PM Modi goes to Europe to initiate a new season of bilaterals

PM Modi goes to Europe to initiate a new season of bilaterals

By Gautam Mukherjee | 3 June, 2017
Prime Minister Narendra Modi and Russian President Vladimir Putin react while walking near the Constantine Palace during their meeting in St. Petersburg, Russia, on Thursday. REUTERS
This quartet of visits may be about being at the right places at the right time, even as outcomes are measured later.

The thing with the European Union (EU) is its mini-bus load of 27members. This after not counting the one that recently got off, but is yet to complete its divorce negotiations. An outsider might be forgiven, given the names of some of them, for thinking there are just too many freeloaders at the buffet table. 

Doing a deal with Germany or France, who drive the bus at their own risk, and a disproportionate, some would say unsupportable, share of the cost, means you just did a deal with Malta as well. Negotiations with Brussels, however, are ponderous and reminiscent of the once-upon-a-time Concert of Europe. 

So it is significant that Prime Minister Narendra Modi chose to visit the three top economies in the EU, on a bilateral basis, while missing out Brussels, which is the seat of the EU government of 27 nations.

But Modi took care in Germany to plump for European unity going forward, partly because it may be what his hostess wants to hear and partly because a united EU offers a single market for India. At least for now.

But being told what to do by Brussels, without concomitant benefit to British interests, may have been the very thing that prompted Brexit. Though the officiousness of EU’s Brussels HQ, located in tiny Belgium, allegedly also played its part. It wasn’t just Agatha Christie’s Hercule Poirot, after all, who was often constrained to clarify, with all the dignity he could muster, that he was Belgian, and not French.

Prime Minister Narendra Modi was undoubtedly looking for one-on-one gains during his calls on Berlin, Madrid and Paris, between 29 May and 3 June, with a visit to Russia in between, starting 31 May. So is the Chinese Prime Minister, from Germany’s numero uno trading partner, compared to India’s 24th slot - nevertheless following hot on his heels.

Modi thinks the time is opportune for this European visit, given the financial strains being experienced by the EU, where even Germany is growing at just 1.9% in GDP. He is probably willing to trade on aspects of the Free Trade Agreement (FTA) with the EU, stuck in limbo since 2013, if not the whole thing.

Both sides have been obdurate and self-focused, feeling justified to hold fast. But India may have the winning hand at this juncture.

This has prompted support for its NSG bid from Germany, mutual nods on fighting terrorism, and broad agreement on climate concerns, though short of formal acceptance from India on the last.

But even on bilateral investment agreements, there have been problems. A number of international arbitrations based on the recently expired one, have all gone against India. This suggests that perhaps it was not drafted to secure Indian interests all that well, in the first place. 

Though negotiations on the EU’s FTA are expected to resume in July, what Germany, the EU’s biggest economy, really wants, is a new “Investment Protection Pact” for itself. 

The old India-Germany Bilateral Investment Treaty expired in March after India gave a one-year notice, as stipulated, to end it. There are 600 joint ventures with Germany operating in India at present and hundreds more German companies that trade with it. But there is also the matter of the EU proclaiming, in 2012, that its individual members would not henceforth enter into bilateral investment treaties. But after Brexit, and existential threats to the EU’s survival, there may have to be a rethink on the omnibus approach that favours, say, Latvia, more than it favours Germany.

India meanwhile, wants more of the mid-sized German engineering companies to form joint ventures in India. Though of long standing, India’s trade with Germany is at a paltry euro 17.4 billion in 2016. This compares badly with Germany’s euro 169.9 billion trade with China. And moreover, this is more or less evenly balanced.

Nevertheless, Germany is now uncomfortable with China’s opaque One Belt One Road (OBOR) initiative. It does not indicate any road-map for the participation of other countries in the contracts for all its infrastructure development. India made clear that it wants new Make in India deals. Only, it wants them on a bilateral basis, in a “quantum leap” of “outcome-oriented” transactions. So, if Germany wants an Indian concession on multi-brand retail, India just might agree as it frees up its foreign direct investment (FDI) norms, but only in return for a clutch of strategic German engineering collaborations back-to-back. 

At this time, as many as eight broad pacts were signed, but reciprocity will be the key to operationalising them going forward. Key amongst them were ones on “cyber politics” and “cooperation on digitalisation”.

Meanwhile, President Donald Trump’s no-holds-barred instruction to NATO to pay up its fair share of the costs, looking squarely at Germany at the time, may be adding urgency to the idea of expanding German presence in other markets. While Modi visited Germany last in 2015, making little headway beyond friendly atmospherics, this time changed circumstances could produce results.

Next, it was the first time an Indian Prime Minister visited Madrid in three decades. Here too, the most interesting pact signed was on “cyber security.” Not only have cyber attacks been responsible for abstracting millions from Indian banks, but they are suspected to have addled military assets like Army mortars. Most recently, a cyber attack is thought to be responsible for bringing down a mechanically sound Sukhoi fighter in Northeast India, and its pilots, out on a routine sortie. 

Spain, the EU’s third biggest economy, has also inked pacts to cooperate in the fields of aerospace and defence with India. 

Modi visited St Petersburg after Madrid in order to attend a Russia sponsored International Economic Forum, and tick the box of India’s 18th annual bilateral summit with Russia. Modi is the guest of honour at this first of a kind Russian hosted economic summit. On India’s part, there is a home delegation of 60 business leaders that are participating, with a special India pavilion at the venue. The key bilateral takeaway is expected to be a signing of contracts for the Kundakulam V and VI nuclear power reactors. 

The whole gamut of bilateral relations between India and Russia, is also scheduled to be reviewed by President Putin and Prime Minister Modi, especially in a season of shifting alliances.

With several other mega military deals in the balance, including a state-of-the-art anti-ballistic missile shield system and several joint venture manufacturing projects, for helicopters, battle tanks, etc., Russia will be seeking to woo India.

In France, the EU’s second placed economy, it is a first meeting between the newly elected Emmanuel Macron, a Centrist, following on from a Socialist Francois Hollande, and Narendra Modi. 

Paris is already in the process of supplying the first 36 state-of-the-art Rafale fighters to India, even as a bigger contract to make hundreds more of the Rafales in India, is being negotiated. Macron has indicated a keenness to participate more vigorously in Modi’s Make in India programme, with other military items to join the Rafale. This even as the French nuclear reactors on offer are found to be much too expensive.

While sections of the international and domestic media have characterised this quartet of visits as a “power push”, the truth may be in being at the right places at the right time—even as outcomes are measured later. 

America has signalled its unwillingness to prop up the European economy and its security going forward. How serious it is, cannot be immediately assessed. Still, there is something of a vacuum to be filled, and realignments to be made.

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