscow next week for talks with President Vladimir Putin, his first visit to the country since the Kremlin’s 2022 invasion of Ukraine.

The meeting, which will help Putin to counter Western efforts to cast him as a pariah, comes two months after Putin went to China for the first foreign visit of his new term. That trip underlined Moscow’s increasing dependence on Beijing, which India has eyed warily.

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“The deepening of the strategic alignment between Russia and China is uncomfortable for New Delhi because it’s like your best friend sleeping with the enemy,” said Swasti Rao, an associate fellow at Manohar Parrikar Institute For Defence Studies and Analyses, a Defense Ministry-backed research group in New Delhi. “Given that we have these concerns it makes sense for the prime minister to go there and talk to Putin at the highest level.”

It will be Modi’s first bilateral visit since he won a third term in office, with the prime minister breaking convention by visiting Russia instead of neighboring countries like Bhutan, Maldives and Sri Lanka, where he chose to go after previous election wins. 

That underlines the importance New Delhi places on its ties with Moscow, people familiar with the matter said. India, the world’s third-largest crude consumer, has become a major buyer of Russian oil, and is reliant on its military hardware supplies. At the same, relations between China and India have been at a low point since land-border clashes in 2020.

The two leaders are expected to discuss a range of issues although no breakthrough agreements are likely, according to Indian officials familiar with the matter, who asked not to be identified as the discussions are private. The agenda includes a logistics supply agreement to bolster cooperation between the two militaries, restarting discussions on the joint development of a fifth generation fighter aircraft, and collaboration on nuclear power, the people said. 

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India’s Ministry of External Affairs wasn’t immediately available to comment when contacted for further information.

The visit to Moscow, which is expected to take place on July 8-9, partly coincides with a separate summit in Washington of members of the North American Treaty Organization. Modi’s Russia trip was long overdue and the timing had no connection with the alliance’s meeting, people familiar with the matter said. Modi is expected to visit Vienna on a two-day trip after Moscow.

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The US has sought to strengthen ties with India to counter China’s dominance in Asia and has been tolerant of New Delhi’s relations with Russia. Asked about those relations, Kurt Campbell, the US deputy secretary of state, said last week Washington has raised concerns about India-Russia ties with New Delhi, but that it had confidence in India and wants to expand relations with the South Asian country.  

Modi has skipped annual in-person summits with Putin for the past two years amid discomfort in New Delhi over the worst fighting in Europe since World War II. Even so, India has avoided censuring Russia for invading neighboring Ukraine, abstaining at United Nations votes on the issue, and has advocated diplomacy to resolve the conflict.

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Cheap Oil

Oil sales by Russia to India are helping to maintain ties, even if they aren’t as close as during the Soviet era. As Russia offers deeper discounts on its oil amid Western energy restrictions, India has increased its purchases of Russian crude more than 20 times compared to 2021, exceeding 2 million barrels a day.

India saved $13 billion by importing cheaper crude oil from Russia over the previous 23 months, according to a study by ICRA, the rating agency, published in April.

A Moscow meeting with the Indian prime minister is a diplomatic win for Putin, whose country’s been hit with unprecedented sanctions over its attack on Ukraine. He’s also wanted for war crimes by the International Criminal Court, which has restricted his travel abroad.

In June, Putin on a rare foreign tour visited North Korea, where he signed a military defense pact with Kim Jong Un that alarmed the US and its allies. Last year, he didn’t attend the Group of 20 leaders’ meeting hosted by India or the BRICS emerging economies’ summit held in South Africa.

A former Indian envoy to Russia, who asked not to be identified, said New Delhi’s ties with Moscow are stable and strong, although economic and defense interactions have slowed recently. The relationship has always been driven from the top, and summits between the leadership have their own importance, the person said. 

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“The visit of a leader of a state such as India demonstrates that Russia isn’t facing international isolation, and for the Kremlin this is very important,” said Aleksei Zakharov, an expert on India based in Moscow.

India, which has refused to join punitive measures against Russia, has worked to resolve problems affecting trade caused by Moscow’s need to reduce its use of the US dollar.

India now pays largely in UAE dirham for Russian oil, and the two countries have found a solution to a deadlocked payment system for weapons and other goods. That had led to Russian companies amassing as much as $8 billion worth of rupees in accounts in India which they couldn’t spend, according to senior officials who didn’t want to be named because of the sensitivity of the issue.

Under the agreement, Russia has used the funds to invest in Indian enterprises and buy more electronic goods, pharmaceuticals, agricultural tools and textiles, said officials directly aware of the details.

Arms Deals

From New Delhi’s perspective, the commercial relationship remains unbalanced, however, with India importing about $60 billion a year and Russia buying less than $5 billion from India.

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Russia, meanwhile, is seeing its once-dominant position in India’s arms market weaken as New Delhi looks to Western suppliers led by France and the US, as well as to its own defense industry. There have been no new major arms deals with Russia for the last three years, and India’s push to diversify looks set to continue after delays in the delivery of Russian S-400 air defense systems.

Russia for now remains India’s main supplier, accounting for 36% of arms imports, according to the Stockholm International Peace Research Institute. But that’s down more than half from a decade ago.

Wary of sanctions risks and payments difficulties, Indian businesses also are cautious about operating in Russia, and top Indian officials and executives have been reluctant to attend major economic gatherings in the country.

Modi’s last trip to Russia was in 2019, when he attended a far eastern economic forum in Vladivostok.

“This is about maintaining the status quo,” said Zakharov, the Moscow-based India specialist. “Ties are not deteriorating but there’s no particular drive to improve relations either.”

—With assistance from Rakesh Sharma and Dan Strumpf.

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