India’s Increasing Connectivity With Central Asia, Iran & Russia

Op/Ed by Chris Devonshire-Ellis

Indian Prime Minister Modi Looks To Re-Connect India At Far Eastern Economic Forum

India’s historic connections with Central Asia have long been curtailed since the 1947 partition of Pakistan, in addition to the constant wars on-going in Afghanistan effectively removing New Delhi from meaningful border connections between the regions. Yet prior to partition, the country had long borders with Afghanistan, Tajikistan, Turkmenistan & Uzbekistan, in addition to Iran to the West. All have contributed hugely in the past to current India’s cultural make up and status; losing these direct connections has tended to isolate the country away from its own heritage and interconnectivity, an unforeseen consequence of poor planning at the time.

Yet with Indian Prime Minister Modi about to address the Far Eastern Economic Forum in Vladivostok tomorrow, there are signs that India is finally shaking off its isolation and attempting to literally, rebuild its regional relations. As can be seen from the map, this is not an easy task. India was effectively pushed south-east as a result of partition, and its borders cut to the region.

However despite these connectivity issues, trade with Central Asia and Russia has been increasing. We can look at this as follows:

Afghanistan
Trade volumes are currently running at about US$900 million per annum, although Pakistan has been interfering with this, closing the Wagah border by insisting India’s bilateral trade with Afghanistan was a “trilateral matter”. However, India has begun servicing the market by opening up air cargo routes with Kabul, with trade expected to double to US$2 billion by the end of next year. Kabul-Delhi and Kabul-Mumbai routes have both been established. The Economic Advisor to President Ashraf Ghani of Afghanistan, Ajmal Ahmadi said that “Afghanistan still considers India as the largest market for agriculture and craft products. During the last three years Kabul exported about 10,200 metric tonnes in volume to India. Last year, it went up to 2,500 metric tonnes and this year we expect it to reach 5,000 metric tonnes.” Afghanistan has opened up its power, pharmaceutical, optical cable manufacturing and other sectors by allowing 100 per cent foreign direct investment where it is looking forward to significant participation from Indian firms. Afghanistan is going to make changes in existing rules for mineral sector in the country, which will boost the bilateral trade with India. The Indian Ambassador to Afghanistan, Sahida Mohammed Abdali said that Indian and Afghanistan companies had last year signed business agreements worth US$250 million during 2018. An Indian Government Briefing can be viewed here while an update from the Indian Embassy in Kabul can be viewed here

Tajikistan
India-Tajik relations are also on the up with a great deal of emphasis placed on developing stronger diplomatic and trade ties. (See an Indian Government bilateral brief here) Trade remains somewhat low, running at about US$75 million per annum and hampered by a lack of access. Should Delhi be able to replicate the success of the Afghani air cargo routes then this could significantly change. Tajikistan imports India’s pharmaceutical products, while India imports from Tajikistan include cotton, aluminum and other minerals. Indian contractors are in the process though of building Dushanbe’s new ring road, an eight-lane highway expected to be completed in 2023. A briefing from the Tajik Embassy in Delhi can be viewed here

Turkmenistan
Indian relations with Turkmenistan also follow the same upward path, with bilateral trade now running at US$82 million, again a relatively low amount but marginally up on 2017/18. (See an Indian Government bilateral brief here). Turkmen Airlines operates services to Delhi and Amritsar. Products imported from India include electronic goods, machinery and pharmaceuticals, while India imports rawhides, chemicals, cotton, grains and other agriculture. There are also co-operations with Indian companies in the oil and gas sector, mainly along the TAPI (Turkmenistan–Afghanistan–Pakistan– India) 1,800 km gas pipeline project that extends from the Caspian into India. A briefing from the Indian Embassy in Ashgabat can be viewed here

Uzbekistan
India also has good relations with Uzbekistan, although bilateral trade dipped in the last fiscal year to US$284 million, down from US$323 million. (See an Indian Government bilateral brief here) Of this trade, Indian exports to Uzbekistan make up about 90% of the total, and include Pharmaceuticals, machinery and electronics. Uzbek exports include mainly agricultural and fruit based products. Again, connectivity issues remain a hinderance. A briefing from the Indian Embassy in Tashkent can be viewed here

