On a Newfound Solid Footing

The Ministry of External Affairs in India was always in the news as it dealt with the country’s foreign relations. But it was never in the news for strong and unequivocal promotion of Indian interests in the world.

But now there is a marked difference in the way foreign policy is being handled. There is a confidence borne out by the fact that whenever India speaks at world body meetings, countries take notice. The global south has perhaps found a new mentor as being a developing country, many of India’s interests coincide with their own.

This change has come about in the last two years, especially after the pandemic. However, the signs were visible during the pandemic as well.  India’s vaccine diplomacy was much appreciated during that time.  Many countries in South America and Africa had not received any vaccines even a year into the pandemic. India sent vaccines all over the world in response to requests from countries.

The new chapter in Indian diplomacy started when China entered Galwan in eastern Ladakh and tried to claim territory which is at best disputed. In doing so they backtracked on agreements which had enabled trust to be built up for over three decades. India decided to take active measures to deter China from its misadventures. India began a series of diplomatic initiatives to engage China. It also started measures to decouple its economy from China. This was a bold step as compared to the meek responses which India had taken earlier in repose to China’s incursions along the border.

The Russia Ukraine war was the incident which showed the world a new avatar of India. Confident and resilient. The war brought in its wake supply chain disruptions and skyrocketing oil prices. Russia was offering oil at discounted prices to circumvent sanctions imposed by the US and Europe. India bought oil from Russia despite the pressure from the west to adhere to the moral high ground and show solidarity with the west. Russia was an old, trusted friend who has genuinely helped India in the past, even at times using its veto power in the UN. India was not about to abandon Russia despite its aggression in Ukraine.

This rankled the west which had till now taken India’s foreign policy for granted. They assumed that India would toe the line of the west and abandon Russia which India refused to do.

The change in India’s foreign policy is mainly due to a strong government at the center. This government has shown the courage to back its convictions. National interest is now front and center. India was able to weather high oil prices in the world due to its buying of discounted oil from Russia.

India’s foreign policy today reflects sobriety, balance and above all dogged determination. As the EAM said India is in nobody’s camp. India is in India’s camp. This message has gone out loud and clear, so much so that the US has acknowledged that India can buy as much Russian oil as its wants.

Since independence, India has also been dragged in the dock on various issues like erosion of democracy and personal freedom. Many think tanks and academics across the world have been criticizing India for what they call its rising political autocracy. In answer, experts in India are questioning the methodologies and techniques adopted by these agencies, as well as demanding that Indian rating agencies should now counter the foreign ones. Earlier India used to meekly accept any ratings that the foreign agencies dished out.

India’s policy towards Pakistan has also been articulated most unequivocally. India will not enter into any talks with Pakistan unless it stops its funding for cross border terrorism. Also, it has dealt firmly with Chinese designs on claiming and forcefully occupying Indian Territory. The Chinese military buildup along the LAC has been matched by India to deter any misadventure. India is also building its own infrastructure along the border areas. The diplomatic heft that India is showing its neighbors has been matched by action on the ground. This is the solid footing on which India’s foreign policy is standing. India can now play to its strengths when it assumes the G20 Presidency in December.

After the G20 Summit in Bali a CNN report said that a new world power is emerging in Asia, and it is not China. 

Imdia is also hosting the meeting of the National Security Advisors of the Central Asian Republics (most of the CIS) with regard to its security interests in Afghanistan. It is significant that the meeting could have been held under the umbrella of the Shanghai Cooperation Organization but was not. India wants to keep its security interest paramount in the region and hence wants to lead these countries.

It is said there will be an economic recession in the world by next year. Several wars are being fought across the world. The next few years are going to be turbulent to say the least. The current Indian policy rooted in national interest and resting on a solid footing of commitment and confidence, stemming from rising economic clout, will stand India in good stead, to navigate the troubled times ahead.

Shifting Sands of Geopolitics

 

The Geo-political sand never stays in one place. Like the proverbial sand of the desert, it is forever shifting, creating new alignments and shifting old ones.

In geopolitics too, there have been subtle changes happening in the alignment of nations. Countries are changing their stance and positions as the situation on the ground changes.

A few weeks earlier the west was insisting that India reduce its purchase of oil from Russia in order to show solidarity with the free world.

