RUSSIA AND INDIA: MAKE NEW FRIENDS, BUT DON'T

C O N F I D E N T I A L SECTION 01 OF 04 MOSCOW 000648

SIPDIS

SIPDIS

E.O. 12958: DECL: 02/09/2017
TAGS: PREL ENRG KNNP MASS ETRD IN RS
SUBJECT: RUSSIA AND INDIA: MAKE NEW FRIENDS, BUT DON'T
FORGET THE OLD

REF: A. NEW DELHI 440

B. 05 MOSCOW 15711

C. MOSCOW 301

Classified By: Political M/C Alice G. Wells. Reasons: 1.4(B/D).


1. (C) Summary: Russia's goal is to "revitalize" its ties
to India by concentrating on energy security and hi-tech
joint projects according to the MFA, which provided a readout
on Putin's trip to India and a look ahead at high-level
meetings in February. Moscow heralded an agreement to sell
four new reactors to New Delhi, but acknowledged it would
need to work with Washington in the Nuclear Suppliers Group.
Russian experts were skeptical about further growth in
Russia's arms relationship with India and argued that anemic
trade figures could not be remedied by government fiat, but
needed a private sector solution. There are no serious
political issues separating Moscow and New Delhi and Russia
will continue its support for India's permanent seat on the
UN Security Council. Russia-China-India talks in New Delhi
are unlikely to produce any concrete results. Russia is
struggling to readjust its longstanding ties with India to
meet new realities. End Summary.
.
MFA: ROSY ASSESSMENT
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2. (C) The MFA's briefing after President Putin's January
25-26 India trip highlighted agreements on civilian nuclear
cooperation, hi-tech joint ventures and military sales, while
downplaying political discussions. MFA Deputy Director
Andrey Budnik's spin was that Moscow and New Delhi were
taking their strategic partnership to a new level by focusing
on cutting edge technologies and increasing energy
cooperation. The MFA stressed that Putin's visit was not the
end of Russia's engagement for the year, but only the
beginning. According to the MFA, Russia and India are on the
same page on most international and regional issues, and the
GOR was now looking forward to troika (Russia, China, India)
discussions in New Delhi on February 14. The MFA posited
that Russian Economics Minister Gref's mid-February visit to
India would be a start at addressing disappointing trade
levels. Summing up, Budnik argued that Russia's longstanding
close ties with India were being revitalized and updated to
reflect the realities of the new "multipolar century."
.
NEW IMPETUS TO AN OLD RELATIONSHIP
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3. (C) The GOR's take on this year's summit was decidedly
more upbeat than the assessment following PM Singh's late
2005 visit to Moscow (ref B). Then, the MFA was concerned
that despite high-level and frequent discussions, firm
results were lacking. As Gennadiy Chufrin, Deputy Director
of the Institute for World Economy and International
Relations (IMEMO) explained, following the steep fall-off in
trade and other contacts following the fall of the Soviet
Union and after India's economic liberalization, the
bilateral relationship was primarily based on military
cooperation and a shared sensibility on international issues.
However, nostalgia and affirmations of strategic partnership
were insufficient to propel the relationship forward in the
absence of underlying concrete activity. Chufrin told us
before the latest visit that he detected a quickening pace,
particularly in the fields of hi-tech and energy, which
suggested that a resurgent Russia and a growing India could
renew their ties. At the same time, he acknowledged that
closer ties between Washington and New Delhi constituted a
"fact on the ground" which complicated Russian ties with
India and challenged longstanding assumptions about India's
strategic position.
.
RUSSIA IN THE NUCLEAR LEAD
--------------


4. (C) In reviewing those factors which have deepened the
relationship, energy cooperation looms large in the MFA's
calculations. The MFA highlighted the importance of the
signing of a Memorandum of Intent to construct four
additional nuclear power plant units at Kudankulam, while
stressing that Russia would act in a manner consistent with
its Nuclear Suppliers Group (NSG) responsibilities and only
after an IAEA safeguards agreement had been concludedn (see
ref C). Deputy Director Budnik stressed that India had an

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excellent record on proliferation. While slyly noting that
only France and the U.S. could compete in this field with
Russia and that Moscow had "gotten there first," Budnik said
that Russia would work with the U.S. and others in the NSG to
address concerns about India, but said that this would
involve "heavy lifting." (Comment: Budnik responded to
another diplomat who asked whether the U.S. and Russia were
in competition in India by noting that Russia had strong ties
to India dating back many years and had "always" demonstrated
its reliability as New Delhi's "primary" strategic partner.
End Comment.)
.
HI-TECH AND MILITARY COOPERATION
--------------


5. (C) Putin's visit, which had been immediately preceded
by a visit by Defense Minister Sergey Ivanov, was also marked
by an agreement to jointly develop and produce the 100-seater
Multi-Role Military Transport Aircraft (MRTA) as well as by a
verbal agreement to jointly develop a Fifth Generation
Fighter Jet (ref A). Recognizing that military cooperation
remained a major pillar of bilateral ties, the MFA stressed
that the agreements inked in New Delhi reflected growth in
the relationship -- Russia was no longer simply selling and
India buying, but now the two had moved on to joint R&D,
manufacturing and marketing. Joint development of the
Brahmos cruise missile was held up as a model for the
transformed relationship. The Russians also stressed a
stepped-up level of hi-tech cooperation, citing an
Indian/Russian technical center to be set up in Russia to
facilitate the commercialization of jointly developed
technologies, as well as joint work on the GLONASS Global
Navigation system and a project to produce titanium oxide in
Orissa.


