Quad cannot ignore fallout of Russia-ukraine conflict
It is only India’s foreign policy establishment that is so convinced that it has the absolute brilliance to make the world understand India’s position with precision. Those with less brilliance simply see India as more aligned to one side. And that has a
Of the Quad members, US, Japan, India and Australia, it is only India that is not officially aligned with Ukraine. India’s “principled neutral, independent, impartial, non-aligned or its modern reincarnation—strategic autonomy” or any number of euphemisms cannot easily explain India’s position in the conflict that can potentially spiral into World War III. India insists that the Quad nations should restrict to Indo-pacific matters, and not venture into Russia-ukraine, but the rest of the Quad disagrees and is spending time, attention and funding for Ukraine and refugees from the conflict, presumably as a signal that they and much of the world stand united against potential aggression in the Indo-pacific and elsewhere.
An expected military victory of the more powerful armed force in the conflict may not end the war, but rather convert it into a festering wound in the heart of Europe that does not heal anytime soon, unless there is an unconditional surrender or the decapitation of leadership of one of the sides that could change the current inability-to-compromise scenario. Further, with some 6,000 nuclear bombs available with the Russian Federation (including 2,000 smaller and more precise tactical nuclear weapons— one of which is being threatened to be dropped somewhere in Europe), this is no ordinary conflict like those abandoned after so-called struggles to impose democracy via the barrel of the gun in Afghanistan, Libya, Iraq, Yemen, Syria, Ethiopia, Yugoslavia, Vietnam, Cambodia etc., that have sapped so much of the West’s moral supremacy encapsulated in UN rhetoric.
THE ‘MELANIN TEST’
While many ascribe diverse motives and attempt to understand the reasons for India’s repeated abstentions at the UN, the Indian statements and actions look eerily like India’s response to the USSR’S crushing of the Hungarian revolution in 1956—although of course that conflict was less bloody and destructive, with approximately 2,500 Hungarians dead and 20,000 wounded. Many fled as refugees, including Andy
Grove who escaped from communist Hungary as a 20-year-old, completed his education in the US and became the third employee of Intel Corporation and later its CEO, and he is credited with transforming it into the largest semiconductor company in the world. Further, India was comfortable immediately condemning UK and France when they attacked Egypt in the Suez crisis that occurred simultaneously in late October and early November 1956, thus providing a fitting contrast. Some have seen these actions meeting the so-called “melanin test” wherein India immediately sides with the party with large melanin concentration in the skin (that gives the darker skin coloration) and against the melanin-deficient (Caucasians). When it is two sets of melanin-deficient parties going at each other, India demonstrates action-paralysis and confusion—as it did in the Hungary crisis in 1956 and as alleged by the Indian government’s detractors today in the Russia-ukraine war.
In the beginning of the conflict, India was very focused on getting out about 20,000 Indian students, who were left stranded in Ukraine by the sudden Russian invasion. Indeed, given all the chaos, the students themselves made their way to the multiple borders in a bid to escape the horrors of the fighting. Once they were across the Ukraine border, in Romania, Hungary, Slovakia, and Poland, the Indian government provided Air Force and commercial flights to the students to return to India, but to what is now a very uncertain future given that many university buildings in Ukraine have been destroyed, and faculty and management have fled as refugees.
DE-DOLLARIZATION RISK
In business schools where the most insightful professors teach finance as if it were mathematical poetry, the term “risk-free” asset is emphasised in every class. It was believed, for instance, that US treasuries or bonds designated in US dollars issued by the US Treasury or Finance Ministry and held by investors around the world, ranging from oligarchs to sovereign wealth and pension funds, are “risk-free”. The recent round of sanctions against oligarchs and people allegedly “close to Putin” no matter which passport they carried or whether in fact they had any leverage over President Putin, has left the finance community shellshocked. Because, for the first time they understood that no asset in the world is actually “risk-free”. Unilateral US sanctions have bitten around the world. For instance, an oligarch’s $100 million yacht, registered in the Cook Islands was impounded at Mallorca island in the Mediterranean by Spanish law enforcement authorities at the request of the US with the backing of a US magistrate judge’s order. The Cook Islands is a self-governing island country comprised of 15 small islands in the South Pacific Ocean in free association with New Zealand wherein New Zealand is responsible for the Cook Islands’ defence and foreign affairs, and it is a little-known tax haven and the yacht was not even registered in the oligarch’s name but allegedly does indeed belong to the oligarch.