India did not condemn Russia’s attack on Ukraine but was consistent in its call for dialogue and diplomacy. However, the west wanted India to be categorical in its support for Ukraine. But in this war geo-economics has also played an important role. With war came the inevitable inflation. Oil prices increased and countries scrambled to look for deals which suited them.  The situation was exacerbated due to earlier sanctions on Iran and Venezuela, two big suppliers in the world.

India’s policy was consistent that it will buy oil from whatever source at affordable rates. And it stuck to its guns over a period of six months or so.

Recently, in a policy about - turn, the US is not objecting to India’s purchase of Russian oil. The shift has come because the US now realizes that it needs India more than India needs the US. Also, US policy makers are of the opinion that the US needs India to counter China if hostilities ever break out and even otherwise. Western sanctions on the other hand have not proved quite effective against Russia as Russia is a major producer of two important commodities which the world needs. Oil and wheat.

Also, the US needs India to back it up economically. The US is promoting what it calls the Indo Pacific Economic Forum. This is an alliance conceived by the US. It includes countries in the southern Pacific Ocean which will balance China on the economic front. Without India this alliance does not amount to much. With India it becomes an excellent counterweight to China. Thus, the US is keen to get India on board in this project.

The US is also talking about friend shoring. This term signifies the US will only source its imports from countries that it considers to be friendly and reliable. This also signifies that the US does not consider China as a reliable partner anymore.

This shifting of businesses will involve tradeoffs, some quid pro quo, as India is also dependent on the US for defense and other critical technology. However, the US giving a free hand to India regarding purchase of oil from Russia signifies the US views the relationship as a long term one. Incidentally India is the only country in Asia which has stood up to the Chinese bullying tactics.

The ongoing G20 Summit is being watched closely by experts as it might give an indication as to where the world may be headed. China, for all its bravado regarding Taiwan may not actually initiate hostilities. The Chinese leadership knows China cannot withstand western sanctions and neither can it counter the American military might. China may act against India, Japan and Vietnam keeping in view its territorial claims.

The Russia Ukraine war has drastically altered the energy and trade flows in the world. Many Indian private producers like Reliance and Nayara have benefitted by exporting refined oil products to Europe and the US.

The geopolitical chessboard is a busy place currently. Moves and counter moves are being played out between nations and world leaders. We are headed for some interesting times.

China - The Way Ahead

On the eve of the National Congress of the Communist Party of China it will be worth taking stock of the situation with regard to China. Today’s China is a complex country. Listening to talks by George Friedman and Peter Zeihan and Shekhar Gupta brought home the fact that we, and the world in general, think very superficially.

We tend to take world events at face value. Whenever any world leader makes any statement, it is taken as gospel by the public and the media. This is more the case when the regime is authoritative to the extreme, as in China.  

In the late seventies Japan was at the peak of its economic power. In the eighties it began to invest in the rest of the world. It bought Warner Brothers, and many other companies in the world. Many thought that the Japan has arrived in the world, and they are buying out assets in the world. This was taken to be a sign of the rising power of Japan.

It was in fact, exactly the opposite. Japan was investing outside of Japan because return on capital had fallen inside Japan. Even in the peak of their economic boom return on capital in Japan was very low.

Today China is doing the same. They started the Belt and Road initiative and made massive investments around the world. But the return on investment they are getting from these projects is dismal. In countries like China a growing economy has to be defined differently. In China growth has to be achieved to create jobs, not wealth, like in other economies. Most of the private sector in China is heavily subsidized. China produces a lot, but very inefficiently. Their return on capital is a dismal 1.7%. Loss of jobs means social unrest, which is what the CPC fears the most.

Now Xi Jinping has secured his third term as leader of the CPC in the on-going Party Congress. If he has his way, he could anoint himself president for life. This would be unprecedented. Xi Jinping has built a personality cult around himself. He is trying for absolute power in China, for life. In the modern age, this looks rather unrealistic. But in China absolute power is still achievable. Xi gas surrounded himself with yes men, loyalists.  Whether he will be able to retain this absolute power, however, is the real question.

Where will China go from here? Looking at the economy of China there is not much room to maneuver. China faces many problems. The housing crisis has now ballooned and threatens to slow down the entire economy. The spillover effect of this crisis has started affecting other sectors too. The Local governments and some banks have been facing serious funds crunch. The zero covid strategy is not working and is causing huge anxiety among people. It has also derailed China’s manufacturing sector causing unemployment. Experts say, the lack of an effective vaccine has forced the leaders to continue with the policy. 

