INDO-RUSSIAN ECONOMIC RELATIONS

The disintegration of the Soviet Union and the end of cold war brought about a
fundamental transformation in the geopolitical map of the world. For India, the
consequences of the Soviet collapse and the new priorities of the Russian foreign
policy were shattering. Though 'complicated' and 'unusual', there had been a highly
beneficial trade relationship between the two countries. The Soviet Union was India's
largest supplier of arms and a major market for its exports. But much more than that
India was damaged by the loss of a strategic partner. The Soviet Union could always
be relied on to provide political support at multilateral fora particularly at the UN on
issues like the one related to Kashmir. It is difficult now to imagine about such
support from Russia.

The first couple of years of India's relations with post Soviet Russia were
marked by a good deal of uncertainty, inconsistency, lack of clarity and even
'unreliability' from India's point of view. Learning with the uncertainties of the new
era lndia did take early steps to 'protect its own interest' though without marking any
significant headway. The two-track approach that lndia adopted was on the one hand,
aimed at resurrecting the vital elements of its economic and military relations with
Russia and, on the other, searching other alternatives in the west. On both these
counts, however, India's difficulties were compounded both by the magnitude of her
dependence on Russia and the political- economic uncertainties faced by the latter. It
meant that it often had to 'wait and see' what Russia would do and how this would
affect the relationship of the two countries. However, Russia seems to be shedding its
initial hesitation, inconsistency and uncertainty. The contours of new Russia's foreign
policy are becoming clearer. It is now giving all the indicators of its ability and
intentions of redefining its foreign policy goals, priorities and international role with
India the objectives and character of its relations are being defined with a measure of
clarity. The national goals of two countries are being looked upon in the light of new
international realities. The two countries once again began to rediscover the mutual
importance but with a qualitative difference, which commensurate with the realities of
the post cold war era'.

The break up of the Soviet Union has made a major impact on lndo-Russian
economic relations. Certain specific conditions under which Indo-Soviet Economic
relations were developing for about four decades since the early 1950s ceased to exist.
Firstly, the state monopoly over foreign trade and state trading institutions and
organizations that prevailed in the USSR disappeared. Secondly, the central planning
organization (The Gosplan), which played an important role in the decision-making
process and in implementing all matters relating to foreign trade, was wound up soon
after the Soviet disintegration. Thirdly, even as these old institutions were wound up,
new institutions that regulated market economy were not in place, resulting in
uncertainties and chaos, which affected foreign trade and economic relations of
Russia. Fourthly, the system of bulk imports and exports by the state agencies, which
prevailed in the Soviet era, came to a halt and in its place, trading has been carried out
in small quantities and by small private trading firms. Indian traders, who were used
to trading with the USSR on old basis found it difficult to adjust to new conditions.
Fifthly, in the past all decisions on foreign trade were taken by bureaucrats in
ministries located in Moscow and this practice was discontinued almost overnight.
Hence, foreign trading firms which were interested in trading with Russia were
required to contact customers not located in Moscow alone but spread in all parts of
the country and they were required to open branch offices in major cites and regions
of Russia. However, by virtue of being the hub of all economic activities, Moscow
continued to play an important nodal centre for certain types of goods. Sixthly, as
economic transition was still in process, new banking and financial institutions were
not fully developed to meet the needs of foreign trade transactions. This problem was
even more acute in many regions of Russia. Seventhly, in the immediate post-Soviet
period, Russian policy makers, particularly, Anderi Kovyrey as foreign minister, were
oriented to the West and in particular to the USA. As a result, there was some neglect
so far as the 'Eastern' countries particularly developing countries were concerned
including 1ndia2.

While today, it has become fashionable to discredit the public sector in India,
it is pertinent to draw the attention of readers which mentions that in the past several
years, fiuitful cooperation developed between the two countries in a large number of
areas including steel, coal, oil, power, non-ferrous metallurgy, machine-building,
communications, irrigation, and science and technology. Some of these public sector
projects, set up with the soviet assistance, were also the first of their kind in India.
Projects built with the Soviet collaboration in India, accounted for as much as 40
percent of India's steel output, 32% of aluminum production, roughly 80% of heavy
power equipment, 35% of crude oil production, 40% of oil processing and 10% of
power generation. The Commodity wise composition of the Indian exports and
imports were broadly as follows: on the side of exports, there were basically three
categories of goods, primary goods, eg., tea, coffee, pepper, spices; secondly
manufactured consumer goods, textiles, garments, shoe uppers etc, and finally other
manufactures articles which had been the fastest growing items since 80's. However,
its share in the total Soviet imports of machinery and equipment was not significant -
the main suppliers being the then Germany, formerly Germany democratic Republic
(GDR), Federal republic of Germany (FRG) Finland and former ~zechoslovakia~.
 INDIA'S TRADE WITH RUSSIA

1 YEAR EXPORT IMPORT BALANCE

1 2 3 4

I
-
Source DGCl & 5, Calcutta.

1. As compared to the level of trade turn over in 1991-92 when it was about $
2368 million, trade declined to $ 1569 million in 1997-98. This declining trend
in trade turnover persisted during the period April-November 1998. Over the
last six to seven years, overall trade has not shown any steady trend. Both
India's exports to Russia and imports from that country have been
characterized by lack of stability and sustained growth. Infact, as can be seen
from the data, there were wide year-to-year fluctuations, annual exports to
Russia have fluctuated between $600 million and $ 1,600 million.
2. There has been a substantial decline over the years both in India's exports to
Russia and imports from Russia. Decline in exports was quite significant about
48% between 1991-92 and 1997-98, while decline in imports was relatively
modest about 32 percent during this period. However, if 1992-93 is considered
as the base year, i.e., when the Soviet breaks up was complete, then a different
picture emerges. Both exports to Russia and imports from that country have
increased though to a modest scale, exports increasing by about 33 % between
1992-93 and 1997-98, while imports increased by nearly 150%. It is important
to note that barring 1995-96, India's exports to Russia have been much below
$1 billion (Rs. 3000 crores), which is the amount of debt repayable by India to
Russia annually between 1992 and 2005. In other words, Russia was not able
to fully utilize Rs. 3000 crores for importing goods from lndia despite the
agreement signed on this aspect during President Boris Yeltsin visit to India in
1993. Thus, Russia had accumulated a sum of over Rs.6000 crores by 1998-
99.

3. India has maintained a positive balance of trade with Russia throughout this
period. However, it is important to note that the volume of trade balance has
declined significantly over the years, from about $91 1 million in 1992-93 to $
352 million in 1992-93 to $ 209 million in 1997-98. This positive trade
balance is primarily due to the fact that India is required to repay debt
accumulated during the soviet era in terms of goods. Moreover, it appears that
Russia has been able to improve its export performance to lndia including
defense sales to India.

4. There is no steadiness and consistency in India's annual exports to Russia and

imports from Russia. So far as exports are concerned, out of 8 years there was
decline in 4 years with sharp decline in 1991-92 and 1992-93. At the same
 time there was very modest positive growth in exports in 4 years. A similar
picture emerges with regard to India's imports from Russia.

The data on India's exports of major commodities to Russia is given in Table-

2. As per the data, major commodities exported from India to Russia are tea, coffee,
rice, tobacco, ready-made garments and so on. Among the rest are engineering goods
whose importance had reduced over the last 7-8 years. But a significant new
development is that 'pharmaceutical products' have gained importance among the
groups of 'chemical and allied products' in India's exports to Russia. On the other
hand, between 1995 and 1998 there was a sharp decline in the exports of several
traditional items such as cashew, castor oil, processed items and jute manufactures.

In short, traditional items have continued to dominate in the total basket of

exports accounting for about 60% of India's exports to Russia. As against that non-
traditional items such as engineering goods are losing their significance in the Russian
market. Moreover, there is no steadiness in the export, which may be due to the
absence of state regulated purchases, which was prevailing in the Soviet era.

Table3 contains data regarding India's imports of major commodities from

Russia. Among the major items imported from Russia are ferrous and non-ferrous
metals, fertilizers, newsprint, petroleum products, chemicals and machinery. These
items accounted for about 70% of Russia's exports to India. However, there has been
sharp decline in the imports of fertilizers since 1995-96, while in the case of other
commodities there is minor fluctuation in imports over the years. Oil and oil products
were the most important items of India's imports during the soviet era, and their
significance has substantially gone down aAer the soviet break up.

There were wide year-to-year fluctuations in the value to trade in respect of

these major commodities. For instance, imports of ferrous and non-ferrous metals in
1998 went down drastically presumably due to antidumping duty imposed on Russia,
 Ukraine and Kazakhstan by India. However, there was a sharp increase in project
exports from Russia to India in 1998. This was possible because Russian h s were
able to secure orders for the supply of coal mining machinery to coal India Ltd, and
for machinery and equipment for modernization of still mill packages in Bhilai and
Bokaro plants, besides the civil construction contract for the Tehri Hydel project.

TABLE:2- India's exports of Major commodities to Russia

Plastic & 28.0 32.8 27.9 8.0 22.7 -14.7 -64.8

Linoleum
 products

Engineering
goods
Cotton yam, 32.4 51.5 20.4 -37.1
fabrics, made
ups etc.,
Ready-made 80.7 69.3 20.2 16.4
garments
Jute 0.2 1.3 -89.3 -88.3
R-
manufacturers
INCL,
floor
coverings
Others 25.6 38.4 7.7 -33.3
Total Exports 439.0 571.5 9.6 -23.2

Source - DGCI&S. Calcutta

TABLE:3- India's exports of Major commodities to Russia

Commodity ApriCMarch April -November (US % million) %

(1) change
1997198 1996197 1995196 1998199 1997198 (2)1(3) (5)1(6)
(2) (3) (4) (5) (6) (7) (8)

Synthetic and 8.3 4.8 4.4 7.8 4.7 71.0 66.2

reclained rubber
Pulp and waste 10.6 6.4 23.2 0.5 5.9 65.0 -91.2
Pya
Fertilizers 76.2 29.5 169.8 81.7 68.9 158.3 18.7
Cotton raw and 5.4
waste
Metalliferrous 13.1 10.9 10.0 5.2 10.1 20.0 -48.0
ores and metal
Petroleum, crude & 35.1 100.6
products

Chemicals, 54.8 43.6

organic &
inorganic
Medical & 5.3 5.2
Pharmaceutical
Newspriit 81.3 74.1
[ron and steel 162.6 85.6
Non-ferrous metals 138.5 164.2

Gold and silver

Machine tools
Machine except 39.5
:lectric &

I I
'reject goods 0.7 9.3

I I

P- Provisional Source- DGCT & S, Calcutta

 Moreover, a significant development has been that Russia agreed to give a
loan of $2.3 billion for the import of technology and machinery for the
Koudankulam Nuclear plant being built by India. Thus, Russia's exports of
machinery for nuclear power generation to India will be expected to increase over the
next ten years4.

