Tag: russia china

Five Takeaways From the BRICS Expansion

The enthusiasm for BRICS in the West Asian region signals that it no longer sees its relationship with the world through the eyes of the United States.

The expansion of BRICS to include four West Asian nations along with two other influential countries – one African and the other South American – has been a head turner, given the current geopolitical fluidity.

All are expected to accept the invitation to join though Saudi Arabia has injected a note of uncertainty in the process, saying it will “consider” the invitation and make “an appropriate decision”.

Here are five takeaways from the summit:

Disillusionment with the US/West

The membership of Saudi Arabia, Iran, UAE and Egypt – Ethiopia and Argentina are the two other countries – in BRICS will take effect from January 1, 2024.

The enthusiasm for BRICS in the West Asian region signals that it no longer sees its relationship with the world through the eyes of the United States. The weakening US influence in the region became apparent with the China-brokered Saudi-Iran peace deal earlier this year. Barring Iran, each of these nations has been a close US ally until recently.

The disillusionment with the US may have begun more than a decade ago. During the Arab Spring, the Obama administration’s abandonment of close ally Hosni Mubarak was a rude awakening for other long standing American friends and partners from Saudi to Bahrain.

Earlier, George Bush’s 2003 invasion of Iraq and the overthrow of Saddam Hussein’s Baath regime strengthened Iran’s clout in the Shia-majority country and in the region. Eight years later, the Saudis and the Gulf Co-operation Council’s Persian Shield army had to rush to the rescue of the Sunni rulers of Shia-majority Bahrain to clamp down on a nascent “Arab Spring” in that country.

The Obama administration’s pivot to Asia, and engagement with Iran for a nuclear deal convinced Riyadh that the US focus had moved to the Asia-Pacific. President Donald Trump’s tough talk against Iran rekindled Saudi hope in its benefactor, only for it to shatter when Washington did nothing to help as missiles fired by Iran-backed Houthi rebels struck two of its refineries halting production for a week.

“We are looking at a sea change in the region. Saudi Arabia and UAE [joining BRICS] is symbolic of the disenchantment of the West Asian countries with the US as a security provider in the region,” said Talmiz Ahmed, who was India’s ambassador to Saudi Arabia, Oman and UAE.

This, plus the emergence of a younger leadership, Mohammed bin Salman in Saudi, and Mohammed bin Zayed in UAE, have marked what Ahmed called “a coming of age moment for these two countries, a return of national self-confidence”.

Both major oil producing countries had decided to find their own place in the world in pursuit of their own interests, said Ahmed. Riyadh has more strategic ambitions than the UAE and wants to wield more influence on its own, on the global stage, while the UAE is focussed on pushing its commercial interests. Countries in West Asia “want to be part of the East Asian success story”, the former ambassador said.

Also read: As BRICS Evolves Criteria for Expansion, Here’s What India Thinks of the 22 Countries That Want to Join

Iran less isolated

A membership of BRICS gives Iran an opportunity to signal that the US attempt to isolate it has failed.

Iran has forged close ties with China (the two sides have reportedly signed a “25-year co-operation programme”) and Russia. With Chinese mediation, Iran signed a peace agreement with Saudi. The deal has stopped the fighting in Yemen, though the conflict in that country still awaits resolution. Iran has supplied Russia with several hundred attack and surveillance drones for its war in Ukraine. By mid-2023, the drones were being manufactured in Russia with Iranian collaboration.

President Ebrahim Raisi, an anti-west hardliner, told the BRICS summit that Iran’s entry into the grouping would bring “historic benefits”. Under UN sanctions for much of the last two decades, Iran has been an early votary of “de-dollarisation” or trade in local currencies. On returning to Tehran, Raisi told media that Iran’s entry into BRICS was “no random occurrence”, but “a policy pursued by the government”.

A well-oiled BRICS

The grouping now has five of the top 10 oil producing countries, adding to its financial and economic heft. Saudi and founding members Russia and Brazil are respectively the second, third and eighth biggest oil producing countries (the US tops the list), while UAE and Iran are ranked seventh and ninth respectively. The three West Asian countries are key members of OPEC.

How this will play out for oil production and prices versus demand is to be seen. What is apparent since last year is that Saudi has ignored repeated US calls not to cut production as it would blunt the impact of sanctions on Moscow. Instead, Saudi has cooperated with Russia in OPEC+ to do exactly this in order to prop up prices.

In July, the two countries reached yet another agreement to deepen production cuts in a bid to increase prices, which have remained low due to sluggish demand.

The West Asian presence in BRICS puts the OPEC big shots in the same room as big oil consumers. Despite the world’s determined push to replace fossil fuels with renewables, accelerated by Russia’s war in Ukraine, and despite the slowing down of the Chinese economy, China along with India will remain among the world’s largest oil consumers for the next few decades.

It is expected that Saudi will seek more clout within the grouping with investment in the BRICS bank, called the National Development Bank.

BRICS and blocs

Members of BRICS emphasise that it is not an anti-Western bloc, and speak about “strategic autonomy”, and multipolarity, and having their voice heard in the global arena. This appears to be the main attraction for the long waiting list for joining it, at last count 40 countries. Access to China is always good leverage in negotiations with the West.  Interestingly though, the summit declaration affirmed the importance of US-Iran efforts to restore the 2015 nuclear deal (or Joint Comprehensive Plan of Action) “and hope for relevant parties to restore the full and effective implementation of the JCPOA at an early date”, appearing to distance itself from President Raisi’s belief that the US had nothing more to offer.

However, the reality is also that two powerful BRICS members, China and Russia, are locked in adversarial relations with the US. And the queue to join the grouping is a validation that they still carry enough influence in the world for these countries to want to associate with them. Inevitably, BRICS will be seen as an anti-US/anti-west bloc in the same way that China sees the Quad as a US-led “small circle” in the Indo-Pacific, an attempt to create Cold war-style camps and an “Asian NATO”.

Delhi’s excellent ties with each of the BRICS members, including the new ones, the technology boost of Chandrayaan -3’s moon landing during the summit, India’s demography and its growing economy, all give it influence in the group potentially to prevent it from turning into an anti-West bloc. But as the most powerful country in BRICS, China dominates the grouping.

In the West, India’s membership of BRICS is seen as an oddity for a country that is in a deep and nationally celebrated embrace with the US. But Prime Minister Narendra Modi’s aspiration to be accepted as the leader of the “Global South” and Delhi’s quest for a permanent seat at the United Nations Security Council are clearly better served by multilateralism of the BRICS kind, even if China is the dominant player. The summit declaration contains an unequivocal paragraph on supporting the claims of India, South Africa and Brazil for “a greater role in international affairs, in particular in the United Nations, including its Security Council”

India has also used BRICS as well as the Shanghai Co-operation Organisation to keep lines open to Beijing for a diplomatic resolution of the LAC dispute, however dim the chances look for a return to the status quo of April 2020. The Modi-Xi meeting on the summit’s sidelines had no breakthroughs for India.

