Ahead of Russian Foreign Minister Sergey Lavrov’s ongoing visit to India, Moscow stated that it has pushed for India’s entry into the Eurasian Economic Union (EEU) as a third country partner to strengthen its relationship with the Central Asia-Eurasian region.
India has been in talks with Russia to enter a Free Trade Agreement (FTA) or a Comprehensive Economic Partnership Agreement (CEPA) with the EEU since the inception of the body in 2015. Such a partnership holds immense strategic potential for New Delhi to boost its relationship with the EEU member states and counteract China’s growing influence in the region. But given the country’s current economic slowdown, would this be the wisest move to make right now?
The EEU is a Russia-led free-trade bloc boasting a population of 180 million and a GDP of $1.9 trillion. Its other members are Belarus, Armenia, Kyrgyzstan, and Kazakhstan, while Uzbekistan and Tajikistan are in negotiations to enter the union.
India’s Connect Central Asia Policy reflects its interest in building ties with countries in the Central Asian Region (CAR) by providing infrastructural support in setting up universities, hospitals, and telemedicine and IT centres; entering joint commercial ventures; and improving connectivity to facilitate joint scientific research, trade, and security partnerships. Especially in terms of connectivity, India has been supportive of projects passing its non-disputed territories, like the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project, the International North-South Transport Corridor (INSTC), and the Chabahar Port project.
Russia and Kazakhstan, in particular, have been of great strategic importance to India. While Moscow and New Delhi have close ties in science and technology, defence, and nuclear energy and have been looking to strengthen their economic ties, Kazakhstan is India’s largest trade partner in the CAR and the two countries have signed various treaties to cooperate strategically and militarily. New Delhi also has security interests in Tajikistan, which is soon to gain membership to the EEU
But India must extend its outreach beyond just the CAR to encapsulate all of Eurasia, including the Commonwealth of Independent States (CIS), which would be facilitated greatly by joining hands with the EEU through an FTA.
As per the latest data from the Directorate General of Foreign Trade, India’s exports to the five EEU member states were valued at $1,539,617 million, while imports were approximately $5,759 million, proving that the Eurasian market holds high potential for Indian goods. However, a major weakness for New Delhi in its economic linkages with the CAR and CIS countries is a lack of direct and regulated access to the region’s markets, which an FTA would immediately resolve.
Exporters of bovine and dairy products, who face strict restrictions from Russia but contribute most to India’s exports to the region, would stand to benefit the most from an FTA. Since the formation of the EEU, the export of non-basmati rice and oilseeds from India to Russia has been lifted, and Indian entities have also been permitted to export egg powder to its member countries.
Further, Indian pharmaceuticals currently face non-tariff barriers in Russia, and face time crunches for the implementation, registration, and confirmation by Russian officials, delaying the supply of these products. The increasing credibility of Indian healthcare and pharmaceuticals has also caught the eyes of the CIS nations, and an FTA would, therefore, tap into the massive economic potential of the pharma industry. Duty incentives from an FTA or CEPA would stand to benefit Indian textile exporters as well, as it would make Indian products more cost-competitive in the region.
Experts have opined that an increase of FDIs in Indian businesses would usher in relief in the current economic slowdown. Simultaneously, the government is working towards relaxing and expanding its regulations on FDIs. The FTA would also be vital for foreign investment in India’s defence, technology, energy, and infrastructure projects. On the other hand, India’s ever-increasing dependence on EEU members for chemical products, mining equipment, and vehicles to fulfill its energy, security and infrastructure requirements warrants enhanced cooperation with the Union, especially to further its Make in India initiative. For example, in December, Russian President Vladimir Putin offered to outsource the construction of one of Russia's most advanced helicopters to India. The signing of such agreements would also speed up the supply of defence capabilities to India from Russia and the rest of Eurasia.
Most recently, India pulled out of the Regional Comprehensive Economic Partnership (RCEP), a China-led pan-Asian FTA. The sticking point for New Delhi, according to experts, was skepticism from companies over China’s role, with fears that cheap goods from China will swamp markets and thwart Indian businesses. This also stems from the lack of investments from China in Indian businesses, which is contradictory to Beijing’s dealings with India’s other neighbours like Sri Lanka and Pakistan, and other regions of the world. But these same traders seem to be more comfortable doing business with Russia, as the EEU is not powerful enough to disrupt the presence of Indian manufacturers in the domestic market, and at the same time can offer market access and investment.
Strategically, Russia has always been concerned about external influences in the region, although this has usually been directed at the US and other Western powers. But China has emerged in the region as a geopolitical force in a much more sustainable manner than the US, as its ties are economically dependent and not visible at the military level. A growing Indian presence in the EEU would satiate Russia’s concerns as it would help blunt future expansion by the Chinese. This would also be supported by other CAR states who have already established their worries about the prospect of a Chinese FTA initiative, much to New Delhi’s advantage. An alliance with a Russia-led union would also send a strong message to Washington, which has imposed tariffs on a wide range of Indian products.
An FTA with the EEU stands to benefit India’s economy, which is currently failing to meet its FDI goals and has seen a decline in exports. The foremost common interest of India and Russia to displace China and the Shanghai Cooperation Organization (SCO) from Eurasia seems to be at the heart of this issue.
Strategically, given the congruency of Russian and Indian interests and the untapped potential of the EEU, New Delhi will have to simultaneously work towards maintaining good bilateral relations with Moscow as its positioning as a partner relies heavily on this. But given the long history of amicable Indo-Russia relations especially in contemporary international politics, close involvement with the EEU is a solid mechanism for India to strengthen its involvement in Eurasia, improve its economy, and potentially weaken Chinese influence in the region.
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