The Union Deputy Minister for commerce Mr. Salaman Khurshid, expressed
the hope that a new trade arrangement with Russia and the other new republics would
be worked out with in the next month or two. He said an official team had already
visited Russia and he had a discussion with the Russian Ambassador in Delhi. Things
are moving slowly, but we hope to have an arrangement with in a month or so he told
the Leather research industry-get-together (IERIG), when opened at the CLRl here.
Concealing that exports to the rupee payment areas (RPA), especially the erstwhile
Soviet Union, would have been hit by the recent developments there, the Deputy
Minister urged them saying (Russian's will continue to wear shoes and drink tea,
though it may take some time for us to get back to their market. Mr. Khurshid wanted
the leather exporters to put in extra effort to get back to their old export performance.
In the case of the centralized economy countries, which have broken down, the
process of privatization has just begun. They may not even know the process and will
require your help and guidance for the documentation he added. He urged the leather
industry to strive for achieving to ambitious export target of Rs. 10,000 crores by
2000. The government has set this high target with the full confidence and faith in the
industry and we know you can reach it with some more efforts. The center was also
aware of the problems faced by the exporters, including those related to eximscrips
and advance licenses, he said, assuring them that they would be solved by April.

Mr. Khurshid said, "India had consciously chosen the path of liberalization to
take its rightful place in the global economy. If we had taken these steps some two
years ago, we would have already joined the top League of Nations by now. It is
unfortunate that even after trade and industry have welcomed these measures, an
attempt is being made to create the impression in the country that the government
took these steps only under pressure from the IMF or the World Bank. I can tell you
clearly that we have chosen this path and we cannot be pressured by any world body
or superpower".

The Deputy Minister said the country faced a peculiar problem because of
poverty and a large section of the people has no understanding of the complex
economic issues confronting the nation. Inaugurating the meet, the Tamil Nadu rural
industries Minister, Mr. Mohamed Asif, took pride in the fact that 53 percent of the
country tanning activity and 55 to 60 percent of the exports of leather and leather
products were from Tamil Nadu. Asif said the CLRI, with support of the International
development and research council of Canada was currently involved in evolving a
suitable mode for producing meat in rural areas and marketing it profitably. A chain
of rural meat production centers was expected to emerge, Explaining the salient
features of the new industrial policy, the minister said leather industries located any
where in the state would be eligible for an investment subsidy of 20% on fixed assets,
with a ceiling of Rs. 20 Lakhs. An additional subsidy of 5% would be available the
unit had women employees of more than 3%. The leather industry had the record of
providing 80 percent employment for women and about 28,000 women in Tamil
Nadu were emerged in this industry? The Defense Minister Mr. Sharad Pawar who
arrived in Moscow was the highest Indian official to come to Russia since the break
up of the Soviet Union, nine months ago.

Mr. Pawar visit to Russia at a time when relations between the two countries
are going through a deep crisis. Bilateral trade is in the doldrums, with Russian
exports to India virtually grinding to a halt this year. Although Moscow went out of
its way to emphasize the importance it attaches to ties with India by sending to New
Delhi earlier this year two top oficials, the state Secretary Mr. Gemdy Burbuils and
the Parliament speaker, Mr. Ruslan Khasbulatov, the relations are bound to get
downgraded unless trade turnover can be restored.
 Russian- Indian cooperation in the defense field has been affected by the same
factors that have caused an overall slump in trade, a 30 percent fall in industrial output
in Russia, disruption of economic links among the former Soviet Republics and the
reluctance of Russian factories, which are now free to e m foreign exchange, to
accept payment in rupees.

Although officials as the Russian Ministry for foreign economic relations

insist that the situation with defense exports to India is for better than in the civil
sector trade, the fact remains that over the past few years sales of Russian military
hardware and spare parts to India have slumped by about three-fourths to $400
millions under the trade protocol for 1992. But even that volume is now under
question as a Russian credit line for Indians defense purchases negotiated last March
and described as a "big" has not been opened to this day.

Russia is now trying hard to push its arms exports, as a recent visit of the
Chinese defense Minister showed. After the initial clumsy attempts to convert some
high-tech arms production lines to the output of ordinary consumer goods in keeping
with drastic defense budget cuts, the Russian leaders came to the conclusion that it
would be much wiser to manufacture arms for export and earn money for subsequent
in depth re-conversion of some defense factories. Also, the ongoing armed forces
reductions will make redundant military hardware worth between $10 and 20 billions.

According to the Russian Minister for foreign Economic relations

Mr. Peter Aven, the downtrend in arms exports will be reversed this year. However,
Indian officials in Moscow complain that Russian's arms sales drive is still more a
declaration of intent than actual policy. At least partly tries is due to the confusion
caused by the current decentralization of Russian defense exports, with both arms and
manufactures striving to get direct access to international arms markets by passing the
Foreign Trade Ministry, which they say is too conservative and inflexible to compete
with foreign exporters.
 There are indications that the new emphasis on arms exports may make Russia
less scrupulous about choosing potential buyers. Some officials have hinted that the
Defense Ministry is considering applications from Taiwan, South Africa, and
Pakistan. The foreign Ministry promptly ruled out the possibility of selling weapons
to either Taiwan or South Africa. As for Pakistan, which would like to buy tanks and
combat aircraft, the Deputy Minister for foreign Economic relations, Mar Vladimir
Shibayev, confirmed that negotiations were under was but promised that any decision
would be taken in consultation with India. The issue is likely to come up during Mr.
Pawar's talks in ~ o s c o w ~ .

Russia has proposed to India a comprehensive military cooperation agreement

between the Defense Ministers of the two countries. The proposal was conveyed by
the Russian defense Minister Gen. Pavel Gravchev, to the visiting Indian Defense
Minister Mr. Sharad Pawar during these talks here. Arms sales figured prominently in
the talks although they are channelled through the Russian Ministry for foreign
economic relations Mr. Gravchev promised that he would "help see it that the defense
contracts are carried out satisfactorily". The Russian Minister said the two sides also
discussed the situation in the former Soviet Union Central Asia in particular and in
Asia in general. Mr. Pawar confined himself to expressing satisfaction over the talks
he had with Gen. Gravchev, "We have held detailed and very useful discussions, I am
quite satisfied with them. He however, did not mention the defense cooperation tartly
proposed by Russia. When the Indian delegation will inspect an air force unit at
Kubinka, near here, before having what is called in the programme, a protocol
meeting" with the commander -in-chief of the common wealth armed forces, Marshal
Yevgency Shaposhnikov. It may also here a meeting with the country's leadership.
But it is not clear whether Mr. Yeltsin or the Vice-president, Mr. Alexander Rustskoi
will receive the team7.
 A senior Russian diplomat believed that the cancellation of the President Mr.
Boris Yeltsin visit to Japan indicates a reordering of the foreign policy priorities that
open new possibilities for Russian lndian relations.

As a matter of fact, other months of stagnation Russian- Indian relations are

showing signs of Riclaimg up. lndian defense Minister, Mr. Sharad Pawar, during his
visit to Moscow earlier this month sorted out the problem of continued defense
supplies to India was assured of Russian's readiness to sell India any weapons it
wished. According to lndian sources in Moscow, an agreement on $ 830 millions
defense credit to lndia is close at hand.

The latest trade figures just released in Moscow put the Russian- Indian
commodity turnover in the first eight months of 1992 at $1,100 billions despite the
fact that Russian's centralized exports to India have been zero. The built of trade has
been Russia import from lndia outside the trade protocol for the current year. This
indicates the growing appreciation. But there has also been some progress in the field
of centralized commodity sales to lndias.

Although the Russian delegation has returned home empty- handed from last
weeks annual session of the international monetary fund and the World Bank in
Washington, Moscow seems to show no signs of concern. The deputy Prime Minister
Mr. Alexander Shokin, for one, was quite optimistic about getting agreed credits and
rescheduling Russian's foreign delat, despites its failure debt, despite its failure to
meet tough IMF recommendations.

This confidence may be partly due to the fact that in Washington, Russia for
the first time, look a seat on the IMF board of directors. But mostly it seems to stem
from an awareness that the growing economic and political instability in the former
Soviet Union poses a big threat for the west to let Russia and the other newly
independent republics sink in to chaos. At least so far the IMF and the World Bank
have been remarkably learnt of Russian's repeated breaking of the agreed terns for
getting western aid.

Early this year Russia slashed its budget deficit in the first quarter of 1992
from 20 percent of the GNP to as little as one percent and to deregulate energy prices
in return for a promise of a $24billions international aid package. However, the target
could not be achieved, for the Russian non-market economy refused to respond to
standard treatment prescribed by the IMF to market-oriented third-World economics.

