Joseph Sullivan’s article today for Capital Matters discussed India’s continuing purchases of Russian oil. He wrote:
Despite Western governments asking it not to, India is buying more Russian oil because it’s so much cheaper than the alternatives. . . . At current prices, the switch to Russian oil could save India as much as $40 billion per year, around 1.5 percent of its GDP. For context, 1.5 percent of GDP is, according to the Congressional Budget Office, typically the size of America’s entire federal budget deficit in a “relatively strong” economy.
Declining that type of cost savings is an act of self-flagellation that the world’s poor cannot bear.
Indeed, they cannot, and these financial difficulties could present challenges to the promising U.S.–India relationship.
Writing for the Times of India on April 3, S. A. Aiyar made the same point that Sullivan makes today. He wrote:
The US and Australia are rich countries that are also oil exporters. Their oil companies (though not consumers) have benefited enormously from the sharp rise in oil and gas prices after imposition of western sanctions. But India is a lower middle-income country that is 70% dependent on imported energy. Skyrocketing oil and gas prices have mauled its economy at a juncture when wholesale price inflation was already 12% before the war. Imported gas has doubled in price. Consumer price inflation in March crossed 6.07%, above the [Reserve Bank of India’s] acceptable maximum of 6%.
He went on to say, “India should tell Australia and the US it will be delighted to buy their oil instead of Russia provided they match the 30% discount Russia is offering.” It’s hard to argue with the mathematical reality, given India’s fiscal situation.
India is far from alone on this issue, as Andy Mukherjee pointed out on April 1 in the Economic Times, India’s top English-language business paper. He said that India’s decision to buy Russian oil is “no more opportunistic than Europe continuing to buy Russian gas.” Again, it’s hard to argue with that.
He goes on to say, however, that it would be in India’s best long-term interest to play along a little more with the U.S. by not acquiescing to Russia’s demand that oil trades be conducted in rubles. Mukherjee sees the U.S. as a better long-term partner to lift India out of poverty, and views that goal as “much more vital to its national interests than a $35 discount on oil or a favorable deal on weaponry.”
(Russia began making good on its threat about paying in rubles, by the way. Today it announced it would no longer send gas to Poland or Bulgaria, which refused to comply with Russia’s demands. The Bloomberg report on that development contained this ominous line: “There was no immediate reaction from Berlin.”)
Since Russia’s invasion, India has already purchased over twice as much Russian oil as it did all of last year. As this trade continues, it could undermine Western sanctions. India has significant refining capabilities (and the largest refinery complex in the world, in fact), and refined petroleum products are traded on a global market just as much as crude oil is. With significantly lower input costs due to the Russia discount, the rest of the world could buy refined products from India for cheap, thereby indirectly buying Russian oil. Indian firms have already been selling more diesel to Europe since early March.
As for the larger geopolitical question, Brahma Chellaney argues that the U.S. is upset because India, as the world’s largest democracy, is not taking the American line, so it is undermining President Biden’s democracy-versus-authoritarianism narrative. He draws moral equivalence between Russia and Ukraine that is hard to stomach, writing that Zelensky’s regime is “no less autocratic” than Putin’s. But he does make some stronger points, from India’s perspective, on the U.S.-India relationship:
While seeking to co-opt New Delhi in his new Cold War with Moscow, Biden has still not uttered a single word on China’s two-year-long border aggression against India, which has triggered the largest Himalayan buildup of rival forces in history. In keeping with Biden’s outreach to Beijing, his State Department, equating the victim with the aggressor, has urged India and China to find “a peaceful resolution of the border disputes.”
Chellaney sees parallels between the Russia sanctions and America’s longstanding Iran sanctions:
The U.S. used its Iran sanctions to deprive India of cheaper oil and turn it into the world’s largest importer of American energy. The main beneficiary of those sanctions has been India’s rival, China, which, without facing American reprisals, has been buying Iranian oil at a hefty discount, besides becoming Iran’s security partner and top investor.
India doesn’t want to get beat by China again, which is the main reason it participates in the Quad with the U.S., Australia, and Japan. But as Chellaney argued in a different article, India has some reasons to be skeptical of the U.S. commitment to the alliance, given the war in Ukraine. Focusing too much on Ukraine would undermine the promised pivot to Asia for American foreign policy. (Elbridge Colby and Oriana Skylar Mastro made a similar point from the U.S. perspective for the Wall Street Journal in February.)
Chellaney goes on to write:
The war might also spur Biden to take a more conciliatory approach to China. Even before Russia invaded Ukraine, Biden had begun to ease pressure on China. He effectively let China off the hook for both obscuring COVID-19’s origins and failing to meet its commitments under the 2020 “phase one” trade deal with the US. He also dropped fraud charges against the daughter of the founder of the military-linked Chinese tech giant Huawei. US sanctions over China’s Muslim gulag remain essentially symbolic.
Now, as Biden attempts to ensure that Xi does not offer Russian President Vladimir Putin an economic lifeline, thereby neutralizing the impact of Western sanctions, he is likely to adopt an even more conciliatory approach.
You don’t have to buy all of Chellaney’s analysis to see that India is coming from a very different place on the question of Ukraine. India has always been this way, famously leading the “nonaligned” countries during the Cold War.
India’s nonaligned status remains a source of national pride today. As Aiyar writes in a Cato Institute blog post, Russia has returned the favor to India, consistently blocking U.N. resolutions about Kashmir for over 50 years. He does clarify, though, that India would not object if Putin falls, and isn’t rooting for Russia in Ukraine. “India seeks a Russian connection but not necessarily a Putin connection,” he says.
Zorawar Daulet Singh, writing for the Times of India, sees the whole Ukraine episode as a vindication of India’s foreign policy. He writes:
Some observers assert that the events in Europe have greatly complicated or even upended India’s foreign policy. Yet, only those who have visualised India’s role as a western sentinel or future frontline state in Asia would draw such a conclusion. To the contrary, the crisis has vindicated the core tenets of India’s foreign policy, with the main one being the ability and conviction to pursue partnerships with great powers that might be locked in competition with each other. Despite its public critiques, the Biden administration has grudgingly accepted that India will continue to pursue positive ties with Moscow while building a partnership with Washington. A multipolar world makes this realpolitik approach natural and prudent.
Singh says that India’s vision is not for another Cold War, but for “promoting an Asia that does not look like Europe’s past or its present.” That vision aligns with U.S. interests in some respects, and contradicts them in others. India’s response to Russia’s invasion of Ukraine is a perfect example of that fact.