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20th India-Russia Inter-Governmental Commission Meeting; India Seeks FTA with Customs Union
Nov 10, 2014

The 20th session of the India-Russia Inter-Governmental Commission (IRIGC) meeting was held in Delhi.It was co-chaired by External Affairs Minister Sushma Swaraj and Russian Deputy Prime Minister Dmitry Rogozin. The two leaders discussed the entire gamut of the bilateral relationship between the two countries. Later, the two countries signed the 20th IRIGC-TEC Protocol.

For the first time, India and Russia have agreed on negotiations for a Free Trade Agreement (FTA) between India & the Customs Union of Belarus, Kazakhstan & Russia. The Indo-Russian Inter-Governmental Commission on Trade, Economics, Scientific, Technological and Cultural Cooperation (IRIGC-TEC) oversees 20 working groups covering trade, economic, scientific, technological and cultural cooperation.

India said it continues to work on the draft agreement on a Free Trade Agreement (FTA) with the Customs Union of Russia, Belarus and and hopes that the obstacles on the path be overcome. At a time when Russia is staring at the possibility of more sanctions from the West, India is looking to deepen its engagement with the country. The government will soon begin negotiations on a free trade agreement with the Customs Union of Russia, Kazakhstan and Belarus.

The trade with CIS is less than 2 per cent. It is a region left unattended by many sectors. These countries have a lot of natural resources holding a lot of potential. Bilateral trade between India and Russia stood at $6 billion (about Rs 36,600 crore) in 2013-14, with a deficit of $1.7 billion against India. The joint study group will take six months to a year to outline strategy for the free trade agreement, which will include goods, services and investment. With $6 billion bilateral trade in 2013-14, India and Russia are not expected to meet their target of $15 billion by 2015.

Russia’s recent pivot to the east, especially in the field of energy and gas partnerships, is driven by sanctions on the Russian leadership by western countries over the Ukraine issue. Last month, Russia and China signed more than 40 agreements, including a deal to boost Russian gas exports, on the back of the mega 30-year, $400 billion deal signed between them last year.

Russia will soon discuss a new joint venture on the lines of the Sakhalin-1 gas fields, where India’s ONGC has a 20 per cent stake and also ground transportation and other routes for energy supplies to India. Russian company Novatek has invited Indian partners for the development and production of hydrocarbons. Discussions will also be on Russia acting as an intermediary on Indian oil imports from Iran.

Apart from it, the final agreement for co-development and co-production of the Fifth Generation Fighter Aircraft (FGFA) is on track, as differences have been sorted out. The aircraft induction will fit in with President Putin’s plan for import independence programme for the defence industry sector. Other major deals under negotiation include three additional Talwar class frigates, leasing a second Akula class nuclear submarine and a trilateral agreement for development of BrahMos-M.

Russia said if Indian state corporations, when making purchases, not only ask for the delivery of goods but also the localisation of Russian production in India, we are ready to meet them half-way. Russia is ready to complement its proposals on the supply of vehicles, aircraft, and navigation equipment for GLONASS, with joint-venture projects in India.

After Russia annexed Crimea in March this year, the European Union and the US imposed restrictions on major Russian state banks and corporations, which provides an opportunity to India to expedite the comprehensive trade pact. On September 12, the EU targeted Russia's state finances, energy and arms sectors. On the other hand, Russia has imposed sanctions against a number of countries, including a total ban on food imports from the EU, the US, Norway, Canada and Australia, a situation India can leverage to its advantage. While Russia is keen to expedite Comprehensive Economic Partnership Agreement (CEPA) negotiations with India, Kazakhstan is learnt to have expressed apprehensions.

The meeting of the Inter-Governmental Commission is the precursor to the annual summit between India and Russia which will be held in December to be attended by Russian President Vladimir Putin.The IRIGC is the main institutional mechanism supervising economic cooperation between India and Russia. It integrates six working groups on economic and trade cooperation, mines and metallurgy, energy, tourism and culture, science and technology and information technology. Besides this the two countries have an Inter-Governmental Commission on Military Technical Cooperation co-chaired by the Defence Ministers of both nations.


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