Narendra Modi and Vladimir Putin to boost trade despite Ukraine war

India’s Narendra Modi and Russia’s Vladimir Putin have agreed to boost trade between their two countries, defying western efforts to squeeze the Russian economy over its invasion of Ukraine.

During Modi’s visit to Moscow on Monday and Tuesday, he and Putin pledged to increase annual bilateral trade to $100bn by 2030, up from $65bn at present, with India importing more Russian oil and fertilisers and seeking to export more agricultural and industrial products.

Modi — who is seeking to counter Russia’s increasingly close ties to India’s strategic rival China — hailed Russia as India’s “all-weather friend” during his visit and was presented by Putin with the country’s highest civilian honour, the Order of St Andrew.

Sergei Lavrov, Russia’s foreign minister, told reporters Putin and Modi had laid a “fantastic foundation” to deepen their economic, political and defence ties during the talks, according to Interfax.

The Kremlin, which has sought to rally countries such as India behind Putin’s vision of a Moscow-led “global majority” to challenge US hegemony, has hailed the trip as a sign Ukraine’s western supporters have failed to isolate Russia or generate support for Kyiv in developing countries.

Putin thanked Modi for what he described as the Indian premier’s efforts to “find a way to solve the Ukrainian crisis, through peaceful means foremost” during a five-hour conversation at the Russian president’s residence.

India has not condemned the invasion or taken sides in the war, but has called for an end to hostilities while offering Moscow a critical lifeline from western sanctions by ramping up discounted purchases of Russian oil. New Delhi has a decades-long relationship with Russia, its largest arms supplier.

Ukraine’s President Volodymyr Zelenskyy criticised Modi for the visit, calling it “a huge disappointment”. Zelenskyy described it on X as “a devastating blow to peace efforts to see the leader of the world’s largest democracy hug the world’s most bloody criminal in Moscow”.

Modi’s visit, his first to Russia since Moscow’s full-scale invasion of Ukraine in 2022, came as a Russian barrage on Monday struck a children’s hospital in Kyiv and other targets, killing at least 38 people, including four children, and injuring 190 others.

Modi expressed sadness about Monday’s victims and called for “dialogue and diplomacy” to resolve the conflict. “When innocent children die, the heart breaks and that pain is horrific,” he said.

Kremlin spokesperson Dmitry Peskov said western countries were “jealous . . . and with good reason” that Modi had chosen Russia for his first bilateral visit after India’s election last month, in which Modi won a third five-year term.

India’s ties to Russia have become particularly important for New Delhi as western sanctions designed to isolate Russia have pushed Moscow closer to China. Beijing has provided Moscow with an economic lifeline, increasing bilateral trade to record levels and becoming a critical supplier to Russia of western-manufactured components with potential battlefield uses.

“India wants to give Russia room for manoeuvre,” said Alexander Gabuev, director of the Carnegie Russia Eurasia Center in Berlin. “They might not have the levers to pull Russia away from China, but they want to give it as many opportunities as they can to stop them from putting all their eggs in the Chinese basket.”

India is engaged in a stand-off with China along their disputed Himalayan border, and sees Russia’s neutrality as vital to national security, officials said. “China is the primary challenge,” said Pankaj Saran, a former Indian ambassador to Russia. “We really cannot afford to do anything which converts a friend into an adversary.”

Trade between India and Russia has soared since Moscow’s full-scale invasion, largely due to a sharp increase in purchases of discounted oil. Russian crude accounted for 43 per cent of India’s oil imports in June, according to data provider Vortexa, making it the second-biggest buyer after China.

This has led to a sharp trade imbalance. Indian foreign secretary Vinay Mohan Kwatra told reporters that economic issues had “dominated” discussions between the leaders and that Modi told Putin of “the need to broad-base the trade basket”. Kwatra said Russia had also told India it would ensure the early discharge of the dozens of Indian nationals unwittingly conscripted into the Russian army to fight in Ukraine.

Western sanctions have complicated Moscow’s ability to repatriate dollar revenues from its oil sales to India. A US crackdown has driven banks to sharply cut back on Russian counterparties, limiting their access to certain currencies and forcing traders to conduct transactions in roubles or even bartering for goods, according to financiers involved in the trade.

The US and EU have also stepped up efforts to target the fleet shipping Russia’s oil, leaving buyers such as India vulnerable to possible future sanctions.

“Global banks will be hesitant to touch any transactions that may expose them to enforcement action by the US,” said Benjamin Hilgenstock at the Kyiv School of Economics Institute. “An expanded tanker designation campaign could become a problem for Indian buyers.”

India and Russia are attempting to promote domestic payment systems for trade, but doing so at scale will be difficult because of limited capacity, as well as the challenge of exchanging roubles and rupees for dollars and euros, he added. Maxim Oreshkin, Putin’s economic adviser, claimed India and Russia were already conducting 70 per cent of their trade in their national currencies, according to Interfax.

Some analysts said Modi’s visit obscured the fact that India was increasingly staking its future on economic and military co-operation with the west.

Russia’s share of Indian arms imports fell to a near 60-year low between 2019 and 2023, according to data from the Stockholm International Peace Research Institute, as India sought more sophisticated military technology from countries including the US and Israel.

Moscow’s growing dependence on Chinese supplies for its arms industry created another concern for India and its weapons procurement plans, the Carnegie Center’s Gabuev said, because of concerns that Moscow cannot service weapons systems or sell new arms without component supplies from China.

“The substantial part of the [India-Russia] relationship is on a very fragile basis,” said Pramit Pal Chaudhuri, South Asia head at the Eurasia Group consultancy. “I would argue that this is a managed decline.”

Additional reporting by Christopher Miller in Lviv and Isobel Koshiw in Kyiv