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February 8, 2000
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Central Asia/Russia

Russian rhetoric fails to bolster business
By Sergei Blagov

MOSCOW - Russia has repeatedly vowed to hike trade with its Cold War-era allies in Asia, like India and Vietnam, but the growth of its ties with the two countries has lagged well behind Moscow's cheery rhetoric.

''Trade between Russia and India in 1999 is estimated at roughly $3 billion US, slightly up from the previous year,'' Nikolai Baisogolov, an India expert with Russian Trade Ministry, said in an interview.

Trade between India and Russia, at $3-4 billion a year in the early 1990s, fell to $1.3 billion in 1996. Indo-Russian trade includes tea, tobacco and pharmaceuticals from India and metal products, fertilizer and newsprint from Russia. Moscow had hoped to boost bilateral trade to $5 billion annually by 2000. But Baisogolov argues these plans had been outlined before Russian economic crisis in 1998, so the $5-billion-a-year benchmark is not expected to be achieved soon.

During the Cold War, Moscow was India's biggest arms supplier and an important trade partner. Arms sales remain an important factor of bilateral trade today. India and Russia have agreed in principle to extend to 2010 a long-term program of military-technical cooperation signed in 1994 and initially limited to the year 2000. India, which has equipped some 60 percent of its armed forces with Russian hardware, imported Russian arms worth $3.5 billion between 1990 and 1996.

India's appetite for Russian military hardware is probably being driven by local instability. India's desire to strengthen its air power could be explained by recent developments in its neighbor-adversary, Pakistan, where an October coup installed a military government. Under a protocol signed in November in New Delhi, Russia agreed to sell a range of weapons systems to India. The deals could earn Russia as much as $4 billion over the next three years, including $1.5 billion from the sale of 60 carrier-capable MiG-29Ks, with a further $1.5 billion from the sale of a production license for Su-30MKI multi-purpose fighter planes. The remaining $1 billion would come from a deal to sell about 100 T-90 tanks to India and for the production license to cover the Indian manufacture of another 210 of these battle tanks.

India is thus one of Russia's biggest debtors, owing some $10 billion, mostly for warplanes and other arms supplies. In 1992, an agreement was signed requiring India to repay in rupees over 12 years, $1 billion of which would be used each year to buy Indian goods. But the arrangement has not worked according to plan, as Russia has never managed to purchase $1 billion worth of goods each year.

Other large-scale, long-term projects include a long-delayed agreement to build a nuclear power plant in the southern state of Tamil Nadu. The Kudankulam power project, which had been slated to operate with two 1,000-megawatt light-water nuclear reactors, has been under discussion for more than 10 years.

Moscow also nurtured close ties with Vietnam, but the special relationship faded almost overnight after the collapse of Hanoi's main benefactor, the Soviet Union in 1991.

In the heyday of ideological ties between Hanoi and Moscow for three and a half decades - between mid-1950s and 1990 - the former Soviet Union flooded its ideological ally in Southeast Asia with concessionary loans. Tens of thousands of Vietnamese still speak Russian, but a new mutual understanding is yet to emerge. Since the collapse of the Soviet Union the relationship between former Cold War allies have been overshadowed by a dispute over repaying Vietnam's ruble debt to the former USSR, inherited by Russia.

Vietnam still owes to Moscow 10.5 billion transferable rubles, Soviet quasi-currency, and conversion estimates range from $2 to 17 billion. Much of the debt emerged from a number of showcase projects that Moscow backed in the past. However, the amount that will be paid back by Vietnam is expected to be far less than original loans.

Apart from the debt problem, bilateral trade is hindered by high transport costs, lack of capital and cumbersome bureaucracy in both countries, while the Russian private sector, badly burned by the crisis, is reluctant to be actively involved in dealings with Vietnam.

Bilateral trade in 1999 is estimated at roughly $400 million, slightly up from the previous year, but is a ''considerable increase'' as compared to $280 million in 1997, Alexander Sitnikov, Vietnam expert with Russian Trade Ministry, said. Vietnam still runs a trade deficit with Russia, he added. Moscow and Hanoi agree that the figure is far below its potential. Moscow has said it aims to multiply its trade with Vietnam tenfold - or to about $3 billion - over the next few years, but experts concede that it is still long way off. However, in August 1998 Russia and Vietnam signed an agreement to build $1.3 billion Dung Quat oil refinery in central Vietnam with an annual capacity of 6.5 million tonnes.

Russian armaments sales to Vietnam amount to roughly a third of bilateral trade. During the past three decades Moscow supplied Hanoi's army with most of its hardware, because the former Soviet Union considered Vietnam as an important outpost of the ''socialist camp'' in Southeast Asia. After the collapse of the former Soviet Union, military aid was replaced by Russian commercial armament sales, to supply Vietnam's 500,000-strong army that still uses Russian arms and spare parts. Within the past five years Vietnam bought 12 Sukhoi-27 jet fighters at an estimated price of $330 million. The Russian navy still maintains several hundred personnel at Cam Ranh Bay, 400 kilometers north of Ho Chi Minh City, a large US-built naval facility that once provided the Soviet Pacific fleet with a strategic base.

The presence of some 100,000 Vietnamese in Russia, mainly in Moscow, remains an economic link between two nations.

Yet it remains to be seen to what extent Russia can and will capitalize on its long-standing relations with India and Vietnam.

Russian officials repeatedly insist that Moscow has no intention to ''give up'' economic ties with New Delhi and Hanoi, but the pronouncements are to be substantiated - undercut by Russia's declining economy.

(Inter Press Service)

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