Neel Murlidhar's Blog

Bridges to India

September 16, 2019
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Marshal Bulganin and Premier Khrushchev visited Bangalore, India in the 1950s and planted two tall trees there with great pomp and ceremony, to signify the growing solidarity between India and the USSR.

It is said the Bulganin tree started growing at a slant right away and toppled over a few years later (to be replanted discreetly in a less prominent space). Apparently, a few years after that, the Khrushchev tree also toppled over.

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Source: liders.rusarchives.ru

It was as though the two countries had become so close by the 1970s, that even the trees in Bangalore knew about the inner workings of the Sovet Ministrov!

But from this peak, there has been a steady and gradual divergence between Russia and India. Whereas India had a marked tilt toward the USSR back then, there is now an even more marked tilt toward the US.

Centralized government plans for increasing trade between India and Russia may not be as successful as the creation of a large private sector Indo-Russian ‘executive bridge’. This executive bridge could be similar to the Indo-American one between top business executives in US and Indian companies, that has transfigured US-India relationships and trade.

Although having fallen behind for now, Russian hi-tech has an excellent core. With a Russo-Indian executive bridge, the Indians can help move core Russian capabilities to newer heights, just as they have in the US.

Developing access to India’s oil and gas market as soon as possible is the other principal vector for quickly increasing trade between Russia and India. This can be via pipelines or customized shipping, whichever is quicker to achieve, to replace India’s imports from pro-Pakistan Middle Eastern suppliers.

This is the second part of a three-part series on possible future re-industrialization of Russia, developing hi-tech and oil & gas business with India as a Eurasian balance, and bringing together Russia, China and India.

The series begins with ‘Russian re-industrialization dangers’, a cautionary overview of Japanese re-industrialization and the problems that Japan underwent – from its meteoric rise to the top, to its equally precipitous fall since the 1990s.

Next, ‘Bridges to India’ is about hi-tech possibilities for Russia and India, and the urgency of creating access to the Indian oil and gas market for Russian products.

Finally, ‘Eurasian Triple-Entente’ is about a possible Russia-India-China collaboration, with Russia’s potential as mediator and balancing factor between India and China.

Indian foreign trade in billions of US$, 2017-2018:

China

US

UAE

Hong Kong

Saudi Arabia

Germany

Switzerland

Indonesia

ROK

Malaysia

84.4

74.3

49.74

34.04

26.72

20.33

20.28

19.05

18.13

16.93

Trade between long-term affectionate friends Russia and India was a mere US$ 10.7 billion for the same period. This pales in comparison with trade between uneasy and uncomfortable neighbors India and China, or even the long-distance Indo-US trade.

There are several reasons for this:

I. Close connections between India and the US via an affluent Indo-American community and their intimate friends and relatives in India

1I. High level of synchronism between principal sectors of the Indian and US economies

III. Lack of Russian access to the Indian oil & gas market

IV. Lack of an effective Indo-Russian executive bridge between private sector Indian and Russian companies

V. Low cost Chinese goods

The ever-growing interdependence between the US and India, via the Indo-American community and the Indo-American executive bridge, began with increased emigration of technical specialists from India to the US, starting in the 1960s.

These were the brightest Indian engineers and scientists, who were fleeing lack of opportunity and the large-scale unemployment that existed in India. They returned on vacation to India every year, and maintained close contact with their friends from university who had stayed behind.

Over the years, a very strong bond formed between management in Indian and US companies, via Indo-Americans and their friends and relatives in India.

Meanwhile, India had begun to grow as a software and IT powerhouse, since there are lower entry barriers and startup costs for IT companies compared to, for example, heavy industry and manufacturing.

By the late 1980s, many Indo-Americans readily obtained the highest jobs in technology in American companies, as Chief Technical Officers, but found it difficult to get other ‘C-level’ functions (Chief Executive Officer, Chief Commercial Officer, etc.).

In the 1990s, in order to circumvent this barrier, Indo-Americans began to start their own companies where they could be CEOs. This led to many spectacular successes. By the 2000s, most American venture capitalists insisted the companies they funded have at least one or two Indo-Americans among the C-level executives.

Things are very different today, after Indo-Americans became CEOs of giant US corporations such as Pepsi-Cola, CitiGroup, Google, Microsoft and so on.

