In search of alternatives
Merz in India: Germany’s Chancellor wants to strengthen economic ties (against China), expand arms links (against Russia), and build cooperation with New Delhi (as a partial alternative to the US).
NEW DELHI/BERLIN (own report) – Germany’s power struggles with China, Russia and, to limited extent, the United States form the context of Chancellor Friedrich Merz’s current talks in India. Merz is keen to strengthen German trade with India and promote German investment in the Indian economy. On the one hand, this move is intended to create an alternative to German business with China and to strengthen New Delhi’s standing vis-à-vis Beijing. On the other hand, Berlin is promoting German arms exports, not only to increase sales for Germany’s arms manufacturers but also to reduce the share of Russian military equipment in use by the Indian armed forces. So far, however, the West has failed to break Moscow’s influence in New Delhi – not even on a military level. Both countries continue to conduct joint military exercises, most recently in October 2025 in India (‘Indra-2025’). Merz and Indian Prime Minister Narendra Modi are now negotiating a deal to supply German submarines worth seven billion euros. Efforts to achieving deeper economic relations are intended to make both countries less dependent on the United States now that Washington is seriously damaging both Germany and India with its tariffs and other repressive measures.
Far behind China
The Federal Republic has in fact been working systematically to expand trade with India and boost German investment in its economy for more than two decades. The aim is to create a counterweight to China’s hugely important role both as a producer and as a sales market for German companies. Berlin would also like to strengthen India as a rival to China. New Delhi sees itself as the People’s Republic’s main Asian challenger. However, the success of Berlin’s efforts have so far been modest. Although German investment in India has grown, reaching more than 25 billion euros in 2023, German investment in China reached almost 116 billion euros, more than four and a half times that amount. German trade in goods with India rose from almost 16 billion euros in 2014 to over 30 billion in 2024. But German trade in goods with China rose from 154 billion euros in 2014 to more than 246 billion in 2024, i.e. more than eight times the previous figure. So India is still a long way from achieving comparable importance for the German economy.
The next EU free trade agreement
Nevertheless, Berlin is striving to upgrade India’s status relative to China. German Chancellor Merz has demonstratively chosen India as his first destination in the new year, symbolically visiting the country before making his trip to the People’s Republic, the first since taking office. Friedrich Merz and Indian Prime Minister Narendra Modi signed more than two dozen agreements and memoranda of understanding on deeper economic cooperation and other matters. One key deal is for the Düsseldorf-based energy utility Uniper to procure up to half a million tonnes of green ammonia per year from India’s AM Green Ammonia, a leading renewables company.[1] There was talk on Monday of one of the “first large-scale supply corridors between India and Europe”. Merz and Modi also discussed progress on the European Union’s free trade agreement to be concluded with India. After almost nineteen years of negotiations, the European Commission hopes to reach an agreement at the end of January. The agreement is intended as a framework for a more rapid upturn in trade between Germany and India.
Arms deals
Merz and Modi have placed particular emphasis on expanding defence cooperation, for which they also signed a memorandum of understanding. Berlin’s reason for this is not only the export interests of German arms producers. The German government is also keen to break or at least weaken Russia’s defence industry and military influence in India. Russia has been India’s most important arms supplier for decades. True, Russia’s share of Indian arms imports has been slowly declining for some time, since New Delhi does not want to be too dependent on Moscow. Yet it still stood at 36 per cent between 2020 and 2024, according to the Stockholm-based research institute SIPRI.[2] The second-largest arms supplier was France, with a share of 33 per cent, followed by Israel with a share of 13 per cent. The government in Berlin now thinks the burgeoning German defence industry can catch up. The new deals would involve not only German arms exports but also the production of military equipment in India. Last year, Rheinmetall and Diehl Defence signed agreements with the Indian company Reliance Defence Ltd. for the joint production of explosives, propellants and ammunition (german-foreign-policy.com reported [3]).
No break with Russia
It was also reported that the talks between Merz and Modi on Monday included another major arms deal: the planned sale of six Class 214 submarines manufactured by the Kiel-based ThyssenKrupp Marine Systems (TKMS) group. India is said to be willing to pay around seven billion euros for the conventional hunter-killer submarines, but insists that the Indian shipbuilding group Mazagon Dock Shipbuilders Limited (MDL) be involved in their construction.[4] New Delhi’s thinking here is that India can establish and expand its own arms industry, which already includes the production of artillery, helicopters, fighter jets and other weapon systems. MDL hopes that the joint construction of the submarines with TKMS will result in technology transfer and the development of its own capabilities. The contract has not yet been finalised, but TKMS considers the deal to be fairly certain. Analysts say it will lead to New Delhi cancelling the purchase of three French submarines.[5] India takes the view, however, that any business with German arms manufacturers should not hinder military cooperation with Russia. The Indian and Russian armed forces conduct joint manoeuvres on a biennial basis, the most recently being the Indra-2025 army exercises held in October 2025.[6]
In opposition to the US
The expansion of economic cooperation in general, and arms cooperation in particular, also serves the interest of both countries in creating alternatives to deals with the United States. The Trump administration has imposed not only general tariffs of 25 per cent on India, but also slapped on additional punitive tariffs of a further 25 per cent because New Delhi was not prepared to stop all oil purchases from Russia. Germany has also had to accept a poor customs regime – within the framework agreed by the European Union – and is facing severe pressure from Washington in various ways. For one thing, the US has ramped up its threats to take Greenland away from Denmark. This would affect Germany by demonstrating Berlin’s complete incapability of defending a EU member states against serious attacks.[7] Relations with the US remain “important”, in the words of Chancellor Merz at Monday’s press conference together with Modi, but he concluded that “today we must establish a wider, larger network of partnerships, both quickly and with staying power.”[8] In addition to expanding relations with India, the recently finalised free trade agreement with Mercosur and the expansion of defence and military cooperation with Canada[9] are also intended to reduce dependence on the United States. To this end, Merz announced that Germany would in the future “be moving closer to New Delhi in terms of security policy, too.”
[1] Deutsch-indische Kooperation in wichtigen Branchen. tagesschau.de 12.01.2026.
[2] Trends in International Arms Transfers, 2024. SIPRI Fact Sheet. March 2025.
[3] See: Joining the arms race in India.
[4] Moritz Koch, Frank Specht, Leila Al-Serori: U-Boot-Deal mit Indien kurz vor dem Abschluss. handelsblatt.com 09.01.2026.
[5] Sudhi Ranjan Sen, Michael Nienaber: Germany and India on Verge of $8 Billion Submarine Deal. bloomberg.com 08.01.2026.
[6] Main Phase of Russia-India Joint Military Exercise “Indra-2025” Underway in India. sputniknews.in 13.10.2025.
[7] See: „Der Mobber im Weißen Haus“.
[8] Pressestatements von Bundeskanzler Merz und Premierminister Modi anlässlich der Reise des Bundeskanzlers nach Indien am 12. Januar 2026 in Ahmedabad.
[9] See: Von der Ost- an die Nordflanke.
