The Enduring Entente: A Comprehensive Analysis of the India-Russia Economic Partnership

Executive Summary

The India-Russia economic partnership is a complex relationship, rooted in a shared history of strategic alignment and mutual support. While the post-Soviet era saw a period of transition, the partnership has recently undergone a dramatic transformation. Bilateral trade has reached unprecedented heights, surging nearly six-fold since 2022 to a record high of USD 68.7 billion in fiscal year 2024-25. This remarkable growth, however, is overwhelmingly driven by India’s increased imports of discounted Russian energy, creating a significant trade imbalance and a complex payment predicament.

Beyond the headlines of trade figures, the relationship is sustained by a bedrock of collaboration in strategic sectors. Long-standing military-technical cooperation, joint ventures in civil nuclear energy, and ambitious infrastructure projects underscore a commitment that transcends transactional ties. India’s pursuit of “strategic autonomy” in its foreign policy is a central theme, allowing it to navigate intense geopolitical pressures from the United States while maintaining its access to affordable energy and critical defense technology. While the partnership faces significant challenges—including a growing Russia-China axis and the unresolved payment issue—its future trajectory will be determined by its ability to diversify its economic base and successfully implement its long-term strategic projects. This report provides a detailed examination of these dynamics, from the historical foundations to the current geopolitical complexities, offering a nuanced view of one of the world’s most enduring and pragmatic international relationships.

The Long View: Foundations and Evolution of the Partnership

A Legacy of Friendship and Strategic Alignment

The economic partnership between India and Russia is not a recent development but a continuum stretching back to the Cold War, founded on a shared vision of multipolarity and a consistent history of strategic alignment. Diplomatic relations were established shortly before India gained its independence in April 1947. In the early years of nation-building, the then-Soviet Union was a crucial partner in India’s drive for economic self-sufficiency. The Soviet model of economic planning, centered on five-year plans, deeply influenced India’s own development strategy. Moscow provided foundational support for India’s heavy industry, investing in key sectors such as steel production, mining, and energy. Notably, during India’s Second Five-Year Plan, the Soviet Union helped establish eight of the sixteen heavy industry projects, including the world-renowned Indian Institute of Technology Bombay.  

This economic collaboration was fortified by critical political support. The Soviet Union consistently backed India on the global stage, most memorably during the 1971 war between India and Pakistan, when the US and China sided with Pakistan. This unwavering support cemented a high degree of historical affinity for Russia, particularly among India’s older generation of policy elites.  

The economic architecture of this partnership was formalized through early trade agreements. The agreement signed on November 16, 1958, established a framework based on “equality and mutual benefit,” which included a crucial rupee-ruble payment mechanism. This innovative arrangement allowed India to use its own national currency for trade, enabling it to conserve its limited foreign exchange reserves for other essential needs. This bilateral mechanism was a cornerstone of the relationship, allowing it to flourish outside the constraints of the dollar-denominated global financial system. The legacy of this system is directly relevant today, as both nations grapple with the complexities of a similar payment challenge in the modern era.  

The Post-Soviet Transition and Institutionalization

The dissolution of the Soviet Union in 1991 marked a tumultuous period for both countries. Despite the geopolitical upheaval, the fundamental nature of the relationship persevered. A new Treaty of Friendship and Cooperation was signed in January 1993, followed by a bilateral Military-Technical Cooperation agreement in 1994, signaling a commitment to continuity.  

This phase saw a formalization of the partnership, moving from an ad-hoc arrangement to a structured and institutionalized one. In 2000, during President Vladimir Putin’s visit to India, the partnership was elevated to a “Strategic Partnership,” which was further upgraded to a “Special and Privileged Strategic Partnership” in 2010. These designations institutionalized high-level engagement through annual summits between the leaders and created formal dialogue mechanisms, such as the Inter-Governmental Commission on Trade, Economic, Scientific, Technological and Cultural Cooperation (IRIGC-TEC). These platforms have been instrumental in setting and revising ambitious trade targets over the years, starting from USD 30 billion by 2025 and subsequently raising the goal to an unprecedented USD 100 billion by 2030. The sheer existence of these multi-decade agreements and institutionalized forums underscores the depth of the commitment that has outlasted short-term political fluctuations.  