Managing differences

Most commentary on BRICS describe it as a grouping that lacks inner cohesion, and note that it will remain hobbled by adversarial relations between India and China. The same could be said of G20 with Russia and China at odds with the Western members of the grouping. At the recent summit in South Africa, BRICS was able to manage its differences to agree on admitting six new members. It also put out a communique acceptable to all including India, that the more powerful and “cohesive” G20 may yet fail to do.

Of course the BRICS document skipped the war in Ukraine entirely, and instead expressed “concern at “ongoing conflicts in many parts of the world”, a formulation that would not pass muster in most other multilateral fora.

But the Johannesburg Declaration does refer to G 20 as the “premier multilateral forum in the field of international economic and financial cooperation that comprises both developed and emerging markets and developing countries where major economies jointly seek solutions to global challenges”. In a good augury for India, the BRICS summit said it looked forward to “a successful hosting of the 18th G20 Summit in New Delhi under the Indian G20 Presidency” boosting hopes that there might be consensus on the Delhi Declaration after all.

Russia, China Block UNSC Action Against North Korea Over Missiles

North Korea has carried out an unprecedented number of missile tests this year, amid fears it is preparing to test a nuclear weapon for the first time since 2016.



The United States and its allies strongly condemned North Korea’s recent test of a suspected intercontinental ballistic missile (ICBM) during an emergency meeting of the United Nations Security Council on Monday.

However, the Security Council did not take any action in response to North Korea’s recent moves due to opposition from Russia and China.

On Sunday, North Korea’s foreign minister called UN Secretary General Antonio Guterres a “puppet” of the US for joining in on condemning missile tests.

“The DPRK (Democratic People’s Republic of Korea) is acting with impunity in the face of the Security Council’s inaction,” read a joint statement delivered by US ambassador to the UN Linda Thomas-Greenfield, and signed by 14 countries.

Earlier in the meeting, the US circulated a proposed presidential statement – a step below a legally binding resolution – condemning the missile launches and calling for North Korea to abide by current UN sanctions in place banning Pyongyang from carrying out ballistic missile and nuclear tests.

North Korea has carried out an unprecedented number of missile tests this year, amid fears it is preparing to test a nuclear weapon for the first time since 2016.

Russia, China block US position on North Korea

However, such statements require signatures from all 15 Security Council members to be adopted.

Russia’s deputy UN Ambassador, Anna Evstigneeva, said the reason for North Korea’s growing aggression is “Washington’s desire to force Pyongyang into unilateral disarmament by implementing sanctions and exerting force.”

She cited recent US military drills with South Korea that included practice strikes on North Korean missile and defence systems, as having antagonised Pyongyang.

The US has maintained that all military drills with South Korea and Japan are defensive in nature.

Discouraging any action which could worsen the situation, Evstigneeva called for “inter-Korean dialogue” and “multilateral negotiations”.

North Korea launches suspected long-range missile

China’s UN Ambassador Zhang Jun said the UN had to meet North Korea halfway to prevent the situation from getting “out of control.”  He urged the US to show “initiative, put up realistic proposals, respond positively to North Korea’s concerns stop military exercises and ease sanctions.”

Thomas-Greenfield said the US is “prepared to meet without preconditions,” and called on North Korea to “engage in serious and sustained diplomacy.”

“But the DPRK continues to not respond and instead chooses to continue this reckless behaviour. The council must instead respond,” she added.

This article first appeared on DW.

Macron in Africa: A Cynical Twist to Repair the Colonial Past While Keeping a Tight Grip

In my view Macron exploits the increased call for the more fundamental decolonisation of African societies as a cover to exercise continued influence on the continent.

In late July 2022, French president Emmanuel Macron concluded a tour of Cameroon, Benin and Guinea-Bissau. He visited Algeria between August 25 and 27.

At first glance, his choice of countries is difficult to understand. Three former French colonies – Cameroon, Benin and Algeria – and a former Portuguese colony, Guinea-Bissau, seem very different.

Nevertheless, taken together, Macron’s visits tell a story in which France is doing penance for its colonial crimes while simultaneously trying to maintain the influence it gained through colonialism.

These two themes also emerged at the New France Africa Summit in October 2021 in Montpelier. There, Macron promised investments in African technology startups as a way to increase the influence of French private business, while also promoting the scholar Achille Mbembe’s report on the new relationship between France and Africa.

Macron got another chance to show off his good relationship with African leaders at the European Union-African Union summit of February 2022. This was hosted by Macron – France held the presidency of the European Union at the time – and EU Council president Charles Michel.

The penance efforts were on show in each of the recent country visits. At a press conference with Cameroon’s president Paul Biya, Macron said France’s archives on colonial rule in Cameroon would be opened “in full”. He said he hoped historians from both countries would work together to investigate “painful moments”.

In Benin, the French president accompanied Benin’s president, Patrice Talon, on a visit to an exhibition devoted to the royal treasures of Abomey. These had been robbed by France 139 years ago and were returned in November 2021. In Guinea-Bissau, he announced the opening of a French school and a sports exchange programme, in line with his increased emphasis on cultural diplomacy.

The effort to maintain influence was evident in all three visits too. With the presence of French troops in Mali dwindling, Paris is looking for new military options and hoping to find those with Macron’s hosts. In Benin, the French president, therefore, talked about security while in Yaoundé he restated France remained committed to the security of the continent.

In Guinea-Bissau Macron declared France should “contribute to the fight against terrorism everywhere in the region”.

In my view Macron exploits the increased call for the more fundamental decolonisation of African societies as a cover to exercise continued influence on the continent.

Rectifying the colonial past

The project for decolonial justice has recently been used by other former colonial powers to brush up their image in Africa. Belgium recently returned a tooth of Patrice Lumumba, the Congo’s first prime minister, 61 years after enabling his assassination.

Rectifying the colonial past has become a popular way for northern governments to do their diplomacy in Africa. In the past there were calls for new relationships and a forgetting of the colonial past. Now heads of state showcase their willingness to face colonial crimes head on. US secretary of state Antony Blinken, for instance, talked about the need to become “equal partners” and acknowledge “generations of Africans whose destiny had been determined by colonial powers”.

In my view, this is a smart way to flip the script the Russians and the Chinese employ. They stress that they never colonised the continent, a claim already put forward in the 1960s when Zhou Enlai and Leonid Brezhnev visited the continent.

In his bid to reset this narrative, Macron went as far as to brand Russia “one of the last imperial colonial powers” for its invasion of Ukraine.

It’s all part of the cynical twist of Macron’s version of decolonisation, which seeks to repair the old while setting back the cause of decolonisation through intervention.

Renewed interest in Africa

What separates France from the US and Belgium is that the Elysée is trying to offset a dwindling military position in Mali. Its troops are leaving and are being replaced by Russian mercenaries, the so-called Wagner Group.