In Munich last July, the group of seven agreed to give Russia to first $ 1
billion to replenish its depleted hard currency reserves in exchange for a new pledge
to keep down the budget deficit at 5% of the GNP, control inflation at around 9% a
month and limit credits to industry and agriculture to 700 billion rubles. The World
Bank followed suit by marking available to Russia $600 millions for virtual imports
and assistance to agriculture, transport and the energy sector9.
Russian leadership has assured Indian's Ambassador, Mr. Alfred Gonsalves
attached top priority to its relations with India. The out going Ambassador assessed
the current state of Indo-Russian relations as more orderly than we had with the
Soviet Union during its last two years. He referred to the agreement for the delivery of
one million tones of Russian crude oil to India and said there was a possibility of
another two million tons reaching India before the end of the year. Russia has
promised to sell lndia three million tons of crude next year. Also, Indian exports to
Russia outside the 1992 trade protocol registered $471 millions in the first six months
of this year, which is more than half of the protocol target India has also secured
commercial credit for the import of Indians power plant'0.

lndia and Russia have more or less decide to give a decent burial to their
existing system of bilateral trade used on an agreed protocol and predetermined quota
of exports and imports. The trade between the two countries beginning from January
1993 will be based on freely convertibly currency.
 Informed sources told this correspondent that after the virtual collapse of Indo-
Russian trade protocol for 1992, it may not be surprising to see during the
forthcoming visit of the Russian President, Mr. Boris Yeltsin, on January 27, the two
countries announcing their decisions to throw open their bilateral trade to free
market". The issue of Indo-Russian bilateral trade as also the repayment of India's
dept to Russia was considered at a series of meeting the visiting Russian Vice-
Minister for foreign economic relations Mr. V.D. Shibayev had with the Indian
authorities concerned here from January 6 to 8.

The beginning of 1993 therefore, marked a new chapter in the trade relations
between the two nations with both agreeing to deal with each other on the basis of
freely convertible currency Russia, successor state of USSR even during the days of
Soviet Union accounted for 80 percent of India's bilateral trade in the region.

In this context the sources said once the two countries decided to trade based
on convertible currency, there will be neither any need for a protocol nor any
bureaucratic control usually associated with the ticklish system of technical credit.
Incidentally, under the 1992 trade protocol, India had agreed to extend a technical
credit of $285 millions to Russia to cover select exports from India. However, by
December 31, 1992 (the day the trade protocol was supposed to have expired
formally), lndia had extended $200 millions dollars in technical credit. Sources, said
the remaining $85 millions will be allocated to those who had exported to Russia but
had not received payments.

The fact of the two countries agreeing to trade in freely convertible currency
was not new. Even during 1992, the enterprises belonging to the countries used
companies based in Singapore to conclude their trade. The sources said the 1992
protocol provided for a clearing mechanism based on US dollars. Under this any
export from Russia to India, like say petroleum, based on international prices would
be paid for by India in the form of goods again dominated in the same US dollars.
However, instead of the two trading partners paying each other in hard currency, an
Escrow account was to be opened to finance purchase of goods by either side.
Interestingly Singapore route witnessed a trade quantum of which was far higher than
ever what had been envisaged. The nearly 14 percent rise in Indian exports to GCA
countries during April-November 1992.

Another aspect of India's economic exchange with Russia that may come in
for scrutiny as well as possible agreement during Mr. Yelstin's visit related to the
beginning of the liquidation of India's debt to Russia incurred on supplies made earlier
by Russia to India of defense and power equipment.10 The differences in the
perceptions of India and Russia on the question of outstanding Soviet aid to India
continued today even after two rounds of discussions between the Finance Minister
Dr. Man Mohan Singh and the visiting Russian first Deputy Prime Minister Mr.
Vladimir Shuneko. The discussion today centered on the issue on the rupee-ruble
exchange rate in the context of the debt owed by the India to the former Soviet Union
, reported to be around 1,000 crore rubles at the 1978 rate of Rs.35 at a ruble. The
rupee trade agreement between India and the former Soviet Union was initialed in
1978 after which the rupee-ruble parity rate was fixed on the basis of a complicated
formula without either side disclosing fully the basis of the parity rate so fixed.

Well before the collapse of Soviet Union doubts were being expressed in some
quarters in India that the ruble was terribly over valued in relation to the ruble rate
was fixed in relation to the US dollar. At present, there are reports of a dollar fetching
as much as 400 rubles where as the rate against the rupee continues to be around Rs.
35 to a ruble. In case the rupee-ruble parity rates is now worked out on the basis of the
true strength of the ruble, the outstanding debt would shrink considerably.

This point was mentioned by Dr. Man Mohan Singh also at today's meeting
when he stressed that India had raised the issue of renegotiating the exchange rate
formula long before the dissolution of the Soviet Union. He pointed out that it was
essential to correct the exchange rate imbalances implicit in the 1978 protocol by
establishing a mechanism, which reflected the strengths and weakness of both the
rupee and ruble",

Mr. Yeltsin said he was confident that difficulties in Russian- Indian trade that
has arisen in the process of reforms in both countries would be largely overcome
during his visit, "The visit will lay a basis for long term cooperation between our
countries in power, steel, coal, industries, and the exports of Russian oil to India". He
called the step decline in bilateral trade in recent years "impermissible" and said that
while it was impossible to restore the peak trade turnover of $5.5 billions overnight,
what would and should be done this year was to reverse the downward trend.

The Russian President affirmed that his visit would not have the same result as
that of Mr. Mikhail Gorbachev in 1988, when the latter vowed to triple the volume of
Soviet-Indian trade. But instead the trade shrank by half. He said political dialogue
with India has been disrupted during the last three years of the Soviet Union and had
only been resumed last year when he met Mr. Narasimha Rao in New Year.
According to Mr. Yeltsin, the two countries had an enormous potential for increasing
bilateral trade and economic co-operation12.

The "shock therapy" pro-market experiment in Russia began in January 1992

has devastated the economy and aggravated food shortages through out territory of the
former Soviet Union. This hash conclusion was drawn by an international conference
on translation strategy for Russian agriculture, by the non-governmental international
commission on place and food (ICPF) and the Gorbachev foundation in Moscow last
weak.

The conference, attended by experts from a number of leading food producing

countries including India, as well as some international organizations, blamed the
falling food production in Russia and other countries of the common wealth of
independent states (CIS) on the "big-leap" in to the market economy attempted by the
previous Russian government of Mr. Yegor Gaidar on the recommendations of the
International Monetary Fund (IMF)and the World Bank.

Last year, the overall agricultural production in Russia dropped by about 20

percent and it is likely to decline further this year. A large-scale transfer of land from
collective to private farms without adequate state support for the latter only made
things worse. Despite a good harvest last year, Russia and other CIS countries
imported 35 million tons of grain.

In particular, the conference strongly criticized the premature deregulation of

prices in Russian in the absence of any market infrastructure and free competition,
which led to runaway inflation and a glaring disparity of prices between agricultural
and industrial products. It is recommendations to the governments of all CIS
countries, the conference urged a more gradual and orderly transition to a property
regulated market economy by restoring greater state control over the economy and
introducing wage and price controls for a limited period.

Instead of a one-sided reliance on private farms, the conference recommended

combinations of petty goods economy with large-scale production based on voluntary
cooperation. The reduction of crop losses was declared an urgent national priority for
Russia and specific recommendations were offered on how to improve crop
management, storage, processing transport and distribution.

The conference participants agreed that the recommendations of the IMF had
far less relevance to Russian than countries as India, which achieved self-sufficiency
in food production though the "green revolution" under effective stare control. India
also a figure prominently in ICPF plans to launch a number of pilot projects in
Russian agriculture. Talks are already under way to build a body milk power plant in
Russia in cooperation with the Dalmia industrial group of India. The ICPF Secretary
Mr. G a w Jacobs, thinks there are very good prospects for developing Indo-Russian
exchanges in the field of agro industrial production and technology transfer. He
recalled that a few years ago. Tata group experts had drawn up a list of some 60Q
Soviet technologies that could be marketed in India. The former Soviet President Mr.
Mikhail Gorbachev, who took lively interest in the conference, also appears to set
great value by India's experience of agricultural reform. In a break between
conference sessions, he buttonholed the Indian delegate, Mr. B.S. Raghavan, for over
half an hour to reminisce about his trips to India and discuss bilateral cooperation13.

The high-level Russian delegation is to visit India on February 8 next to

discuss the possibility of finalizing a new bilateral trade plane. Besides, the two sides
would also find ways to wipe off the technical credit totaling Rs.3,250 crores at the
end of December 31 1991 against the former Soviet Union on trade account because
of its failure to match Indian exports by its own as per the 1991 t ~ a d eprotocol.

According to the Union commerce Secretary, Mr. A.V. Ganesan, while India
has insisted that the technical credit be cleared as fast as possible, the Russians have
sought time to pay it two installments in as many years. The technical credit has
resulted in widening of the central budgetary deficit. However, their plea to adjust the
technical credit of Rs. 3,250 crores against the cumulative overall credit extended by
the former USSR to India till now in various fields has not been agreed to by India.

Similarly, the Indian request for supplying crude petroleum (One million tons)
to clear the technical credit did not find favour with the Russian's as their central
enterprise (earlier under central control) had been given full autonomy after the break
up of the Soviet Union and shift towards market economy. In fact, a decree issued
recently in Russia stipulated that all former central enterprises engaged in raw
material sector could retain up to 60 percent to the state and in the case to equipment
manufacturing units they could retain 300 percent of the hard currency earned.
 As regards the character of the trade plan, it was pointed out that during the
transitionary period up to the end of 1992 or even 1993 the goods could be designated
in hard currency, preferably, US dollar and paid for in rupees. The Russians desire
that 60% of the trade to be in convertible currency and the balance in rupees.
Similarly, the Ukraine republic wanted trade with India to be 70 percent in hard
currency and the balance in rupees. lndia has so far not accepted the proposition and
even explained to the trade with India to be 70 percent in hard currency and the
balance in rupees. India has so far not accepted the proposition and even explained to
the trade partners of erstwhile Soviet Union that if it was only a question of paying in
hard currency then there were may alternative but cheaper sources of supply available
in other hard currency areas.

Thus, for some more time, India's trade with Russia as well other important
members of the common wealth of independent states like Ukraine, Byelorussia and
Kazakhstan may continue to be rupee based. However, the republics have agreed to
keep alive the former Soviet Central Bank for foreign economic relations to carry out
foreign debt obligations both inward and outward. But as it was pointed out the
writing on the wall was clear that the trade will have to move towards convertible
currency sooner than one expects. India has, however, clear by told Russians that all
items in the category of defense power, coal and steel would continue to be paid for in
rupees as per an earlier binding legal agreement with the Soviet Union.

