India and US in the New World – by Rohan Bedi - for Fair Observer – 10.01.23
Better US military technology, a Russian-China nexus, tensions over Taiwan and US manufacturing outsourcing, all make the US India’s preferred partner.
Flags of India and the USA against the background of the blue sky © Dmitrii Shirinkin / shutterstock.com
India and Russia share historic ties. Soviet communism inspired India’s post-independence socialism. Russians sang songs from Raj Kapoor’s movies. In 1971, when India liberated Bangladesh, Soviet nuclear warships came to India’s defense against a US-UK fleet that sailed to support Pakistan. At the UN, Russia has been a reliable supporter of India on Kashmir and other issues. Therefore, even today, India displays rich sentimentality towards Russia.
In contrast, Russia’s neighbors do not harbor such warm feelings. The Poles are still traumatized by the Katyn massacre of 1940. Hungarians remember Soviet tanks rolling into Budapest in 1956. The Czechs can never forget how Moscow crushed the Prague Spring in 1968. After years of brutal Soviet rule, 14 former Soviet and Soviet-aligned republics joined NATO to seek protection against Moscow.
The Russia-Ukraine War is an unprovoked act of aggression. Historically, India has been close to Russia, including offering an Indian rupee trade settlement mechanism, but the time has come to put more daylight between New Delhi and Moscow.
The Russia-China dynamic is cause for worry
India often hides away from the memory of the 1962 war with China. In the war, Russia suspended the sale of military aircraft to India and dictated that India compromise on its border. Russia also told India that if it raised the matter with the UN, the USSR would be forced to support China.
2023 presents a tectonically different picture. Russia is now subject to more targeted sanctions than Iran, Venezuela, Myanmar and Cuba combined. Forced to tie the rouble to gold, the Russian economy is in a crisis. Although the Russian Central Bank sought to ban cryptocurrency in 2021, the country has now accepted crypto legitimacy in order to evade US sanctions. Also, Russia and Iran are investing an estimated $20 billion in a new 3,000 km trade route starting from Russia-occupied territories in Ukraine.
Russia’s financial system is now tied to China. It has its own domestic alternative to SWIFT — the System for Transfer of Financial Messages (SPFS), a Russian ruble-based system — which could become integrated with China’s much larger payment system, the Cross-Border Interbank Payment System (CIPS). Russia has the Mir card system for domestic payments and seeks to integrate Brazil, India, China and South Africa’s payment systems to promote use of rouble payments.
China is also Russia’s largest trade partner in both exports and imports. Russia has prioritized the use of the Chinese renminbi for international trade and payment purposes. As Visa, Mastercard and Amex exited Russia, Russian banks found a lifeline for their credit cards in the Chinese-owned UnionPay. Furthermore, Russia has also passed a law to allow violation of patents of “unfriendly countries”.
The link between Russia and China is evident. This is a source of concern for India, which has a stagnant, if not deteriorating, relationship with China.
Outdated Russian military technology is also a worry
The Russia-Ukraine war has been an eye-opener for India. A war which was expected to last a week has drawn on for months, with no end in sight. This has brought with it another aspect of concern: arms.
India relies on outdated Russian Technology. NATO weapons (mainly US) and technology (e.g. AI, Big Data), have proved to be extremely resilient against outdated Russian weapons. The US states that Russia has a failure rate as high as 60% for some of its precision-guided missiles. This is a problem for India, where the share of Russian-origin weapons and platforms across armed forces is as high as 85%. This creates a serious supply chain issue for India, which the US claims they can help replace.
It is only logical that if India is to buy arms in the future, it should be from the US, Israel, UK, Italy or France. These present a better alternative to outdated Russian weapons, especially since Russia is lacking resources to back its supply chain. Alternatively, India could produce its own weapons in line with Prime Minister Modi’s Aatmanirbhar Bharat (self-reliant India) policy. Regardless, it is evident that India needs to move its military supply ties away from Russia.
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By Rohan Bedi, who is the Managing Director & Chief Trainer of Singapore Financial Crime Compliance Association (www.sfcca.com.sg). Earlier, he was a trainer with Euromoney Learning. Bedi has worked with JPMorgan, BAML and PwC in Singapore from 2001, and HSBC & ANZ Grindlays Bank in India. He has held important regional management roles and is a known thought leader. Bedi has authored a book on money laundering, which received a PwC award, and is the author of a novel, The Second Attack.
The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.
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