Harsha Kakar
Notwithstanding its intent to display a neutral and independent foreign policy, India is definitely pro-west. Historically it has close ties with Russia, as also is dependent on it for maintaining its origin military equipment, which forms 65% of the Indian military inventory. Both nations are together in multiple international forums. It joined the world in adhering to US imposed sanctions on Iran, despite possessing close ties with it, expending vast sums on developing the Chabahar port as also procuring Iranian oil. It was hesitant to take sides in a US-Iran tussle. However, Indian policies have since changed. India kept its interests foremost during the current Russia-Ukraine crisis in the face of criticism from the US and Europe.
While Europe, despite joining in US led sanctions, continues to procure Russian oil and Gas, they attempted to deny the same to other nations by directing their maritime insurance companies to stop insuring oil carriers transporting Russian oil. To add to pressure on India, their media networks questioned Indian imports, seeking to project that Indian oil imports are funding the Russian invasion of Ukraine, whereas actual financing is from European procurement of gas.
Indian oil imports from Russia have surged over seven times in recent months, averaging about 10% of its needs, basically because of the cost factor. India has to procure the cheapest oil available as almost 80% of its needs are imported. It has to safeguard its economy while the global economy totters with the Russo-Ukraine crisis. To this end, India also doubled its coal imports from Russia. India defended its procurements on the grounds is that if it also seeks oil from same limited sources, oil prices would increase substantially hurting economically weaker nations.
With Russia now paying back Europe in the same coin by reducing flow of gas through its Nord Stream pipeline, inflation has begun to rise and there are reports that European nations could move into recession. Such was the Russian gas reduction impact that the German Chancellor, Olaf Scholz, personally inspected the Nord Stream gas turbine engine, under repair in Germany, and declared it fit to be returned to Russia. European economies have yet to recover from the impact of COVID. China, which continues to lock down cities with its zero COVID policy has hit global supply chains damaging western economies further.
The US economy has witnessed two quarters of contraction with a 40-year high inflation rate of 9%, the Russian economy is expected to contract by 6% while inflation in EU nations has risen to almost 9% and growth dropping to 0.7%, hinting at worse times ahead. Governments are shaky, public discontent is increasing and purchasing power reducing. A Bloomberg survey states that chances of Europe facing a recession is almost 55%, while that of the US is 40%. Taiwan, Australia and New Zealand are equally at risk with around 20% chances of recession.
China has been facing an economic slowdown, again largely due to its zero COVID policy. Its economy is expected to grow at a modest 2% this year, while chances of recession remain at 20%. The collapse of the Chinese property sector, the mainstay of investments for the common man, has resulted in several developers filing for bankruptcy. According to Goldman Sachs, China is sitting on USD 8.2 trillion in hidden local government debt, or approximately half the size of its GDP. There are also reports that investor confidence has faded. There are inputs of runs on Chinese banks as some have been involved in financial frauds. Protestors whose funds have been blocked are being forcibly removed by security agencies.
India, which played its cards correctly, ignored global rhetoric and pressures, sought what was best for the nation, is a rising economy. As the war drags on in Ukraine, Europe will remain impacted, while Indian neutrality will insulate it. India learnt its lessons from adhering to US sanctions on Iran. It stopped oil imports, while China continued, with no bounce back from the US, as payment was not in Dollars. Henceforth, India will bypass sanctions if it suits Indian interests and make its payment in currencies which cannot be sanctioned.
Jaishankar defended the Indian policy when he stated, ‘They (US and Europe) have squeezed every other source of oil we have and then say you will not go to the market and get the best deal for the people; it’s not a fair approach.’ The Indian intention remains to safeguard its economy. The RBI’s monthly July bulletin stated, ‘There are sparks in the wind that ignite the innate strength of the (Indian) economy and set it on course to becoming the fastest growing economy in the world, though besieged it might be by fears of recession.’
To further control oil procurements from Russia, the US is attempting to place a price cap on Russian oil prices. However, it is aware that unless India and China are on board, any such measure is unlikely to succeed. The Economic Times, in an article in June quoted Samiran Chakraborty, managing director and chief economist at Citigroup stating that recessions in advanced countries could benefit the Indian economy. He mentioned, ‘India being a net importer of commodities should benefit on the inflation front.’
The Bloomberg survey, which predicts downswing of almost all global economies stated that India has almost a zero percent chance of slipping into recession. However, it lowered India’s economic growth from 8.2 to 7.4%. As per the IMF, the Indian economy is expected to reach 4.7 Trillion USD by 2024 touching 5.1 in 2026. This will boost India’s global outreach.
A nation which for decades was on the fringes of global decision-making and considered economically weak can no longer be ignored. Any sanctions imposed on a country will only be effective if supported by India and China. India is acting responsibly though keeping its own interests foremost. It now has a voice which carries weight. It is time for India to demand its rightful place in global platforms. India, at 75, has arrived, in style, on the world stage. It is a nation in demand from a nation which was ignored.
The author is Major General (Retd)
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