According to available indication, India's bilateral trade with Russia in the

calendar year 1992 may be fixed by Rs. 2000 crores and the technical credit under no
circumstance would be allowed to exceed Rs. 150 crores. An advance warning system
might built in to the two-way trade so that any increase in technical credit could
automatically cutoff trade till the accounts was settled through corresponding
exports14.
 The Russian Vice President Mr. Alexander Rustskoi, has accused a former
Deputy Minister of receiving $30 million in "kickbacks" from lndia for an oil deal
signed in October last year. He has alleged that the Deputy Minster sought $30
millions of selling oil to lndia at lower than international rate. No Russian or Indian
official was immediately available for comment on Mr. Rustskoi charges as apart
from being a weekend, Saturday and Sunday were official holidays- Russian Easter.
In this report to Parliament on Friday Mr. Rustskoi alleged that the Deputy Minister
was also involved in another deal with India in which Russia "lost about $78
millions". This was a contract for the construction of a four billion dollar factory in
India, Mr. Rustskoi said and charged the Deputy Minister with giving India a two
percent discount on the deal, "which is 20 items more than normal practices". The
Deputy Minister was recently removed from the post and appointed as Russia's trade
representatives in Finland aimed speculation that his demotion was caused by the
discovery of large-scale corruption in his ministry. Mr. Rustskoi said, the Deputy
Minister has instructed his representatives in the delegation that negotiated the deal to
provide lndia a considerable concession in price, which left Russia "with the modest
loss of $30 millions". He also told Parliament that the Deputy Minister Representative
asked lndia to pay $5 per barrel for this concession.

Mr. Rustskoi is apparently referring to a deal for the supply of 900,000 to l .I.
Million tones of crude signed between the Indian oil corporation (IOC) and three
Russians originations. The Russian Vice President said the middleman in the four-
billion-dollar factory deal was a "citizen of the United Kingdom Mr. N. Sethi, whose
services the Deputy Minister offered to help prepare the visit to India by the Russian
President, Mr. Boris Yeltsin. Mr. Rustskoi also claimed that Mr. N. Sethi wanted by
the Indian government for being known crimina~'~.

Indian Ministers Mr. Mukharjee told Mr. Yarov that now that the issue of debt
repayment has been resolved, both the countries should utilize the debt funds of Rs.
3,000 crores annually in the best interests of both countries.
 After touching a peck of nearly Rs. 10,000 crores two-way trade had
registered a sharp decline following the break-up of the Soviet Union. However, trade
has begun picking up and during 1993-94 it crossed Rs. 2500 mark, which was aided
by a 38 % increase in Indian exports to the common wealth of independent states
(CCS) and 55% rise in imports from the CIS countries. The commerce Minister said
the proposed decision by the Russian government to provide 180-day ruble conver for
Russian importers for use of debt funds would help accelerate this trend.

Reacting to Mr. Mukharjee's observation the Russian Minister promised that

the agreement between the two countries reached during the President, Mr. Boris
Yeltsin's visit to India would be fully implemented. He said the two governments had
to play an active role in stepping up economic and trade ties between the two
countries.

Describing his meeting Mr. Yarov as a first step towards meaningful

interaction, the commerce Minister said the Joint Commission setup two years ago
should review bilateral relations and set out the agenda for the future16.

The Russian delegation consists of the Deputy Minister, Mr. Allert

Tschernyshev. Mr. Yakov Urison and Mr. Anatoly Bratuknin, and senior officials Mr.
Gennady Scherbakov and Mr.Nikohai Mashov. The Indian side consisted of the
commerce secretary Mr. Tejindra Khanna and the other senior officers from the
Ministries of commerce, finance and external affairs.

Even outside the defense sector, economic activity; between Indian and Russia
is expected to expand rapidly, have received a fillip from the just concluded visit of
the Prime Minister Mr. P.V. Narasimha Rao. Trade, from all indications, would
account for a good part of it, and the Russian decision to auction part of its Indian
rupee holdings in unlikely to have any significant impact on the value of the rupee as
some fear.
 Details on fostering trade need to be pushed by both sides in the coming weeks
so as to arrive at a measure of concrete working undertaking by September when the
next meeting of the Indo-Russian Joint commissioner is due to Moscow.

The leadership both countries is seized of the importance of accelerating trade

ties. The Russian Prime Minister Mr. Viktor Chernomyrdin assured Mr. Rao in
Moscow last week that he expected the turnover to be about $800 millions this year
i.e., double that of last year.

This means that Moscow, on its part, now considers itself capable of taking
steps to buy more Indian goods, and possibly also goods of greater value, than has
been the case in the three years since the Soviet system collapsed.

Indeed, it is the positive incline of the talks in the lndian team at the highest
levels in Moscow, which give the Union Commerce Minister Mr. Pranab Mukharjee,
the confidence to tell newsmen in Moscow that he expected the Indian Russian trade
to jamb to Rs. 5000 crores in the next two years.

The Indian rupee holdings of Russia (kept in a special account with the
Reserve Bank of India) are mostly payments already rendered for defense purchases
over the past decades. Against it Moscow used to buy lndian goods. It is these
purchas'es, which had dropped drastically in the last three years.

There were several reasons, foremost being the possible collapse of the new
Russian economy. This meant more goods in the system would not have had buyers.
Also, commercial agencies and entitles of the communist state had vanished and new
ones had not quite replaced them. It is only now that private commercial houses have
sprung up which can actually physically lift Indian good to help liquidate the rupee
account, and transfer then to Russia.
 Lastly, and this should not be minimized, impressive segments of the new
Russian economy are virtually in the hands of the mafia. The mafias are successfully
running a trade in inferior quality western goods, which have flooded the Russian
market. Their interest would be hurt if goods from India are brought in to compete
with western consumer items which are a source of enonnous profits for the anti-
socials that enjoy patronage among the bureaucracy and politicians at the highest
levels. The profit margins are said to be very high, though it is doubthl if genuine
statistics are available.

It is good political augury that the Russian leadership at the highest level has
promised a greater trade turnover in these circumstances. It is doubtful at the
auctioning of the lndian rupee planning by the Russian authorities can really hurt the
Indian economy in a significant way.

The process is intended to work in the following manner under agreements

signed during the Russian President Mr. Boris Yeltsin's visit to India last year, Russia
is to clear Rs. 3000 crores from the rupee account every year by purchasing goods so
that the total accumulation of the Rs. 36,000 crores is wiped out in 12 years. This
auction conceived of by the Russian authorities envisages sale to the higher bidder of
50 percent of the projected annual off take. This does mean physical auction of Indian
currency notes, but of goods imported by Russia against the rupees in its account in
the RBI. The bidders should be Russian nationals strictly.

To help the auction process, Russia proposes to give the bidders a discount of
an undisclosed amount, which many guess to be about 20%. This only means that
against the goods lifted, the bidders would have to pay their government that much
less.
 This is strictly an intra-Russian matter designed to accelerate imports from
India finance through the rupee account. The auctioning process is nothing more than
a form of subside given.

Nevertheless, officially India expressed some unhappiness about the proposed

auction at discount. Its main fear was that goods importance to Russia can find their
way to others republics of the former Soviet Union with which lndia trying to
establish an independent trading pattern. Under the auction system, these could
happen more cheaply, undercutting Indian goods being traded directly with those
countries.

The Indian fears are valid, as present day Russia is still to develop a strong
central authority and cannot check illegal movement with in the common wealth of
independent states, of even outside for that matter. But lndia could not convince
Moscow of its case. Obviously, the Russian agreement is that imports from lndia
would be too show in the absence of such subsides as the auction envisages through
discounts. And it is Moscow's money, aRer all, that is lying in the RBI'~.

Apart from the auction controversy, Russia has agreed to let India know in
advance the quantum of certain Indian goods it proposes to pickup so that suppliers
may prepare their schedules for three to five years. In the absence of transparency in
this area, it becomes difficult to plan supplies.

Besides trade, other economic programmes on the annual include joint

ventures in the manufacture of commercial vehicles, including light transport aircraft.
This is aside from joint ventures in defense, possible to be financed on the Russian
side through its rupee account in the RBI.

When the state of renewed lndia - Russia ties are considered, it is worth
remembering that two heavy weights of Mr. Boris Yelstin's cabinet did not keep their
appointments with the Prime Minister Mr. P.V. Narasimha Rao marking last minute
cancellations, both are infinitely connected with defense.

The Russian economy is critically dependent on oil sales abroad, and defense
exports, even though the latter has become less profitable than before on account of
raising internal costs of production. Before the signing of the agreements in Moscow
Russian media speculations indicated that Moscow might desire purchase by lndia of
MIG-29 and SU-27 fighter aircraft. The latter would be a new system. The General
Director of Rosvooruzheniye, the public sector company dealing with defense sales,
Mr. Victor Sanoyla, has been quoted as saying "we suggest to India that we should
substitute the blocked navy-oriented credit deliveries for the delivery of already
assembled aircraft (MIG-29s and SU-27s) of course, the official is also cited as saying
that this would be 'an individual decision'. From the Russian side the naval deliveries
may not be on immediately because of localized internal dislocation in units that
make equipment for the Indian navy. This for instance, has helped up building of
Indian naval ships of the 'Alpha' series, and is a reason why Russia may want lndia to
pickup equipment already available on the shelf. The agreements concluded the decay
after the Russian's official was quoted did not include one on immediate direct
purchase of Russian militate were, but only of extending by two more years the
existing Russian credit line of $830 millions as yet unrealized by India, which so far
has been utilized by India, which so far has been utilized only to the extent of $500
millions. The Russian media have also suggested that India would like to start the
production of missile-artillery version of the T-72s that bears the name T-72c, but the
programme to build tanks is not (yet) underway. The Russian emphasis on Indian
purchase of whole and new system is quite strong, as evidenced from Mr. Yeltsin's
own observation at the delegation level talks in Moscow that more of Indian's defense
needs would be unit.

If the sudden pulling out of appointments of key Russian Minister dealing with
defense is not explained by India not marking outright new defense purchases
straightway, then a host of explanations can be offered. These may relate to an
unstable centre in Moscow where Minister did not defer to the President and his broad
foreign policy scheme of winning new friends through path-breaking political
accords, or that the genuinely do have to make unscheduled dashes outside the capital
to deal with unpleasant situations concerning the Russian Military's relationship with
other CIS statesla.

