India and Russia resume talks on fresh investment treaty

India and Russia have launched discussions to conclude a new investment treaty to strengthen bilateral trade and investment ties. This move follows the expiry of the previous investment treaty seven years ago. The negotiations, held virtually in mid-July 2024, commenced soon after the issue was raised in a meeting between Indian Prime Minister Narendra Modi and Russian President Vladimir Putin in Moscow.

Officials from both nations confirmed that they are prioritising the swift conclusion of the treaty to promote and protect investments, as outlined in a joint statement issued during the India-Russia Summit. The leaders set a bilateral trade target of US$100 billion by 2030 and directed officials to discuss a free trade agreement in investments and services.

Trade between the two countries has seen substantial growth. India’s exports to Russia surged by over 35% in FY24 compared to the previous fiscal year, while Russian imports, primarily petroleum, increased by more than 32%. The ongoing boom in bilateral trade is paving the way for further cooperation in foreign direct investment and services.

Although no timeline has been set for the treaty’s conclusion, both parties aim for a swift resolution. One official noted that both countries are ready to move forward, recognising the need to ensure investment protection and strengthen business cooperation. Russian business delegations have shown keen interest in sectors like energy, petrochemicals, infrastructure, and railways.

In 2018, the two countries set a goal of achieving US$50 billion in bilateral investments by 2025, having surpassed US$30 billion that year. Officials highlighted that both nations have complementary interests in sectors such as oil and gas, with India focusing on upstream areas while Russia is interested in downstream activities.

India is also exploring investment opportunities in Russia’s Far East, including the Northern Sea Route, shipbuilding, and energy. In return, Russia has invited Indian investors to participate in high-tech projects in its Far East. At the same time, India has encouraged Russian firms to establish manufacturing facilities in new industrial cities.

Despite setting a US$30 billion trade target for 2025, the countries already exceeded US$65 billion in bilateral merchandise trade in 2023-24, with Russia benefiting from a trade surplus of US$57 billion. In the first four months of FY25, India’s exports to Russia grew by 32%, while Russia’s exports to India increased by over 20%.

Russia has expressed interest in investing part of its trade surplus in India, recognising its rapid economic growth. The renewed investment treaty will build on a 1994 pact terminated in 2017, as it contained provisions open to broad interpretation by arbitral tribunals, leading to legal disputes. The revised treaty is expected to address these shortcomings and provide a more robust framework for future investments.

Both nations continue to seek ways to deepen cooperation in pharmaceuticals, steel, and banking sectors. The new agreement will reflect a more modern approach to investment protection, aligning with India’s revised 2015 treaty model, which several other nations have adopted following disputes with previous agreements.

Source: Hindustan Times