COVID Pandemic and India’s New Foreign Policy

M.K. Narayanan is a former National Security Adviser and a former Governor of West Bengal

• The year 2021 should see a cementing of the many trends that had their genesis in 2020.
• Leadership change in the United States is perhaps the most awaited change, but is unlikely to bring about a major power shift in the international arena.
• Even before the changeover, and despite the promise of a Biden presidency to invigorate the U.S.-Europe axis, Europe has turned its back on the U.S. and revived its China links, by ‘concluding in principle the negotiations for an EU-China Comprehensive Agreement on Investment’.
• In one swift move, Europe has thus shattered all hope that China would remain ostracised in 2021.
• Many countries will now find themselves scrambling for cover. India which has greatly curtailed its relations with China since April 2020, (in the wake of Chinese aggression in Eastern Ladakh) will find itself ‘out on a limb’, with many countries likely to seek closer economic relations with China now.

A stronger China

• The year 2021, hence, begins on a triumphal note for China and China’s Supreme Leader, Xi Jinping.
• China is about the only major country which had a positive rate of growth at the end of 2020, and its economy is poised to grow even faster in 2021.
• Militarily, China has further strengthened itself, and now seeks to dominate the Indo-Pacific Ocean with its announcement of the launch of its third aircraft carrier in 2021.
• Simultaneously, it is seeking to strengthen its military coordination with Russia.
• Consequent on all this, and notwithstanding Chinese intransigence in several matters including its heavy-handed actions in Hong Kong and Uighur, China’s position across Asia is, if anything, stronger than in 2020.
• News emanating from China is that President Xi will further cement his position, both as Party leader and as President in 2021, despite internecine tensions within the Communist Party of China.
• China is, hence, unlikely to concede any ground to its opponents across the world in 2021, a fact that India will need to reckon with. It cannot expect any Chinese concessions in Eastern Ladakh, until India ‘makes amends’.

Economy first for Europe

• The new year will be dominated by strong authoritarian leaders like Xi Jinping in China, Vladimir Putin in Russia, and Recep Tayyip Erdo? in Turkey.
• International politics may not be very different from that in 2020, but any hope that the Compact of Democracy would emerge stronger will need to be eschewed.
• Europe, minus Britain following Brexit, and the retirement of Germany’s Angela Merkel, could become even less relevant in world affairs.
• The China-EU Investment Treaty which saw Europe capitulating to China’s blandishments is an indication that Europe values its economy more than its politics.
• Major changes are afoot in Eurasia and West Asia which could lead to significant shifts. Russia is beginning to display greater interest in the affairs of countries on its periphery and, together with strengthening ties with China and reaching an entente with Turkey, this seems to signal reduced interest in countries such as India.
• In West Asia, the Abraham Accords, leading to a realignment of forces in the Arab world, have sharpened the division between the Saudi Bloc and Iran-Turkey.
• Despite the hype surrounding the Abraham Accords, the situation, however, remains fluid and has not reduced the risk of a confrontation between Iran and Israel.
• This does pose problems for India since both have relations with it. Meanwhile, China demonstrates a willingness to play a much larger role in the region, including contemplating a 25-year strategic cooperation agreement with Iran.
• Saudi Arabia could find the going difficult in 2021, with a Biden Administration taking charge in Washington. The healing of wounds among the Sunni Arab states in the region should be viewed as a pyrrhic victory at best for Saudi Arabia.
• One by-product of this could be a sharpening of hostilities between the Sunni and Shia camps.
• Given the strategic flux in the region, Iran could well be tempted to use its nuclear capability to enhance its position, confident that the West may be unwilling to challenge it at this juncture.

