Yes, India’s trade deal with the US will still happen. And yes, India’s buying of crude oil from Russia will plummet drastically. But if you thought Trump’s tariff bulldozing of PM Modi would lead to a drastic drop in India-Russia trade, you’ve got another thing coming.
By all indications, Trump may just have inadvertently done the opposite—made India and Russia, strategic allies during much of the Cold War, though the relationship went down the priority chain as India wooed the West in the post-liberalisation years, look at each other with new eyes, and renewed interest. Is there a Nobel prize for that?!
In absolute irony, the decline in energy exports from Russia to India and Trump’s targeting of the bilateral trade between the two nations as hampering the Ukraine peace process may have only led in reality to an expansion and broad-basing of trade categories between Moscow and New Delhi.
Beyond Russian oil
“Today, India-Russia trade already extends well beyond energy (to) include engineering and mechanical goods, electronic products and components, pharmaceutical manufacturing ingredients (including nutraceuticals), food products and ingredients, and organic/inorganic chemicals—all of which represent substantial and growing trade lines in recent years,” said Katerina Filunets, General Manager of ITE Dubai, one of the biggest trade exhibitors from Russia.
“These trends are reflected in official and trade analyses, which show diversified Indian exports to Russia in recent years. (They) reflect both global supply-chain reconfiguration and targeted commercial efforts by Indian firms to supply categories where demand has outstripped local/regional supply. Trade statistics and government trade briefs show an expanding basket of export items into Russia in the last financial year,” she added.
Since its Ukraine invasion, Russia has been a pariah in the West, with repeated sanctions on its economy, freezing of assets abroad and having been kicked out of the international SWIFT financial transfer system. Virtually all Western brands, from consumer to technology, have given up operations in Russia, while the US and its allies have repeatedly picked on those who circumvented its restrictions to make a quick buck.
Like Indian energy behemoths, which benefited massively over the past three years by buying oil and coal at a discount, since their previous recipients in the West suddenly gave up buying it due to the sanctions. It was exactly this trend that Trump wanted to nix when he called it out for backing out of giving tariff concessions to India, and instead putting heavy import duties on goods from India since August.
Silence is golden?
While the Modi government has been largely silent on Trump’s tirades, two realities have emerged—India is dialling down its intake of Russian crude, though the process started well before Trump trained his cross-hairs on it. Signals are that an India-US trade deal may finally fructify.
But at the same time, both Russia and India seem to have realised how they can be ‘the next best thing’ to each other. Russia’s traditional export market of Europe had vapourised overnight after sanctions over Ukraine, forcing it to look for alternative markets. And who else but fellow-BRICS member state India, which itself seemed left out in the cold after the US, its biggest trading partner, did not offer it a sweet deal as was expected?
“Every gap left by traditional suppliers (in Russia) is a doorway for Indian exporters. Agile companies that move quickly can establish themselves as reliable partners in pharmaceuticals, chemicals, food processing, and engineered goods, securing both market share and long-term growth,” said Filunets.
Uptick in bilateral trade
Trade between India and Russia had, for long, revolved primarily around oil and defence imports by India. But in the last one year or so, the trend is changing, with India realising the geostrategic need to expand its trade basket instead of depending on a few big nations—accordingly, its exports to Russia have increased in anything from chemicals and pharma products to electronics, boilers and heavy machinery.
Fresh fruits, processed vegetables and even seafood saw an uptick this summer, even if small and gradual. Russia’s export to India of fats and vegetable oil topped $2.25 billion last year, while indications are that India may cough up Rs 10,000 crore for a new set of S-400 air defence systems.
“Global trade naturally reflects wider geopolitical dynamics, and companies everywhere are attentive to this context. For Indian exporters, the approach has been pragmatic: they pursue opportunities in Russia within the framework of India’s trade policy and long-standing bilateral agreements,” said Filunets.
Of course, the Democles sword of sanctions would still be a dampener for Indian businesses with a presence in the US or its western allies, which have ongoing sanctions against Russia, but Filunets believes a little dexterity goes a long way: “Exporters act responsibly—working with their banks, advisors, and partners to ensure that their activities align with applicable regulations. In this way, trade flows are managed with both opportunity and compliance in mind, allowing businesses to expand in a way that is transparent, secure, and sustainable.”