France intervened in the north of Mali in 2013 with Operation Serval. Paris also brought in allied nations like Belgium and Sweden to provide additional capacity and training. The aim was to push out Islamic fighters in the Sahel.

The Cold War logic that has been imposed on this trip, however, is far too simplistic. It overlooks the regional politics of West Africa, where the Economic Community of West African States (ECOWAS) has increasingly felt the need to intervene against the coups that have plagued the region: Mali in August 2020 and May 2021, Guinea in September 2021, Burkina Faso in January 2022 and the failed coup attempt in Guinea-Bissau in February 2022.

The West African coups, rather than the intervention in Ukraine, also explain what brought Macron to Guinea-Bissau, which took over the rotating presidency of ECOWAS in July. The organisation lifted sanctions when the junta in Mali promised to hold elections in February 2024.

ECOWAS has also managed to reach an agreement with Burkina Faso’s military junta on a timetable for a transition back to democracy. A return to civilian rule is scheduled for July 2024.

With a combined promise of increased cultural investments and weapons for Guinea-Bissau, Macron is seeking to meddle with the regional organisation. That’s despite claiming France “always respected” the position of ECOWAS in regional matters. It is an easy way for the Élysée to blanket West Africa without having to engage in shuttle diplomacy to different West African capitals when it has a vital interest to protect.

Keeping the focus on Ukraine and Lavrov’s mission was therefore in the interest of the French president, who was also conveniently asked questions about why African countries had not received weapon shipments as easily as Ukraine. The delivery of weapons could then be presented as something positive, rather than a disastrous policy that hardly ever works.

As always, it will be regular people who will pay the price because they are forced to live in increasingly heavily armed societies. The uprising in the north of Mali in 2013, which Macron is now seeking to manage through ECOWAS, was the consequence of the 2011 military intervention by France and its allies in Libya and the subsequent overthrow of Libyan leader Muammar Gaddafi.

It might set these countries back for years, preventing them from joining the African Lion economies – Ethiopia, Ghana, Kenya, Mozambique, Nigeria, and South Africa – countries that were avoided by Macron.The Conversation

Frank Gerits, research fellow at the University of the Free State, South Africa and Assistant Professor in the History of International Relations, Utrecht University.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Watch | 100 Days Into the Ukraine Crisis, How Have Fortunes Fared?

Karan Thapar hosts a live interview with the Kanti Bajpai on how Russia, Ukraine, NATO and India have fared, 100 days after the Ukraine war began.

Karan Thapar hosts a live interview with the Kanti Bajpai on how Russia, Ukraine, NATO and India have fared, 100 days after the Ukraine war began. The Wilmar Professor of International Studies at Singapore’s National University says Moscow has united the West like never before and has taken large parts of Eastern Ukraine. He says the war will not be over even if Russia consolidates the eastern part of Ukraine and the threat of invasion will continue to hang over Kyiv. They also discuss what India can do to end the conflict and what New Delhi can do to prevent Russia from embracing China.

Please watch the video for complete details.

Sanctions on Russia Are a Tool That Must Be Calibrated Like Any Other

If de-dollarisation occurs, the impact will be felt wide and far. Severe sanctions are a double-edged sword which will impact every nation.

Russia’s invasion of Ukraine has been condemned by the majority of countries in the United Nations. NATO has not intervened militarily since that runs the danger of a wider conflagration with the possible use of nuclear weapons. So, instead, the NATO powers have supplied Ukrainian forces with weapons and imposed severe sanctions on Russia. Evermore sanctions are announced every week.

It was said that this would degrade Russia’s capacity to wage war by freezing its assets held in Western banks. Also, its earnings through trade would decline and impoverish it. It was also argued that the Russians would be hurt through multiple channels – higher inflation, the inability of its citizens to get dollars, a collapse in prices of financial assets, like, shares and so on.

Thus, while Russia is attacking militarily, the West is hitting back through economic means. Further, there is also a cyber and media component to the war. It is perhaps the first war on multiple fronts. Will the Russians be hurt enough to stop the war? Can one draw lessons from the sanctions against Iran?

Demonstrators attend a rally in support of Ukraine after Russian President Vladimir Putin authorized a military operation in eastern Ukraine, in Prague, Czech Republic, February 24, 2022. Photo: Reuters/David W. Cerny

Patchy sanctions

Iran’s economy is 0.3% of the world’s Gross Domestic Product (GDP) and severe sanctions against it did not bring it to its knees. The Russian economy is 1.7% of the world’s GDP and is much more advanced technologically and is a supplier of critical items. Therefore, its economy may be less impacted by the severe sanctions.

Not just the size of the Russian economy but its exports are critical for the rest of the World. As such, all of Russia’s exports cannot be sanctioned immediately without hurting the rest of the world economy. Crucially, it is a major exporter of energy – oil and gas, especially to Europe. So, a complete ban on Russia’s exports of oil and gas has not been possible. Russia has also turned the tables by asking for payment in rubles and not in euros or dollars.

This has put the Europeans in a quandary. Since they have stopped exporting goods and services to Russia, how do they get rubles? There are two options. First, they continue to trade with Russia and earn rubles. Second, they buy the rubles from Russian banks. But most Russian banks are disconnected from SWIFT so the Europeans will have to use the Russian SPFS, the alternative to SWIFT. In both cases, sanctions will be violated.

Russian assets in Western banks are being frozen, so why would the Russian banks sell rubles to the Europeans? They would have to accept euros and convert them to rubles but because of sanctions, the euros would get frozen. In effect, they would have to provide rubles for free.

So, the option for Europe would be to either find alternative energy sources or continue trade with Russia to meet its energy needs. A shift to alternative sources is not that easy and will be much more expensive. Thus, in the medium run, trade is likely to continue between Russia and Europe. The consequence of Russia stopping supplies of energy to Europe would be severe if payments are not made in rubles. Power cuts and cuts in production will follow and a recession is likely.

Alternatives for Russia

If Russia curtails supplies of energy to Europe its own production would decline. But, Russia can supply energy to China and other countries like India. To make it attractive, it is offering a huge discount on the world price. India is getting a $35 discount on the pre-conflict price and is buying substantially more than earlier. If Russia is able to sell to others, and this is likely given China’s huge demand for energy, the impact of sanctions on Russia would be softened.

Further, Russia also exports critical raw materials like metals, fertilizers and agricultural products. There are a few alternative sources for some of the metals like palladium, nickel and neon gas. If the supply of these items is curtailed then the production of integrated circuit chips and batteries which are already in short supply would be globally impacted. Food and fertilizer prices have already risen because of the war and they can go up further if supplies are blocked. Thus, while Russia may go into a recession, the rest of the world will also be impacted adversely.

Watch | ‘Sanctions Are Economic Weapons of Mass Destruction, We Must Consider Their Consequences’

Are exports financing the war?