A period of decline in Indo-Russian relations is over and bilateral cooperation

is on the rise again, says Russia's Deputy Prime Minister, Mr. Yuri Yarov, who is
arriving in India on Wednesday for a two-day visit. Mr. Yarov, who is also co-
chairman of the inter governmental Indo-Russian commission on Trade, economic,
scientific, Technological and cultural cooperation is to prepare an annual session of
the Joint commission, scheduled to be held in New Delhi some time in autumn. He
will be having talks with the external affairs Minister Mr. Pranab Mukharjee, who is
Co-chairman of the Joint commissioner of India, and may also meet the Prime
Minister Mr. P.V. Narasimha Rao. The two Co-chairmen are expected to review
progress the joint commission made since its last session in September 1994 and
discuss the agenda for the next morning. According to Mr. Yarov, Indo-Russian trade,
after dealing for several years, pickup again last year. Statistics provided by the
Russian foreign trade ministry show that Indo-Russian trade in 1994 increased to $1.3
billion from the low of $1 .I. Billion in 1993 and is expected to grow further this year.
In an interview to "The Hindu' before his departure from Moscow Mr. Yarov
confirmed the Russian commitment to import sensitive Indian commodities, like tea,
tobacco and Soya beans on the basis of a three year ruling plan, to enable Indian
producers to do medium term planning.

During a visit to India by the Russian Prime Minister Mr. Viktor

Chernomyrdin, last December the two sides signed an agreement under which Russia
undertook to purchase in India annually through 1997,20,000 tons of tobacco, 30,000
tonnes of tea, 1,00,000 tonnes of Soyabeans and $100 million worth of medicines
against the rupee debt repayment Mr. Yarov said the Russian government has already
identified the companies that will import the agreed amounts of the above
commodities during the current year.

Russia has also finalized a complex mechanism of the utilization of the old
Soviet debts, which India repay in clearing rupee at a rate of about $I billion a year,
according to Mr. Yarov, the but of rupee is auctioned off to Russian importers of
Indian goods, and the remaining part goes to pay for the rolling-plan imports and to
finance some bilateral investment projects.

Among such projects being considered by the Russian government are a

cargo-handling facility at the Black sea port of Novorossiysk through which lndian
imports will be channeled, three petrochemical projects to be built by the Teknokhin
Company in India and a hotel being built by an lndian company in Novgorod.

To promote further growth of bilateral cooperation, the Russian government

agreed to extend a $ 2.6 billion credit for the construction of the Koudankulam
Atomic Station in Tamil Nadu with Russia's participation and provided additional
guarantees for the delivery of a Russian plant for the Tehri Power Project. Mr. Yarov
also said Russia would welcome Indian investments and for its part was wiling to
supply complete plant equipment and high technologies at competitive prices.

During his talks in lndian Mr. Yarov is likely to raise such issues as delay in
handling Russian letters of credit at the RBI, and a reduction at the VAT for Indian
commodities with foreign component purchased by India against clearing rupees.

Mr. Yarov will also discuss plans for holding days of Russian culture in lndian
late this year, which will include performance by the famous Pyatnitsk folk song
chorus, the Kremulin ballet the Barocco chamber Orchestra, a Gypsy ensemble and a
circus".
 India and Russia agreed in principle to use debt repayment h d s for
investment in joint venture projects in both countries as part of an effort to build
market oriented economic ties. Initially, about Rs. 400 crores has been allocated for
five projects of which two will be in Russia and three in India.

Though five schemes have been identified for the time being, indications are
that another five will be subsequently included in the joint investment programme.

According to the Deputy Prime Minister of the Russian Federation, Mr. Yuri
P. Yarov, the two projects in Russia are a grain terminal at the congested black sea
port of Novorossiysk and the second phase of in tourist Hotel in the city of Novgorod.
The three projects to be set up in this country include a 5,000 tonnes a year Titanium
Dioxide plant, a shockproof polypropylene plant and a scheme for producing
chemical substitutes for Ozone depleting substances.

Mr. Yarov who was addressing a joint press conference with external affairs
Minister Mr. Pranab Mukharjee, at the conclusion of his two day visit here, indicated
the need for better utilization of repayment funds so setup profitable and eficient
industrial ventures. The Russian leader felt that Russian bidders for Indian projects
should be treated on par with other international competitions.

Mr. Yarov also disclosed that the Indian Prime Minister had been invited for
the installation of a movement dedicated to the late lndian Prime Minister Pandit
Jawaharlal Nehru.

A protocol of Co-Chairman meeting of the Russian Indian inter governmental

commission was also signed.

Russia urged lower duties on Indian value added goods as part of an effort to
expand trade. Nearly 100 percent valued-added tax is levied by India. This is levied
by India. This is simply too much, Mr. Yarov said at a luncheon meeting with the
confederation of Indian Industry (CII). But, the Russian Deputy Prime Minister was
optimistic that next year's trade target of Rs.5,000 Crores will be crossed.

India and Russia decided to press for an agreement on avoidance of double

taxation now nearing fmalization. An early agreement on regularizing Air services
was also emphasized. According to the External Affairs Minister, Mr. Pranab
Mukharjee, an extradition treaty was being framed.

The two sides decided to process for an agreement on avoidance of double

taxation, now nearing fmalization, an early agreement on regularizing Air services
was also emphasized. According to the External Affairs Minister, Mr. Pranab
Mukharjee, an extradition treaty was being framed.

The two sides decided to fine tune the nearly seven year old agreement with
the former Soviet Union to build a nuclear power plant in India with known-how from
Russia. According to the protocol the two sides decided to supplement "the agreement
of November 20, 1988 between the USSR and India on corporation in the
construction of a nuclear power plant in India". The facility including two 1000 MW
reactors will be set up at Koudankulam in Tamil Nadu.

According to Mr. Yarov, Indo-Russian scientific ties had remained

uninterrupted even during the days of political turmoil in Moscow. There has been no
let up in scientific co-operation," he observed. The Russian leader pointed to the
launching of automated space probe by 1997, as part of the 50 science and technology
projects being worked upon jointly.

The two-day talks, have laid the ground work for the September-end meeting
of the Indo-Russian Joint Commission. It has advocated setting up of a sub-group on
pharmaceuticals, besides expressing the need of reviewing activities by the nine
working groups".

The Indo-Russian Joint Commission on trade economic, scientific, technical

and cultural co-operation today began its four-day meeting with focus on economic
and trade issues. The Russian delegation is expected to seek early finalization of the
agreement on Air Services and on avoidance of double taxation. The proposal for a
joint Indo-Russian shipping line is also expected to figure in the talks along its steps
to improve the level of bilateral trade and ways to effectively utilize rupee debit
repayment funds.

The Russian delegation to the commission meeting is being led by the Deputy
Prime Minister of the Russian Federation, Mr. Yuri and P. Yarov while the Indian
side is headed by the External Affairs Minister, Mr. Pranab Mukharjee. Both
Ministers are Co-Chairman of the Joint Commission, which is the principal
instrument of monitoring Indo-Russian Corporations and implementing decisions
covering the entire spectrum of issues.

Mr. Yarov is accompanied by a 35 member delegation including the minister

of construction and culture, the first deputy ministers of foreign economic relations,
economy, fuel and energy and the deputy minister of foreign affairs, transport, science
and technology, health and pharmaceutical industry.
The Russian team is eager to increase the level of bilateral trade even as
indications are that this will nearly double in 1996 compared to 1993. They are
seeking further liberation of exports to Russia on rupee payment account.

Besides, they are keen to improve the legal basis for cooperation. This
includes finalizing the agreements on this services and avoidance of double taxation.
The need for an early solution to the issue of Indian banks not accepting guarantees
from large Russian banks has also been highlighted as the Russian team feels that is
hinders the resumption of wider cooperation in setting up industrial projects in this
country. The proposal for a joint Indo-Russian shipping line will also be examined by
the joint commission.

Mr. Yarov who addressed a meeting of Indian industry under the auspices of
the federation of chambers of commerce and industry (F 9 Cos) said projects worth
Rs.1 .6 billion wall be invested in India and Russia during 1995. He said the two
countries had decided to two billion but the amount has been present to paucity of
funds. He suggested that to be set up in Indian can be identified to the consultations.
The Russian deputy prime minister country is keen to raise loans has finance Russian
projects in India. Russia felt the support of Indian industry otherwise such tie-ups
many not work advantage of both countries. Regarding the trade protocol between
countries, he said Russia will improve tones of tobacco, 1000 tones of Soya been?'.

Although recent press reports from Moscow say the Russians will abide by the
contract to supply seven cryogenic stages for the Indian launch vehicle program, there
are strong rumors that they have raised the price by over Rs.200 Crores. A Russian
team is leant to have visited Bangalore last month to renegotiable the contract. The
deal was signed in January 1991 for supply of two cryogenic stages and the transfer of
technology for Rs.235 crores. Under the old Indo-soviet rupee double trade
agreement, India will could pay the money in rupees instead of hard currency. In the
fact of US pressure, the Russian government informed lndia in July, 1993 that it
would not be able to provide cryogenic technology. The contract was renegotiated in
early 1994, giving lndia two more cryogenic stages in lieu of technology and the
option to buy three more stages at $ 3 millions each. According to Indian space
research organization sources, the Russians now insist on denominating the original
contract in US dollars at the 1991 exchange rate and taking in to account the rupees
payments made at the current exchange rate. At the 1991 exchange rate of Rs.18 to
the dollar, the Rs.235 crore contract works out to about $ 130 millions. At today's
exchange rate of Rs.35 to the dollar, a $ 130 millions translates in to Rs.455 crores.
Assuming that the full amount of Rs.235 crores has been paid, the Russians argument
would be that they should be paid another Rs.220 crores. It is learnt that the ISRO has
agreed to pay about Rs.200 Crores.

If this version is accurate, would additional Rs. 200 crores be paid in rupees or
in US dollars? If the payment is to be in dollars, which is more probable since the
rupee-ruble agreement has been ended, the renegotiated cryogenic contract would
have partial doubted in cost in rupee terms for the ISRO. If the payment in rupees the
Russians can keep demanding more in the future.