Some interesting facts have been brought to light by experts. It seems, by studying the satellite imagery of the intensity of night- time lights of a country, experts can draw conclusions about the amount of economic activity in a country and by inference its relative affluence. China has not released its data for the 3rd quarter of 2022. This prompted economists and data scientists to resort to unconventional methods to gauge the progress of China's economy. 

What Xi Jinping really has done is increased the cost of political failure in China. Deng Xiaoping had introduced the principle of collective responsibility based on consensus. Failure of a policy or its success was considered to be that of the whole Politburo and not of any individual. This consensus had made the CPC somewhat benign. But now the balance of power in the CPC is gone and the Xi faction has no opposition. Purges have had to be carried out as in the case of Hu Jintao.

Moreover, many old co-operatives have been restarted by Xi Jinping. This would suggest that Xi wants to take China back to the co-operative economy of the Mao era. Experts suggest, Xi may be either preparing for war or a famine.  

It is not so anymore. Now power is concentrated in one person and so is the responsibility that goes with it. If Xi fails to achieve any of his declared goals, he stands to lose everything, maybe even his life. He has created many enemies on his way up, who now will be looking for a weakness to exploit. 

The top leadership in China is locked in a bitter power struggle which could continue for a long time even after the conclusion of the Congress.

Xi Jinping is taking China back to the Mao era. He wants to create his own legacy. The recently concluded CPC Congress has laid down China's future path in no uncertain terms. Nationalism has taken center stage. Inside China it is no more about development anymore. It is about socialism as dictated by the CPC and its complete domination of the Chinese society. Foreign investors, as a result, are having second thoughts about investing in China and are looking for alternatives. The CPC has gone into its comfort zone, which is repression. 

With absolute power in his grasp the leader now has the tools to force his will on his people. The world should expect a more belligerent and unpredictable China.

New World Order – Emerging Contours

There has been a marked shift in the way nations are looking at their relations with other nations. The Russia -Ukraine war has now dragged into its eight month and the world has suffered because of it. Shortages of food, oil, gas have pushed up inflation and brought misery to millions, especially those living in poor countries. 

In my earlier article on the emerging world order, I said that it would be difficult to predict anything. While the situation has not changed much, some trends can be noticed through the geopolitical fog. 

As the war drags on and more difficulties emerge in dealing with the upheavals in geopolitics, countries are shedding their initial policies and posturing and are trying to stem the rising turmoil.

Europe has seen political winds of change. The Italian elections have thrown up a right-wing government which is friendly to Russia. Now, news is that Russia could restore gas supplies to Italy. The war and it’s disruptions in supplies, has also prompted protests in France demanding that France should leave NATO. Putin wanted to drive a wedge between NATO countries in order to have better bargaining power. He was trying to wean Germany away from NATO by cutting off its gas supplies, but it could be France instead. Putin may succeed, which means the US will see its bargaining power with Russia considerably reduced and a big strategic blow to NATO.

Despite the sanctions, Russia will not be a pushover. All the sanctions imposed till now have weakened Russia, but not crippled it. Its ability to wage war has diminished but it is still a force to reckon with. Also, Iran has stepped in to supply Russia with drones and other material. This is one pawn in the game whose move was not predicted.

The countries in the middle east, who were traditionally pro west, also seem to be taking a different path. The OPEC+ group which includes Russia, just passed a resolution to cut production of oil by 2m barrels a day, worldwide.  The United States is not exactly appreciative of this move. It is already grappling with inflation which is at an all-time high and could do without a supply shock to such a crucial commodity.  America provides security to friendly countries in the gulf by stationing troops here. America now has threatened to remove its troops from the gulf region in retaliation. President Biden has warned the gulf states of ‘Consequences’.

If one more proof of the changing geopolitical order was needed then India and China’s behaviour is a good barometer. India of late, has been reluctant to tow the line of the west. It has not condemned Russia for the attack on Ukraine till to date, and also bought oil form Russia when the west was for boycotting Russian oil. China has not condemned Russia either. Russia and China have formed an alliance as a counter to NATO and what they view as western hegemony.