The argument that the curbs on Russian exports will lead to a shortage of foreign exchange to finance the war is erroneous. The war requires people, energy, armament and ancillaries which Russia produces indigenously. Dollars are not needed to buy them.

Russia’s main imports from Europe in 2019 were “machinery and equipment (€19.5 billion, 19.7%), motor vehicles (€8.95 billion, 9%), pharmaceuticals (€8.1 billion, 8.1%), electrical equipment and machinery (€7.57 billion, 7.6%), as well as plastics (€4.38 billion, 4.3%)”. Stoppage of most of them will not impact the war effort and certainly not in the short run. The West does not supply any advanced technology to Russia so an embargo on technology is also hardly going to impact Russia’s war effort.

Further, most of the items that Russia is getting from the Western powers can be substituted by China and other nations which need Russian oil. Russia is capable of producing these items itself in the medium run since it is technologically quite advanced. Yes, these may cost more and their quality may not be as good. Stoppage of luxury items imported by Russia will hardly dent the war effort.

In brief, on the trade front, given the critical items supplied by Russia and its huge trade surplus, there will be a marginal impact of sanctions on Russia, especially if China (and India) continue to trade with Russia.

Prime Minister Narendra Modi with Russia’s President Vladimir Putin, left, and China’s President Xi Jinping during the G20 summit in Osaka, Japan in 2019. Photograph: Sputnik/Mikhail Klimentyev/Kremlin via Reuters

Impact of financial sanctions

The financial sanctions are severe. So, will they bite? These consist of a) delinking most of the Russian banks from SWIFT, b) freezing of assets of the Central Bank, c) freezing of assets of Russian leaders and the oligarchs living abroad and d) MNCs closing operations and liquidating their investment in Russia.

As argued above, Europeans will have to continue to trade at least for some time and will need some payment mechanism. For this reason, some Russian banks have not yet been removed from SWIFT. Alternatively, some European banks will have to use the Russian payment system, SPFS. Even then the payment for Russian exports in ruble will pose a problem and Europe will have to find a solution for that.

The freezing of the Central Bank’s assets will not pose a problem since transactions involving foreigners have been frozen. Neither MNCs wanting to pull their investments out of Russia nor Russians wanting to buy foreign currency are allowed. So, no payments are required to be made to anyone in dollars or Euros. Even if Russia’s trade declines, it would still be in surplus so other nations would owe it money and that would strengthen the ruble vis-à-vis other currencies. Already the ruble, after having sharply fallen at the start of the sanctions, has recovered back to its pre-sanctions value.

Freezing the foreign assets of leaders and oligarchs poses no problem for the economy and will be a personal hit to those individuals. Will they put pressure on the leadership to stop the war and come to some agreement? Possibly, but a determined leadership could ignore these pressures for the medium term. We don’t know if this could lead to a coup or a regime change. It could destabilise the situation further and be dangerous.

The financial sanctions may not impact Russia much due to its trade surplus but the implications for the MNCs could be serious. Those of them that have closed their businesses in Russia have mostly lost their capital and the income flow from that. So, their balance sheets will have a big hole. For instance, Shell may write off upwards of $4 billion and BP may lose $3 billion. The future profits would also be lost. The increase in oil prices may compensate them for their loss of profits but the loss of capital would stay. For non-oil MNCs, the loss would be substantial. All this would impact the stock markets in the rest of the world.

Russians may not be affected by the withdrawal of the MNCs. They could simply nationalise the assets of these companies (for free) and continue to operate the businesses using the existing labour and management.

Russian entities have also borrowed in the international markets and repayments are falling due. If the Russians renege on payments of these dues then it will impact the health of their lenders. The Russians can do this since they can claim that their assets in the Western world are frozen. The option would be for the governments of the Western world to allow these repayments out of the frozen funds. But these would be unauthorised payments and would amount to the nationalisation of international assets and that would dent the financial systems. Other countries would also worry that this could also happen with their assets.

Also Read | Ukraine Crisis: The West’s Response Risks Pushing the World Towards a War It Cannot Afford

De-dollarisation a Possibility

China has been viewed as a strategic competitor by the US and the Western powers. Tensions have been rising between the two both militarily and economically. Since this is a long term factor, China will support Russia so that they can form a powerful bloc. China would also get many critical supplies cheap from Russia. So, a collaboration is in China’s long term interest and this would dent Western sanctions.

If this invites Western sanctions against China, the world economy would face problems. China has become the biggest manufacturing hub and if supplies from there are disrupted then the world economy would slip into a deep recession. Of course, China would also be severely impacted. For these reasons, sanctions against China would be limited. Also, would China adjust to Western demands to some extent? It will be a dynamic situation of brinkmanship and it is hard to predict how the situation develops.

Everything is pointing to a de-dollarisation of the world economy. Trade between Russia and the rest of the world would not be denominated in dollars. China’s trade is also likely to get denominated in its currency, Yuan. Blocking of SWIFT for Russian Banks would lead to the evolution of the Russian system SPFS and the Chinese system CIPS. Some countries may want to switch their reserves to other currencies as a matter of abundant caution.

Russia’s insistence that it be paid in rubles is also a start of de-dollarisation. The US economy is likely to slip into a stagflation due to supply bottlenecks leading to further inflation and recession hitting it. This would lead to a decline in the holding of dollars and its weakening vis-à-vis other currencies. This would raise the level of inflation in the US in a vicious cycle. In this situation, Russia linking the ruble to gold will be like adding fat to the fire.

With trillions of dollars floating around the world, de-dollarisation would add to the pressures on the US economy. The US would not be able to sustain the huge current account deficit and budget deficit. This could impact living standards in the US and have social and political consequences.

While the war in Ukraine is not global, the economic war is global in sweep. Russia will certainly be adversely impacted but much will depend on how quickly the economic sanctions are implemented and the role China plays. Most likely, China will aid Russia in its long term interest. Given the critical exports from Russia, supply bottlenecks will increase globally. If sanctions are also imposed on China for its trade with Russia the world economy would be further hit. De-globalisation is very likely. All this could push the world into a recession. If de-dollarisation occurs the impact on the US will be aggravated. So, severe sanctions are a double-edged sword that will impact every nation.

Arun Kumar is the author of Indian Economy’s Greatest Crisis: Impact of the Coronavirus and the Road Ahead.

As Ukraine Burns, India Must Contend With the Worrisome Prospect of a Russia-China Symbiosis

Serving and retired Indian Army personnel anticipate that Russia will gravitate swiftly towards cash-rich China for assistance as punitive sanctions and embargoes for its invasion of Ukraine begin biting.

New Delhi: A disturbing symbiosis has emerged in recent days between military events in Ukraine and the remote Himalayan Ladakh region, over 4,100km away, where, since May 2020, the Indian Army (IA) has been locked in a standoff with China’s People’s Liberation Army (PLA) along their mutually disputed Line of Actual Control (LAC).