This would be just the price for four cryogenic stages (two in the original
contract and two more in lieu of technology). Buying the three optional cryogenic
stages will cost another $3 millions each. The ISRO had sought Russian assistance is
setting up facilities at the Sriharikota launch centre to handle and load cryogenic
fluids as well as test facilities at Mahendragiri in Tamil Nadu. The price for these
contracts too has been raised substantially. In addition, the ISRO has to find the
money to develop cryogenic engine and stage technology indigenously. The
cryogenic upper stage (CUS) project, as it is called, has a sanctioned cost of
Rs.335.89 crores. Questions are also being raised whether the Russians will indeed
deliver the cryogenic stages. The argument is that if they find some reason to back off
at the last movement, they would have had their cake and eaten it as well. They would
have pocketed India's money and also earned US praise for rigidly abiding by the
terms of missile technology control regime, multilateral export control system which
Russia becomes a formal member this year. Recent press reports from Moscow,
however say the Russians intend sticking to the contract and deliver the cryogenic
states, as scheduled22.

Russia was not remerging from its commitment to sell cryogenic enquires to
India, but sought to revise this prices.
 "The Russians have made some proposals," the Chairman of the Indian space
research organization (ISRO), Dr. K. Kasturi Rangan said at a press conference, when
asked whether Moscow had sought to hike the prices ofthe rocket motors.

Cryogenic engines are used in the upper stages of the Geo-Synchronous

satellite launch vehicle (GSLV) to propel it higher. Russia in 1994, agreed to transfer
four such engines to India with an option for the purchases of three more at $ three
million each.

Russia has also hiked the price to launching IRC-IC satellite from the
Baikanour facility in Kazakhasthan; through it was still much cheaper than the
western charges. "Russia earlier had asked for Rs.32 Crores but was now charging
Rs.50 Crores". Mr. Kasutirangan said, But, the launching of the INSAT-2C recently
from a Ariane launcher had cost $62.5 million, he said.

China, which had already made a dent in satellite launching market, was
looking at sending payloads on India's indigenously built polar satellite launch vehicle
(PSLV) in the orbit (LEO). But, only, "Gyloration had so far been made, the ISRO
chairman said that third launch of PSLV (D3)with the IRS-P3 was planned between
Feb,

Russian ministry for foreign economic relations is seeking the president Mr.
Boris Yeltsin approval for a package of measures designed to boost Russian exports
to India, a ministry official said.

The proposed measures are designed to stimulate priority industrial exports

and call for easy-term credit to export-oriented producers, state insurance of exports
and government guarantees to Russian tenders for the construction or modernization
of industrial projects in India. It is also proposed to make extensive use of rupees
funds generated by India's repayment of its debt to Russia to finance joint investment
projects in both countries. The Russian official, who asked not to give his name, told
The Hindu that the proposed measures were aimed at sustaining and strengthening an
upward trend in bilateral trade evident over the past couple of years. After hilling an
all-time low of $1.1 billion in 1993, Indo-Russian trade rebounded to nearly $2 billion
last year and is projected to grow to about $3 billion in 1996. However, the growth
has been achieved largely thanks to the utilization of India's old debt to the former
soviet union which is being repaid since 1994 at a rate of about Rs.3,000 crores a
year. As this source of bilateral trade will dry up after the year 2000 the two countries
are looking for ways to provide a more solid basis for continued trade growth.

The ministry for foreign economic relations is proposing to stimulate export of

Russian industrial equipment to India, which has been declining despite the recent
growth of bilateral trade. It is hoped that the proposed measures would reverse the
negative trend. The ministry is also trying to speed up the establishment of joint
investment projects to be financed partiy from the rupee funds. Lat year, the Russian
government approved a list of six priority projects for investment, which included
three petrochemical plants in India, a tourist complex, a metallurgical project and a
sea port facility in Russia. However, minister sources said most of the projects had
been up because of a lack of financing, as rupee funds earmarked for investment were
being used to plug holes in the stage budget. No decision has yet been taken on the
proposal plan to stimulate Indo-Russian trade, the Russian foreign trade official said,
but the current reorientation of Russian foreign policy from the West to East made
him optimistic that Mr. Yeltsin could endorse the scheme. Earlier this month Mr.
Yeltsin replaced the notoriously pro-westem foreign minister, Mr. Anderi Kozyrev
with academia Mr. Yevgeny Primkov, who favours shifting foreign policy priorities
towards the ~ a s t ~ ~ .

India today took up with the Russia the non-fulfillment of the agreement to
purchase drugs and pharmaceuticals worth $100 millions every year, a decision which
was taken in December, 1994. The agreement was to be in operation for three years.
 The issue figures at the first meeting of the Indo-Russian working group on
phamaceuticals which began here today. The Indian side was led by the commerce
secretary, Mr. Tejendra Khanna, while Mr. A.E. Vilken, Deputy Minister for medical
industry and drugs, is leading the four-member Russian delegation.

During the meeting Mr, Khanna pointed out that it was agreed during the visit
of the Russian Prime Minster, Mr. Viktor Chernomyrdin, to India in December, 1994
that Russia would purchase at least $100 millions worth of pharmaceuticals annually
from lndia over the next three years on the rupee debt payment track. However,
exports of pharmaceuticals during the first nine months of the last financial year were
estimated to be around $59 millions only, much below the desired level Mr. Khanna
saidz5.

lndia and Russia have managed to iron out some of the difficulties which were
holding up Indian exports of pharmaceuticals to that country. Infact, at the conclusion
of the two day meeting of the Indo-Russian working group on pharmaceuticals,
Russia has not only agreed to take the necessary steps to fully lift the targeted level of
$100 millions worth of Indian drugs and pharmaceuticals every year under the rupee
debt route, but the two sides have also worked out some steps to go beyond the target
figure.

To facilitate this, the two countries have agreed that the term
"pharmaceuticals" should cover drugs, pharmaceutical formulations and raw
materials, medical technology and medical goods as well as technological equipment
for the medical industry. Also, in response to the Indian concern at the delay in
opening letters of credit the Russian side has agreed to look into the matter urgently
and has said that the letters of credit against concluded contracts of 1995 would be
opened shortly.
 lndia has also requested Russia to finalize allocation of drugs and
pharmaceuticals for 1996 well in advance so that preparations for exporting the
medicines could be made by the Indian suppliers concerned. lndia also promised to
supply Russia the list of lndian companies registered with the world health
organization (WHO) as that would facilitate exports here. This offer was in response
to the Russian point that in selecting Indian companies for import of pharmaceuticals,
the health authorities of the Russian federation would recommend that preference be
given to Indian company having WHO certification.

Regarding registration and quality over both sides have agreed to promote
greater action between their drug control authorities avoid delays in registration of
products. On the issue of inspection raised by the Indian side Russian delegation said
that products of lndian companies registered with the WHO and apply whome there
were no quality complaints in Russia, could be exempted fiom batch-by-batch
inspection, subject to certification of quality Russian experts and satisfactory exports
importance in the Russian market during the few years.

The two countries have also agreed to export the possibilities ofjoint ventures
and collaboration in the pharmaceuticals sector.

At the conclusion of the two-day meeting, the two sides also signed the agreed
minutes that commerce secretary, Mr. Tejendra Khanna, the Russian deputy minister
for medical industry and drugs Mr. A.E. Vilken signed the accounts26.

Conversion of the lndian Rupee debt to the former Soviet Union into hard
currency will be on the agenda of the Indo-Russian inter governmental commission on
trade, economic, scientific, technical and cultural cooperation scheduled to meet in
Delhi on November,26. This was confirmed today by finance minister Mr. P.
Chidambaram, who is in Moscow for a three-day visit at the invitation of Russia's first
deputy prime minister and finance minister Mr. Anatoly Chubars. The two are co-
chairman of the joint commission and their current meeting is in the framework of
preparation for an annual session of the joint commission,-scheduled to meet in New
Delhi on November. 26.

Mr. Chidambaram will also have meetings with Russia's prime minister, Mr,
Viktor Chernomyrdin, as well as deputy prime minister and economy minister Mr.
Yakov Urison, and the foreign economic relations and trade minister, Mr. Mikhail
Fradkov. Under a 1993 deal lndia agreed to repay Rs.30,000 crores of its old Soviet
delates over 10 years with Indian exports to Russia. However, Mr. Chubars this year
proposed converting the outstanding Indian debt into dollars to help the Russian
government combat its service budget deficit problem. Conversion of the India debt is
expected to deal below to Indian exports to Russia. At present, up to 85 percent of
Indian exports to this country are against rupee debt funds. It would also put an end to
Russia's commitment to import four groups of sensitive Indian commodities tea,
tobacco, Soya beans and pharmaceuticals on the basis of three year rolling plan. Mr.
Chidambaram also said India and Russia have almost settled financial aspects of a
contract for the construction on the Kudankulam atomic power station with Russian
participation.

"One or two small points of the accord remain to be clarified", he said, " I
hope they will be clarified today and tomorrow, so that by the time Mr. Chubais
comes to Delhi we will have the accord in more or less final shape.

Mr. Chidambaram today inaugurated India's trade exhibition in Moscow

designed to boost limping bilateral trade with Russia.

Speaking at the ceremony, Mr. P. Chidambaram said the display gave a

glimpse of what India is producing. He expressed the hope the show will go some
way towards imparting new momentum to commercial tries with Russia.
 Sponsored by the India Trade promotion Organization, the exhibition covers a
wide range of quality Indian products, including food, textiles, clothing, footwear,
leather goods, handicrafts, chemicals, pharmaceuticals, machine tools and accessories.

According to the ITRO Chairman, Mr. Kaushal Kumar Mathur, the organizers
have made a special effort to select for the display only products highly relevant for
the Russian market. In the past Indian exhibitions in Russia were sometimes criticized
for displaying items that had poor market potential in this country. To rectify this
shortcoming the IPTO, which opened an office in Moscow earlier this year, has
conducted an in-depth study of the local market for the current exhibition and has
built an extensive database of leading Russian imports, who have been invited to the
exhibition.

