In-depth Study on India-Russia Economic Relations

Key Chapter Title List

1. Shift in Core Drivers of India-Russia Relations
2. Trends in the Trade Basket
3. India's Imports from Russia
4. Changes in India's Exports to Russia
5. Sanctions Measures and India's Response Strategies
6. Payment and Settlement Related Issues
7. Conclusion and Strategic Balancing Challenges

Document Introduction

Over the past decade, the core drivers of India-Russia relations have undergone a significant shift. The traditionally dominant military-technical partnership has weakened as India's procurement of Russian weapons, technology, and military platforms has declined. Bilateral trade long hovered in the $10-11 billion range, with the economic pillar remaining stagnant. After February 24, 2022, this pattern experienced a fundamental turning point. India, which did not join the sanctions regime against Russia, became Russia's second-largest trading partner. Bilateral trade surged to $49 billion in 2022 and is projected to reach $65 billion by the end of 2023, with discounted oil trade policies serving as the core driver of this growth.

This report focuses on the dynamic developments in India-Russia economic relations from 2022 to 2024, providing an in-depth analysis of the evolving characteristics of the trade structure. Data shows that hydrocarbon imports dominate bilateral trade. In 2023, Russia's oil exports to India amounted to $54 billion, constituting the vast majority of the total $65 billion trade volume for that year. Although non-oil trade accounts for a relatively smaller share, it has shown steady growth since 2022, with significant export increases in categories such as fertilizers, gemstones, metals, jewelry, and animal and vegetable oils. Simultaneously, India's export structure to Russia has undergone profound adjustments. Exports of traditional stronghold products like pharmaceuticals have continued to decline, while exports of goods such as steel, electrical machinery, chemical products, and machinery equipment have grown substantially, filling the economic void left in the Russian market after the withdrawal of Western companies.

The report systematically outlines India's policy responses and trade behavior under the sanctions backdrop. Since the sanctions on Russia in 2014, India-Russia trade has remained generally stable without significant supply shocks. However, India has exercised restraint in exporting critical technologies and dual-use goods to Russia. In response to the U.S. Treasury Department's sanctions allegations against 19 Indian companies, India's Ministry of External Affairs clearly stated that the relevant companies did not violate Indian law, as India does not recognize sanctions not approved by the United Nations. Furthermore, the escalation of Western sanctions against Russia has had complex impacts on India-Russia cooperation, such as Indian companies ultimately abandoning plans to acquire equity stakes in Russia's Arctic LNG-2 project.

The data foundation of this study comes from authoritative sources such as India's Ministry of Commerce and Industry trade statistics and Observer Research Foundation analysis reports. Through longitudinal comparison and horizontal analysis of disaggregated bilateral trade data, the report reveals the true picture and internal logic of India-Russia economic cooperation. The report also points out that India-Russia economic relations face multiple practical challenges, including the Financial Action Task Force's "high-risk" rating for Russia, the Indian Securities and Exchange Board's investment restrictions on Russia's largest bank, and operational obstacles in rupee settlement accounts.

Ultimately, the report concludes that India-Russia trade should be assessed based on supply-demand dynamics rather than political system interventions. Bilateral trade is expected to continue deepening, but the severity of secondary sanctions could have a substantive impact on cooperation. India faces a complex strategic balancing challenge: maintaining diplomatic relations with Russia while deepening cooperation with the West and securing its short-to-medium-term energy security needs. Achieving this balance is crucial for India's strategic interests in the complex global landscape.