Russia Negotiating Free Trade Deal With India to Facilitate Imports in the Face of Sanctions – India and Russia are in talks to establish a new Free Trade Agreement (FTA) aimed at deepening the economic ties between the two nations, which have grown in the aftermath of Western sanctions against Russia. According to Reuters, India’s Foreign Minister, Subrahmanyam Jaishankar, noted that the negotiations were at an advanced stage and that the FTA could pave the way for increased bilateral investment.
As India’s largest energy supplier, Russia is looking to replace restricted imported goods with products sourced from India. On this, Russia’s Trade and Industry Minister Denis Manturov stated: “We need to find a niche in the products which India can replace. In civilian projects, we need as wide cooperation as it was before the sanctions.” Reports from November indicated that Russia was exploring the possibility of procuring car, aircraft, and train parts from India and other countries to replace the affected imports due to the sanctions.
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Despite the Russia-Ukraine conflict, the partnership between India and Russia remains unaffected as India has maintained a stance of public neutrality towards Putin’s actions. This has enabled India to benefit from discounted crude prices that are sold based on the Dubai benchmark, rather than the Brent benchmark which is Europe-centric. Conversely, India is striving to balance the trade deficit by identifying products that could compete in the Russian market.
In December, the Indian government forwarded a list of such products to Russia to secure permission for their export. If an FTA is concluded between India and Russia, it could streamline the entry of foreign products into both markets, subject to the terms of the agreement. Additionally, Russia is in the process of concluding another bilateral trade agreement with Iran, which has been subject to a broad range of U.S. sanctions, in order to boost their trade integration and levels without being constrained by external factors.
The potential risks associated with the excessive use of the U.S. dollar as a tool for imposing sanctions have been recently recognized by U.S. Treasury Secretary Janet Yellen. She has cautioned that the targeted countries, which are subjected to such measures, would be motivated to seek out alternatives to the dollar-based financial system. Such a move could have far-reaching consequences, not only for the U.S. economy but also for its global influence and its ability to enforce its foreign policy objectives through financial means.