As Russia’s access to its traditional markets of exports and imports are hugely limited following its Ukraine invasion and the subsequent sanctions, Moscow is looking to develop new trade and investment relations with partners in Asia, including India, China and Southeast Asian countries, said Russian aluminium tycoon Oleg Deripaska.
Speaking on the sidelines of 25th St. Petersburg International Economic Forum (SPIEF), also known as the ‘Russian Davos’, Mr. Deripaska, founder of RUSAL, one of the world’s largest aluminium producers, said there’s an understanding that “the new normal” would fundamentally change Russia’s economic reality.
To facilitate such a shift, he said, Russia needed to create the same kind of infrastructure as it had built over the 12 years, from 1991 to 2003, with Europe. This includes setting up new logistics routes and related infrastructure, customs procedures, trade agreements, infrastructure for settlements, gaining access to debt capital markets and creating an ecosystem for various modes of trade financing.
Mr. Deripaska, who has been under U.S. sanctions since 2018, was one of the few Russian billionaires publicly criticised President Vladimir Putin’s “special military operation” in Ukraine. Following the February 24 invasion, Britain and the EU have also imposed sanctions on him.
“It is a lengthy process,” he said about the shift in the trade routes. “We need to build transport corridors through the Bosphorus via Turkey to North Africa and the Middle East; through the Caspian Sea via Iran to India; and from the [Russian] Far East to Southeast Asia. This requires significant efforts and large investments.”
The funding, he added, should come from both the government and the corporate sector, as well as the countries that would benefit from those new routes, including India, as this would reduce the price of key commodities, including oil and gas, in the long term.
“This is a complex process, it will require certain efforts from the government — which, too, must change its approach and thinking. If earlier we relied on the WTO and believed everyone plays by the same rules, it is clearly a thing of the past now,” the tycoon said.
Turn to the East
It is important for both Russia and India to have direct trade agreements and bilateral investment treaties, Mr. Deripaska added. Solving the payment issues by creating a full-fledged settlement ecosystem that is supported by currency swaps as well as new-age mechanisms like digital currency and cryptocurrency is another critical factor to enable Russia’s ‘Turn to the East’.
Moscow and New Delhi have been attempting to finalise negotiations of the Bilateral Investment Treaty for several years now, while talks on a trade agreement between India and the Eurasian Economic Union, comprising Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan, have been under way since 2017. The bilateral trade between India and Russia stood at around $13 billion by the end of 2021, and the countries have set a target of $30 billion by 2025.
“Look, Russia’s annual bilateral trade with the European Union was in the range of €750 billion to €1 trillion. We expect to reach around $200 billion with China in the next three years; it could be even $500 billion, depending on what kind of economic growth Russia will be able to maintain. I believe Russia-India bilateral trade will reach $120-150 billion in the next decade, I have no doubt about that,” Mr. Deripaska said.
India’s energy needs
He added that India as a dynamically growing economy would require raw materials and energy resources, machinery, components, and technologies that Russia could supply. Emphasising India’s energy needs vis-à-vis its strong commitments to carbon neutrality, Mr. Deripaska noted the growing importance of nuclear energy as a base load source of energy, and Russia’s advanced nuclear generation capabilities, including its leading positions in the fast breeder reactor technology, paved the way for broader cooperation in this field.
“Resources will be very important to India if it wishes to have minimal carbon footprints, and Russia can supply some of the most sustainable raw materials,” Mr. Deripaska said.
India has increased its imports of Russian hydrocarbons many-fold over the past few months.
“One should understand that [redirecting trade and investment flows] won’t happen all of a sudden, also because of the existing sanctions. See, sanctions have an instantly destructive effect, but at the same time, they have a certain lifespan, an expiration date. I have been under sanctions, so I do understand how it works,” Mr. Deripaska said.
“The lifespan of sanctions is two years. For two years, people will be reluctant [to cooperate], but after two years, the ways will be found, and agreements will be reached. I am confident that in the next two and a half years, we will find ways to work with all our major partners, and in 10 years Russia’s exports will be well-diversified”.
Ksenia Kondratieva is an independent journalist based in Moscow