Iran
While many countries trade relations with Iran revolve especially around oil and gas, India has another unique aspect to this – connectivity. The 1947 partition deleted India’s centuries-old border with Iran, cutting it off from Persia and access to Europe. Although Indian trade with Iran does mostly comprise of oil and gas products and runs at about US$14 billion per annum, Tehran and Delhi are committed to doubling this despite the threat of US sanctions – an issue that is pushing Delhi more towards Moscow than Washington. But India also sees Iran as an important connectivity route – the International North-South Transport Corridor connects Mumbai to the Iranian Port of Chabahar. This is a hugely valuable strategic route in three ways, it reconnects India with Afghanistan to the East, drives through to the Caspian Sea and onto Russia heading North, and provides access to markets to Turkey and Europe heading West. India, Iran and Afghanistan have signed an agreement to give Indian goods, heading toward Central Asia and Afghanistan, preferential treatment and tariff reductions at Chabahar. From the geographical perspective, Chabahar provides India with an easier land-sea route to Afghanistan. The Indian government has committed US$500 million to the entire Chabahar project, with an aim to join an increasingly important transport corridor to resource-rich regional countries. For this reason India-Iranian relations are significant and can over time be expected to make further impact on Delhi’s desire to reconnect with Central Asia and Russia.

Russia
India and Russia have made no secret of their desire to develop bilateral ties, the two nations wanting to increase bilateral trade volumes to US$30 billion by 2024. There are some natural alignments, both are looking to develop new trade ties, while India is in the market for military hardware. The two countries are collaborating on developing commercial airliners, while traditional Indian industries such as jewelry are finding new opportunities in gemstones – Siberia produces the worlds largest amount of diamonds, and Indian investors are present at the Eurasian Diamond Exchange in Vladivostok as well as Siberian gold mines. India has also been among the first customers for Siberian LNG gas shipped in from the Arctic. Indian companies intend to increase the supply of Russian LNG, and in particular they are interested in buying gas from future Novatek projects – Arctic LNG-2 and Arctic LNG-3, Russia’s Minister of Energy Alexander Novak told TASS commenting on the results of meetings this week with the Indian Minister of Petroleum and Natural Gas Dharmendra Pradhan. According to Novak, Russia is steadily increasing its export of energy resources to India. For the first 6 months of this year, Russian supply of petroleum products to India increased by 17.6% and amounted to 1.36 million tonnes, while coal exports increased by 25% – up to 3.05 million tonnes.

India and Russia are also to be connected via the International North-South Transport Corridor running from Chabahar Port in Iran through to Azerbaijan and onto Russia. This is a work in progress, but with India, Iran and Russia all committed to it this will see a development of trade through both the Eastern Corridor via Vladivostok and the Western one via Iran.

The Eurasian Economic Union
There is additional glue coming down the trade pipeline to link all this together. India is currently involved in negotiations with the Eurasian Economic Union (EAEU) concerning a Free Trade Agreement. The EAEU comprises Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia, and effectively sits between the European Union and Western China. China has a non-preferential FTA with the EAEU, meaning no products are identified within its scope at present, although this is understood to be under negotiation. Iran does have an FTA with the EAEU as do Vietnam and Serbia. Other countries, such as Singapore, Thailand, Turkey and Egypt are also currently in the process of discussing an FTA with the bloc. Should this take place, then India will find itself more closely trade aligned with Central Asia.

The Shanghai Cooperation Organization
India is also a full member of the Shanghai Cooperation Organisation (SCO), which includes China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Uzbekistan as well as Pakistan. Afghanistan, Iran and Mongolia are participating observers while Turkmenistan is a guest and Turkey a dialogue partner. The bloc is a multilateral grouping established to secure the region, deal with terrorism and discuss trade and development. India and Pakistan were admitted in 2017.

As can be seen, India’s relations with Central Asia were badly affected by the history of 1947. However, although trade ties remain relatively small, significantly they are on an upward trend, with many of the countries concerned also wanting to have some leverage over China and its Belt & Road Ambitions. Allowing India access to markets and investment is one way to accomplish this balancing act, and especially with Russia on board as well. This means that over time, India’s trade and development influence in the region will increase, partly as a counterweight to the Belt & Road Initiative, but also partly to join up with certain aspects on that, in addition to developing India out of its current China-Pakistan surrounded box. India-Central Asian and Russia trade volumes may just beginning, however there is plenty of room for growth – and with that, opportunities.

Related Reading

• Uzbekistan Re-Energizing as Central Asia’s Traditional Hub for the Silk Belt and Road
• Turkmenbashi’s Caspian Window and the Turkmenistan Belt and Road
• The Emerging Markets In China’s Belt & Road Initiative