Negotiations are underway between the finance ministries of India and Russia to restructure the $3 million debt owed by New Delhi to Moscow.
Following the breakup of the USSR, the terms of the unique rupee-rouble trade also had to be renegotiated.
In 1993, the two countries decided that they would rework the terms on which trading would be done. However, the tricky issue of the outstanding debt that India owed the USSR had to be resolved.
In 1997, the Indian government suggested that 10 per cent of the debt be kept for projects with government equity. The suggestion was ignored by the Russian government.
However, when President Vladimir Putin visited India a week ago, he said part of the Indian debt could be used as investment towards joint ventures.
The government of India has been arguing that a higher percentage of outstanding debt be used to pay for investments.
Because the prices of Indian commodities exported to Russia has been rising, using the debt to pay for commodities is not in India's interest.
Putin's remarks suggest that this has been found acceptable by the Russians.
In the next two months, the two countries will discuss what percentage of the debt should be used towards equity -- whether on merit or on an across the board basis -- and whether the percentage towards investment could be raised vis a vis trade.
India is bound to pay Rs 2,300 crore (Rs 23 billion) a year till 2005 and Rs 800 crore (Rs 8 billion) per year after that.
However, it is in India's interest to pay off the debt as soon as possible. If overall guidelines are decided, there is a chance of huge investment in the telecommunication sector from Russian telecom companies.
The investment is likely to flow from Russian private sector enterprises to Mahanagar Telephone Nigam Ltd and Bharat Sanchar Nigam Ltd, in a unique telecom partnership.
There is also a prospect of investment in the energy sector. Russia holds a 50 per cent stake in Kormanghazi of which the Indian ONGC-Videsh wants to buy 10 per cent of the Russian share.
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