Geography Reference
In-Depth Information
The early years (1991-96) in which Russia's policy toward India amounted at
best to 'benign neglect', have left a deep mark on Indian policymakers, in
particular providing a rude awakening for those who imagined that Indo-Russian
relations were strong enough to weather any circumstances that might emerge.
The partial recovery of their ties since then is explained in large part by the
techno-commercial arms trade which has proved to be the only real enduring
aspect of their earlier 'special' bilateral relationship.
The manner in which the rupee-ruble balance came to haunt India and Russia
is emblematic of how the very logic of earlier ties, has crumbled. By the end of
the Cold War, India had accumulated a debt of near $15 billion owed to the
Soviet Union for weapons purchases. The Russians, who had previously gone
along with accepting rupees, became reluctant to do so resulting in a dispute over
the type of currency and exchange rate. Without much of a demand in Russia for
Indian goods, approximately one half of the rupee debt remained in Indian
banks.
22
The inability to find a mutually satisfactory way out of this quandary led to a
virtual collapse in trade in 1992. Even after prolonged negotiations,
the agreement reached led to charges of corruption and manipulation of the rupee
fund by Russia's banking oligarchy. At issue was the Russian decision to auction
off large sums of rupees at a 15 per cent discounted rate to stimulate Russian
investor interest in importing Indian goods. By 1994, Indo-Russian trade had
dropped to just one-fifth of the level of 1990. During his visit to India in 2000,
Putin made it a point to address a large gathering of big industrialists in Mumbai
(Bombay), and invite them to assist Russia in certain areas of Indian expertise
such as information technology, management and financial services.
23
Arms Link
It has turned out that the engine driving post-Cold War Indo-Russian relations is
a familiar one—that is, the arms trade—but without the overt trappings of
geopolitics or ideology as before. The commercial aspects are dominant, with the
accompanying constraints of a narrower focus in the bilateral relationship. For
India, however, arms trading with the Russians, along with new possibilities for
greater cooperation in the nuclear realm, could represent an important element in
its larger strategic vision. As such, there is some potential built-in imbalance
between the interests of the two countries.
The arms link between the two states has been not only resurrected, but taken
to a new level in recent times. The stimulus for this regeneration after the initial
uncertainty, was largely determined by Russia's pressing need to earn hard
currency and to safeguard its embattled defense industry. On India's part, the
need to upgrade its Soviet-made conventional weapons arsenal and to step up the
modernization and expansion of its defense capabilities (made more acute since
