Fortnightly Review & Analysis: USA, Russia & EU (Vol 2 Issue XII)

June 16 - 30, 2017


Prime Minister Modi has had a successful visit to the United States, thereby allaying concerns that India was not getting enough attention from the Trump administration. Modi and Trump had their first meeting on the afternoon of June 26. The meeting lasted over five hours and ended with a working dinner hosted by the US president at the White House, the first for a foreign leader at the White House in his five-month term. Trump has hosted dinners for Chinese President Xi Jinping and Japanese PM Shinzo Abe at the Mar-a-Lago golf estate in Florida, but this was the first such dinner at the White House. Officials, who are keen to portray “good optics” for the Modi visit, are projecting the dinner invite as a reflection of Trump’s personal warmth for Modi. To further set a positive tenor to the visit, the United States declared Hizbul Mujahideen Chief Syed Salahuddin, who also heads the Pakistan-based United Jihad Council, a “global terrorist” hours ahead of Prime Minister Narendra Modi’s maiden meeting with President Donald Trump.

The PM, who was visiting the US for the fifth time in three years, arrived to a vastly changed environment from the time he was last in Washington DC, just over a year ago, for his first sit-down meeting with Trump. They have spoken thrice since Trump was elected. Their last conversation was a congratulatory call made by the US President after the BJP won the Uttar Pradesh Assembly elections. Interestingly, while the Indian side had lowered expectations from the meeting — officials maintained this would be a first, “get-to-know each other” kind of trip — the US side was more forthcoming and upbeat. Senior Trump administration officials said that the White House is very interested in making this a “special visit”. “We’re really seeking to roll out the red carpet,” an official said. Striking a more pragmatic note, an Indian official said, “This meeting is about giving a new direction, setting priorities in the current atmosphere and consolidating gains from the previous years.”

The agenda was quite open and broad-based, touching upon all of the bilateral issues like defence partnership, trade and market access though some tricky issues like H1B visas and the Paris Climate accord do not fine mention. The American delegation comprised the senior leadership of the Trump administration, including Vice-President Mike Pence, National Security Advisor Lt Gen H R McMaster, Secretary of State Rex Tillerson, Defence Secretary James Mattis, Commerce Secretary Wilbur Ross, and Treasury Secretary Steven Mnuchin. Tillerson and Mattis also called on the Indian Prime Minister and met him and the Indian delegation separately before the talks at the White House. Briefing US-based media before the delegation level talks, a US administration official said, “We’ve seen rapid growth in defence and security partnership over the last few years, and President Trump very much wants to build on that momentum. And last year’s designation of India as a major defence partner was extremely important, and I think we’ll see a concrete expression of this important designation during this visit.”Observing that this defence trade has supported thousands of American jobs, the official said since 2008, India has signed over US $15 billion in defence contracts with the US.

During the meetings, India was happy to observe a firmer commitment from the USA for stronger cooperation on counter-terrorism and cross-border terrorism emanating from Pakistan. This found clear mention in the Joint Statement that was released at the end of the talks. The Joint Statement commits itself to combating all forms of terrorism and strengthening cooperation in areas like terrorist screening, intelligence and information sharing, terrorists’ use of the Internet, and, of course, terrorist designations. According to a US official, “I think we can expect to see some new initiatives on counter-terrorism cooperation.”

Russia & Europe

On June 22, the European Union announced the extension of its financing and sectoral sanctions against Russia by six months, up to 31 January, 2018.These sanctions are directly linked to implementation of the Minsk agreements of 2015. But unlike the US sanctions, this move by the EU did not arouse much reaction in Russia as the economic engagement between Europe and Russia has been deepening in recent months, with increase in trade and investment.

Major European countries were, however, exasperated by the US Congress legislation proposing extra-territorial application of the Russia sanctions. Their application to the gas industry would directly hit European economic interests. Europe still sources about 35% of its natural gas from Russia. Imports increased in 2016 and a number of additional gas pipelines are under discussion. This is the reason why European sanctions against Russia have not included the gas sector (American sanctions include the gas sector, but exclude the space sector because of NASA’s ongoing cooperation with Russia). The new US Act (if passed) would shackle European companies’ investments in Russia. The explicit motivation, spelt out in the Bill, is to promote American LNG exports to Europe, in replacement of Russian gas.

In an unprecedented move, the Foreign Minister of Germany and Chancellor of Austria issued a joint statement, declaring that Europe’s energy supply is Europe’s affair, not America’s and that the “threat of illegal extraterritorial sanctions” is not acceptable. German Chancellor Merkel’s spokesman confirmed that she shared the concern of her Foreign Minister, “with the same vehemence”.

The immediate context of this outburst is the ongoing negotiations with the Russians on the proposed Nord Stream 2 pipeline across the Baltic Sea to Germany. French, German, Austrian and Dutch companies are investors in this project, along with Russia’s Gazprom. This mothballed project is now being revived; the CEO of Royal Dutch Shell visited Russia for discussions and was received personally by President Putin.

There has been a divide within EU on such gas pipeline projects from Russia, bypassing Ukraine. Countries which would lose transit fees on existing routes are joined by others seeking to restrict Russia’s dominance in the European energy market. Others (like Germany) have generally been in favour of the most economical and reliable gas supply route. The former group have prevailed in the debate over the past decade or so, with more than a bit of encouragement from the US Administration. The South Stream project for a pipeline across the Black Sea to Bulgaria was a victim of this.

With recent developments in Europe and the perceived loosening of the trans-Atlantic hold, Nord stream 2 proponents seem to feel the tide has turned in their favour. Chancellor Merkel confirmed Germany would be going ahead with the project, dismissing suggestions that it needed EU approval, since it was “a purely economic project”. European energy analysts estimate that the price of Russian gas, whether supplied through the Baltic or the Black Sea, is likely to be more competitive than LNG from USA.

Meanwhile, Russia and Turkey have commenced construction of the Turkish Stream, which would pipe gas from Russia, via the Black Sea. The planned capacity of this pipeline is 31.5 billion cubic meters (bcm), of which Turkey will consume about 15.5 bcm. If this project fructifies, it may raise a clamour from Southern Europe for its extension to EU.

India & Russia

The India-Russia Inter-Governmental Commission on Military Technical Cooperation meeting, at the level of Defence Ministers (June 22-23), agreed on a roadmap for bilateral defence cooperation, identifying specific activities and cooperation in political and military dialogue, joint exercises, exchange of visits, military cooperation and training of military personnel.

Review of ongoing projects included the joint manufacture of the Russian Ka226 helicopters, manufacture of naval frigates and major refits of submarines with progressive technology transfer to India, and acquisition of the S-400 air defence system. The perennial issues of spares and engineering support for Russian defence platforms are being addressed by transfer of technology (ToT) for component manufacture and maintenance workshops in India. It was reported that 485 lines have been identified for ToT to support the Su-30MKI aircraft fleet. A high-level Science and Technology Commission met in Novosibirsk (with Indian Defence Minister and Russian Dy PM Rogozin as co-chairs) to discuss new projects of cooperation in cutting-edge technologies.