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Valdai Club proposes roadmap to resolve Russia-India trade imbalance

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The report, presented at a conference organized by the Valdai Discussion Club in collaboration with the Vivekananda Foundation, recommended “a shift from a transactional approach to a long-term approach” for the sustainable growth of Russia-India trade relations.

The report outlines a set of measures to address the trade imbalance and achieve the goal of $100 billion in trade volume by 2030.

Marking the beginning of a new era in Russian-Indian trade relations, the report was submitted for review to the Vedomosti newspaper.

Significant progress has been made in recent years to strengthen bilateral trade. Payment mechanisms in national currencies have been bolstered, logistical and insurance frameworks expanded, and trade flows safeguarded against external interference.

However, of the $66 billion trade volume, $60.9 billion represents Russian exports to India, while India’s exports to Russia remain limited to $5 billion. This disparity underscores the need for corrective measures.

To correct the existing imbalance and reach the target of $100 billion in trade volume by 2030, set during Indian Prime Minister Narendra Modi’s visit to Moscow in July 2024, the Valdai report proposed several measures.

First, it proposed to “launch full-scale negotiations on a free trade agreement (FTA) between the Eurasian Economic Union (EAEU) and India as soon as possible.”

Russian Deputy Prime Minister Alexei Overchuk mentioned consultations in October, while the Ministry of Economic Development stated in January that negotiations could take place in 2025.

The author of the report, Lidiya Kulik, Head of the Department of Indian Studies at the Skolkovo School of Management, told Vedomosti that the process would be lengthy. “It is not possible for Russia to conclude an FTA with India alone without the EAEU. This requires an assessment of product positions and tariff policies with all participants,” Kulik said.

Another important proposal is to sign a new agreement on mutual investment protection or a similar document as soon as possible. The 1994 agreement expired in 2017. The Hindustan Times reported that a new agreement was being discussed for September 2024.

According to Kulik, India has previously terminated such agreements with dozens of countries to re-sign them “modularly” on a single template. The main challenge is the need for special conditions for investments between Moscow and Delhi.

In the absence of agreements, strengthening ties between the countries’ regions and utilizing the potential of special economic zones could optimize the working conditions of companies.

Kulik noted that India has extensive experience working with 280 economic zones, and it is important to establish connections between these zones and the regions of the Russian Far East.

The document also proposed “further development” of the trade and investment cooperation program in the Far East and the Arctic by 2029, including roadmaps for concrete projects.

Additionally, the report emphasized the importance of diversifying business contacts based on small and medium-sized enterprises. Currently, large state-owned companies dominate the trade relationship.

Gleb Makarevich of the Centre for the Indo-Pacific Region at the Institute of World Economy and International Relations of the Russian Academy of Sciences (IMEMO) noted that “everything can work when there is a foundation in the form of established contacts and market knowledge.”

Addressing sanctions, the report recommended accelerating the development of financial infrastructure and resolving issues with individual payment mechanisms.

This is “one of the basic conditions for economic relations under sanctions,” Olga Belenkaya, Head of the Macroeconomic Analysis Department at Finam Finance Group, told Vedomosti.

According to Kulik, the problem for legal entities has largely been resolved—there are no pending rupees, two Russian banks are operational, and “the third is in line.” She added, “The problem is the cost of payments and bank commissions. Trade imbalance makes them more expensive, and banks need competition.”

The Valdai report highlighted logistics as a critical area for the development of bilateral trade and encouraged Indian investors to invest in the North-South International Transport Corridor, the Chennai-Vladivostok Eastern Sea Corridor (India announced the opening of the line in November 2024), and the Northern Sea Route.

Kulik noted that the Eastern Corridor is limited by the capacity of the Eastern line in Siberia, the North-South Corridor is still “not working properly” due to its multimodality and lack of infrastructure, and the idea of subsidizing transport through a single operator has been rejected by anti-monopoly agencies.

According to Makarevich, there are two views on the development of corridors: they will become functional “when there is something to transport” or when they are fully technologically ready.

The report cited the “inadequate” situation in mutual product certification as one of the urgent problems requiring solutions at the ministerial level.

According to Kulik, unlike tax authorities and customs, direct contact has not yet been established in this area, and certification for some products takes “years,” hindering trade development.

Proposed measures to strengthen trade include creating favorable conditions for the diasporas of both countries and improving labor migration mechanisms.

Kulik noted that India has significant experience in labor export, but due to its aging population, there are less than 30 years left to utilize this advantage.

Although India has a population of 1.4 billion and Russia 146 million, cultural and habitual differences are unlikely to lead to the settlement of large numbers of Indian workers, Makarevich added. “Instead of low-skilled labor migration, the focus should be on educational migration and the creation of contact networks.”

DIPLOMACY

First official Russia-US talks since Ukraine war begin in Riyadh

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Representatives from Russia and the United States (US) have commenced their first official high-level talks since the onset of the Ukrainian war in Riyadh, Saudi Arabia.

The meeting is being held at the Diriyah Palace, a residence of the Saudi royal family. The Russian delegation includes Foreign Minister Sergei Lavrov, Deputy President Yuri Ushakov, and Russian Direct Investment Fund (RDIF) President Kirill Dmitriev. Representing the US are Secretary of State Marco Rubio, National Security Advisor Mike Waltz, and White House Special Envoy for the Middle East Steve Witkoff.

