India and Russia Negotiate New Free Trade Agreement Amid International Sanctions

Against the backdrop of international sanctions against Russia, the two countries want to embark on the conclusion of a comprehensive free trade agreement.

Distrust of the G7 or strong interests… Unless it’s both… India wants to strengthen its commercial and industrial ties with Russia. Despite European, American, and to some extent Japanese sanctions, which hit Moscow, the country led by Narendra Modi has expressed its willingness to negotiate a new free trade agreement with Russia.

This was indicated by Indian Foreign Minister S. Jaishankar on April 17 during a meeting with Russian Deputy Prime Minister and Minister of Trade and Industry Denis Manturov in the part of an event on “India-Russia Business Dialogue” in New Delhi. Discussions also include a new bilateral mutual investment protection treaty, according to the Indian minister.

These statements come against a background of strong growth in trade between these countries, both members of the BRICS. Bilateral trade has more than tripled to a record high of $39.8 billion in Indian fiscal year 2022-23 (March to March), according to Indian authorities. A fact which is mainly explained by the boom in exports of Russian oil to India, essentially embargoed by the G7 countries, following the aggression of Ukraine in February 2022.

Since the era of President Nerhu, Russia (then the USSR) has been one of India’s traditional partners, particularly in the field of defence. The two countries are already bound today by a fairly basic bilateral investment treaty. To go further, during the meeting in New Delhi, they indicated that they wanted to create an intergovernmental commission on trade and technology.

In detail, the discussions envisaged relate in particular to certificates of origin and other mutually acceptable commercial documents, or even the mutual recognition of standards. On the menu is also included, in particular, the mutual use of national currencies when concluding trade agreements, within the framework of the reduction in the place of the dollar and the euro. More immediately, Russia says it wants to make its program of preferential loans and insurance for Russian importers eligible for Indian products.

As a reminder, India is also negotiating with Russia and the other member countries, a free trade agreement within the framework of the Eurasian Economic Union (EAEU) which brings together Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan. In fact, more than Russia, the country of Narendra Modi, which wants to pose as an alternative to China in terms of foreign investment and manufacturing industry, is currently seeking above all to attract large Western companies as it has successfully done with Apple (and its Taiwanese partner Foxconn), in a context of structural imbalance in its trade.

India has thus just recorded an overall trade deficit of 266.78 billion dollars over the fiscal year 2022-2023 against 191.05 billion dollars over the previous period.