India isolated

• At the start of 2021, India seems the odd man missing as far as these developments are concerned.
• No breakthrough in Sino-Indian relations has, or is likely to occur, and the confrontation between Indian and Chinese armed forces is expected to continue.
• India currently plays no significant role in West Asia.
• India-Iran relations today lack warmth. In Afghanistan, India has been marginalised as far as the peace process is concerned.
• While India’s charges against Pakistan of sponsoring terror have had some impact globally, it has further aggravated tensions between the two neighbours, and in the process, also helped Pakistan to cement its relations with China.
• While hostility between India and Nepal appears to have reduced lately, relations continue to be strained.
• Through a series of diplomatic visits, India has made valiant efforts to improve relations with some of its neighbours such as Bangladesh, Myanmar and Sri Lanka, but as of now worthwhile results are not evident.
• One key takeaway is that as India-China relations deteriorate, India’s neighbours are not averse to taking sides, increasing India’s isolation.
• Whether India’s perceived marginalisation from global mainstream events as we enter 2021 signifies a sharp drop-off in its foreign policy capabilities is, no doubt, debatable. India’s foreign policy objectives are to widen its sphere of influence, enhance its role across nations, and make its presence felt as an emerging power in an increasingly disruptive global system.
• It is a moot point though whether any of these objectives have been achieved. Today, India’s voice and counsel are seldom sought or listened to.
• This is a far cry from what used to happen previously.
• India will serve as the president of the powerful UN Security Council for the month of August 2021, but if it is to make a real impact, it must be seen to possess substantial weight to shape policies, more so in its traditional areas of influence.

Diplomacy and perceptions

• Many explanations could be available for this state of affairs. Admittedly, our diplomats conduct their activities with a high degree of competence, but they are possibly hampered by other factors.
• One, could be the kind of policy choices the country has adopted in the recent period, which has possibly altered the perception of India in certain quarters.
• There is again a perception that India’s closeness to the U.S. has resulted in the weakening of its links with traditional friends such as Russia and Iran, impacting the country’s image.
• Perhaps the most relevant explanation could be the shifting balance of power in the region in which India is situated, notably the rise of China, and the enlarging conflict between the two biggest powers in Asia, compelling many nations to pick sides in the conflict.
• A less obvious, but a perhaps more relevant aspect, could also be that India’s foreign policy suffers from an ideational vacuum.
• It is not the sharp decline in the economy, problems caused on account of the pandemic, or the growing polarisation in values across nations and societies, but more possibly India’s inability or failure in the ideational realm that lies at the root of our foreign policy inadequacies.

More misses than hits

• Currently, India remains isolated from two important supranational bodies of which it used to be a founding member, viz., the Non-Aligned Movement (NAM) and the South Asian Association for Regional Cooperation (SAARC).
• Efforts to whip up enthusiasm for newer institutions such as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), have hardly been successful.
• India has opted out of the Regional Comprehensive Economic Partnership (RCEP) (a majority of Asian countries are members), and failed to take advantage of the RIC, or the Russia, India and China grouping, even as relations with Russia and China have deteriorated.
• On the other hand, India’s foreign policy imperatives, across Asia and South Asia in particular, today seem to be a mixture of misplaced confidence, sometimes verging on hubris (as in the case of Nepal), a lack of understanding of the sensitivities of neighbours such as Bangladesh and long-time friends (such as Vietnam and Iran), and according to excessive importance to the policy needs and pressures of nations such as the U.S.
• There is possibly a misplaced perception in much of Asia that the India of today is not unwilling to sacrifice its strategic autonomy under U.S. pressure.
• As part of the ideational restructuring of India’s foreign policy, what is urgently required, apart from competent statecraft, is the adoption of prudent policies, the pursuit of realistically achievable objectives, and, above all, a demonstration of continuity of policy, irrespective of changes in the nature of the Administration.
• These may be time-consuming but are a surer recipe for success in attaining foreign policy objectives.