6. (C) While the Russian experts we spoke to acknowledged
that military/technical cooperation had sustained ties during
the lean nineties, some questioned its continuing relevance,
as India developed an independent capacity to produce the
latest generation arms and sought more advanced electronics
in its weapons systems. Russian Institute for Strategic
Studies Director Yevgeniy Kozhokin pointed out that work on
the Brahmos joint venture had hardly been seamless.
Difficult IPR issues remained when India attempted to
integrate Western technology onto Russian military platforms,
despite an IPR agreement the two sides had wrangled over for
years before signing in 2005. Tatiyana Shaumian, who heads
the Center for Indian Studies at the Oriental Institute, also
highlighted difficulties in implementing military technical
agreements because of continuing problems in supplying spare
parts for Russian weapons. She said that the GOR was
responsible for delays in refurbishing the Russian aircraft
carrier the Admiral Gorshkov.
.
ENERGY: FUTURE PILLAR?
--------------


7. (C) Despite the MFA's best efforts to suggest that
energy ties would bolster the relationship, aside from the
nuclear agreements, there was little concrete progress.
While the first oil from India's investment in the Sakhalin I
project was off-loaded in India in December, the sides could
only agree to encourage state oil companies ONGC and Rosneft
to discuss upstream and downstream projects. With the
possible exception of LNG from Sakhalin, energy experts were
dubious that Russia could become a significant supplier for
India. Chufrin noted that while it might make sense that
energy would become a larger component in the relationship
given Russia's role as an energy supplier and India's as a
buyer, geographic constraints and Russia's greater interests
in Europe and Northeast Asia would limit energy ties.
Shaumian pointed out that while Russian firms were interested
in working on an Iran-Pakistan-India pipeline, there were
serious political and economic barriers that made that
project seem unlikely anytime soon. She said pipelines from
Central Asia through Afghanistan faced their own set of
complications.
.
TRADE: FLY IN THE OINTMENT
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8. (C) Low trade levels were the primary stumbling block in
the relationship, according to the MFA, but the remedies
suggested -- official target-setting and further governmental

MOSCOW 00000648 003 OF 004


talks -- were unlikely to spur increased trade according to
Russian experts. The MFA said that a joint study group would
focus on identifying trade barriers with the goal of raising
turnover from its current level of USD 3.8 billion to over
USD 10 billion a year by 2010. Minister Gref's mid-February
visit is designed to boost these totals.


9. (C) However, as Shaumian stressed, government-led
efforts missed the point; what was needed were greater
interaction between Russian and Indian business figures, and
that was not happening. Part of the problem was the thorny
issue of business visas for Indians -- with Putin insisting
that any deal on visas be linked to Indian willingness to
sign a readmission agreement with Russia, which Moscow was
compelled to do by its agreement with the EU on visas and
readmissions. As it was, Indians often needed to wait two
months to travel to Russia, which put up obstacles to
concluding business deals. Moreover, Shaumian noted, Russian
companies were more comfortable dealing with other Europeans
or even the Chinese than they were with India, even though
India offered more relevant lessons for Russia on how to
develop hi-tech centers and encourage the growth of small and
medium enterprises.
.
POLITICAL HARMONY
--------------


10. (C) Political discussions at the Summit were
unremarkable, according to the MFA's Budnik, given the
consensus on Russia's favorite topics: the need to recognize
a mulitpolar world, non-interference in internal affairs,
territorial integrity, and the central role of the UN. On
the latter, Russia continues to support a permanent seat on
the Security Council, albeit without a veto, according to the
MFA. Counter-terrorism cooperation and India's role as an
observer in the Shanghai Cooperation Organization were also
touched on. The Russians encouraged the Indians to be more
active in Central Asia, but there was only a limited
discussion of Afghanistan and little or none on the
Indo-Pakistani dispute. Russian experts we talked to were
hard pressed to point to any serious problems on the
political level.

TROIKA: NOT MORE THAN MEETS THE EYE
--------------


11. (C) The MFA highlighted the mid-February discussions
among the Chinese, Indian and Russian Foreign Ministers in
New Delhi as marking another milestone in the developing
troika relationship, but were quick to add that the grouping
was not directed against any other country. Moscow wants the
Troika to focus on economic cooperation, regional issues and
counterterrorism. During the Putin meetings, the Russians
had also raised the possibility that the BRIC (Brazil,
Russia, India and China),which had met on the margins of
last year's G-8 Summit in St. Petersburg, could focus on
political issues, but India pushed for a continued BRIC focus
on economic topics.


12. (C) IMEMO's Chufrin was skeptical about the Troika's
value -- he saw an absence of concrete activity that could
lead to results and viewed it as a talking shop. In his
view, difficulties in the India-China relationship limited
the group's potential; China's support for Pakistan and
territorial disputes with India and its concerns about the
burgeoning U.S.-India relationship were stumbling blocks that
Russia could do little to influence. At the same time, he
thought that rapidly expanding trade ties between India and
China could form the basis for more constructive efforts in
the future. In this view, Russia would act as the energy
supplier to the two manufacturing powerhouses, but he
questioned whether this arrangement met Russia's interests.
Shaumian agreed that bilateral problems between Beijing and
New Delhi limited the ability of Russia to make something out
of the Troika, but looked to economic ties as the driver of a
closer political relationship.
.
COMMENT
--------------


13. (C) Despite MFA's protests to the contrary, our Russian
interlocutors are aware that growing cooperation between the
U.S. and India challenges long held assumptions here about
India's role as Russia's closest partner in Asia. As

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government-to-government economic ties dwindle and India
turns to others for defense technology, Moscow will likely
seek to strengthen energy, scientific and technological ties
and promote India's enhanced role in the UN. Russian
supplies of oil and gas look to be a long-shot, with the
exception of LNG from Sakhalin. Links with India remain
strong, and are even expanding into new areas, but Russia is
still struggling to reposition itself to take account of
India's rising political status and growing economic capacity.
BURNS