Russia is very much interested in making a success of Modi’s Make in India programme and accordingly, a number of proposals have been under discussions for defence and civil aviation sectors. Apart Russia is interested in seeking Indian investments in the massive privatization programme that has been announced early this year. The giant Russian oil and gas companies are selling their stakes and the Putin Government is keen that the Indian oil and gas companies participate in those companies by buying the stakes like the companies of other countries. China is another country which is seeking big stakes in the Russian oil and gas companies.

At the beginning of 2016, the Russian government announced a large privatization plan which it hopes, will bring one trillion roubles ($12.5 billion) into the state coffers in the next two years. This year, the plan includes the sale of shares in two oil companies Rosneft and Bashneft as well as a share package in one of the largest state banks, BTV and the Alrosa Diamond Company. The Indian private sector considers Russia a country of great opportunity and is keen to work with the two governments to develop sector partnerships which will benefit both economies. In fact, the leading Indian chamber, Confederation of Indian Industry (CII) feels that the bedrock of India-Russian partnership has been the energy and defence sectors and there is immense potential to expand cooperation beyond the realms of a buyer seller relationship into one of collaboration for technology transfer and joint collaboration.

For India, strengthening its energy security is of great significance and it has been an important constituent of India’s bilateral relationship with Russia. Accordingly, India is keen to secure long term supplies of hydrocarbons and diversification of imports from Russia through LNG supplies. In the hydrocarbons, apart from the existing investments in oill and gas sectors, there is considerable scope for expanding Indian private investments in Russia. It is in this backdrop that in 2015, ONGC bought a 15 per cent stake in Vankorneft for $1.26 billion in a deal with Rosneft that provided for subsequent enlargement of ONGC’s share in the company to 26 per cent. It now expects to sign a deal with Rosneft to expand its share in Vankorneft by 11 per cent.

Interestingly, in order to ensure that the European companies can avoid sanctions of West on dealing with Russia, the Russian authorities have ensured that the privatization purchases can be made through affiliate participants and this will make it possible for the European investors to purchase shares through mediators. However, foreign investors will be able to participate in the privatization on condition that they register their subsidiaries in Russia. This is an essential part of the privatization rules introduced by President Putin on February 1, 2016.In accordance with these conditions, share purchases must be under Russian jurisdiction and the shares must be bought either with one’s own money or with credit received from non state banks. The most important condition is that control over the strategic enterprises must remain with the Russian state.

Though some European companies are exploring the possibilities to negotiate through their mediator companies, the Chinese and the Indian companies are at more comfort level in dealing with the Russian companies. Even before the present privatization programme was announced, ONGC Videsh Limited invested in 2001 a 20 per cent stake in Sakhalin 1 worth $ 1.7 billion. Since then, the OVL has been expanding its operations and recently, it picked up significant stakes in Bashneft, Titov and Trebs fields. In the private sector, Essar signed an agreement with Rosneft to acquire 49 per cent stake in Essar’s Vadinar oil refinery and supply crude to Essar over ten years.

While the steps are being taken to expand the areas of investments in oil and gas sector in both countries, the bilateral trade is not growing as per the potential. The current bilateral trade between India and Russia is estimated at US$ 10 billion as against more than $ 100 billion between India and China. In China’s bilateral trade, the private sector plays a big role but that is missing in the case of trade with Russia. Both the Governments have planned to hike the trade level to US$ 30 billion by2025 but still this is not adequate compared to the size of the markets of the two countries.

At the government level, this is the right time for giving a big push to the bilateral trade and joint collaboration in projects under Make in India programme. In the civil aviation sector, the Russian side has been keen to participate in the Make in India programme in order to set up technological and production capabilities of the Indian side and to facilitate the process of exports of these products to the third countries. Both the Governments have to identify new areas including coal and steel sector for joint production. The possibilities are immense and the October summit has to play a catalyst role in pushing the India-Russian strategic partnership to a new high. (IPA Service)