Serving and retired IA personnel expressed concern to The Wire over this burgeoning association which presages the swift gravitation of Russia – which is India’s principal military platforms and assorted defence equipment supplier – towards cash-rich China for assistance as punitive US and European sanctions and embargoes against Moscow for its Ukraine invasion begin biting.

They were of the view that China may eventually pressure Moscow to stanch, if not altogether cease, the supply of assorted materiel to India, which New Delhi had essentially been acquiring for decades to deter Beijing’s – and its military and nuclear ally Pakistan’s – militarism.

This recently included five Almaz-Antey S-400 Triumf self-propelled surface-to-air (SAM) missile systems, which New Delhi had ordered in October 2018 for $5.5 billion. Of these, one had already been delivered by sea and air late last year, and was in the process of being assembled and deployed at an Indian Air Force base in Punjab to ‘monitor’ aerial activity along the Pakistani border and the LAC.

The arrival of the remaining four S-400 systems was initially scheduled for completion by 2023, but many Indian service officers agreed that this would almost certainly be delayed or worse, possibly even curtailed under Beijing’s pressure or US sanctions, or both. There was no official indication from either Moscow or Delhi regarding the future status of either the balance S-400s or the slew of varied other Russian armaments – like assault rifles, frigates and a nuclear-powered submarine and other defence kits – intended for India’s military.

“Under the prevailing circumstances, Russia will be looking inwards, to supply equipment to its own military, rather than concentrate on exports, which, considering the harsh sanctions, will be demanding if not impossible to execute,” said military analyst Major General A.P. Singh (retired). But, he warned that the projected ties between a sanctions-beleaguered Moscow and a hegemonic Beijing could end up adversely affecting the Indian military’s operational efficiency due to resultant equipment shortages and spares and component deficiencies for in-service Russian materiel.

Other military officials concurred that despite confidence in India’s jugaad tactics in being able to somehow circumvent collective sanctions on Russia, this time around it would be difficult to bypass the vigil and determination of Western countries to punish Moscow. And even if Delhi did manage to dodge these prohibitions, it would be difficult to keep it under wraps, inviting retributory penalties in return. Under a sanctions regime, both the seller – in this instance Russia – and all its buyers would be liable to grave penalties.

Official sources, however, specified that the IA was ‘adequately outfitted’ with regard to its diverse platforms and equipment deployed in Ladakh to meet the PLA threat, once the snows melted later this month. These included imported and licence-built Russian Bhishma T-90S and Ajeya T-72M1 main battle tanks, towed and self-propelled howitzers, amongst others and varied ammunition, rockets and missiles, many supplied by Moscow.

“But all armies need constant sustenance which, for over 50% of its equipment and ordnance, the IA is helplessly dependent on Russia,” said a senior officer from Army Headquarters in Delhi. This reliance has now become worrisome, as there are no alternatives in the foreseeable future to support or replace Russian-origin materiel, he added, declining to be named.

But the greater, apocalyptic threat looming over India, Major General Singh cautioned was from the prospective China-led Quad with Russia, Pakistan and Iran as members, and with Turkey as a possible fifth constituent, and one that Beijing had speculated about constituting last July. Notably, three of this grouping’s four incipient constituents – China, Russia and Pakistan – were all nuclear-weapon states, while the former two were permanent UN Security Council members with veto power to block all and any resolutions they opposed. US-sanctioned Iran, on the other hand, is an aspiring nuclear power, closely aligned to China and with whom it had signed a 25-year agreement in mid-2020 to invest $400 billion into its economy in exchange for steady and heavily-discounted oil supplies.

Maj Gen Singh further said that in addition to the stalemate along the LAC which necessitated large scale troop deployments, the IA could well face the emergence of another front on its western flank from China’s ‘willing’ affiliate Pakistan, with the aim of dividing India’s already overstretched forces and equally strained financial and equipment resources. “India’s repeated refusal to condemn Russia’s assault on Ukraine will only encourage Chinese irredentism and its claims over Arunachal Pradesh and other Himalayan regions,” the two-star officer forewarned. In the event of such a dire eventuality, it’s unlikely that many countries would step up and offer India succour, he added.

Indian Army vehicles moving towards the Line of Actual Control (LAC) amid border tension with China, in Leh. Photo: PTI

Furthermore, the inchoate and nebulous preemptive deterrent instrumentality like the naval-focused Quadrilateral Security Dialogue, initiated in 2007-08 as a China-containment strategy, and one which included Australia, Japan and the US, has, in its new avatar, proven ineffectual in discouraging Beijing’s adventurism in Ladakh. Besides, all four Quad members are now preoccupied with dealing with the fallout from Ukraine’s invasion and bracing themselves for a unified China-Russia front, in which the latter’s military technology, expertise and know-how would be more aggressively mated and advanced by a financially flush and industrially forward Beijing.

“The Beijing-Moscow axis that has been proliferating in recent years, is now poised to become firmer, posing a formidable threat to world peace as both strive to aggressively carve out a new regional and global order based arbitrarily on financial and military might,” said Brigadier Rahul Bhonsle of the Security Risks Asia consultancy in Delhi.

Nonetheless, India which had incrementally emerged as the US’s cat’s paw over the past 15 years to manage China, could well end up facing the brunt of this deadly security partnership between Moscow, Beijing and Islamabad, he ominously declared. Pakistani Prime Minister Imran Khan’s recent meeting with Russian President Vladimir Putin in Moscow on February 25, within hours of the latter having ordered his army’s mobilisation against Kyiv, was ‘significant’ in this regard, Bhonsle said. It had firmly secured Putin’s eastern flank, with the exception of India, which had opted to remain neutral, he added. It is apposite to recall that Putin lifted sanctions on Pakistan in 2014, sold it Mi-35M Hind-E attack helicopters and conducted joint exercises with its army near Peshawar in October 2018.

Former foreign secretary Shyam Saran too recently talked of India’s ‘nightmare scenario’ if Washington decided that it confronted a greater threat from Russia in its European backyard than from China, and opted for and justified a strategic accommodation with Beijing. Or in blunt terms, he stated in The Tribune on February 25, this would mean the US conceding Chinese dominance in Asia to safeguard its European flank from an expansionist Russia, in a cynical calculus that bodes ill for Delhi.

Watch | ‘Nightmare Scenario for India If US Decides Russian Threat Means Easing Up On China’: Shyam Saran

Additionally, the ongoing confusion over the war in Ukraine, Saran stressed in a recent interview to The Wire, could impact the LAC situation, as sanctions could drive Moscow into a ‘Chinese embrace’. Regarding India’s position on the LAC in Ladakh, the retired diplomat reiterated his stand that India would have to deal with the PLA threat by itself. And to do so it needed to summarily and significantly augment its economic and military capabilities, which needed supplementing by an overarching environment of ‘national coherence’. Much like Ukraine, Saran added in a subtle hint to Prime Minister Narendra Modi’s Hindu nationalist Bharatiya Janata Party-led government, India needed to present itself as a ‘united country without divisions’.