The whole situation is very interestingly poised. The current dynamics makes prediction hazardous, as anything can happen. However, the new world order which is expected to crystallize in the near future may have begun to show its contours.

International Relations at Work

 

It is interesting to note how international politics, or for that matter any politics, works on perceptions.

The Russia Ukraine war has upset a lot of equations, in the west and east. Russia has been the traditional enemy of the west since the end of WWII. Even after its fall, the west continued to view its actions with mistrust. As Russian power decreased there was a predictable approach by NATO to countries which were formerly under the Warsaw Pact with an offer of membership.

Ukraine was prominent among them. Latvia, Lithuania, Poland, Belorussia, and all of the Central Asian states came under the influence of the west. These newly liberated states wanted investments to sustain their economies. Russia could not do that and so began to lose influence over these states.

The US took advantage of the situation and began to add these newly liberated states (mostly European) into the NATO fold. When eventually they reached Ukraine, Russia put its foot down.

This is a game of perceptions. India is now an emerging player in this balance of power equation. But for India the main reason to join groups like the quad is to counter China. For India, Russia is a friend, but China needs to be deterred. For the other members of the quad Russia also needs watching.

That India views Russia and China differently is obvious from the fact that India abstained from voting in the UNSC against Russia on the resolution on Russia’s annexation of some of Ukraine’s provinces, but, helped to thwart Chinese resolution against the AUKUS regarding breach of the NPT in the IAEA. 

If America wanted to check China, it could have weaned Russia away from China. American actions against Russia have forced it to side with China. The Russo-Chinese relationship is nothing to write home about. China wants Russian resources like oil and other minerals in the Russian far-east. China ultimately wishes to annex this region by flooding it with their own people and changing its demographics.

It is in India’s strategic interest to not let Russia go under the boot heels of China. Probably, India is also eyeing the Russian resources in the Arctic region. There have been talks regarding India investing in this region and having a permanent presence here.

Thus, every power, small or big, is vying to achieve its own strategic ends in this region. There are some convergences among perceived enemies and some divergences among friends. 

The Armenia Azerbaijan conflict has also shown how nations maneuver for advantages. Turkey was interfering in the Kashmir issue at Pakistan's behest. India has responded by bringing out the issue of Cyprus which is a burning issue between Turkey and Greece. Turkey and Pakistan have also funded internal Islamic dissidents in India, namely the PFI and earlier the SIMI. Turkey is helping Azerbaijan in this conflict.  Thus, India thinks it is justified in supplying arms to Armenia to counter Turkey in Central Asia. It has been noticed that whatever happens in this region has a direct bearing on India's security. 

This is how international politics works. The power play among nations and the maneuvering for advantage is evident here. The outcome is anybody’s guess. But experts say that China is now viewed as a declining power economically, and demographically, and may see its window of opportunity closing fast. If that is indeed the case, Chinese leadership may throw caution to the winds and act against Taiwan.

The way matters are headed, a clash between the USA and China cannot be ruled out in the near future. A student of international relations would be interested in learning how the other powers loose or gain from this rivalry.           

China - The Pushback and the Difficult Times

 In recent times relations between countries have become somewhat transactional, especially after the pandemic. National interest is seen to be dominating the foreign policy of countries which were hitherto complacent about their interests. The Russia Ukraine war has further exacerbated the economic difficulties.

In the last three decades China was the growth engine of the world. It dominated manufacturing and therefore had a huge impact on the supply chains of the world. However, since the start of the pandemic Chinese leadership led by the Xi Jinping has been reversing many of the economic policies which made China the second largest economy after the USA.

This may surprise many. But to understand this we have to understand the Psyche of the CCP (Communist Party of China). The ruling elite values political power more than the riches earned by the people. Democracy is anathema to the top leadership of the CCP. People should always be subjugated and kept under the thumb of the ruling elite. What the CCP fears most is independent thought, and the fact that people may ask uncomfortable questions when they start thinking.

This monetary influence enjoyed by the private companies and their owners in China is what prompted the CCP to crack down on the big companies. The private businessmen were getting too big for their shoes as some of them criticized the Communist Party policies. The party never tolerated criticism, however constructive. The Chinese government began to cut the private industry down to size. The likes of Jack Ma are not heard of anymore. This policy of the CCP is responsible for the decline in the Chinese economic power. But it is not the only reason.