With such close contacts between people in Indian and American companies, many US corporations began to ‘scale-up’ operations by offshoring to subsidiaries in India. The Indians proved to be very good at scaling IT operations, in quickly going from small groups of five to ten people in the US to large operations with thousands of people in India.

This scale-up should be explored for Russia.

The most desirable career choices for qualified Indian candidates are likely to be in the US or in India. Perhaps graduates of top-tier institutes in India who are looking for a third career path – presently the UK or elsewhere in Western Europe – can be attracted to Russia.

These Indo-Russians would not be immigrants as in a ‘liberal’ world, with large scale people movement and refugees into the EU. Indian professionals should be invited to Russia only if they bring skills in advanced technology and quickly assimilate with the national population.

Russia has a substantial core of highly capable technical experts – how Indians would augment this core is the question.

The Russian people will have to decide whether the risk involved in bringing in large numbers of foreigners is worth the potential rewards, such as accelerated modernization, availability of trained manpower to scale-up and help achieve that modernization, and close coupling to the Indian market.

It could start small, and kinks worked out before ramping up the influx of new professionals from India. Perhaps a few thousand hi-tech workers can enter at first, then scale-up to a few tens of thousands allowed in every year.

A population of around a million Indo-Russians by 2040 may be a good threshold for such a program to achieve significant results, and the risks vs benefits of this scale of immigrants will have to be assessed carefully by Russian leadership.

Note: For comparison, there are about five million Indo-Americans in the US. According to US census and other survey data, Indo-Americans on average are better educated and have much higher income levels, compared with others such as Chinese-Americans, Jewish-Americans, etc.

Graduate programs at prestigious Russian institutes can begin with instruction in English for Indian students, with emphasis on students quickly becoming proficient in Russian.

Indian institutes are very good with management and technology. Perhaps co-operative programs between top Russian and Indian institutes can be created with graduate courses in management and IT, awarding joint Russian and Indian degrees.

Graduates from such programs can be recruited by large Russian companies that are interested in joint-technology projects with the Indians, and for C-level positions at Russian startups and venture companies.

There are many Indians experts in venture capital, with Silicon Valley and Indian experience. They can be given incentives to advise Russian corporations on creating venture funds that work in Russia, similar to the India-US milieu.

Perhaps they can even be enticed to become partners at such funds, helping Russian entrepreneurs create and grow startups in Russia, with scale-up at subsidiary operations in India.

For various reasons, Tula Oblast, Krim, Novorossiysk, Vladivostok, and Kamchatka all are interesting locations to start hi-tech co-operative zones.

Connectivity and infrastructure needed for efficient IT operations can be created quickly even in the remote Russian East. Combining this with a high quality university will be similar to how high tech zones were formed and flourished in Bangalore in India, and Silicon Valley in the US.

Silicon Valley was the brainchild of one man – the legendary Professor Fred Terman of Stanford.

Till the 1950's, Stanford was a sleepy college for rich California students, far from the traditional American centers of technology. It had little money to attract good research or teaching talent, but had plenty of land granted it by its founder, Senator Stanford.

Armed with thousands of acres of land, Fred Terman proceeded to attract startups to the area from all over America, with offers of free land – especially if key researchers at the startups were also willing to teach at Stanford.

This symbiotic relationship between the university and the surrounding hi-tech companies grew, each feeding the other. Student researchers at Stanford were hired by nearby startups, whose key people were teaching the same students at the university across the road. There was a tremendous amount of cross-pollination between university and industry. This has kept getting more inter-connected over the years.

Along with the first successes, venture capitalists showed interest and a very successful troika formed – between the university, leading-edge startup companies and venture funds.

Equal in stature to Aleksandr Suvorov's dictum, 'train hard – fight easy', is Fred Terman's 'the business of engineering is business', which changed the entire world with Silicon Valley's technical innovations and new business models.

Based on long history in The Valley, about 80% of startups will stagnate or die, even with experienced venture capitalists helping motivated and skilled entrepreneurs. This failure rate has to be allowed for and budgeted into funding and operational models. After all, he who does not take risks does not get to drink champagne.

Looking at Google or Facebook as examples of Silicon Valley companies is a mistake that visitors make time and time again. These are monsters that in all likelihood can never be duplicated elsewhere.

