India, Russia push $100bn trade target, advance EAEU FTA

By_shalini oraon

_ India and Russia’s push for a $100 billion trade target and the advancement of the EAEU FTA.

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Beyond the Rupee-Ruble: The Ambitious Recalibration of India-Russia Trade

In the grand theater of global geopolitics, few relationships have demonstrated the resilience and stubborn pragmatism of the one between India and Russia. Forged in the crucible of the Cold War, it has weathered the collapse of the Soviet Union, India’s economic liberalization, and its burgeoning ties with the West. Today, as the world fractures into new blocs, this decades-old partnership is undergoing a profound and ambitious recalibration. The recent setting of a $100 billion bilateral trade target and the accelerated push for a Free Trade Agreement (FTA) with the Eurasian Economic Union (EAEU) are not merely incremental goals; they are a strategic imperative to future-proof a relationship at a critical juncture.

The $100 Billion Ambition: Acknowledging the New Reality

The audacious $100 billion trade target is a stark admission of a fundamental shift. For decades, the India-Russia economic relationship was lopsided, overwhelmingly dominated by a single sector: defence. While this created deep strategic interdependency, it left the broader economic landscape underdeveloped. Annual trade hovered around a modest $10-13 billion, a figure embarrassingly low for two such significant powers.

The war in Ukraine and the subsequent Western sanctions on Russia acted as a violent catalyst. For India, a country heavily dependent on energy imports, discounted Russian crude oil presented an irresistible economic opportunity. For Russia, cut off from traditional European markets, India emerged as a crucial economic lifeline. The result was a vertiginous surge in trade, which skyrocketed to over $65 billion in the 2023-24 period. This unprecedented boom, however, is overwhelmingly a story of oil and fertilizers.

The new $100 billion target, therefore, serves a dual purpose. First, it is a political statement of intent, signalling that both nations view this expanded economic engagement as permanent, not a temporary aberration born of conflict. Second, and more critically, it is a recognition that the current model is unsustainable and overly reliant on hydrocarbons. The real challenge, and the subject of intense dialogue, is how to diversify the trade basket to reach this new zenith.

The EAEU FTA: The Key to Unlocking Sustainable Growth

This is where the Free Trade Agreement with the Eurasian Economic Union becomes the cornerstone of the entire strategy. The EAEU, a economic union comprising Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan, represents a market of over 180 million people. An FTA with this bloc is the master key intended to unlock sectors beyond energy.

1. Diversifying Trade: An FTA would systematically dismantle tariff and non-tariff barriers, making a host of new exchanges viable and profitable.
    *   Indian Exports:Indian pharmaceuticals, chemicals, textiles, apparel, and agricultural produce (soybean, tea, coffee) could gain significant market access. The Indian services sector, particularly in IT and healthcare, also sees immense potential.
    *   Russian Exports:Beyond oil and gas, Russia could increase exports of metals, diamonds, coal, and advanced timber products to India. The FTA would provide a stable, predictable framework for this expansion.

2. Creating New Logistics Corridors: The Ukraine conflict has disrupted traditional trade routes, making the development of new corridors a logistical and strategic necessity. Both nations are aggressively pushing the International North-South Transport Corridor (INSTC), a 7,200-km multi-modal network linking India to Russia via Iran and the Caspian Sea. This route promises to reduce transit time and costs by up to 30-40% compared to the traditional Suez Canal route. The success of the INSTC is inextricably linked to the success of the FTA; one enables the other by ensuring goods can flow efficiently and cheaply.

3. Payment Mechanisms and De-Dollarization: The shadow of Western sanctions looms large over the financial aspects of this trade expansion. The inability to use the SWIFT banking system for many Russian entities has necessitated the creation of alternative payment mechanisms. India and Russia have been experimenting with rupee-ruble trade, but this has faced significant challenges, including a massive trade imbalance leading to a pile-up of rupees in Russia that it struggles to use. Finding a sustainable and scalable financial architecture—potentially involving currencies like the UAE Dirham or the Chinese Yuan as intermediaries, or the creation of a digital ledger-based system—is a critical piece of the puzzle that must be solved for the $100 billion target and the FTA to be viable.

The Inevitable Obstacles on the Path

Despite the ambitious rhetoric, the path forward is fraught with formidable obstacles.

· The “Stuff vs. Services” Imbalance: The core structural problem remains. India imports hard commodities—oil, coal, weapons—from Russia. Russia, at present, has a limited appetite for an equivalent value of Indian goods. Until Russian demand for Indian manufactured products and services increases, the trade imbalance will continue to complicate financial settlements.
· Logistical Bottlenecks: While the INSTC is promising, it is not yet fully operational at the scale required for $100 billion in trade. Infrastructure on various legs, particularly the Chabahar port in Iran and the rail links through Central Asia, needs significant enhancement.
· Geopolitical Tightrope: India cannot afford to let its relationship with Russia be perceived as an endorsement of its actions in Ukraine, which could alienate its Western partners, particularly the United States and the European Union, with whom it has deep strategic and economic ties. New Delhi will have to continue its delicate balancing act, advocating for diplomacy and peace while protecting its own clear national interests.
· Technical Negotiations: FTA talks are inherently complex, involving tough negotiations on rules of origin, sanitary and phytosanitary standards, and intellectual property rights. Reconciling the economic structures and regulatory frameworks of India and the EAEU states will be a time-consuming and challenging process.

Conclusion: A Strategic Pivot with Global Implications

The push for $100 billion in trade and the EAEU FTA is more than an economic agenda; it is a strategic pivot. For Russia, it is about building a sustainable economic future in the “Global South,” reducing its isolation and dependence on China. For India, it is about securing long-term energy supplies, finding new markets for its goods and services, and maintaining its strategic autonomy in a multipolar world.

Achieving these goals will require more than political will. It will demand innovative financial solutions, massive infrastructure investment, and a relentless focus on trade diversification. If successful, it could reshape the economic geography of Eurasia, creating a new east-west axis of trade that bypasses traditional hubs. If it falters, the India-Russia relationship risks remaining trapped in its past—a strategically important but economically narrow partnership, unable to meet the challenges and opportunities of the new world disorder. The $100 billion figure is not just a target; it is the measure of their success in rewriting the rules of their engagement.