Discussions are anticipated to cover preparations for potential negotiations to end the Russia-Ukraine war, as well as the arrangement of a direct meeting between Russian President Vladimir Putin and US President Donald Trump.

Before the talks began, RDIF President Dmitriev indicated that Russia had presented the US with several proposals in the trade and economic sectors, anticipating progress within two to three months.

“The American business community has lost over $300 billion by withdrawing from the Russian market. Thus, identifying mutual economic avenues and constructive solutions is crucial for the United States and other nations, which are recognizing the Russian market’s appeal and the necessity of maintaining a presence there,” Dmitriev stated.

Dmitriev further mentioned that Russia and the US should initiate joint projects, particularly in the Arctic.

A Washington Post source revealed that the Kremlin’s primary objective in the negotiations is the removal of sanctions against Russia, including those impacting senior officials and prominent Russian billionaires.

Ukrainian President Vladimir Zelensky previously stated that Kyiv would not acknowledge the outcomes of the Russia-US talks in Riyadh.

“Ukraine views any discussions about Ukraine without Ukraine’s participation as unproductive. We cannot accept any outcomes or agreements made about us without our involvement,” Zelensky asserted.

NBC News television sources reported that the US plans to conduct a separate meeting with Ukrainian officials prior to direct negotiations between Moscow and Kyiv.

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NATO criticizes Ukrainian army’s ‘wasteful’ use of Western weapons

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The Sunday Telegraph, citing a source, reported that NATO is dissatisfied with the Ukrainian army’s use of Western-supplied weapons alongside Soviet ones.

This is resulting in the wasteful use of weapons provided by allies due to their different approaches to using weapons.

According to the newspaper, NATO advocates the use of high-precision weapons from different sources, while the Soviet approach calls for intensive use of cheap firepower.

An official involved in the training of Ukrainian soldiers told the newspaper that the Ukrainians were using British-supplied NLAW anti-tank missiles (around 5,000) as hand-held anti-tank grenade launchers (RPGs).

It was reported that the soldiers were firing salvos of five or six rockets, but that each rocket cost around £20,000 (2.2 million rubles at the time).

It was emphasized that using RPGs was not that costly. The launch of the rockets was reportedly recorded on video, and Ukraine provided the footage for reporting purposes.

Other sources told the newspaper that Ukrainian troops often abandon their equipment during withdrawals and that NATO’s principle is to “leave nothing behind” due to the cost of the weapons.

In particular, it was noted that the Ukrainian army did not take the launchers of the Javelin anti-tank missiles, which cost $100,000, from the abandoned positions.

“The Russian army probably has more Javelins than the British army,” one of the newspaper’s sources said. The Russian side has been reporting the seizure of such anti-tank missile systems since 2022.

The Telegraph listed the reasons for Kiev’s departure from Western tactics as the lack of time to train Ukrainians and disagreements with instructors who were unfamiliar with real combat conditions.

It was stated that this situation caused Ukraine to demand cheaper firepower and that the West was forced to turn to former Warsaw Pact countries for Soviet weapons.

“Foreign training is not only ineffective, but also dangerous, unless it is adapted to Ukrainian conditions and integrated into existing unit practices,” said Sergey Filimonov, commander of Ukraine’s 108th battalion.

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DIPLOMACY

Possible US-Russia talks on Ukraine to be held in Riyadh

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Russian and American delegations may meet in Riyadh, the capital of Saudi Arabia, on February 18 to discuss the Ukraine issue.

Sources informed Kommersant that talks between the US and Russian official delegations on Ukraine could take place in Riyadh.

According to Axios, Russian Foreign Minister Sergei Lavrov will attend the talks, while the US delegation will be headed by Secretary of State Marco Rubio.

The US delegation is also expected to include the President’s National Security Adviser Mike Waltz and Special Envoy Steve Witkoff.

Bloomberg had previously reported that Russia could be represented at the talks by Vice President Yuri Ushakov, Foreign Intelligence Service Director Sergei Naryshkin, and Russian Direct Investment Fund (RDIF) Chairman Kirill Dmitriev.

US President Donald Trump announced last week that talks between the US and Russia would begin in Saudi Arabia.

Trump stated that these talks would take place before his personal meeting with Russian President Vladimir Putin, with whom he held a one-and-a-half-hour meeting on February 12 and agreed to work to resolve the military conflict in Ukraine.

Ukrainian President Vladimir Zelensky is also expected to visit Saudi Arabia in the coming days.

“I will not only meet with Russians,” Zelensky said. “As I said, we see the order of the talks as follows: first the United States, then Europe, and then the Russians.”

US Secretary of State Rubio stated that Ukrainian and European leaders will take part in the decisive stage of the peace talks, while the bilateral meeting between representatives of the United States and Russia is aimed at starting the negotiation process.

According to Bloomberg, Trump expects a cessation of hostilities in Ukraine by Easter, which falls on April 20 this year.

Senior Ukrainian and Western officials told the Financial Times that Trump is trying to reach an agreement with Putin by that date.

Another possible date for a deal is May 9, when Russia will celebrate the 80th anniversary of the end of the Great Patriotic War.

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