What is India's role in boosting Russia's war economy?

India took a lot of flak in the West for increasing imports of Russian fossil fuels in the face of Moscow's full-scale invasion of Ukraine. The world's third-largest oil importer saw deliveries from Russia jump tenfold in 2022 and double again last year, thanks to heavy price discounts. India's coal imports from Russia rose threefold over the same two-year period.

Despite accusations of funding Putin's war machine, New Delhi has justified the increase by citing India's traditional "stable and friendly" ties with Moscow and its heavy reliance on imported oil. 

As Indian Prime Minister Narendra Modi meets with Russian President Vladimir Putin in Moscow this week, the Kremlin will be looking to further boost trade with the South Asian power to shore up Russia's commodity-dependent economy and lessen the impact of Western sanctions over the Ukraine war.

When announcing the talks, Kremlin spokesman Dmitry Peskov said that in addition to working together on global and regional security issues, there was "mutual political will" to boost trade and economic cooperation.

India, on the other hand, must tread a delicate path as it aims to maintain strong links with the West, seek new trade links with Moscow and retain a neutral position over the conflict.

DW looks at the current state of India-Russia trade ties and what the two leaders could agree on next.

How strong are India-Russia relations?

During the Cold War, the Soviet Union and India built a strategic partnership for defense and trade that continued after the end of communism. In 2000, Putin, then Russia's prime minister, signed a new declaration of cooperation with New Delhi.

India is a major market for the Russian defense industry — until recently its largest. During the past two decades, Moscow supplied 65% of India's weapons purchases, totaling more than $60 billion (€55.8 billion), according to the Stockholm International Peace Research Institute (SIPRI).

After Russian forces invaded Ukraine, Moscow sought to deepen its relations with India and China as a counterweight to the West. The Kremlin offered New Delhi huge discounts on oil, coal and fertilizer deliveries to boost the country's finances to fight the war.

As a result, India emerged as a major export market for Russian fossil fuels in search of new destinations in the wake of Western sanctions. In April, for example, Russian crude oil deliveries to India surged to a new record of 2.1 million barrels per day (b/d), according to the financial analytics firm S&P Global.

Bilateral trade between the two countries reached a record high of nearly $65.7 billion last year, figures from India's Department of Commerce showed. Trade is, however, massively stacked in Russia's favor, with India importing $61.4 billion worth of goods, including oil, fertilizers, precious stones and metals.

"For long, we have looked at Russia from a political or security perspective," Indian Foreign Minister Subrahmanyam Jaishankar said at an industry conference in May. "As that country turns eastwards, fresh economic opportunities are presenting themselves ... the spike in our trade and new areas of cooperation should not be regarded as a temporary phenomenon."

What are New Delhi's concerns about ties with Moscow?

While the West limited its criticism of India over the cheap oil deal with Russia, New Dehli's historic reliance on Moscow for weapons is a major concern for the US and Europe.

"New Delhi has demonstrated a nuanced approach to navigating the Russia-Ukraine conflict, staying on good terms with Moscow and the West," Aleksei Zakharov, a researcher on Indian foreign policy at the French Institute of International Relations (Ifri), wrote in a paper last month.

Zakharov wrote of "structural challenges" that he said "appear to still prevent the two sides from reinvigorating the economic ties, adding that the defense cooperation between Russia and India is currently "in a state of limbo," partly as the Ukraine war and Western sanctions have hobbled Russia's arms sector.

India had several negative experiences in earlier deals with Russia's arms industry. A 2004 deal to buy a Soviet-era aircraft carrier, upgraded and retrofitted by Russia, was criticized over long delays and a doubling of costs.

In 2013, the explosion and sinking of a Russian-built submarine, which killed 18 crew members, further pressured India's leaders on their defense cooperation with Moscow.

The Indian military is currently awaiting two of five S-400 air defense systems and Russian-made frigates that Russia agreed to supply as part of 2018 deals, local media reported in April.

While India remained the leading destination of arms transfers from Moscow between 2017 and 2022, Russia's share of defense exports to the South Asian country dropped from 65% to 36% during the same period, SIPRI data showed.

French and German arms suppliers have benefitted from New Delhi's change of strategy, amid reticence among Indian policymakers to break Western sanctions on Moscow by signing new deals with the Kremlin.

Is more trade between India and Russia in the cards?

Modi's visit to Moscow — his second overseas trip after reelection in June — is a sign of the importance India still places on relations with the Kremlin. As a growing world power, New Delhi is keen to prioritize its own strategic interests while balancing relations with the West, Russia and China.

While New Delhi has called for "dialogue and diplomacy" to end the Ukraine war, at the recent Ukraine peace summit in Switzerland, India's representative did not sign a joint communique calling for Ukraine's territorial integrity to be respected in any peace agreement.

"On the surface, it may seem that India's neutrality [in the Ukraine war] has allowed the strengthening of bilateral ties with Moscow," said Zahkarov in his recent paper. "However, a closer look suggests that India has become more cautious in its interactions with Russia ... [so] maintaining dialogue and hedging bets will likely be more important for both sides than striking new deals."

Although new pacts to buy Russian weapons may be limited, Modi's "Made in India" initiative, which aims to promote the country as a manufacturing hub, could see Russia provide more raw materials and parts for domestic Indian arms production.

Russia is also keen to expand the International North-South Transport Corridor (INSTC), a road, sea and rail project that connects Russia to India via Iran. Russia shipped the first tranche of coal through the INSTC last month.

The project has been in the works for over two decades and due to the constraints that Russia is facing from Western sanctions, INSTC is now a key trade priority for the Kremlin. 

Completion of another project that has taken on new urgency is the Chennai-Vladivostok maritime corridor. First proposed in 2019, the sea route stretching 10,300 kilometers (5,600 nautical miles) from Russia's easternmost region could help secure flows of Russian energy and other raw materials to India.

The proposed corridor is expected to reduce shipping times from 40 to 24 days, compared with the existing route through the Suez Canal.

Edited by: Ashutosh Pandey

This article was originally published on July 4. It was updated on July 8 to reflect recent events.