Security analysts too agree that irrespective of the rapidly evolving Ukrainian situation, India would need to forge long-term alliances with advanced materiel producing countries to eventually replace Russian equipment, in addition to ‘realistically’ beefing up its domestic defence manufacturing.

“The government’s disjointed and ad hoc approach to fostering military capability development has to stop,” said Amit Cowshish, former Ministry of Defence acquisitions advisor. The MoD needs to optimise scarce financial resources and focus on immediate security threats and not on optics, like the recent strident official announcement that Indian industry had indigenised the manufacture of assorted military-grade nuts and bolts.

What India Needs To Do To Deal With the Consequences of the Russia-Ukraine War

India will face a far more difficult situation in the months ahead, given global uncertainty, than it might have expected after the impact of the COVID-19 pandemic begins to wane.

The Russian invasion of Ukraine is unlike the many ongoing conflicts in various parts of the world – whether in Arab countries or in Africa or between India and China. A military superpower, Russia, has decided to invade Ukraine which is backed to a certain extent by the US and NATO. While the latter have repeatedly stated that they will not send their troops to defend Ukraine, they are imposing tough sanctions against Russia and its rulers.

These will have long-term consequences. New elements will be introduced into the ‘new normal’ that the world was headed towards due to the ongoing pandemic.

The implications will be both national and international and long term and immediate. The issues will be political and economic with inter-linkages between them. Since the war directly and indirectly involves many countries, the implications emerge from the international situation. It is within that framework that the implications for India and its people can be understood.

War has immediate consequences for global trade, capital flows, financial markets and access to technology. Sanctions being imposed on Russia by the rich countries will not stop the war and nothing much will change in the immediate. The real impact will be seen over time on political and economic relations between the two sides. It is almost certain that the Cold war of the 1950s will reemerge between an Eastern Bloc consisting of Russia and China on one side and the Western powers and their allies on the other side. Since the world today is far more globalised than in the 1950s, the impact will be greater. It will also be more since in the 1950s the two blocs already existed while now there is a sudden major disruption.

Russian President Vladimir Putin arrives for a meeting with representatives of the business community at the Kremlin in Moscow, Russia February 24, 2022. Photo: Sputnik/Aleksey Nikolskyi/Kremlin via Reuters

International short run

Global trade will be immediately impacted by sanctions on both sides. Exports and imports will be hit and the existing supply bottlenecks due to the pandemic will aggravate. The Western powers are likely to insist on other nations stopping trade with Russia. For instance, they will ask other nations to stop their import of energy from Russia and threaten sanctions against those nations and companies that continue to trade with Russia. This would include China, otherwise the sanctions on Russia will not bite. Since China is the biggest trading partner for many of the rich countries, this will disrupt trade massively and lead to further supply bottlenecks. The US may act to increase supply of petro products and ask friendly OPEC countries to also do so, to prevent prices from shooting up and disrupting the world economy.

Ukraine is a major exporter of agricultural produce and their supplies will get disrupted, leading to increase in food prices. Commodity prices had already been rising and this will continue since some of the critical supplies come from Russia and China. Consequently, inflation will kick up globally and impact purchasing power of people and weaken demand which was already hit by the pandemic. With liquidity ruling high due to the quantitative easing during the pandemic, inflation can kick up quickly. This will slow down global growth.

Global capital flows will decline since many countries would want their capital to invest at home rather than abroad. This along with the sanctions on financial flows will impact the financial markets. The stock markets will decline not only due to this factor but also due to increased uncertainty facing the world and the likely end of quantitative easing by Central Banks in the face of higher inflation and moves to increase interest rates. All this will adversely impact private investments.

Growth will be hit as a result of these adverse changes in consumption and investment. Budgets of nations will be impacted as military expenditures rise. The already high fiscal deficits in the budgets will rise further and most likely setback social sector expenditures which will impact the poor the most.

Authoritarianism will rise in most countries on the grounds of need for national unity and need for a strong leader to steer the nation through a crisis. Dissent will be frowned upon and might have public support. A fall out of all this could be reduced attention towards the pandemic, which most nations are assuming is now in an endemic phase. The WHO has cautioned against this. Global vaccine inequity could rise in the name of national requirements.

International long run

The pandemic was forcing the world towards a ‘new normal’ and that is likely to have newer elements due to greater deglobalisation and greater competition among the two blocs. There will be greater distrust between the important nations on the two sides and cooperation on important world matters will decline. Already the pandemic had sown discord with some countries believing that the coronavirus was deliberately spread or leaked out of a laboratory. The hawks and the right wing will gain ascendency.

China and Russia will get pushed closer to each other and given the strength of the Chinese economy and the technology available with Russia, the cold war will not be between very unequal blocs as was the case in the 1950s. So, potentially it could be more dangerous. Globally, the rich nation’s bloc will not be seen as a reliable ally since recently, the US deserted its allies in Afghanistan and now it has left Ukraine to fend for itself.

With two comparatively equal blocs competing for influence in the developing countries, the latter may get a greater degree of autonomy. But there will also be the danger of managed regime changes which can destabilise nations and aggravate conflict within them. This will accelerate the trend towards rule by authoritarian regimes.

The current moves to freeze the assets of Russians in Western banks and to cut off credit to their companies, would force them to devise alternative international payments system independent of the dollar. Those companies like, the Chinese, which defy Western sanctions will also need such a payment system. So, two trading and financial blocs will emerge. The Chinese and the Russians have large foreign exchange reserves and the surplus in trade that they can successfully create a bloc. All this will have uncertain consequences.

With deglobalisation and a greater need for investment in the home countries, global capital flows are likely to decline with less going to the developing world. This may be partly compensated by the reduced flow of capital from the rich countries to China. But MNCs will make the developing world compete with each other for its capital by offering more concessions. This will work against the interest of the workers.

The military industrial complex everywhere will be strengthened as militarisation increases. As more and more armament is used up in the conflicts and more arms are offered to countries, profits of these companies will rise. Producing more armament is like producing machines to  destroy them to produce more. This will help overcome to some extent the shortage of demand in the world economy and boost employment.

With greater investment in armament there will be shortage of high technology for civilian use and that will slow down growth while raising inflation and decreasing investment in social sectors. All this will aggravate poverty in spite of more employment. Inequalities will rise further with workers getting marginalized and capital making higher profits. Expenditures on R&D will increase and the technology companies will do even better than they did during the pandemic. Old style companies producing intermediate technology goods in the developing world will suffer as their exports decline with deglobalisation and production in the home countries.

Demonstrators attend a rally in support of Ukraine after Russian President Vladimir Putin authorised a military operation in eastern Ukraine, in Prague, Czech Republic, February 24, 2022. Photo: Reuters/David W. Cerny

National considerations

Given these tricky developments and global uncertainty both in the short and long run, India will face a difficult situation.

