Russia and India are currently in the process of negotiating a free trade deal to substitute products and investments that were banned by sanctions enacted after the Ukrainian conflict erupted. India is now the largest oil supplier of Russia, with the country taking advantage of the discounted Indian crude. The two countries are negotiating a new Free Trade Agreement (FTA) to increase the trading integration between them, which has thrived after the establishment of Western sanctions on Russia. According to India’s Foreign Minister Subrahmanyam Jaishankar, the deal was in an “advanced agreement” stage, and this might secure bilateral investments between the two countries. Russia, which is now India’s biggest energy supplier, would be seeking to substitute throttled import products with those from India. On this, Russia’s Trade and Industry Minister Denis Manturov stated: “We need to find a niche in the products which India can replace. In civilian projects, we need as wide cooperation as it was before the sanctions.”
The cooperation between the two countries has not been affected by the Russia-Ukraine conflict, as India has not condemned Putin’s actions, maintaining public neutrality on the issue. This has allowed the country to take advantage of the discounted crude, sold at a discount due to the recent adoption of the Dubai benchmark, shunning the Europe-centric Brent benchmark. On the other hand, India is trying to bring equilibrium to the trade balance. In December, the government of India sent a list of products that would be competitive in Russian markets, to gain permission to export them to the country. The completion of an FTA between the two countries would simplify the introduction of foreign products in both markets, depending on the final determination of such an agreement.
Russia is also finalizing another bilateral trade agreement with Iran, a country that has also been facing a wide range of U.S.-based sanctions, to increase their integration and trade levels without being limited by foreign determinations. The dangers of overusing the U.S. dollar as a weapon for establishing sanctions were recently acknowledged by U.S. Treasury Secretary Janet Yellen, who stated that countries facing these sanctions would be determined to find alternatives.
The potential FTA between Russia and India is a significant development for both countries. India is looking to increase its exports and reduce its trade deficit, while Russia is seeking to expand its economic relations beyond its traditional Western partners. The FTA would also provide a boost to the two countries’ strategic partnership, which has been strengthened in recent years through cooperation in fields such as defense, space, and nuclear energy. The two countries have set a target of increasing their bilateral trade to $30 billion by 2025, which would represent a significant increase from the current level of around $10 billion.
In conclusion, the ongoing negotiations between Russia and India for a free trade agreement are a positive development for both countries. It would provide a boost to their economic relations and help them to diversify their trade partners. The potential FTA would also strengthen the strategic partnership between the two countries, which has been growing in recent years. The completion of the FTA would simplify the introduction of foreign products in both markets, depending on the final determination of such an agreement.