Stuck in the middle

With the current tension around the globe with regard to the Russian-Ukrainian conflict, the powers that be are forcing all nations to pick sides. The entire conflict and the consequences that followed can be traced directly to the US-Russian cold war of old, and now India, by rights a superpower as well, is being put on the spot by the West.

India, alongside China and a handful of other countries, had abstained three times from voting in the UN’s condemnation of Russia’s aggression in Eastern Europe, throwing the global power balance into confusion. While China has not overtly shown support for Russia, the camaraderie between Russian President Vladimir Putin and Chinese President Xi Jinping is obvious, and repeated attempts by the US to try and trump China in terms of economy and military over the years has only strengthened this bond between the two nations. India, under Prime Minister Narendra Modi, has also had a cosy relationship with Russia, but with connections that date much further in history.

India has been historically dependant on Russia in terms of military and geopolitical connection since the 90s, even with the fall of the Soviet Union. Back then, they had forgone the US dollar as a currency vessel and dealt directly in Rupee-Rouble, at rates that were fixed artificially between the two governments, and with the fall of the USSR India most definitely held the short end of the stick. Even so, the context of their relationship meant India bore the unfair costs financially, and has continued to do so even now.

Abstaining from the vote was a given, as India was not subject to subtle or overt pressures by the US, yet India stepped up soon after the embargoes and sanctions fell into place around Russia by US-inspired Western nations. They did so by buying up all the fossil fuel shipments that were on hold due to the payment issues and sanctions, and with Russia demanding that all payments for energy resources need to be made in Roubles. To this effect, India bought up over thirteen million barrels of crude oil, confident in their capacity to refine and use it. This figure is substantially larger than the sixteen million barrels of crude oil that was bought throughout the whole year of 2021.

The US of course took notice, and reports have circulated that the US government has warned India that buying more oil from Russia could expose it to a "great risk" in light of more sanctions against Moscow, according to Reuters. "U.S. has no objection to India buying Russian oil provided it buys it at discount, without significantly increasing from previous years," the source said, adding. "Some increase is allowed.”

This subtle warning defines no parameters, but a simple glance at how the US strong-arms the rest of the world to adhere to their perceived superiority would show that India does run a risk of sanctions upon them from the West as well. India however, has been trying to play both sides of the table, keeping relations as smooth as possible with the western world while ensuring the strong diplomatic ties with Russia remain strong. While their intervention is not of militaristic nature, this economic participation would bolster the Russian war effort and circumvent the detrimental intentions of the western sanctions upon Russia.

However, why India should be even slightly perturbed is contradictory. The Western European countries that have been dependant on Russia for crude oil and LNG still continue to deal with Russia, regardless of the sanctions, and regardless of the price per barrel breaking every historic price ceiling. Countries around the world seemed to have forgotten the very prominent climate change mitigation struggle and continue to purchase oil with wild abandon, and India has been no different. The daily number of barrels of oil imported to India from Russia has exceeded 360,000, four times more than last year, and the numbers do not seem to falter.

Furthermore, the two nations have been in talks to reestablish a Rupee-Rouble mechanism for transactions between them. Such a system is also reflected in the way Russia has demanded the rest of the western nations pay for their energy resources in Roubles by establishing accounts in their national bank. However, such a situation is already skewed given the flow of finances between the two countries.

According to Al Jazeera, Indian government data shows the two countries had bilateral trade amounting to USD8.1 billion during the financial year April 2020 through March 2021, where Indian exports were at USD2.6 billion while imports from Russia were at USD5.48 billion. This bias will remain and may tilt more in the direction of imports especially if it increases its purchases of oil from Russia. Unless, of course, India ramps up exports. “The exporter community is definitely looking at opportunities that are going to come [along] the way,” said Ajai Sahai, director general and chief executive of industry body the Federation of Indian Export Organisation (FIEO).

However, he cautioned, Indian banks are averse to backing trade with Russia even on goods that are allowed under the sanctions. To circumvent those troubles, FIEO has submitted a proposal to India’s Ministry of Commerce suggesting a rupee-rouble mechanism as well as a rupee-based trade mechanism where the contract is made in the local currency, the rupee, and the other party bears the exchange rate risk.

For this end, India, with more experience with SMES and such, would be looking to expand into Russian markets without rocking the boat too obviously. Goods such as agricultural machinery, medicine, furniture and bathroom fittings are just a start, and this might be the way forward to balance the relationship between the two countries.

However, the future is fraught with challenges for India if they choose to secure deeper bilateral ties with Russia at this juncture. Even US President Joe Biden has pointed out that amongst the four nations in the Quad security alliance, India is the “most shaky”, as the usual US pressure is holding little sway. 

India, however, would not be alone in taking an individual, self-interest stance, as China is resisting the almost-bullying tactics of western influence. What is interesting are the tensions between China and India, almost palpable in the Indian Ocean, yet on this matter there has been, according to the current global trends, a common ground between them. When the rift between the West and the East deepens further, India may remember the colonial horrors the nation had gone through under the very powers that now sends ambassadors to woo them.