The New Economic Reality: A Dramatic Surge in Trade

Unprecedented Growth: The Post-2022 Trade Boom

The economic partnership between India and Russia has recently experienced a transformative surge, driven by global geopolitical shifts. Bilateral trade reached a record high of USD 68.7 billion in the Financial Year 2024-25, representing a nearly six-fold increase from the pre-pandemic trade volume of USD 10.1 billion. This rapid growth has positioned the two nations on a clear path to achieving their ambitious bilateral trade target of USD 100 billion by 2030.  

This dramatic expansion, however, masks a profound structural imbalance. The bulk of this trade is heavily skewed in favor of Russia. In FY 2024-25, India’s imports from Russia amounted to USD 63.84 billion, while its exports to Russia stood at a comparatively modest USD 4.88 billion. This massive trade deficit of nearly USD 59 billion illustrates that while the volume of trade has soared, its composition is overwhelmingly one-sided.  

To provide a clear picture of this imbalance, the following table details the trade figures for FY 2024-25.

Table 1: India-Russia Bilateral Trade at a Glance (FY 2024-25)

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The Lopsided Equation: A Deep Dive into Imports and Exports

The composition of bilateral trade reveals the core of its current dynamic. Imports from Russia are heavily concentrated in a few key sectors, while Indian exports are more diversified.

Russian Imports to India: Mineral fuels, oils, and products of their distillation dominate the import basket. In 2024, these items accounted for USD 59.53 billion, comprising approximately 89.1% of India’s total imports from Russia. This reflects India’s reliance on Russia for its energy security. Other significant imports from Russia include fertilizers (USD 1.61 billion), vegetable oils (USD 2.25 billion), precious metals and stones (USD 783.15 million), and iron and steel (USD 423.11 million).  

Indian Exports to Russia: India’s exports to Russia, while smaller in value, are more varied. The top category is machinery, nuclear reactors, and boilers at USD 1.11 billion. This is followed by electrical and electronic equipment (USD 424.21 million) and pharmaceutical products (USD 413.48 million). Other key export items include various chemical products, iron and steel, ceramics, and agri-products such as fish, rice, coffee, and tea.  

The following tables provide a more granular view of the top export and import categories, highlighting the diversity of India’s exports and the concentration of Russia’s.

Table 2: Key Indian Exports to Russia (2024)

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Table 3: Key Russian Imports to India (2024)

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The “Discounted Crude” Conundrum: Economics vs. Geopolitics

The immense growth in trade is largely attributed to India’s significant increase in Russian crude oil imports. Prior to 2022, Russia supplied less than 2% of India’s oil imports. By mid-2024, this share had surged to nearly 40%. This shift was a purely rational economic decision, as Western sanctions following the Ukraine conflict forced Moscow to offer steep discounts on its crude. The price of Russian Urals crude was offered at a discount of $3 to $4 per barrel compared to Brent crude, making it a significantly cheaper alternative to oil from other suppliers like the US, which was sold at a premium.  

The financial benefit to India from these purchases has been a subject of considerable debate. While some media analyses suggest savings of up to $17 billion to $26 billion, a report from the brokerage firm CLSA estimated the annual net benefit at a much lower $2.5 billion. This wide discrepancy highlights that the economic data is being used as a tool in a larger geopolitical narrative. The US, in particular, has used the higher estimates to accuse India of “profiteering” and helping to fund the Russian war machine, a narrative that served to justify the imposition of a 50% tariff on a range of Indian goods. This suggests that for the US, the core issue is not just the economics of the oil trade but a broader effort to force India into a clearer geopolitical alignment.  

India’s position on this matter is rooted in pragmatism and national interest. New Delhi has maintained that its oil purchases do not violate any international laws and are essential for ensuring the energy security of its 1.4 billion people. India has also pointed out what it perceives as double standards, noting that both the US and the EU continue to trade extensively with Russia, importing commodities like fertilizers and palladium. For India, the decision to continue buying Russian oil, even at the cost of US tariffs, is a demonstration of its commitment to an independent foreign policy. The cost, therefore, is not just a simple financial one; it is a political statement about its place in a multipolar world.  

Beyond Trade: Core Pillars of the Strategic Partnership

The economic relationship between India and Russia is underpinned by deep and long-standing cooperation in strategic sectors. These collaborations, often characterized by a co-development model rather than a simple buyer-seller dynamic, form the true bedrock of the partnership.

Military-Technical Cooperation: The Bedrock of the Relationship

For decades, Russia has been India’s most important and reliable arms supplier, a role that began with the Soviet Union’s technology transfer to co-produce the MiG-21 jet fighter in 1962. A key reason for this preference is that Russia provides arms at reasonable prices without end-user constraints and is often willing to supply sensitive technologies that other countries are not.  

