War Economics – Why is India audience to Russia-Ukraine war?

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While Russia is evading Ukraine, India has remained silent on the entire crisis. Even at the United Nations General Assembly, when 141 countries voted for a resolution to condemn Russia over its invasion of Ukraine, and 4 countries voted against the same, 35 abstained from voting which included India as well as Pakistan and China. India has maintained a non-aligned stand in this conflict and there are several reasons for the same.

India’s relations with Ukraine

Diplomatic ties between India and Ukraine were established in January 1992. India had recognised Ukraine in December 1991 when Ukraine became an independent country after the dissolution of the Soviet Union. Trade relations between India and Ukraine have increased significantly in recent years and touched almost USD 2.8 billion in FY 2019. Meanwhile, India is also Ukraine’s fifth-largest export destination, and largest in the Asia-Pacific region. About 18,000 Indian students study in Ukraine, mostly in the field of medicine and a few businesspersons in the fields of pharmaceuticals, technology, medicine, engineering, education, etc. In 2005, APJ Abdul Kalam (then President) and ISRO officials also visited Yuzhnoye, a Ukrainian space agency to bolster ties in the space sector. On the political front, the following were some of the key noticeable conflicts between India and Ukraine –

  • In 1998, when India conducted nuclear tests, Ukraine supported the United Nations Security Council (UNSC) resolution which condemned India’s actions.
  • When Russia annexed the Crimea region of Ukraine in 2014, India said that Russia had legitimate interests in Crimea and also opposed sanctions against Russia. Further, in November 2020, India voted against the United Nations resolution that condemned Russia for human rights violations in Crimea.
  • Ukraine is also a key partner in China’s Belt and Road Initiative (BRI) its largest trading partner, as trade with China equals 11% of Ukraine’s GDP (FY 2020).
  • Ukraine also supplies jet engines to China for its military aircraft and strong military ties with Pakistan and China. Ukraine has supplied tanks and aircraft to Pakistan and is also aiding their servicing and modernising efforts. Recently, Ukraine signed a contract worth USD 85.6 million to repair battle tanks of the Pakistan army.
  • Ukraine has also expressed support for United Nations’ intervention in Kashmir, supporting Pakistan, while India has called it a bilateral issue and seeks no third party interventions.

Thus, India’s relations with Ukraine have been generally cordial, however, Ukraine’s close ties with China and Pakistan, and India’s close ties with Russia has led to indirect conflicts in the past.

India’s relations with Russia

As compared to Ukraine, Russia is a tried and tested strategic partner of India and the relations age way back to the Soviet Union era. Russia has leased India’s nuclear submarine, has sold aircraft carriers, and also advanced surface-to-air missile systems. Russia and the erstwhile Soviet Union, has consistently vetoed United Nations’ resolutions against India on Kashmir. While India was officially a non-aligned nation during the Cold War, the Soviet Union supported India in the 1971 war against Pakistan that led to the creation of Bangladesh while the United States backed Pakistan. Russia continued to help India with its defence and nuclear capabilities when the United States poured billions into Pakistan during the cold war and the Afghanistan war. However, when it comes to military alliances, chances are bleak if Russia would ever support India, against China, as Russia-China relations have grown closer. However, the history of the United States stance on the Kashmir issue and its ties with Pakistan’s military forces India to remain aligned to Russia.

India’s dependence on Russian arms

India’s dependence on Russian arms is heavy and this is known to the world including the United States has considered imposing sanctions on India, several times for this reason. Over 65% of arms imported by India between 1950-2020 were from Russia. Since 2010, Russia has been the source of 62% of all Indian arms imports and on the contrary, India is also Russia’s largest arms importer, accounting for 32% of all Russian arms exports. India’s defence ties with Russia are strong and deals worth as much as USD 15 billion are in pipeline including contracts for S-400 missile systems. Indian army’s battle tank is composed predominantly of Russian T-72M1 and T-90s. India is also manufacturing over 5 lakh AK-203 assault rifles in partnership with Russia. On the navy front, the Indian Navy’s sole operational aircraft carrier INS Vikramaditya was a refurbished Soviet-era ship. India’s sole nuclear-powered submarine is also obtained on lease from Russia, and also 8 of the total 14 other submarines are of Russian origin.  India has also sealed USD 3 billion deal with Russia for another nuclear-powered submarine on lease for 10 years. On the airforce front, the Indian Airforce’s 667-plane FGA fleet is 71% Russian-origin consisting of Su-30s, MiG-21s, MiG-29s. India has also signed a USD 800 million contract to make 18 Sukhoi fighter air jets. In the latest budget, the government has announced that 68% of the defence procurement budget would be from domestic manufacturers, to reduce dependence on imports. However, defence manufacturing is strategic and takes time to establish and develop.

Alternate modes of payments to Russia

Indo-Russia trade is approximately USD 10 billion or 1.3% of India’s total trade. Although the trade is not significant, the Indian Government has huge defence trade deals with Russia. With the United States and European Union announcing wide-scale sanctions, the Indian government is examining all possible payment mechanisms to continue trade with Russia including settlement of payments through Iran. Foreign banks that don’t operate in countries that have imposed sanctions or routing payments through small Russian banks unaffected by the sanctions are the options that India is exploring currently considering. The Indian Government is also considering repayment of Russian debt through a rupee auction held by the Russian central bank where the repayment is made via export of identified commodities and services. Currently, two Russian banks – Sberbank and Gazprombank are exempted from sanctions as they are the main channels for payment of gas and oil imports from Russia.

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