It is much more meaningful to plan on creating less ambitious ventures, where success is much more moderate, but satisfactory nonetheless, while moving technology along in some unique way.

Monster successes could happen along the way, from this pool of startups, most probably in some unpredictable and entirely unexpected way.

Many Indian entrepreneurs and venture managers understand these processes well. Working with them will bring the latest ideas in startups and venture funding to Russia, in new areas of hi-tech.

This will accelerate and augment Russia’s hi-tech, which has a very capable core to begin with. The Indians can help move Russian hi-tech capabilities to newer heights, just as they have in the US.

India can also be a source of qualified and experienced manpower, to scale-up from smaller groups in Russia, similar to how US-India cooperation works.

Over the next twenty years, this can create an Indo-Russian executive bridge similar to the Indo-American one. Commerce between India and Russia would grow in IT and other hi-tech areas as in the Indo-American model.

India’s energy needs

Energy is the most critical need for India. India imported US$ 112 billion of crude oil in 2018, of which US$ 75 billion of crude came from Middle Eastern countries. This is galling to the Indians, especially given the overwhelming geopolitical support given by the Middle Eastern oil exporters to India’s adversary Pakistan. This is a great opportunity for Russia.

India’s crude oil imports from pro-Pakistan countries, in US$ billions, in 2018

Iraq

Saudi Arabia

Iran

UAE

Kuwait

Oman

Qatar

23

21.2

13

8.9

5.7

1.7

1.2

Russian oil exports to India were at US$ 1.2 billion in 2018, up 612.4% since 2014, so things are on the right track. There is a market of at least US$ 75 billion within which Russia has a good chance of substituting Middle-Eastern oil suppliers.

The Indians are not likely to put all their eggs in the Russian basket for energy. But there is still a huge, untapped, potential before Russian supply volumes get anywhere close to a strategically undesirable level for the Indians.

Replacing a large portion of Middle Eastern oil and gas supply with Russian products should be a top Russian priority. That would dramatically increase trade between Russia and India, before India becomes even more intricately enmeshed and interdependent in trade with other partners, who may then be able to force India away from Russia with the usual techniques of enticements, sanctions and so on.

This means one thing: Access.

Various access routes have been considered, such as INSTC and Iranrud transportation systems, pipelines through China, Iran and elsewhere, and shipping via Sevmorput. Of these, Sevmorput looks like the most feasible path for the near term.

Several new oil and gas developments on and around the Yamal peninsula in Russia's Arctic North makes the Northern Sea Route an attractive ocean-way for LNG carriers, especially with plans in-place to install the necessary port facilities for Russia to become the world's largest LNG supplier in the next decade or two.

Sabetta is being developed as the main port in this area, with a large LNG plant serving the Yamal.

Russia has ordered unique 'icebreaking LNG carriers' from S. Korea. These custom-built ships can keep the Sevmorput open year-round for LNG shipments between ports around the Yamal peninsula and Europe without icebreaker support. The Eastern Sevmorput between the Yamal and Asia will be open from July to December without icebreaker escort.

Russia is said to be negotiating with Korean shipbuilders to deliver hulls to them, so nuclear reactors can be installed in Russian shipyards for nuclear-powered ice-breaking LNG shipment.

In co-operation between Russia, Korea and India, similar designs can be built in India with nuclear reactors installed in Russia, to transport gas and oil to India. This would be in keeping with the Indians’ Make in India initiatives.

In addition, the Indians are developing compact nuclear reactors for ships. Building ships in India for installation of nuclear reactors in Russia may be an attractive first phase for future Indian nuclear powered fleets.

Once Russian product begins to flow to India – perhaps via Sevmorput – pipelines and other long-term projects could expand the volume. The Indians are likely to welcome any replacement of Middle Eastern suppliers by Russian ones. It would also become the basis for increased investment and partnership by the Indians in oil and gas exploration in Russia.

In 2017, Rosneft bought a 49% stake in Essar Oil, India's second largest non-state refiner of petroleum products. Russia’s UCP and other investment partners bought another 49%. Renamed Nayara (New Era), the company owns a large refinery, port and terminal facilities, and over 5,000 petrol stations across India.