This relationship has matured into a series of major co-production programs. The BrahMos cruise missile program is a prime example, a joint venture between India’s Defence Research and Development Organisation (DRDO) and Russia’s NPO Mashinostroyeniya (NPOM) in which India holds a 50.5% share. The program has been a resounding success, culminating in the development and deployment of a missile system with advanced features. Other notable collaborations include the Sukhoi Su-30MKI program, where over 230 jets are built by Hindustan Aeronautics Limited in India, as well as joint projects on KA-226T helicopters and frigates. India has also acquired critical technologies like the S-400 surface-to-air missile system.  

Despite the depth of this cooperation, India is strategically diversifying its defense imports. As part of its “Make in India” initiative, there is a concerted effort to strengthen domestic defense production and reduce reliance on a single supplier. As a result, Russia’s share of India’s arms imports has dropped from 76% between 2009 and 2013 to 36% between 2019 and 2023. This is not a sign of a “managed decline” of the relationship, but rather a strategic evolution. India seeks to build its own industrial capacity while selectively engaging in high-impact, long-term joint projects.  

The Energy Nexus: Nuclear and Hydrocarbon Collaboration

Beyond military hardware, energy cooperation has become a cornerstone of the partnership. While oil dominates recent trade figures, the most significant long-term collaboration is in the civil nuclear sector. The Kudankulam Nuclear Power Plant (KNPP) in Tamil Nadu, built with Russian assistance, serves as a powerful case study for global energy cooperation. The project, which uses Russian-designed VVER-1000 pressurized water reactors, goes far beyond a simple vendor-client transaction. It is a blueprint for technology transfer and capacity building, with Russia’s state-owned company Rosatom working directly with India’s Nuclear Power Corporation of India Limited (NPCIL). This model has allowed Indian engineers to gain first-hand exposure to advanced light water reactor technology, strengthening India’s capabilities in the field.  

The success of the Kudankulam project has led to further cooperation. The 2017 visit by India’s Prime Minister saw the signing of agreements for six additional nuclear reactors. A 2009 nuclear deal agreed to a roadmap to build sixteen to eighteen new reactors by 2030, with a potential value of up to USD 45 billion. In a testament to the effectiveness of this model, India is now leveraging its acquired knowledge to provide technical and operational support for the Rooppur Nuclear Power Plant in Bangladesh, in a trilateral arrangement with Russia as the primary technology provider.  

In the hydrocarbon sector, the partnership is equally strong. Indian companies have invested over USD 15 billion in Russian oil and gas fields, including acquiring stakes in projects like Sakhalin-1 and Vankorneft. This demonstrates a shared commitment to long-term energy security that is not limited to commodity trade alone.  

Connectivity and Infrastructure: Building Bridges for Future Trade

Addressing the geographical distance and logistical challenges between the two nations is a shared priority, with both sides promoting ambitious infrastructure projects.

The International North-South Transport Corridor (INSTC) is a 7,200 km multimodal network of ship, rail, and road designed to move freight between India, Iran, Azerbaijan, and Russia. The primary objective is to reduce transport time and costs compared to traditional routes. The corridor is expected to significantly increase bilateral trade volumes by providing seamless connectivity to major cities like Mumbai, Tehran, and Moscow.  

Another key initiative is the Chennai-Vladivostok Maritime Corridor (EMC). This proposed sea route, spanning 5,647 nautical miles, aims to reduce the transit time for cargo between India’s East Coast and Russia’s Far East to just 24 days, saving approximately 5,608 km compared to the traditional Mumbai-St. Petersburg route. These projects are not merely about logistics; they are strategic investments aimed at building a more resilient and independent trade architecture that can bypass traditional chokepoints and geopolitical pressures.  

Table 4: Major India-Russia Joint Projects & Strategic Engagements

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Navigating the Headwinds: Challenges and Strategic Dilemmas

Despite the impressive growth in bilateral trade and the depth of strategic collaboration, the India-Russia partnership faces significant challenges that test its resilience and long-term viability.

The Payment Predicament: Surplus Rupees and Sanction Fears

The most pressing economic challenge stems from the massive trade imbalance. With India’s imports from Russia far exceeding its exports, Russia has accumulated a large surplus of Indian rupees, estimated to be in the tens of billions. This surplus creates a payment predicament, as Russia has limited options to spend these rupees, which are not freely convertible or easily repatriated.  

