India seeks economic energy in Russian Far East
India is pushing to bolster its economic presence in the Russian Far East amid growing concerns in New Delhi about the increasingly cozy relationship between Russia and China, Nikkei Asia reports.
Indian Foreign Secretary Harsh Shringla spent two days last week in Moscow, where he met with Russian Foreign Minister Sergei Lavrov and other senior officials. As he later told an audience of students at the elite Russian Diplomatic Academy, one of the primary aims of his trip was to discuss bolstering economic cooperation in the Russian Far East. "We see that as a very high potential area, where we can develop new sectors and help companies looking to invest in new areas such as coking coal, timber, liquid natural gas," he said. "There is huge potential there."
For India, the Russian Far East has emerged as a region of growing interest over the past three years. During a 2019 visit to the Far Eastern port city of Vladivostok, Indian Prime Minister Narendra Modi announced that New Delhi would provide a $1 billion loan to aid the region's economic development. He also signed a memorandum to establish a direct maritime corridor between Chennai and Vladivostok. The new sea route is expected to cut the shipping time for goods between India and Russia to 24 days, versus 40 days via a European route.
More recently, India has sought to bring Japan aboard its investment plans in the region. Last month, representatives from India, Japan and Russia concluded their first Track II or semi-official negotiations about joint Far East projects. The three countries identified energy, coal mining, diamond processing, forestry, agro-industry, transportation and pharmaceuticals as potential areas of cooperation.
India's interest in the Russian Far East is not purely economic, though. Nandan Unnikrishnan, a distinguished fellow at the Observer Research Foundation in New Delhi, told Nikkei Asia that Indian policymakers have watched with growing concern in recent years as Russia drew ever closer to China in response to worsening relations with the West. One way to prevent Moscow from being pulled deeper into Beijing's orbit is to expand trade and investment with the Far East, he explained. "If India and other Asian countries don't get involved in the Russian Far East, then Russia will increasingly have to look to China as its main partner for developing the region," Unnikrishnan said.
The Far Eastern Federal District is the largest of Russia's federal districts, constituting a little over 40% of the country's territory. The region is also home to much of the nation's resource wealth, including oil, natural gas, gold, diamonds, coal, timber and fish. Yet with a population of just over 6 million people, the Far East is also Russia's least populated region, and its numbers have only been dwindling since the collapse of the Soviet Union.
Russian President Vladimir Putin has declared that promoting economic development in the Far East is a "national priority of the entire 21st century." Over the past decade, the Kremlin has sought to jump-start the regional economy by building new infrastructure, offering businesses tax breaks and loans, and making it easier to purchase land. It has also sought to attract foreign investors with the Eastern Economic Forum, a glamorous annual business conference that -- in non-pandemic times -- is regularly attended by Putin and Asian leaders.
Yet, although India was the first country to open a consulate in Vladivostok in 1992, it has until now maintained a fairly low economic profile in the Far East. The most prominent Indian investment in the region came in 2001, when an overseas arm of the state-owned Oil and Natural Gas Corporation purchased a 20% share in the $10 billion Sakhalin-1 project. Since then, major Indian investments in the Far East have been few and far between.
But that has started to change as more Indian companies look abroad for new opportunities. Unnikrishnan explained that the Russian Far East is attractive to New Delhi because it has an abundance of energy and land suitable for agriculture -- two resources that India will need in large amounts over the coming decades to sustain economic growth. And as China moves in, too, there is a growing sense that New Delhi needs to counterbalance Beijing's influence.
Over the past several years, China has emerged as the Far East's primary foreign investor and trading partner. In 2019, the country accounted for over 70% percent of all direct foreign investment in the region and 28.2% of its foreign trade. Beyond economic cooperation, Moscow and Beijing have also conducted regular joint military exercises in Northeast Asia since 2012.
Unnikrishnan argued that if New Delhi wants to prevent Russia from becoming overly dependent on China, then it will need to help the Far East find alternative sources of trade and investment. He predicted that initiatives such as the Chennai-Vladivostok maritime corridor could help the region establish economic links not just with India but also with Southeast Asia. Ships would ply Southeast Asian waters while sailing the estimated 10,450 km route, compared with the current 16,000 km European route between Mumbai and St. Petersburg, according to an Observer Research Foundation report. "If we are able to establish trade routes between the Russian Far East and India, if we are able to establish a flow of goods in two directions, then Russia will get sucked into the broader Indo-Pacific one way or another," Unnikrishnan said.
Experts, however, warn that it will not be easy for Indian companies to establish themselves in the Far East. Artyom Lukin, a professor of international relations at Russia's Far Eastern Federal University, told Nikkei that any foreign investors hoping to do business in the region would have to accept numerous high risks, including potential Western sanctions, poor infrastructure and frequent changes in Russian legislation. Indian companies will also encounter fierce competition from Chinese rivals who benefit from lower transportation costs. "It is one thing to supply timber from the Far East across the border to China and a totally different thing to transport it halfway across the world to India," Lukin said. "This makes it significantly more expensive for India to buy natural resources from the Russian Far East." But Lukin argued that Indian companies could find success in the region by taking advantage of occasional disputes between local exporters and Beijing. He noted that a recent Chinese decision to restrict seafood imports from the Russian Far East could provide India with an opportunity to make inroads. "Everyone understands that relying on China as a monopolistic buyer is very dangerous," Lukin said. "It is here that the interests of Russia and India converge. There is a real opportunity for India to position itself as an alternative to China on a whole range of important export goods."