Modi with Putin: India caught between two stools | EUROtoday

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Status: 08.07.2024 15:19

Relations between India and Russia appear nearer than ever. Nevertheless, India isn’t attempting to place itself geopolitically as both for or in opposition to Russia. It is a tough balancing act.

Annette Kammerer

It doesn't sound uncommon at first: a dinner, a wreath-laying ceremony, bilateral talks. That's what's on the agenda when the Indian Prime Minister visits Russian President Vladimir Putin.

But Narendra Modi is already sending a transparent message: his first international journey since his re-election will take him to Moscow. And there are a variety of points that have to be mentioned. The most urgent downside: the problem of cash.

Complicated funds

Since the start of the struggle in opposition to Ukraine, India has been the most important purchaser of Russian crude oil after China. Russia, in flip, is India's largest provider. Around 40 % of all oil imports to India now come from Russia. A file excessive.

Good for India, you may suppose, and even higher for Russia, which might use it to finance its struggle in Ukraine. But it’s not so simple as it appears at first look.

This is as a result of India doesn’t pay for Russian oil in {dollars}, as is common on the world market, however in rupees, its personal foreign money. However, as a result of these aren’t freely convertible and Russia is excluded from the worldwide financial institution switch system SWIFT, not all of this earnings flows again to Russia.

As a end result, billions of rupees are stated to have gathered within the Indian accounts of Russian oil corporations – cash that originally appears to be of little use to Russia.

Is India financing Russia's struggle?

It is an issue that doesn’t exist with China, the opposite main purchaser of Russian oil. In distinction to commerce with China, the vary of Indian items that Russia should purchase and import is comparatively restricted. The commerce of Russian oil for Indian items due to this fact does not likely work. The commerce surplus embodies how poorly it really works.

India purchased items from Russia, primarily oil and army gear, price 66 billion {dollars} final fiscal yr. In distinction, Russia solely purchased round 4 billion {dollars} price of products from India. The distinction between the 2 ends in a commerce surplus for Russia of greater than 60 billion {dollars}.

Some analysts consider that a big a part of the commerce surplus stays in India. This means cash that formally belongs to Russia however truly sits in Indian accounts. Others consider this determine is extreme. What is obvious is that Russia doesn’t have direct entry to all the income from the oil commerce with India. The basic accusation that India is financing Russia's struggle in Ukraine is due to this fact too simplistic.

Perhaps additionally within the pursuits of the West

At the identical time, it’s noticeable that the West is essentially letting India do because it pleases in relation to buying and selling with Russian oil. Some folks even suspect that this enterprise is within the West's curiosity. An argument that the Indian facet additionally repeatedly places ahead. Because if India, at the moment the quickest rising world financial system, have been to purchase its oil on the world market like many Western nations, the worth would in all probability rise exorbitantly. Even for Western nations.

On the opposite hand, India buys from Russia at a reduction, thereby pushing down the worth of Russian oil. India does pay greater than 60 {dollars} per barrel, which corresponds to the worth cap on Russian oil launched by the USA and the EU. Nevertheless, India can also be lowering Russia's pre-war astronomical earnings from commodity buying and selling.

It can also be suspected that Germany can also be immediately cashing in on India's oil enterprise with Russia, as Germany, amongst different issues, is shopping for Indian gas that was in all probability produced from Russian crude oil.

Russia and India traditionally shut

Russia and India have had a particular relationship for the reason that Cold War, explains Harsh V. Pant, vice chairman of the Indian suppose tank Observer Research Foundation. In the struggle with Pakistan in 1971, it was the Soviet Union that got here to India's assist.

Since then, India has purchased most of its army gear from its companion Russia. In earlier years, a mean of greater than 60 % of all arms imports got here from Russia; immediately, in accordance with the Stockholm Peace Institute SIPRI, the determine remains to be round 45 %.

India maintains an in depth partnership with Russia due to this dependence. But for the reason that struggle in opposition to Ukraine, relations have turn out to be tough for varied causes, explains Pant. On the one hand, Russia is transferring ever nearer to China, India's international coverage opponent. On the opposite hand, Russia is taking an antagonistic place in the direction of the West – a place that truly contradicts India's international coverage targets.

All buddies?

India needs to be buddies with everybody, stresses economics professor Ashwani Mahajan, who’s near the Hindu nationalist RSS. And so India has circuitously criticized Russia's struggle.

However, at a summit in September 2022, Modi stated within the presence of and doubtless to the shock of Putin that now was not the “era of war” and added to his Russian counterpart: “I already told you that on the phone.”

India is caught between two stools and is due to this fact being courted by the West geopolitically. But it’s a balancing act, says professional Pant, which presents main challenges for Indian international coverage – regardless of or exactly due to the shut relations with Russia.