India will see an immediate impact on inflation (already ruling at high levels) with rise in fuel and food prices. Other prices will also rise as supply bottlenecks get aggravated due to sanctions and the war situation. The investment climate will deteriorate due to the uncertainty. Capital flows into the country will decline leading to a further decline in the stock markets. The P/E ratio was already ruling at high levels and such a big shock was bound to hit stock prices.

Demand for gold is likely to increase leading to its increased import. This along with the high bill for petro goods will mean that the imports bill will rise. Exports are likely to be hit due to the decline in growth in the world economy and deglobalisation. With capital flows declining the Balance of Payment which was already turning adverse will deteriorate further. Consequently the rupee will weaken compared to the dollar which will aggravate inflation further.

All these factors, uncertainty, demand, investment, inflation and BOP, will reduce the rate of growth of the economy which was badly hit by the pandemic.

Budgetary arithmetic will also be impacted. While due to inflation the targets may be met, this would not be so in real terms after adjusting for inflation. Expenditures will increase while real revenues will be hit due to slow down and other difficulties. The already high fiscal deficit will increase further and in such circumstances, it is the social sector and capital account expenditures that are curtailed. The support to the poor then declines.

India depends on imports for critical defence equipment. It will face difficulty in procuring defence equipment already contracted since both the rich countries and the Russians will delay deliveries, given their own requirements. This will mean India’s preparation to face China and Pakistan will weaken. China could take advantage of this development and push India harder. Further, relations with both the US and Russia are likely to become tricky since we are forced to stay neutral between them while both expect support. While neither may antagonise India but the support that was available till now may weaken.

In the longer run, India will have to restructure its international relations in the new Cold War scenario and especially given the relations with China. That is India’s most important concern and not Ukraine. In fact in the last two years while facing the Chinese obduracy we only got lip service from the Western powers and silence from Russia.

With deglobalisation impacting growth in the world, trade, capital and technology flows, India will have to strengthen its economy on its own. The public sector will have to play an important role since the private sector will not be able to boost itself on its own when demand is short. The country will have to strengthen its R&D which will require putting its education sector in order and the disastrous NEP based on substituting teachers by technology will have to be given up. Actually no matter how good a Policy unless the milieu is correct it would not translate into reform and the NEP only strengthens the existing milieu.

Social sectors will have to receive a much higher priority so that the productivity of workers rises and their degrading living conditions improve. That will not only provide the market for growth of Indian economy but strengthen the country. We would have to resist the temptation of the rulers to turn more authoritarian because that would only dissipate the nation’s energies.

Arun Kumar is  author of `Indian Economy’s Greatest Crisis: Impact of the Coronavirus and the Road Ahead’. 2020. Penguin Random House.

Citing Need To Keep Door Open for Diplomacy, India Abstains From UNSC Vote on Russia

The draft resolution was not adopted as Russia used its privilege as a permanent member to veto the text. While 11 Council members voted in favour, all three Asian members – India, China and the United Arab Emirates – abstained. 

New Delhi: India abstained on a US-backed, Russia-vetoed draft resolution at the United Nations Security Council (UNSC), that called on Russia to reverse its military attack on Ukraine, asserting that there was still space to return to diplomacy.

The draft resolution was not adopted as Russia used its privilege as a permanent member to veto the text. While 11 Council members voted in favour, all three Asian members – India, China and the United Arab Emirates – abstained. 

India’s vote was on expected lines, as the draft resolution’s language went much beyond its stated public position that refrained from directly criticising Russia, even after it deployed troops on Ukrainian territory.

Delivering the explanation of the vote, India’s permanent representative, T.S. Tirumurti, stated the dialogue was the only way forward, “However daunting that may appear at this moment.”

“It is a matter of regret that the path of diplomacy was given up. We must return to it. For all these reasons, India has chosen to abstain on this resolution,” he said.

Official sources claimed that India’s abstention allows for New Delhi to retain the option of reaching out to all sides and “find a middle ground”.

Stating that India was “deeply disturbed by the recent turn of developments in Ukraine”, he urged all efforts to be made for “the immediate cessation of violence and hostilities”.

Tirumurti asserted that the current global order “has been built on the UN Charter, international law, and respect for the sovereignty and territorial integrity of states”.

“All member states need to honour these principles in finding a constructive way forward,” he added.

This was the first time that India had used the term ‘territorial integrity’ in a public statement on the crisis in Ukraine, where Russian soldiers have taken over two breakaway republics and closed in on the capital city.

The statement calling on “all member states” was a deliberate choice to bring attention that the principle of territorial integrity had been violated by all sides in various disputes, as per sources.

The UNSC meeting, which earlier was scheduled for 3 pm New York time, was postponed twice. It finally began two hours late and lasted for less than two hours.

The final draft had two significant changes from the text circulated by the US and Albania on Thursday. The biggest change was that that reference to Chapter 7, which allows Council to enforce its direction, had been removed. Secondly, operative paragraph two had replaced “condemns” for Russian actions with “deplores”.

Hours before the UNSC meeting, Chinese foreign minister Wang Yi had told UK foreign secretary Liz Truss that Beijing “has always disapproved of the fact that security council resolutions often invoke chapter VII authorising the use of force and sanctions”.

As per sources, the western countries had removed the reference to Chapter 7 to change China’s vote from ‘No’ to abstention. However, there is no clarity if China had ever actually planned to deploy its veto power along with Russia. 

While the Western countries claimed that Russia was “isolated” by pointing to the majority of ‘yes’ votes in the UNSC, a deeper analysis of the co-sponsors of the draft resolution gave a more ambiguous picture.

After the text was circulated, the principal sponsors had called on the entire UN membership to come forward as co-sponsors. In the end, 81 countries – less than half of the United Nations – heeded the call.

The majority of the co-sponsors were from Europe, the Caribbean, Latin America and the Pacific Ocean Islands states.

From the 54 African member states, only Botswana, Gambia, Liberia, Lesotho and Niger featured in the list of co-sponsors. Similarly, Japan, South Korea, Kuwait, Turkey and Singapore were the only five representatives of mainland Asia. 

As per informed sources, the low turnout of co-sponsors was not surprising that the resolution was largely seen as a “European” issue within the wider UN membership. The draft text apparently further reinforced this perception, with the language not seen to be open to negotiation but rather as a ‘take it or leave it’ proposition, they said.

After the draft text was put into ‘blue’, sources said that there had been no substantive discussion about the text, except at the last minute when Chapter VII reference was dropped to ostensibly appease the Chinese.

Among the UNSC members, only six countries – US, UK, France, Albania, Ireland and Norway, were co-sponsors.

During the meeting, Norway implied that Russia’s veto violated the UN charter. However, none of the P3 – UK, US and France – pushed on this point. The Norwegian representative was drawing attention to Article 52’s paragraph 3, under which parties to a dispute should abstain from voting if the draft resolution was brought under Chapter VI.

The US permanent representative to the UN, Linda Thomas-Greenfield, that the vote “showed which countries truly believe in supporting the core principles of the UN – and which ones deploy them as convenient catchphrases”.