Once Sevmorput and oil & gas traffic to India becomes routine, a network of Russian petrol stations and Russian gas outlets can be developed all over India in cooperation with the Indian authorities. Russian branding of petrol stations and retail gas outlets across India would be a great means of reaching out to everyday Indians, supplying petrol for Indian vehicles and gas for cooking-gas cylinders, which are in most homes in India.

This will greatly increase Russian presence in Indian life, and could make Russia a routine partner for Indian companies.

At the height of Indo-Soviet relations in the 1970s, Russian culture permeated India. Even school children were exposed to the works of Tchaikovsky, Rimsky-Korsakov, Mussorgsky, also Petipa, Ivanov and other luminaries of the Mariinsky, plus Pushkin, Tolstoy, Gorky, Sholokov, Dostoevsky, as well as Eisenstein, Tarkovsky, Bondarchuk and myriad others.

Engineering texts from the Soviet Union were prized by students. Aerospace was the rage back then, with TsAGI and other world-famous Soviet institutes providing an important part of engineering knowledge in India.

Translators sent by the Soviets were stationed at many top universities in India, to help translate works from Russian for the Indians.

At the grassroots level, magazines such as ‘Soviet Land’ would arrive like clockwork at many homes in small towns and big cities across India. These were filled with superbly grainy art-book quality photographs of impressively gigantic Soviet earth-moving and construction machines, giant Soviet hydro-electric projects, giant Soviet helicopters, giant Soviet everything.

This is not so much indulging in nostalgia for Soviet times, as a brief recounting of how thoroughly and successfully the Soviets had become part of many levels of Indian society.

The Russian Federation can quickly rebuild such grassroots links. Today, the internet offers many effective and economical methods of creating bonds between people.

One obvious path is education. Internet classes in Russian aimed specifically at Indian students can begin quickly. Russian and Indian universities can have distance learning classes in management and IT. Russian and Indian universities can have joint degree programs.

Russian companies can start special courses, hold examinations and issue certificates for IT work in Russia, similar to certificates from Microsoft and other major American IT companies. Indians who are certified in such programs would have the skills and incentives to work with Russian companies.

Russian and Indian companies can partner in offering software coding ‘boot-camps’ over the internet, between sites at various Indian and Russian cities. Such boot-camps have proven to be a very successful way of developing specific software coding skills, with highly personalized instruction and monitoring.

Russian TV and internet companies can create ‘high production-value’ internet video tours of everyday Russia aimed at young Indian technologists. They can also organize Russian rock events with live streaming on the internet for Indian audiences, and once they catch on in India, organize Russian rock concerts in India for young Indians.

The list is endless.

The Englishman Lord Palmerston is greatly admired in the West for having said ‘there are no permanent friends or permanent enemies, only permanent interests’.

Perhaps such crass opportunism, with neither honor nor fidelity, is everyday business in the UK – with its well-earned reputation for being a shop-keeping nation governed by shopkeepers’ interests. On the contrary, India and Russia should work towards creating interests, interdependence and, most importantly, creating an environment to ensure permanent friendship.

Russian supply of oil and gas to India and replacement of pro-Pakistan Middle Eastern suppliers is of great interest to the Indians, and has to happen as soon as possible.

Creation of an Indo-Russian hi-tech executive bridge has to be explored. If that is attractive to Russia, every attempt should be made to increase the Indo-Russian community in technology and venture companies. This community should be large enough to ensure sustained growth of the all-important executive bridge between Russian and Indian businesses, and lead to manpower scaling-up of Russian companies through subsidiaries in India.

India and Russia are very close friends on a government to government basis. Russia is viewed fondly by most Indians, based on the history between the two nations. With a little care and nurturing, this potential can be realized, so Russo-Indian relations develop in many meaningful ways, with mutual benefit and prosperity for both countries.

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Poll conducted

  1. In your opinion, what are the US long-term goals for Russia?
    U.S. wants to establish partnership relations with Russia on condition that it meets the U.S. requirements  
     33 (31%)
    U.S. wants to deter Russia’s military and political activity  
     30 (28%)
    U.S. wants to dissolve Russia  
     24 (22%)
    U.S. wants to establish alliance relations with Russia under the US conditions to rival China  
     21 (19%)
 
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