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Sheela Bhatt in New Delhi | July 27, 2004

Even as India's Left parties threaten the coalition United Progressive Front government over foreign direct investment limits, Lenin's Russia is talking aggressively about attracting Indian investment into its growing market economy.

"Russia wants your IT engineers. We want your financial management experience, we want your fantastic designs of furniture, we want Indian pharmaceuticals, we want Indian banks, we want your textiles, and we want bamboo products which we don't have," said Nikolay N Stepanov, Deputy Trade Commissioner, Russian Embassy, in New Delhi.

Denis Alipov, First Secretary (Commerical), Russian Embassy, told rediff.com: "Russia is waiting for India. Russia wants to increase its trade volume with other nations and improve its financial services to facilitate bilateral trade."

Russia is looking to enter into private joint ventures in high-tech sectors with India. The sectors that Russia is keen to collaborate in are energy, space, defence, information technology, telecommunications, railways, civil aviation and ports.

Russia is especially keen on joint ventures in the IT sector. Moscow has been importing IT products from Europe, which have been sourced from India at much lower cost, he said.

But there are things that the Russians find worrisome too. Alipove complained that India was not recognising the guarantees given by many Russian banks.

The current volume of commodity trade (excluding arms) between India and Russia stands at a lowly $1.5-1.7 billion. According to an Indian finance ministry report, exports from India to Russia totaled 1.34 per cent of India's entire exports. And imports were just 0.97 per cent in 2003. This is another cause for the Russian worry.

In Moscow and St Petersburg, there are many hypermarkets, but it is practically impossible to find any Indian goods. Most Indian goods supplied to Russia are a part of the debt repayment arrangement made by India.

The major part of this debt would be repaid in one or two years, and Russia is worried that bilateral trade between India and Russia could fall further due to this. The only major joint Indo-Russian investment is in the Sakhalin Oilfield in Russia where ONGC Videsh Ltd has invested $1.5 billion. The only other noteworthy investment is in India's Kudankulam Nuclear Power Plant.

However, Russia believes that its entry into the WTO could solve the problem to some extent. But Russia feels things are not going very smoothly and, to an extent, it is India's intransigent posture on the WTO talks that is making things difficult.

It was an unusual briefing to the Indian media by Russian diplomats, who actually wanted to register a complaint against India's slow response to World Trade Organisation talks in Geneva. They also spoke about the 'novelty and continuity in Russia's foreign policy' and about the 'big opportunities in the Indo-Russian relations.'

Evgeny Sergeev, Counsellor (Political) and former MP, told the media that Russian President Vladimir Putin, after retaining power for a second term, had briefed his ambassadors to attract more and more investment into Russia from all over the world.

President Vladimir Putin is pushing hard for Russia to join the WTO and has given it top priority in his economic policy. But Russia is concerned over India's 'slow response.'

Alipov said: "We seek India's help in concluding faster negotiations."

Whenever a new nation joins the WTO, countries interested in trading with the incoming country sit together for bilateral negotiations. Putin feels that the ongoing talks in Geneva on the entry of Russia into the WTO are too slow and India should finalise its response faster.

Russia is likely to join the WTO in 2006, but wants India to facilitate faster negotiations at the ongoing WTO talks. These talks are expected to be over by 2004.

Russia is already bargaining hard with Europe over the domestic prices of gas and the opening up of certain markets. Russia has been asked to pay 'entry tickets' by relaxing its grip over the giant gas pipeline networks and the state-controlled gas giant Gazprom.

When asked about the grip of dreaded mafia in some of the Russian cities, Alipov said that the criminal problems have been highly exaggerated. "Big nations have big problems, but President Putin has tackled the issue successfully. In the 1990s it was a bigger problem, but it's not so now," he said.

Evgeny Sergeev too argued that the perception of political instability and presence of criminals in businesses might have deter the Indians in past, but now the scene is different with so many Western multinationals doing roaring business in Russia.

Alipov cited the experiences of European Union and some of the Indian companies like Sun Group and ONGC who are operating profitably in Russia. Sun Interbrew, the Russian-Ukranian unit of Belgium's Interbrew and India's Sun Group, commands 25 per cent market share of the Russian beer mart.


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