“Responsible members of this Security Council have stood together today in the face of Russia’s aggression,” she asserted.

Russia’s Vassily Nebenzia claimed that the “main reason why we voted “no” is not what the draft resolution says, but rather what it lacks”.

“In particular, they left behind the story how the Maidan junta that rose to power after the unconstitutional coup d’état in Kyiv in 2014 waged war on the people of eastern Ukraine, firing at residential quarters from guns and multiple rocket launchers and air-dropping bombs on Donetsk and Lugansk,” he said.

Giving China’s reasons for abstention, permanent representative Zhang Jun stated that “any action (by Security Council) should be truly conducive to defusing the crisis, rather than adding fuel to fire”.

He also reiterated that “after five successive rounds of NATO’s eastward expansion, Russia’s legitimate security aspirations should be given attention to and properly addressed”.

UAE permanent representative stated that the fate of the draft resolution had been a “foregone conclusion” but called for an “inclusive and consultative” dialogue process as a way forward. 

After the meeting, 51 co-sponsors issued a joint statement stating that they will be bringing a resolution to the UN general assembly, “where the Russian veto does not apply and the nations of the world will continue to hold Russia accountable”.

This was the fifth meeting of the UNSC on Ukraine and the third emergency meeting on this subject since the beginning of 2022.

With today’s developments, Russia and its predecessor state, USSR, has used the veto 143 times since 1946. The last time that Russia had wielded the veto was in December 2021 to stop the passage of a resolution linking climate change and international peace and security. Overall, the veto has been wielded 297 times by permanent members.

China’s Silk Road is Laying Ground for a New Eurasian Order

Both Kazakhstan and Russia look at China’s economic power with a mix of awe and alarm.

Kazakhstan sees itself as the linchpin of Eurasia and has long been a staunch supporter of cross-border initiatives that help alleviate its disadvantages as a landlocked country.

So it was no coincidence that, in September 2013, Chinese president Xi Jinping chose the country’s Nazarbayev University to announce the creation of new economic corridors across Eurasia as part of China’s ambitious Belt and Road Initiative (BRI). The project could have direct economic benefits for Kazakhstan, but an increasingly powerful China is also playing its own long game with an eye on creating a new Eurasian order.

Russia has plans for the region, too – Kazakhstan is also a member of the Russian-led Eurasian Economic Union (EAEU). The EAEU theoretically reduces customs duties and eliminates non-tariff barriers between member states. This opens Kazakhstan up to a bigger regional market while protecting domestic industries from the competitive prices of imported Chinese products. Kazakhstan also makes money from the transit of goods coming from China – and new overland corridors are thought to increase cross-border commerce.

Kazakhstan and the surrounding regions. Credit: Wikimedia Commons.

The Khorgos Gateway is “where East meets West”, according to its website. But there is one major obstacle: the different track gauges used by the two countries’ railways. Chinese, like most European, trains operate on a track gauge of 1.435 metres, while the track gauge in the countries of the former Soviet Union, such as Russia, Belarus and Kazakhstan, is 1.52 metres. Consequently, freight containers entering Kazakhstan from China have to be shifted onto the wider track gauge by cranes.Central to Kazakh and Chinese plans is the Khorgos Gateway dry port, which handles rail – rather than sea – cargo. Located on the Chinese-Kazakh border, it is a key gateway on the “Silk Road Economic Belt” (SREB), which is supposed to stretch from China all the way to Europe.

With six parallel railway tracks, the Khorgos port has an efficient handling capacity. And now that China has ratified the UN’s International Road Transports (TIR) Convention, special bloc trains can be sealed with certificates that obviate the need to inspect the contents at each border crossing. But is it really a great leap forward or just a white elephant in the steppe?

Limited benefits

A few kilometres east of the dry port is the International Centre for Border Cooperation (ICBC), a Special Economic Zone established to attract investment and stimulate regional development. In practice, most visitors are locals that come for duty free shopping in the malls straddling this no man’s land between China and Kazakhstan. Indeed, sceptics have speculated that the zone will serve primarily as a trading hub for Kazakh middlemen to resell cheap Chinese products to domestic markets in nearby Almaty (Kazakhstan’s largest city) and neighbouring Uzbekistan – not distant Europe.

I visited in June 2018 – and, to enter the ICBC from the Kazakh side of the border, I had to wait to pass through passport control in a long line of Uyghur, Hui, and Kazakh shoppers carrying carpets and carting enormous parcels of clothes, shoes and electronic gadgets. This is not the “New Dubai” some have promised.

The author at the Khorgos dry port on the Kazakh-Chinese border. Credit: Author provided

The economic benefits for Kazakhstan as a Silk Road gateway have been limited so far. Chinese “investment” projects under the BRI banner (for which reliable numbers are hard to come by, but there are said to be around 50) haven’t yet significantly improved employment in Kazakhstan. Indeed, many of China’s “investments” are really schemes to lend money to Kazakh authorities which they then have to reinvest to secure Chinese engineering contracts.

Because the money hardly leaves the Chinese system – and the impression prevails that China’s interest in Kazakhstan lies in building and owning assets – simmering anti-Chinese sentiment in the region may become difficult to contain. China will have to convince not only Russia, but also its Central Asian partners, that its grand connectivity narrative isn’t just about establishing Chinese hegemony in the region.

Eurasian power dynamics

Kazakhstan’s location as a geostrategic “hub” at the crossroads of the SREB and the EAEU also means it is at the sharp end of frictions between the main sponsors of the two projects: Russia and China. The EAEU is a regional integration project initiated and dominated by Russia – but, for the first time in modern history, Russia’s power is receding while China has already replaced Russia as the region’s most important trading partner. The Chinese government also appears to be conscious of its increased geopolitical leverage in the area.

Kazakhstan’s EAEU membership is also controversial domestically. Kazakhstani experts have argued that the economic benefits don’t outweigh the political costs of accepting a Russian quasi-veto over tariff and trade policy. The Kazakh leadership has already criticised Russia’s politicisation of the EAEU. It also felt ignored when Russia acted on behalf of the union to sign declarations of continental importance with China and set up working groups without including other EAEU members.

Russian officials, in turn, were equally irritated when the Kazakh government announced its own alignment (“sopriazhenie”) between the Kazakh “Nurly Zhol” economic stimulus programme and the Chinese SREB, which they saw as a move to undermine the EAEU.

Kazakhstan has become a microcosm for a new Eurasian order in the making. Both Kazakhstan and Russia look at China’s economic power with a mix of awe and alarm. At the same time, both Astana (the Kazakh capital) and Moscow attempt to engage with and contain Chinese business interests and growing economic power, aware that a tectonic geopolitical shift is underway, which they hope to be able to manage in one way or another.

Moritz Pieper, Lecturer in International Relations, University of Salford

This article is republished from The Conversation under a Creative Commons license. Read the original article.