Salvaging a strategic partnership

The India-Russia dialogue should not get inextricably entangled in the India-U.S. dialogue
At their meeting in Goa at the India-Russia annual summit, in October 2016, Prime Minister Narendra Modi quoted a Russian proverb to Russian President Vladimir Putin: “An old friend is better than two new ones.” It was a reassurance that India’s growing proximity to the U.S. would not affect India-Russia relations. As Mr. Putin came calling two years on, the shadow of America again loomed over the summit, in New Delhi. This time, it was closer, larger and more menacing.There are obvious opportunities for cooperation between Russia, which is natural resources-rich, and India, which is resource-hungry. Whether they are exploited would depend on how well India’s economic ministries, banks and business community understand the ground realities of doing business with Russia. Even before CAATSA, there was confusion in India about sanctions against Russia. The U.S. and European sanctions between 2014 and 2016 are sector- and currency-specific. They affect entities operating in Europe and the U.S., and transactions in euro or dollar currencies. They are not applicable to other geographies or currencies. This remains the case, even post-CAATSA, for all sectors other than defence and energy. Therefore, with proper structuring of business deals, trade and investment exchanges with Russia are possible, and without losing business with Europe and America. This explains how the economic engagement of major European countries with Russia has actually grown in 2017 and 2018, despite the sanctions. European and American corporate lawyers with expertise on sanctions have enabled this. Indian business needs to tap into this expertise. The threat to India-Russia defence cooperation extends well beyond the suspense over the S-400 deal. Every potential India-Russia defence deal could be subjected to a determination on applicability of sanctions. Actually imposing sanctions would hurt U.S. defence sales to India, defeating one of the principal objectives of the legislation. The effort would likely be to achieve desired results with the threat of sanctions. Given the political dynamics in the U.S. today, a systemic solution to this problem is not evident. However, it has to be on the India-U.S. dialogue agenda. The India-U.S. strategic partnership is based on a strong mutuality of interests, but it was not intended to have the exclusivity of an alliance. India should not have to choose between one strategic partnership and another. The India-Russia dialogue should not get inextricably entangled in the India-U.S. dialogue.
P.S. Raghavan, a former diplomat, is Convenor of the National Security Advisory Board.

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