Analysis of Qatar and GCC

• The Gulf reconciliation summit, in Al-Ula, Saudi Arabia, where the kingdom and its allies decided to end their blockade of Qatar, has brought to an end, for now, their long feud.
• In 2017, Saudi Arabia, under the leadership of Crown Prince Mohammed bin Salman (MBS), the UAE, Bahrain and Egypt imposed the blockade and severed diplomatic ties, accusing the tiny Gulf country of supporting terrorism.
• They also issued 13 demands for it to be lifted, which included shutting down the Qatar-funded TV network, Al Jazeera, closing a Turkish military base and reducing diplomatic relations with Iran. Qatar did not budge despite the heavy economic cost.
• When the Saudi and Emirati airspaces were closed, Iran offered Qatar global connectivity. Al Jazeera is still live.
• And, Qatar has invited more Turkish troops, bolstering its ties with Ankara, which is eager to play a bigger role in West Asia.
• Moreover, it played an important role in the U.S.-Taliban deal and continued to host talks between Taliban representatives and the Afghan government.
• If the original Saudi plan was to isolate Qatar and make it kneel, it has backfired. And in the last weeks of the Trump administration, MBS and his allies seem to have realised their strategic folly.
• Qatar has made a few concessions to reach reconciliation.
• The 13 specific demands were replaced by a broad agreement on non-intervention in other countries internal affairs and cooperation to ensure regional stability and security, which can be open to different interpretations from different sides.
• After the summit, Qatar’s Foreign Ministry said that the country had no intention of altering ties with Iran and Turkey.
• In practice, the Saudi side stepped down from its demands and made amends with an unshaken Qatar as a new President is going to assume power in the U.S. The Saudi U-turn could be the result of a genuine tactical rethink.
• The rift in the Gulf helped Iran and Turkey, Riyadh’s main rivals, while it failed to scuttle Qatar’s standing. Iran, reeling under U.S. sanctions, also got some financial relief from Qatari payouts for using its airspace.
• By lifting the air and sea blockades, the Saudis and the Emiratis could deny Iran of those funds and also try to put up a united Arab regional front as Joe Biden is preparing to renegotiate the Iran nuclear deal.
• The Saudis may also be hoping that bridging the Gulf between two American allies would help them warm up to the Biden administration.
• While ending the feud is welcome, it cannot be overlooked that this unnecessary crisis was born out of an ill-thought-out Saudi-Emirati strategy of coercion. It reflects poorly on them.
• They should learn from their mistakes and build ties based on mutual interests and cooperation, not on threats and coercion.

Dual Currency in Cuba

• As per the latest devaluation plan announced in December by President Miguel Diaz-Canel, the CUP’s artificial one-to-one parity with the U.S. dollar has been removed.
• The currency will instead trade at 24 pesos to the greenback and the CUC will be phased out in six months.
• The CUP is in circulation in the domestic economy and serves as the principal medium by which goods are priced and wages paid.

A dual domestic currency

• During the turmoil in Cuba’s sugar industry and a plunge in nickel prices in the 1990s, a volatile CUP had fallen to 140 to the dollar. Against this backdrop, the CUC was introduced in 1994 as a unit of account and store of value, to prevent the country’s excessive reliance on the U.S. dollar following the end of the former Soviet Union. ‘
• In recent years, this second currency has more or less steady at one CUC to 24 CUPs in official exchange outlets and is the predominant mode of transaction for tourists and residents at high-end shopping outlets and other imported goods.
• Apart from the disparities attributed to the prevalence of a dual domestic currency, Havana has at times had to deftly deploy the surge in dollar remittances and tourism to bolster the peso, by legalising the greenback in the 1990s.
• It has also had to respond in kind to American sanctions in other instances, such as when the government in 2004 imposed a 10% tax on the exchange of the dollar for CUCs.
• Last July, Havana scrapped the 10% surcharge in a sequel to the 2019 opening of stores trading principally in dollars.
• The recent shift is part of the government’s bid to boost dollar transactions alongside other hard currencies, especially after tourism was closed in the wake of the pandemic.
• There is concern that the circulation of hard money could reinforce the segmentation and distortions of the past that resulted from access to the CUC for public sector companies at preferential exchange rates.

An important objective

• The country’s switch back to a single currency was an important objective in the economic transformation plan envisioned in the 2011 Congress of the Communist Party of Cuba under former President Raul Castro.
• Among the expected gains from a unified peso are transparency of firms in terms of costs and profits, higher economic productivity and incentives for exports.
• Experts have opined that a corresponding devaluation of the peso was a necessary first step to discontinuing the dual currency.
• The government of President Diaz-Canel has sought to cushion the likely impact of high inflation resulting from the devaluation with a generous wage and pension hike for state employees, besides a roll-back of subsidies to state-owned firms.
• There are concerns, however, that it could still leave a sizeable private and informal sector labour force exposed.
• In addition, there is the real risk that the adverse effects of high prices could further incense protesters who have been demanding protection for civil liberties and artistic freedom following the detention of a well-known rap singer.
• Predictably, the government has been quick to dismiss the voicing of dissent as U.S. interference in Cuba’s internal affairs. Havana must take citizens along in order to implement the new reforms.