Chinese economy has begun to face headwinds. The three decades of growth from the 1990s to about 2012-13, when Xi Jinping took over were spectacular to say the least. But this growth also had the seeds of decline.

Chinese growth was powered by exports and was debt driven. Domestic consumption was not encouraged during this time. Also, Chinese real estate saw spectacular growth in the last two decades, but it accumulated a lot of debt. The sector was highly leveraged. As the growth in the sector began to slow after the onset of the pandemic, companies began to default on their loans. Total Chinese debt is said to be around 300% of its GDP.

The zero-covid policy is hurting the Chinese economy by creating labor shortages, causing delays in transportation of goods and services and throwing the whole manufacturing sector out of kilter. These losses have forced many companies out of China.

The Chinese Belt and Road Project also seems to be faltering. After starting with a fanfare and an impressive global outreach, countries who thought Chinese loans were a Godsend are now hesitating to participate. Many countries have been saddled by debt incurred on projects which the countries did not need. Roads, airports and other infrastructure was built in countries which were poor and now cannot pay back the heavy Chinese loans. Small and poor countries all over the world have been victims of Chinese debt traps. As a result, this initiative is losing steam. There is also a decoupling happening between the Chinese and several other economies, as well as denial of some crucial technology.

China’s obsession with unification with Taiwan has also come a cropper. The United States deliberately called China’s bluff regarding Nancy Pelosi’s visit. All the bluster and anger shown by China by engaging in military exercises in the Taiwan Straits impressed no one. Its aggressive actions along the Indian border and in the South China Sea has created a serious trust deficit in the Indo-Pacific. China wanted India to tacitly accept its hegemony in Asia. India did not oblige.

Last but not the least Chinese demographics are not favorable for a growing economy. Infact China today is well past its most favorable demographic period. Mao instituted the one child policy which was continued for about thirty years. It was meant to reduce Chinese population, and it indeed has. In the next two decades China will have the fastest aging population in the world.

A combination of structural economic factors and political and geopolitical headwinds, internally as well as externally has made the rise of China doubtful. There is now definitely a question mark on its ability to become a superpower.  

Keep to the Golden Mean

 

Since the early and mid-seventies man realized that his progress was coming at a cost. Till then it was not realized that all the scientific and technological progress that was being achieved was coming at a cost. Nature was being harmed irreversibly. But once the scientific community confirmed this, the politicians immediately jumped on this ecological bandwagon and started driving it themselves.

It became necessary to be an environmentalist whether you believed in that sort of a thing. These politicians profited from some of the most polluting industries in the world but kept up a public image which made them champion environmentalists.

The environmental bandwagon has been running since then. Any leader in any corner of the world was forced to support the cause of nature conservation whether he or she believed in it or not.

There was no dearth of activists in the three decades till the start of the new century. Environmental protection was a cause which received world-wide support from the governments and the people. It was the thing to do. But world di not take any drastic steps to curb environmental pollution. This can be understood because it was understood that curbing pollution had a direct bearing on people’s incomes.  

Fast forward to the decade of 2010s onwards. Greta Thunberg a Swedish girl appeared out of nowhere and began to rave about the damage done to the environment by the earlier generations, especially politicians. She was welcomed as if she were a messiah sent to wake up mankind from its slumbers. Naturally, the politicians and the world leaders had to pay attention, and humor her because she gained popularity very quickly.

Her forceful rhetoric and direct approach was new to the people and won her a huge following. Greta began to advise governments and even experts as to how to run their economies. There were sane voices of experts and other people who advised that whatever she was saying was not practical. But their voices were drowned in the noise that was created by Greta Thunberg’s campaigns.

When the people start following a cult the politician and leaders have to follow suit. Greta Thunberg began to call out industries like fracking, the oil industry, thermal plants and demanded that they be shut down to cut down on pollution. Such drastic measures impact adversely directly on the economy of any country. But some political leaders tried to implement them, with disastrous consequences. There were job losses and disinvestment in these industries. These short sighted measures undertaken on the words of a girl touted as a messiah could not be implemented for long.

Today Greta Thunberg is not heard anywhere. The world could not afford her anger.

What the world needs is a gradual shift towards more sustainable exploitation and consumption of resources. Drastic measures will not work without causing disruptions and will only create more problems. The cure cannot be worse than the disease.