Russia is Negotiating on Free Trade Agreement with India

Russia is Negotiating on Free Trade Agreement with India

Russia is in the process of negotiating a free trade agreement with India as part of an effort to replace the products and investments that have been banned by Western sanctions after the Ukraine invasion. Russia is now the largest supplier of crude oil to India, with the country taking advantage of the discounted Russian crude.

Free Trade Agreement (FTA) to Boost Trade Relations

Russia and India are negotiating a new Free Trade Agreement (FTA) to boost the trade relations between the two countries, which have blossomed in the shadow of Western sanctions on Russia. Reuters has reported that the deal is in a stage of "advanced agreement," quoting the Union Foreign Minister of India, Subrahmanyam Jaishankar, and is likely to secure bilateral investments between the two countries.

Russia is now the biggest energy supplier to India and is looking to replace the regulated imported products with those from India. Russia’s Trade and Industry Minister Denis Manturov stated:

"We need to find a niche in the products that India can replace." "In civilian projects, we need as much cooperation as there was before the sanctions."

Reports have stated that Russia was seeking to acquire spare parts for cars, aircraft, and trains from India and other countries in November to replace sanctioned and affected imports.

India-Russia Relationship Blossoms

The cooperation between the two countries has not been affected by the Russian invasion of Ukraine because India has not condemned Putin’s actions, maintaining stoic silence and public neutrality on the issue. This has allowed the country to take advantage of the discounted crude, sold at a discount due to the recent adoption of the Dubai benchmark, shunning the Europe Brent benchmark.

India is also trying to reduce the trade deficit and maintain a balance in trading relations. The government of India sent a list of products in December that would be competitive in the Russian markets to gain permission to export them to the country.

The completion of an FTA between the two countries would simplify the introduction of foreign products and expand the scope of trade in both markets. Russia is also finalizing another bilateral trade agreement with Iran, a country that has been facing a wide range of US sanctions.

The dangers of overusing the US dollar as a weapon for sanctions were recently acknowledged by US Treasury Secretary Janet Yellen, who stated that countries facing sanctions would be determined to seek alternatives.

What do you think about the new trade agreement that Russia and India are currently negotiating? Please post your comment.