Located at the heart of Northern Eurasia, the Eurasian Economic Union (EAEU) is a Russian-led economic bloc of five countries, which includes Russia, Belarus, Armenia, Kyrgyzstan and Kazakhstan, as member states. The forum was established in January 2015 with an aim to guarantee free movement of capital, goods, services and labour among the member states. Many states including China, India and Iran had shown interest to become its part. However, Vietnam is the first country, which has ratified its Free Trade Agreement (FTA), while India is expected to reach an agreement soon. With this move, India’s trade with EAEU member states will cross $35 billion by 2025. India’s economic engagements in the strategically important and energy rich region, will serve its strategic and energy interests.
Three out of five members of EAEU are also founding members of the Shanghai Cooperation Organization (SCO), which is another important intergovernmental organization of Central Eurasian states including China, Russia, Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, India and Pakistan as its full members. The SCO is backing both the Russian-led EAEU and the China-led Belt and Road Initiative. Joining SCO as a full member will give ample opportunities to Indian diplomacy in the region. It will also increase, India’s connectivity with Russia and the resource rich CARs.
In the last two decades, New Delhi has successfully pursued its ‘Look East policy’, which is now known as the ‘Act East Policy,’ while cultivating extensive economic and strategic relations with its extended neighbours in South East Asia, to counter Chinese influence.
India’s growing diplomatic and economic strength has compelled it to increase its engagement beyond its immediate neighbourhood in South Asia to its ‘extended neighbourhood’ in South East Asia, Persian Gulf, Central Asia and Caucuses; to ensure its strategic, economic, security and energy interests. In the last two decades, New Delhi has successfully pursued its ‘Look East policy’, which is now known as the ‘Act East Policy,’ while cultivating extensive economic and strategic relations with its extended neighbours in South East Asia, to counter Chinese influence.
The focus on its extended neighbourhood had come into limelight when New Delhi announced its ‘Connect Central Asia Policy’ (CCAP) in 2012. In July 2015, Modi’s eight-day visit to Central Asian states had reflected its strategic significance. Before, embarking on his eight-day visit, Modi’s government had agreed to form a Joint Study Group with EAEU, in June 2015—to submit a feasibility report, within a year, on trade between India and EAEU. At present, based on that report an FTA between both the entities is in its final stages.
India’s CCAP is the continuation of its policy of ‘extended neighbourhood,’ to expand its relations beyond the energy and economic sectors to security, strategic and cultural relations. Nevertheless, China has significantly increased its economic role in Central Asia. It is now the largest trading partner of CARs. However, India regards China as its strategic competitor. India is sensitive to Chinese dynamic economy, trading policies, geographic proximity, and particularly its growing economic relations with CARs.
To counter the growing Chinese influence in India’s extended neighbourhood, it is pursuing CCAP to cultivate extensive geopolitical, economic and strategic relations in the region. But unlike China, India has no territorial borders with CARs. The shortest route to the region is either via Pakistan or China. India has never wanted to depend on either Pakistan or China for the pursuit of its long-term goals. This is why, India had signed a trilateral agreement with Iran and Afghanistan in May 2016, to make the strategic port of Chabahar operational. This port will help India in trade connectivity with CARs via Iran and Afghanistan while bypassing Pakistan and China.
The INSTC will not only address the logistical issues between two strategic partners, but will also reduce the transportation cost and time. It is estimated that the Corridor will reduce the distance by 40% and the transportation cost by 30%.
Historically, Russia and India had a special and privileged strategic relationship. But, despite that the bilateral trade between both states is relatively low; this is due to logistical problems. To address this issue, Russia, India, and Iran had signed an agreement in 2002, to establish International North-South Transport Corridor (INSTC). This is a 7200 km transport network, which is increasing trade connectivity between India, Iran, Russia, CARs and Europe via network of roads, sea routes and rails. The initiative is an attempt to counter the Chinese One-Belt-One-Road (OBOR) initiative, which has the ability to connect China with over 60 states in Asia, Africa and Europe via a vast network of sea routs, roads and rails. The INSTC will not only address the logistical issues between two strategic partners, but will also reduce the transportation cost and time. It is estimated that the Corridor will reduce the distance by 40% and the transportation cost by 30%.
The EAEU states might be looking at India’s huge consumer market of over 1.2 billion people and a competitive manufacturing environment. Whereas India’s increasing trade with EAEU states with a consumer market of 185 million people by bypassing a crowded Pakistani market of more than 200 million people indicates that targeting the consumer market in Northern Eurasia is not India’s primary objective. The key objective of India’s engagement in the region is the pursuance of its policy of ‘extended neighbourhood’ in its west, cultivating strategic partnership in Central Asia and the Caucuses region to counter growing influence of its strategic competitor, China.