Such has been the effectiveness of the US Treasury and US Department of Justice as they seek to drain President Putin of his support milieu. But has this all been a pyrrhic victory as those oligarchs in fact appear to have little actual influence over Putin, and the conversion of hitherto “risk-free” assets like US Treasuries into politically risky ones, will mean that the wealthiest irrespective of nationality and even others too will seek to diversify their wealth holdings into multiple categories of assets and currencies. Millionaires with nothing to do with any conflict have been opining that “what if some future administration gets upset with them” and so they must diversify. This appears to have become the first genuine risk to the US dollar since the heydays of the US in the early 20th century, especially after its decisive role in World Wars I and II, and the Marshall Plan to redevelop a devastated Europe and a similar one for Japan. It comes as technologies like cryptocurrencies and alternative currencies and many commodities like gold are becoming viable options for safeguarding wealth away from diverse political risks.
Decades ago, Dr Saburo Okita, a prominent economist and Foreign Minister of Japan, who was also a great friend, tried hard to make purchases of oil in Japanese yen to enable the yen to become a world currency. He was unsuccessful then because of larger geopolitical factors beyond his control. Today, however, Saudi Arabia is selling oil to the PRC in yuan/renminbi, breaking the historical jinx. Further, that would never have happened if the de-dollarization move was not underway.
India has great expertise in digital payment systems, with 74 billion digital financial rupee transactions being recorded during the past fiscal year. But India has no digital currency and cryptocurrencies are currently not traded in India and an ambiguous version of illegality is ascribed to cryptocurrencies, making India behind the times in ascertaining value through mining and utilising cryptocurrencies. This is another area that ought to be developed with
Quad expertise since investment capital, digital or otherwise, is the urgent need.
A CAUTIONARY TALE
India and Prime Minister Narendra Modi are being pressed by multiple leaders of European countries to intervene and resolve the Russia-ukraine imbroglio, especially those in Western and Northern Europe that have existential reasons to press India. Sweden (9.7 million) Norway (5.1 million) Denmark (5.6 million) Finland (5.3 million) are less populated than most major Indian cities and would expect to be overrun by a rampaging Russia (144 million) should the conflict spill over beyond its current dimensions. While India remains smug in its belief that its “nuanced, principled and balanced” approach is well understood, a harsh reality exists as in Cold War 1.0 that perceives India as being on the side of Russia while mouthing generalities in support of Ukraine. Meanwhile, sycophants have been attempting to portray that there are several Nobel Peace Prizes available for the team that successfully negotiates an end to the conflict and ensures lasting peace.
A cautionary tale in history is worth recounting for India and PM Modi on playing negotiator. Before the name of Nelson Mandela became known worldwide, the reputation of Dr Kwame Nkrumah, Ghana’s Prime
Minister, and later President, was acknowledged as the greatest champion of Pan-africanism and decolonization. Ghana was the first Black African nation to achieve independence in 1957 and that was followed by 31 other African nations in rapid succession within a decade and Nkrumah was the foremost proponent of that effort, with his stirring, passionate rhetoric and arguments joined at the hip with the mass movement of Dr Martin Luther King, Jr, and ideological assimilation of black nationalist Marcus Garvey and other leading lights of US Africanamericans. Nkrumah also joined with Prime Minister Nehru and Presidents Nasser and Tito to build the Non-aligned Movement. Thus, he was a towering figure, politically, in the “Third World”, while commanding at best a nascent economy seeking to industrialize that was heavily dependent on cocoa, then as the world’s No. 1 producer. His critics also saw him as authoritarian and increasingly under the grip of party apparatchiks and his Soviet advisors. While he himself proclaimed to be nonaligned, the world saw him (like it saw Nehru) as being aligned to the communist network of USSR, China and North Vietnam. Ironically, even tractors donated by the Soviet Union (that were apparently older than second-hand) broke down in Ghanaian fields, further compounding the mess in agriculture and efforts on food self-sufficiency. Thus, when he set out on his quixotic mission to broker peace between the US (and its allies) and North Vietnam that was backed by China and Russia, it was seen as an affront to US President Lyndon Johnson, who was then in no mood to negotiate peace. Indeed, servile flatterers like Defense Secretary Robert Mcnamara and his band of “best and brightest” hacks continued to convince President Johnson that the “kill ratios” and other fake statistics were indicating the certainty of victory over the peasant population. From declassified documents, it even appears that Nkrumah might have been lured into that politically suicidal mission to facilitate a coup in Ghana, while he was away, by senior military officers backed by US intelligence officials. On 24 February 1966, while Nkrumah was in the PRC, en route to North Vietnam, he was overthrown in a coup that ended his government and the young democracy in Ghana. Nkrumah spent the remaining 6 years of his life in the West African nation of Guinea as an exile writing books and railing against “neo-colonialism”. While no military coup can possibly happen in democratic India, the cautionary part that resembles this facet of history is that if two belligerents (Russia and Ukraine) are each convinced of complete victory, there is really nothing that a negotiator or negotiating team can accomplish, no matter what well-wishers might want.