Indo-Russian trade dropped from some $4 billions in soviet times to just $1.3
billions last year, largely due to the break up of the soviet union six years ago and the
opening of the Russian market to western products27.

India is exploring cheaper export routes to Russia to double the trade between
the two countries, according to the Indian counsel general in Russia, Dr. S.K.
Ganguly.

Cheaper routes of exports like the sea route from Mumbai and Bandar Abbas
in Iran and further by rail (or) road ways into Central Asian countries are being
explored he said while inaugurating the fourth India-Russia buyer seller meet in St.
Petersburg recently.

Trade between New Delhi and Moscow was expected to cross $5 billions by
the term of the century from the present through exploration of new routes, he said. It
was imperative for Indian industries to establish and enhance their presence in Russia,
which was likely to serve at gateway for trade with other common wealth of
independent states (CIS) countries. Russian market has become quality conscious and
Indian exporters should ensure that best of the products and services were offered to
it, he said.

The meet was the second to be organized at St. Petersburg, the second largest
port city in Russia by the Federation of lndian Exporters Organization (FIEO). Over
15 Indian companies took part in the multi-product meet.

Mr. Ganguly, speaking on the prospects of the meet, said it would generate
sufficient business enquires while giving lndian exporters an exposure to changing no
trade scenario in the Russian federationzB.

lndia and Russia have agreed to take concrete steps to establish long term
trading arrangements for expanding bilateral trade. The agreement on long-term
purchases of certain commodities of December 1994 will expire at the end of this
month.

The items may include exports of lndian goods such as tea, tobacco and
pharmaceuticals and from the Russian side; fertilizers and newsprint will be covered
under the long-term arrangements. Both sides have also agreed to broad base the trade
basket to impart grater depth to commercial exchanges, engineering goods and other
hi-tech items such as electronic goods or information technology products and
computer software in particular having good potential for enhancing bilateral trade.
The State Trading Corporation (STC) the MMTC Limited and projects and equipment
corporation (PEC) would act as the model agencies for interacting with their Russian
counterparts to be finalized shortly.

This has been indicated in the protocol of the fourth meeting of the Indo-
Russian working 'group on Trade and Economic cooperation, which concluded here
today. The protocol was signed by the commerce secretary, Mr. P.P. Prabhu and by
Mr. V.G. Karastin, the Russian Deputy Minister of foreign economic relations and
trade.

The Indian delegation highlighted the need for an early agreement on setting
up of consignment export against rupee debt to reduce delay in transporting goods and
respond quickly to needs of Russian buyers. It is felt this would be an effective way of
preventing switch trade, encouraging supply of quality and diversified goods from
India and also help in attracting reputed lndian exporters with long term business
interest with ~ u s s i a ~ ~ .

India and Russia will make yet another attempt to breathe new life into their
sluggish economics ties, when the inter-governmental commission for trade
economic, scientific, technological and cultural cooperation meets in Delhi for a
biannual session this week.

A high powered Russian delegation is arriving in Delhi on Tuesday led by the

first deputy Prime Minister, Mr. Anatoly Chubasis, who co chairs the IGC, along with
the Finance Minister, Mr. P. Chidambaram. The 50 member delegation includes the
minister for foreign economic relations, Mr. Michael Fradkov, 11-Deputy Ministers as
well as leading bankers and industrialists.

Such a high level of the delegation reflects the fact that the IGC session is
seem as a crucial stage in preparation for the coming state visit to India by the Russian
President, Mr. Boris Yeltsin, scheduled for next month.

The Russian leader is expected to pay particularly close attention to the state
of trade and economic cooperation with India. Last month he severely criticized the
foreign Economic relations minister, Mr. Fradkov, for what he described as the
minister failure to follow up Russia's foreign policy break thorough with progress in
external trade.
 Mr. Yeltsin has very reason to be particularly unhappy with two-way trade
with India. An impact us his first visit to India 1993 imparted to bilateral exchanges
-
has all but petered out. After rebounding from an all time low of under $ 1 billion in
1993 to about $ 2 billion in 1995, bilateral trade slumped back again to $1.5 billion
last year. This year it is expected to edge up to $ 1.7 billion, but this will still be a far
cry from a target of $3.5 billion to two countries planned to attain a year ago.

Despite repeated pledges on both sides of further, diversify bilateral trade it

continues to be largely dependent on India's repayment of old Soviet debts, resumed
in 1993 at a rate of Rs 3200 crores a year. These funds finance up to 85 percent of
India's exports to Russia and account for nearly half of bilateral trade turnover.

Plants to use debt repayment funds for investment in to joint projects in order
to create a long term basis for trade and economic relations between the two countries
have fallen though Russia has failed to work out an efficient mechanism of utilizing
Rupee funds, due to conflicting interest of different ministries and frequent changes of
Russian Co-Chairman of the inter governmental commission.
Two years ago, Moscow gave up centralized disbursement of Rupee funds to
various governments' agencies and organizations for purchase of Indian -
commodities, because it was deemed cumbersome and ineffective, in favour of selling
off the rupees at auctions. But the new systems, under which rupees are sold to
Russian banks, which is turn sell them to importers of lndian commodities, has led to
even greater delays, irregularities and abuses in the distribution and utilization of
rupees. As of November, for example, Rs, 61,600 crores, of half the annual debt
repayment are yet to be disbursed.
The current Russian IGC Co-Chairman, Mr. Chubais, who pushed through the
rupee-auctioning scheme, is now advocating converting the Indian debt is to hard
currency. He is expected to pursue this line during the IGC session in Delhi. Delhi has
officially agreed to discuss debt conversion, but many in India are against the idea, as
this would affect Indian exports to Russia.
 The Indo - Russian joint commission meeting postponed once will finally be
held here on December 17 and 18 with the first Deputy Premier of the Russian
federation, Mr. Anatoly chubais leading a high - level delegation. The meeting is
expected to take a serious of decision on ticklish issues facing Indo - Russian
economic ties especially the reed to provide infrastructure to promote growth in
bilateral trade.

Simultaneously, approval had been given for opening an office of the lncom
bank here and efforts will be made to allow more Russian banks to open branches to
provide easy flow of credit for exporters and importers. In addition, the Export Credit
and Guarantee Corporation (ECGC) has offered to provide guarantees to exporters,
which had not been prepared to do in the past. Simultaneously, the Exim bank has
also offered a cover of $ 10 millions on exports to Russia.

On joint venture investment scheme, however, most issues remain unresolved.

The Russian delegation last week gave a list of areas where projects could be under
taken jointly by using rupee debt funds, but official sources here maintain that many
-
mitty gritty issues have to be sorted out before the two countries could go ahead with
schemes primarily, this feel then is a problem of matching ruble funds which has to be
discussed before any plans can be taken up for investments using rupee debt fund$'.

A Jewellery industry delegation from India has visited Russia to negotiate

direct imports of diamonds, gold and silver from this country, which could lead the
way to a multi - billion-dollar business between the two countries.

Russia is a major exporter of uncut diamonds and gold, but there is no direct
trade with India, which is a leading consumer of precious metals and stones.

The nine - member delegation led by Mr.Surgit Mitra, Joint Secretary,

Ministry of Commerce and Composed of the Gem and Jewellery export promotion
council (GJEPC) member, met with top Russian officials at the economics ministry,
the state diamond producer metals and stones. If was the first visit by a GJEPC
delegation and no formal agreements were signed, but delegation members were
happy with their talks in Moscow.

"We have got a very good response to our cooperation proposals," said
Mr.Mitra both sides stand to loose from the current situation when Russian diamonds
and gold are exported to India thorough third countries.

Under a trade, agreement with De Bears Russia sells a minimum of $ 550

million worth of rough diamonds per year to the South African diamonds giant for on
ward resale. This constitutions just over a third of Russia annual out put of diamonds.
The other two - thirds are sold in the Russian market and exported to Western Europe
and Israel, from where Russian diamonds find there way to India. "About 15 percent
of Russian diamond productions en up in India" said Mr. Praveen Sankar Pandya
GJEPC Chairman, we are offering to buy; directly from Russia and are prepared to
buy all that in can offer. India is the world's biggest cutting center of small diamonds,
which require a far greater labour input, than bigger stones, and Indian businessmen
believe that Russia may find it more profitable to sell rough stones to India, rakes than
do the cutting at home, because is cheaper in India. While in Moscow the Indian
delegation also held talks with one exim bank and menate two out of three Russian
banks holdings gold export licenses taken to gather, imports of diamonds, gold and
silver from Russia can exceed the total volume of Indo -Russian trade, which
currently stands at about $1.5 billion3'.

A major nuclear deal, India and Russia today signed an accord paying the way
for construction of two 1000 MW light water power reactors at Koodankulam in
Tamil Nadu.
 The accord, which is a supplement to the ten year old agreement with the now
- deferent Soviet Union, was signed by the visiting Russian Atomic Energy Minister
Mr.Yevgeny Adamou, and the atomic energy commission chairman, Mr.
R.Chidambaram here, an official announcement said.

The supplementary accord to the agreement of November 20,1998, between

New Delhi and Moscow became necessary; following the break up of the Soviet
Union in 1991.

Mr. Chidambaram maintained that the coercive measures imposed on India

after the tests would boost the drive for self-reliance and accelerate the movement of
research work from laborato~esto the indusby.

The initial $2.6 billions deal for the construction of the two 1000 MW power
reactors was signed between the then Soviet president Mr. Mikhail Gorbachev, and
the then Prime Minister, Rajeev Gandhi in 1998 - P T ~ ~ ~ .

India may purchase Russian defense hardware technology and services to the
tune of some $ 15 billions in the next decade, A Russian daily said today.

