India-Russia Business Ties are Developing in Energy, Shipping, Agriculture, and Jewelry Fields

September 6, 2019 Posted by India Briefing Written by Chris Devonshire-Ellis Reading Time: 4 minutes

India provides US$1 billion credit line for developing trade with Russia’s Far East Province.

The Indian Prime Minister Narendra Modi has been at the Far Eastern Economic Forum in Vladivostok, boosting promising Indian trade in the region. Attending as this year’s Special Guest of Honor, he traveled with a delegation of about 200 Indian businessmen and signed off deals worth several billion dollars with their Russian counterparts.

The two countries have stressed their need to develop trade, with Prime Minister Modi and Russian President Putin pledging to raise bilateral trade to US$30 billion by 2025.

While India and Russia may be far apart from each other geographically, there are increasing business opportunities between the two.

Energy: coal and LNG

India currently has a deficit of about 50 million tonnes per annum of coking coal (used in making steel) and will develop a shortfall of about 140 million tonnes of regular coal by 2030, according to Anil Kumar, the head of Coal India, speaking at the event. Russia has the second largest coal reserves in the world. Coal India – a government owned company has recently signed memorandum of understanding with two Russian entities to acquire coalmines in the Russian Far East region. India is also looking at acquiring LNG supplies from Russia. Currently, only 3 percent of the Indian households are connected to gas, a situation that the Modi Government wishes to change “several-fold”. India was the first country to ship LNG gas from Russian fields in the Arctic.

Shipbuilding

Indian shipbuilding companies are expected to be working with Russian counterparts in both Vladivostok and India to develop new classes of vessels for LNG shipping, including ice-breaker technologies. Modi travelled with Russian President Putin to visit the Zvezda shipyard in Vladivostok, which builds advanced large-capacity ships and service vessels for work on the Arctic shelf as well as for shipping liquefied gas, oil products and other cargoes. Russia’s oil company Rosneft owns one of India’s major oil refineries, as well as the Indian Port at Vadinar in Gujarat. It is likely that the LNG cooperation with Indian needs will include joint ship-building projects which can be carried out in both Vladivostok and Gujarat.

Agriculture

The Far East of Russia has about 1 million hectares of fallow land waiting to be developed and made productive, and is capable of growing vegetables, grains, and fruits in addition to organic produce. There are growing opportunities for Indian investors in this sector as Russia is prepared to give the land use rights for free, in addition to tax incentives to make the land operational. The produce can be shipped to India, as well as sold throughout North-East Asian markets including nearby destinations such as Japan and South Korea.

India's Increasing Connectivity with Russia & Central Asia

Industrial gems and jewelry

India processes about 90 percent of the world’s gemstones, while Russia produces about 35 percent of the global demand for diamonds. Russia established the Eurasian Diamond Centre in Vladivostok two years, which has been a hit with Indian investors. Indian experts have been able to obtain work and resident visas to join this industry in Russia and engage in both buying raw diamonds as well as polishing and cutting them.

Information technology

Both Russia and India have developing industries and universities dedicated to information technology (IT) sector. Joint development between different universities, and especially with the excellent, 20,000 strong student campus at the Far Eastern University in Vladivostok among many others on Russia provide ample educational and research facilities in this growth area, and especially so as the United States becomes more protectionist in its treatment of these technologies.

Logistics

In terms of shipping, there are direct cargo routes operating between Vladivostok and Chennai, while flights to Vladivostok typically transit through Seoul or Hong Kong. Further, there are on-going discussions to have a direct flight connectivity to Vladivostok from Chennai in the near future. On the west of India, the International North-South Transport Corridor, which links Mumbai to Iran’s Chabahar Port, will eventually extend north to Russia through Iran and Azerbaijan. There are direct flights operating between Delhi and Moscow.

Finance

India has agreed to establish a US$1 billion credit line with Russia for the development of Russia’s Far East region. Prime Minister Modi announced at the Forum. “I am also confident that this step will give new impetus to the development of economic diplomacy and growth of ties between the regions of our friendly states. We will remain active partners in our priority cooperation,” he said.

While current bilateral trade levels are relatively small, there are plenty of opportunities for Indian business in Russia and Russian businesses in India, as there is mutual supply and demand across several spheres.

Several Indian companies have already invested in the Far East region of Russia. These include as KGK in Vladivostok in the field of diamond cutting and Tata Power in Krutogorovo in Kamchatka in coal mining.

As Prime Minister Modi puts it: “Vladivostok will become the springboard of Northeast Asia market in India. This will further deepen the Indo-Russian trade partnership.”