While the Reserve Bank of India has introduced measures to facilitate trade through Special Rupee Vostro Accounts (SRVAs), the fundamental problem persists. Russian exporters, especially those not subject to Western sanctions, prefer to be paid in hard currency like the US dollar. Additionally, the fear of secondary sanctions from the US, which meticulously tracks transactions, makes Indian banks cautious about facilitating rupee-ruble trade, creating operational hurdles for businesses. This financial logjam illustrates that a high trade volume does not guarantee a healthy partnership. The lack of a balanced, self-sustaining economic model threatens to undermine the very foundation of the recent trade boom.  

Geopolitical Pressures: The US Factor and India’s Strategic Autonomy

India’s increased oil imports have become a major point of friction with the United States. In response to India’s continued purchases of Russian oil, the US imposed a 50% tariff on Indian goods, a combination of a 25% additional tariff on Indian crude oil trade and a 25% duty on other Indian goods. This move has been framed by US officials as a way to punish India for “profiteering” and allegedly financing Russia’s war in Ukraine.  

New Delhi has staunchly defended its position, stating that its oil imports are based on market factors and are driven by the national objective of ensuring energy security for its population. India has also accused the US and the European Union of double standards, pointing to their own continued, albeit reduced, trade with Russia, including significant imports of fertilizers and natural gas. This geopolitical pressure, which also includes demands for India to open its agricultural and dairy markets, is seen as a direct challenge to India’s policy of “strategic autonomy”. By choosing to absorb the costs of US tariffs rather than yielding to pressure, India is signaling that its foreign policy principles are non-negotiable.  

The China Question: A Complex Triad

While India and Russia are aligned on many global issues and participate together in forums like the BRICS and the Shanghai Cooperation Organisation (SCO), the deepening Russia-China axis presents a significant strategic dilemma for India. India fears that Moscow could become increasingly dependent on Beijing and, in a future conflict, might side with China. The economic data supports this concern. Trade between Russia and China has surpassed USD 200 billion, with Russia’s firms becoming increasingly integrated into China’s financial system via the yuan. This dwarfs India-Russia trade and suggests that within a potential renewed Russia-India-China (RIC) bloc, India’s economic leverage would be limited compared to its role in the US-centered global economic network. This dynamic highlights a crucial paradox: as the Russia-India relationship sees a surge in trade, the strategic underpinnings are simultaneously being challenged by Russia’s closer alignment with India’s primary geopolitical rival.  

Conclusion and Outlook

The India-Russia economic partnership is a testament to the enduring power of historical trust and modern-day pragmatism. While the relationship is rooted in a legacy of support dating back to the Soviet era, its recent trajectory has been shaped by a confluence of geopolitical and economic forces. The dramatic surge in trade, driven almost entirely by India’s strategic acquisition of discounted Russian energy, has created a new economic reality. This is not a balanced partnership but a pragmatic arrangement that addresses India’s immediate energy security needs while providing Russia with a crucial market for its sanctioned goods.

The core of the partnership, however, remains its strategic depth. Long-standing collaborations in military-technical fields, civil nuclear energy, and ambitious infrastructure projects underscore a commitment that goes beyond transactional trade. The success of co-development models, such as the BrahMos missile program and the Kudankulam nuclear project, demonstrates that the partnership thrives when it is based on shared technology and long-term investment rather than short-term expediency.

Looking ahead, the partnership faces profound challenges. The massive trade imbalance has created a complex payment predicament, leaving a surplus of Indian rupees in Russia that cannot be easily utilized. This financial logjam, combined with the intense geopolitical pressure from the United States, poses a significant test for India’s foreign policy of “strategic autonomy.” The growing Russia-China axis also presents a long-term strategic dilemma for India, as it navigates a complex geopolitical triad where its interests may not always align with those of its historical partner.

For the partnership to achieve its ambitious goals and remain relevant in a rapidly changing world, several key areas must be addressed. First, India and Russia must work to diversify trade and actively promote Indian exports to create a more balanced economic relationship. This is essential to make the rupee payment mechanism viable and sustainable in the long run. Second, both sides must continue to advance strategic joint projects in sectors beyond defense and energy, such as pharmaceuticals, IT, and manufacturing, to broaden the economic base. Finally, the full realization of connectivity initiatives like the INSTC and the Chennai-Vladivostok Maritime Corridor will be crucial for overcoming logistical bottlenecks and fostering a more seamless trade environment. The future of this partnership hinges on India’s ability to maintain its delicate balancing act, prioritizing its national interest while navigating an increasingly volatile and multipolar global order.