Updates to the existing India-Russia Bilateral Investment Treaty and recommencement of the India-Eurasian Economic Union Free Trade Agreement are all underway in Delhi as the BRICS makes its global trade presence felt.
By Chris Devonshire-Ellis
India and Russia are in ‘advanced negotiations” for an updated Bilateral Investment Treaty (BIT) that is necessary to boost the conf confidence of investors, Indian foreign minister S Jaishankar said on Monday as he described India-Russia relations as amongst the ‘steadiest’ in the world. Jaishankar was speaking in New Delhi at a business event also attended by Russian Trade Minister Denis Manturov.
India-Russia Bilateral Investment Treaty
BIT are fairly basic documents and do not generally cover tariff reduction agreements, but instead provide investment protections for investors on each side. They deal with issues such as Double Tax protection and offer reduced taxes based on Withholding Tax provisions, in addition to addressing issues related to bilateral services rather than trade. The previous BIT was agreed back in 1994 and is outdated.
India-Russia Free Trade Agreement
At the same time, both parties are recommencing their Free Trade negotiations with the Eurasian Economic Union (EAEU) having been delayed by Covid. The EAEU includes Russia along with Armenia, Belarus, Kazakhstan, and Kyrgyzstan, and is a trade bloc with a GDP of USD3.5 trillion and a consumer market size of 167 million. Russia is the largest member. Any agreement has to be ratified by all parties and would be an India-EAEU deal, and not exclusively Russian.
Jaishankar said a new deal with Russia would make a huge difference to trade relations. Bilateral trade shot up to US$45 billion in 2022, although there is an imbalance in Russia’s favour created by India’s substantial purchases of Russian oil and gas. Both sides have agreed to establish an inter-governmental commission on trade, culture, science and technology, and discussed a wide range of issues to develop the India-Russia strategic partnership.
Jaishankar also stressed India’s commitment to a multipolar world in comments that will alarm Washington. Brazil’s President Lula said the same thing when discussing trade with the Russian Foreign Minister, Sergey Lavrov, in Brazil on Monday. Both India and Brazil are members of BRICS, together with Russia and China. Lula met with Chinese President Xi Jinping last week, who the week before had met with Vladimir Putin in Moscow. Developments within BRICS are rapidly progressing amongst a flurry of intra-Bloc activity.
Other India-Russia issues discussed
In terms of specifics, energy was very much on the agenda, as was transportation and logistics. India and Russia are at opposite ends of the International North-South Transportation Corridor (INSTC), a multimodal route that includes maritime passage from Mumbai to Iran’s Chabahar Port, overland by rail to Iran’s Caspian sea ports, and connectivity from there through to Russia as well as Azerbaijan and onto Turkiye and Europe, and east via Kazakhstan and Turkmenistan to markets in Central Asia. Iran has also agreed to an FTA with the EAEU and has applied to join BRICS Plus.
The two countries also discussed improving and expanding their trade settlements in mutual currencies with both committed to dropping the USD and Euro in bilateral trade settlements. Other trade matters such as the improved import of Russian fertilizer were also discussed as Indian imports have been disrupted by the Ukraine conflict. Mutually acceptable trade documentation such as certificates of origin and related standards recognition were also part of the negotiations, as were discussions dealing with a Russian program of preferential loans and insurance for Russian importers towards procurement of priority products from foreign countries – with India being among them.
“Among the most demanded goods under this program are components and equipment for road construction, products of chemical and pharmaceutical industries. I am sure that this will create opportunities for Indian companies to increase their supplies to Russia.” Manturov stated. Russia has also invited Indian companies who are keen on joint projects to consider ‘cluster investment platform’. “This provides preferential credits for designing and manufacturing of priority products, subsidies for pilot batches of goods, insurance premium and income tax preferences” he said.
The speed of which changes to the global trade system are occurring are breathtaking, and especially with what can only be described as a massive and rapid strengthening of the existing BRICS bloc. As mentioned, all leaders are currently involved in enhancing bilateral trade discussions: Russia-China; Brazil-China, Brazil-Russia and now India-Russia within the space of a month.
It is apparent that all member countries see BRICS as a hedge against US-EU trade which is viewed as becoming unreliable in terms of sanctions threats spilling over. This is not an end to globalization, but an end to who controls it and decisions taken as to who wants in and who wants out. With the BRICS group already looking at significant expansion – Bangladesh, Egypt and the UAE have all de facto joined with numerous other nations lining up to do the same, the global trade onus is no longer on isolating Russia – as portrayed by the West – but reducing dependency upon the United States and Europe – as is being carried out by significant economies. That the BRICS has already overtaken the G7 in terms of percentage share of global GDP is now ushering in an era where their collective trade might is gaining an upper hand in the battle for multipolarity and a revised world order.
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