According to the Nezavisimaya Gazeta news paper, a new 10 year defense

cooperation programme between India and Russia, currently being discussed in
Moscow, will be worth twice as much as the current programme estimated at $7to 8
billions. A high-level Indian delegation led by the defense Secretary Mr. Ajit Kumar
is here to put final touches to the new defense cooperation programme till 2010.
Which will supersede the current programme expiring in the year 2000? The Itar -
Tass news agency quoted Mr. Kumar as saying after his talks with the first deputy
-
defense minister Mr. Nikolai Mikhailov, on Tuesday that the new lndo Russian pact
for defense and strategic partnership had been "practically" finalized. Diplomatic
sources refused to confirm or deny the Russian newspapers estimate of the planned
volume of defense cooperation with Russia saying that the figures were still being
discussed. The Nezavisimaya Gazeta said the Indian delegation here was discussing
plans to buy "a large consignment of Russian tanks" presumably the T-90 and S-300V
anti-aircraft and anti-missile complexea4.

India has offered to step-up its annual debt repayment to Russia from Rs. 3000
crores to Rs. 5,000 crores in order to increase bilateral trade and help Russia weather
its current economic crisis, Russian sources said.

The offer is going to be discussed at the fifth annual session of the Indo-
Russian Inter-Governmental Commission (IGC), which meets in Moscow on
November 26-28. India is sending a high-powered delegation, led by the Finance
Minister Mr. Yashwant Sinha, who is Co-chairman of IGC, and comprising foreign,
finance, steel, coal and petroleum secretaries, as well as the executive director of the
Reserve Bank India (RBI).
The Russian delegation was led by the first Deputy Prime Minister Mr.
Maslyukov, Co-chairman of IGC for Russia. It is for the first time the two IGC Co-
chairman appointed earlier this year will meet.

Sources at the Russian Trade Minister, which is the nodal Minister for IGC,
said the Indian offer to increase debt repayment was conditional on Russia's
willingness to set up an effective and transparent mechanism for using rupee funds to
buy goods from India. Under a 1993 arrangement. The Union Finance Minister Mr.
Yashwant Sinha signed the protocol on behalf of India while the visiting first Deputy
Prime Minister of Russia, Dr. Viktor Krishtenko, signed it on behalf of his counhy.
Talking to press persons later, Mr. Sinha said that the inter session review of the
governmental committee which took place yesterday, today, went in to the hnction of
the various working groups also analyzed the reasonas.
 The following is the next of the "declaration on strategic partnership between
Indian and Russia" signed here today by the Prime Minister Mr. Atal Behari Vajpayee
and the visiting Russian President Mr. Vladimir Putin.

Strengthening close cooperation with in the framework of the Indo-Russian

inter Governmental Commission on trade, economy, scientific technological and
cultural cooperation, as well as the joint bodies of business and industry
representatives, with a view to expanding trade and economic relations, depending
and diversifying cooperation in sectors such as Metallurgy, fuel and energy formation
technology, communications and import, including merchant shipping and of aviation,
further development of cooperation banking and finance, and improving credit
insurance facilities so as to promote bilateral concerting a favorable environment for
mutual investments and guaranteeing their protection simplifying customs and other
procedures and promoting and removal of non-tariff branches gradual lowering of
tariff barriers, establishment effective mechanism for interaction between India and
Russia entitles with a view to achieve maintained expansion of bilateral trade in along
perspective, encouraging contacts between lndia and Russia in both countries with a
view to promoting trade and economic cooperation. SimplifLing that procedures for
travel by entrepreneurs and businessmen on both countries further enhancing quality
and international competitiveness goods by inter alia, promoting the joint movement
and sharing of the latest technologies doing to mutual benefit the new opportunities
out of integration processed under world economy, enhancing cooperation in addition
at international trade economic financial bodies jointly exploring the position regional
trading arrangements with third World countries36.

Indo-Russia Trade Relations

India and Russia have established a new milestone in bilateral trade and
economic relations, with lndia giving its consent to Russia's accession to the World
Trade Organization (WTO)and both sides setting up a Joint Study Group (JSG) to
finalise a roadmap for increasing the bilateral trade turnover to US $ 10 billion by
2010. The Protocol on Completion of Bilateral Negotiations on the Accession of
Russia to the WTO and the Memorandum of Understanding (MOU) on Cooperation
between the Ministry of Commerce & Industry of India and the Ministry of Economic
Development and Trade of the Russian Federation were signed here this evening by
Shri Kamal Nath, Minister of Commerce and Industry on behalf of the Government of
India and by Mr. German Gref, Minister for Economic Development and Trade, on
behalf of the Government of Russian Federation respectively3'.

Shri Kamal Nath said that India was looking forward to Russia's early
accession to the WTO for further cooperation in the multilateral trade forum on the
basis of mutual benefit. The finalisation of the Protocol marks the completion of
bilateral negotiations with the Russian Federation in connection with their accession
to the WTO. (As per the WTO accession procedures, the member seeking accession is
required to negotiate bilaterally with each member country of the WTO).

The MOU provides for the setting up of a Joint Study Group (JSG) with a
view to examining the feasibility of signing a Comprehensive Economic Cooperation
Agreement (CECA) between India and Russia, besides envisaging increase in
bilateral trade turnover to US $ 10 billion by 2010. The JSG is expected to prepare by
the end of 2006 a roadmap for achieving a significant increase in mutual trade
turnover by diversifying and strengthening bilateral relations in a wide range of areas,
particularly trade in goods and services, investment and economic cooperation.

The JSG, to be co-chaired by the Commerce Secretary from the Indian side
and his counterpart from the Russian side, is expected to specifically suggest
measures to arrest the decline in India's exports to Russia. Even though bilateral trade
-
is increasing with growth of 11% in two-way trade in 2004-05 -India's exports to
Russia had been declining over the last few years. (Indo-Russian bilateral trade in
2004-05 was of the order of Rs.8369.85 crore i.e., US $ 1862.81 million (US $ 1.8
billion). Of this, India's exports to Russia amounted to Rs.2684.33 crore i.e., US $
597.43 million and India's imports from Russia valued at Rs.5685.52 crore i.e.,
US $ 1265.38 million38.

Earlier, Shri Kamal Nath had a bilateral meeting with Mr. Gref during which
trade issues were discussed. Shri Kamal Nath requested for early finalisation and
signing of the draft intergovernmental agreement regarding higher offtake of lndian
tobacco by Russia through the purchase of cigarettes tobacco or procuring of
cigarettes from a joint venture proposed to be set up in Russia by any Indian company
which would procure tobacco from India. He also requested Mr. Gref to accord
protection to "Darjeeling tea" as a geographical indication and to recognize "Assam",
"Nilgiri" and "lndian tea logo" as labels/well known original brands and requested
facilitating setting up of joint ventures between lndian tea companies and Russian
business houses in order to augment the export of quality tea from India.

Cooperation in diamond trade between Russia and lndia also figured in the
discussions given the fact that lndia is the largest processing centre of rough
diamonds and Russia is one of the world's largest producers of rough diamonds and,
therefore, cooperation in this sector though direct trade would be mutual advantage to
both countries. The Protocol for cooperation in diamonds was signed during the visit
of President Putin to lndia in October 2004. In this context, Shri Kamal Nath urged
the Russian Minister to expedite the decision agreed by both sides for inclusion of
MMTC in the list of regular participants for auction and tenders for selling of rough
diamonds by Alrosa (Russian diamond mining company) as also to explore the action
taken by the Russian side for setting up a joint venture by Alrosa with MMTC for
manufacturing jewellery in India. The Indian side requested Russia to expedite the
release of payment due to the lndian exporters and delink this issue from the overall
settlement of state credit. The issue of early conclusion of simplified visa procedure
agreement to enhance trade and economic cooperation also figured in the
deliberation^^^.

The Russian economic assistance to India in the field of technical, Coal, oil,
power, aluminum, copper, drugs, pharmaceuticals, agriculture, transport, space and
defence has strengthened India's industrial economy, improved her defence
preparedness and political independence, besides making lndia self-confident in other
spheres. lndia and Russia are not only friends during the cold war era but also in the
Post-Cold war period.
REFERENCES:

Shashi Kant Jha, International Relations: In the Light of New Relations, SBD
Publications, New Delhi, 1999, PP.75-76
Russian Economy in Transaction and its implications on India-Russia
economic relations, R.G. Gidadhubli Monographic-XI11, centre fro studies on
Indo-China & South Pacific Publications, Tirupati, 2002, P, 22-23.
Arvind Vyas, Indo-Soviet economic relations: A critical estimate, SBD
Publication, New Delhi, 1999, P, 209-21 0
Russian Economy in Transition and its implications on India-Russia Economic
relations, Prof. R.G. Gidadhubli, Monograph- XIII, centre for studies on Indo-
China & South Pacific Publications, Tirupati, 2002,P,24-29
The Hindu, Chemai, Jan29,1992, P-6
The Hindu, Chennai, Sept 6, 1992, PI
The Hindu, Chennai, Sept 8, 1992,P,1
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The Hindu, Chennai Sept 27, 1992, P,5
The Hindu, Chennai, Oct 4,1992, P, 1.
The Hindu, Chennai, Jan 21, 1993, P,1
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f i e Hindu, Chennai, Feb 1,1993, P, 7
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The Hindu, Chennai, April 19,1993, P,6
The Hindu, Chennai, June 4, 1994, P, 13
The Hindu, Chennai, July 5, 1994, PI
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The Hindu, Chennai, July 5, 1995, P-13
The Hindu, Chennai, July, 7, 1995, P,1
The Hindu, Chennai, October 10, 1995 P-14
The Hindu, Chennai, December, 13, 1995, P- 1 6
The Hindu, Chemai, December,7, 1995, P-4
The Hindu, Chennai, January 29, 1996, P- 13
The Hindu, Chemai, April, 4, 1996, p-14
The Hindu, Chennai, April, 5, 1996, P-14.
The Hindu, Chennai Ocf 7, 1997, P-14
The Hindu, Chennai, Nov,8, 1997, P-9
The Hindu, Chennai, Dec 1 3, 1997, PI4
The Hindu, Chennai, December 16, 1997, page. 14
The Hindu, Chennai, December 16,1997, page. 14
The Hindu, Chennai, June 19, 1998.P. 14
The Hindu, Chennai, June 22, 1998, P. 1
The Hindu, Chennai, Nov 12, 1998, P1
The Hindu, Chennai, July 30, 1999, PI
The Hindu, Chennai, Oct4, 2000, P, 14
Arvind Vyas, Op.Cit., PP 215-219.
Ibid.
Ibid.