JAPAN AND INDIA, WITHIN AND WITHOUT THE QUAD
The inability of Japan and India to agree to a special arrangement for India to allow the Japan Air Selfdefense Force (JASDF) to fly its planes to land in India, pick up humanitarian goods from UN High Commissioner for Refugees (UNHCR) warehouses in India (likely filled with humanitarian goods procured in India itself) and then transport those goods to Ukraine is another evidence that India is wary of misunderstanding by Russia that it is getting too cozy with the proukraine camp via the Quad. Correspondingly, India has not succeeded in becoming the prime destination for Japanese industry moving abroad (and transferring production from Japan and other countries) despite considerable rhetorical support for India-japan. Soon after the Great Japan Earthquake and Tsunami in 2011, when India even sent its NDRF to help in Onagawa, industry has been moving production abroad to such a great extent as to hollow out certain parts of the Japanese industrial bases, one reason for the approximately 30% sharp decline in the yen relative to the US dollar. Environmental regulations and protectionist measures in some countries have also compelled Japanese companies to manufacture locally in those countries. However, India has not benefited to the extent it could have in terms of Japanese foreign direct investment (FDI)— revealing the weakness of a government-government approach that does not involve more innovative think tanks and the private sector adequately.
Similar problems were apparent at the end of Cold War 1.0 when leading lights of foreign investment from actual investor nations openly stated that India was with the Soviets when the USSR existed and could not simply turn around and expect FDI stating that it was now genuinely non-aligned. It is only India’s foreign policy establishment that is so convinced that it has the absolute brilliance to make the world understand India’s position with precision. Those with less brilliance simply see India as more aligned to one side. And that has a terrible record of impacting on FDI as it did ever since Independence. Nothing much has changed, except that today, the teeming millions of youngsters in India, with more than 50% of its 1.4 billion population below the age of 25 and more than 65% below the age of 35, many belonging to an “aspirational class”, are desperately in need of investment capital, more than ever before. Failure to see that reality will have enormous consequences for India’s elite.
INDO-PACIFIC ECONOMIC FRAMEWORK
The Quad will be at the centre of the developing Indopacific Economic Framework, that is the way of creating more unity within the countries keen for a free and open Indo-pacific beyond military means. Trade and investment are at the core of the Framework, and most countries need to rapidly upgrade their economies following the catastrophic mismanagement of Covid that was very different from mainstream and other media portrayals. Severely impacting the elderly and those with significant lung and other pre-existing morbidities, Covid did not have any great mortality impact on the younger and healthier part of populations. Yet the one size fits all approach championed by one country and one multilateral brought economic destruction to much of the world through unprecedented lockdowns that had never hitherto been implemented nationwide for any other epidemic or pandemic. To successfully come out of that prolonged stagflation that is now wrecking entire societies will pose a tremendous challenge. The experience of Sri Lanka in recent weeks might portend a similar situation in more Asian countries. The collective wisdom and actions of leading economies will be essential to rectify the man-made catastrophes. Hence, the new Framework will concentrate on 1) fair and resilient trade, 2) supply chain resilience including medicines and vaccines, 3) infrastructure, clean energy, decarbonization, and 4) digital.
The Quad as democracies adhering to four key principles—rather than a gathering of four countries—looks to become the lasting legacy especially as countries like South Korea, Indonesia, the Philippines, Taiwan, and other democracies in the Indo-pacific seek to join a Quad Plus grouping. The rising concerns about the fallout of the Russia-ukraine conflict cannot be ignored by the Quad—even though it is a security dialogue focused not on Europe but rather the Indo-pacific and is not a military alliance. Nevertheless, if the Quad cannot maintain the security of the Indo-pacific through strategic and economic means and its transformation to permanently “free and open”, it all will have little meaning, and will signal the end of the post-world War II era and its associated institutions and frameworks. Therefore, much is at stake in the run-up to the Quad Leaders’ Summit meeting in Tokyo on May 24, 2022 and its follow-up.
India immediately sides with the party with large melanin concentration in the skin (that gives the darker skin coloration) and against the melanin-deficient (Caucasians). When it is two sets of melanin-deficient parties going at each other, India demonstrates action-paralysis and confusion—as it did in the Hungary crisis in 1956 and as alleged by the Indian government’s detractors today in the Russia-ukraine war.
The inability of Japan and India to agree to a special arrangement for India to allow the Japan Air Self-defense Force to fly its planes to land in India, pick up humanitarian goods from UN High Commissioner for Refugees warehouses in India (likely filled with humanitarian goods procured in India itself) and then transport those goods to Ukraine is another evidence that India is wary of misunderstanding by Russia that it is getting too cozy with the pro-ukraine camp via the Quad.
Dr Sunil Chacko holds degrees in medicine (Kerala), public health (Harvard) and an MBA (Columbia). He was Assistant Director of Harvard University’s Intl. Commission on Health Research, served in the Executive Office of the World Bank Group, and has been a faculty member in the US, Canada, Japan and India.