On Wednesday, government officials in India said the state-controlled Indian Oil Corp. had reached an agreement to buy 3 million barrels of oil from Russia’s Rosneft Oil Co. at a 20% discount on global prices. It’s a drop in the ocean of India’s oil needs, which was 4.5 million barrels a day in January. However, if a payment system is worked out in rupees that isolates the transaction from the sanctions imposed on Russia, much more could be followed.
The United States is not happy. White House spokeswoman Jen Psaki said India should be concerned about how it will appear in history books when writing the story of the invasion of Ukraine. If this agreement brings more, you should expect questions about whether the West has given up too much faith in India.
However, India has the same reasons for questioning whether it has put too much faith in the West. Although Europe and the United States are happy with the speed and effectiveness of sanctions against Russia, they seem blind to the impact of these sanctions on the world.
In India and many other developing countries, Western powers and the institutions they dominate seem to have different standards of conflict close to home. Although the World Bank has been slow to respond to the concerns of other war-torn nations, it has raised a $ 700 million package for Ukraine in record time. Some economists say the International Monetary Fund may overturn its rules to send $ 1.4 billion to emergencies in Ukraine.
Meanwhile, these Western nations are showing themselves to be the evil guardians of the global commonwealth. Take the cut of several Russian banks from the SWIFT financial messaging system. We have become accustomed to thinking of interbank communication as a global utility; they have now become a tool of Western foreign policy.
It was a unilateral decision by the countries that control SWIFT, with the exception of the US and Japan, all of which are European. Little thought was given to how countries like India, Russia’s oil and fertilizer-based countries pay for SWIFT, would handle the fall. It should come as no surprise that India’s reaction has been to find a way to deal with sanctions by consolidating trade with Russia in rupee and rubles.
It is particularly shocking to criticize India for continuing to buy oil from Russia, given that European nations still need to withdraw energy from Russia. And, unlike them, India can hardly afford such bills. If oil is left over $ 70 a barrel for a month, the rupee will fall, the government will run out of money, inflation will rise, and the country will have to start worrying about the balance of payments crisis.
We have experienced such a break at least twice, in 1991 and 2012. However, our supposed partners in the West do not recognize that avoiding another is a national priority.
They don’t care how hypocritical their word about punishment can be. The U.S. spent most of the last decade trying to persuade India not to buy Iranian oil in an attempt to return Iranian shipments to market as soon as the focus shifted to Russia. Although the US and other countries in Europe are expected to bear the cost of sanctions, they are too shy to send Polish fighter jets to Ukraine.
Moreover, in the long run, the Indians fear that sanctions will bring Russia closer to China and that Beijing will expand its control over the global economy. While some Westerners are concerned that India is not aligned with their side, many Indians are concerned that the concept of the West “on their side” does not include India.
They’re both short. Whether they like it or not, the guardians of India’s muscular nationalism, India is benefiting from the patience of the West right now in the fight against social unrest and economic performance. It needs European capital, Japanese investment and US technology to modernize its economy, not to mention weapons and diplomatic support, to fight China. Local media and government agencies must also remember that Russia caused this crisis without provoking the invasion of a smaller neighbor – and India is unlikely to be in favor of the attacker.
For its part, the West must learn, once again, that its actions have consequences. India, such as struggling to manage deficits, or Kenya, facing a growing grain import bill, may not be suffering as much as Ukraine, but they are victims nonetheless. The international system must make room for these unexpected challenges through bailouts, liquidity exchanges with central banks and other extraordinary measures.
This is a test case. The world can build effective mechanisms to repel attackers – Russia or China – if countries like India have a voice in them. Otherwise, as with SWIFT, they will reject and weaken these systems in the interests of their national interests.
(Mihir Sharma is a columnist for Bloomberg Opinion. He was a columnist for Indian Express and Business Standard and is the author of “Restart: The Last Opportunity for the Indian Economy.”)
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