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Is India Drifting Away From The U.S.?

  • U.S. efforts to bring India back into the fold have not been bearing fruit.
  • Since the Russian invasion of Ukraine, India has ramped up crude oil imports from Russia. 
  • India’s detente with China, after clashes in 2020, may lead to a further improvement in relations between the two Asian rivals.
Delhi

India last week stepped up its negotiations with the U.S. aimed at continuing to import as much oil from Russia as it requires, regardless of current and future sanctions against Moscow. This runs in tandem with India’s ongoing refusal to vote in favour of United Nations resolutions that condemn Russia for its invasion of Ukraine. As recently as December, on a visit to Moscow, India’s Foreign Minister, Subrahmanyam Jaishankar, stated: “For us, Russia has been a steady and time-tested partner and, as I said, any objective evaluation of our relationship over many decades would confirm that it has served both our countries very, very well.” Last week also saw Jaishankar meet with his Chinese counterpart, Qin Gang, at which both countries agreed to promote the improvement of relations between them. Back in 2020, when the U.S. was rolling out its ‘relationship normalisation deals’ with Middle Eastern states as a counterbalance to ever-increasing Russian and Chinese influence in the region and wanted to use India as an alternative to China’s backstop bid for oil, it was not how Washington thought things would play out. Back then in 2020, it had been around two years since the U.S. had unilaterally withdrawn from the Joint Comprehensive Plan of Action (‘JCPOA’, or colloquially, ‘the nuclear deal’) with Iran, which had allowed Russia and China to pick up the pace of expanding their influence across the Middle East even more than before. The U.S.’s key ally in the Middle East, Israel, was becoming increasingly certain that Iran was no longer ‘years’ away from being able to create a nuclear weapon but rather just ‘weeks’ away – around three weeks away, in fact. In several conversations with former President Donald Trump it was made very clear by Israel that if the U.S. did not do something to halt this progress then Israel would take matters into its own hands. Israel had already undertaken several covert missions – under the bar that denoted outright war – to delay Iran’s progress towards being nuclear weapon ready. The U.S. knew that any escalation by Israel against Iran over and above what it had been doing could well be a catalyst for a broadening and deepening of the conflict across the entire Middle East, which could eventually draw China and Russia into the conflict, in direct opposition to the US. This was, and remains, a conflict scenario in war planning on all sides that almost inevitably leads to global nuclear war. Those around Trump had forged a plan to counterbalance the U.S.’s loss of direct influence in the key countries in the region and would also appease Israel, as analysed in depth in my last book on the global oil markets. This plan became clear on 13 August 2020 when it was announced that Israel and the United Arab Emirates (UAE) would normalise relations in a deal that had been brokered by the U.S. The plan ‘coincided’ with then-Israeli Prime Minister Benjamin Netanyahu’s announcing that he was suspending plans to annex more areas of the West Bank that Israel seized during the 1967 Six Day War.

Related: Russia Remains India’s Top Oil Supplier For Fifth Month In A Row

In the scheme of the broader strategy at play in these relationship normalisation deals, the U.S. and the Middle Eastern countries it was targeting with them required an alternative country to China to be the big backstop bid for oil and other hydrocarbons purchases. China’s massive disparity between its enormous economy-driven energy needs and its minimal level of domestic oil and gas reserves had almost alone created the 2000-2014 commodities ‘supercycle’ of rising commodities prices, including for oil. As late as 2017, China’s high rate of economic growth allowed it to overtake the U.S. as the largest annual gross crude oil importer in the world, having become the world’s largest net importer of total petroleum and other liquid fuels in 2013. It was largely through leveraging this financial buying power initially that China had laid the groundwork in the Middle East for its multi-generational power-grab programme, ‘One Belt, One Road’ (OBOR) in the Middle East. Beijing had augmented these efforts militarily where necessary through its geopolitical partner, Russia, and their key regional ally, Iran. 

India had been identified by the U.S. as the ideal candidate to take over this vital role in its new strategy based around the relationship normalisation deals for two key reasons, as also analysed in depth in my last book on the global oil markets. First, India had a long-running regional rivalry with China, which had just seen another bloody eruption back then in 2020. On 15 June that year, in the disputed territory of the Galwan Valley in the Himalayas, troops of China and India had clashed in what the U.S. thought marked a new ‘push back’ strategy from India against China’s policy of seeking to increase its economic and military alliances through the OBOR project. The U.S. believed that this military push back might also be echoed in India’s economic desire to finally make substantive progress on its ‘Neighbourhood First’ policy as an alternative to China’s OBOR initiative. Second, India’s role as the U.S. counterpoint to China in the Asia-Pacific region, led by its economic development and the corollary development of its demand for oil and gas, was further underlined by data released in the first quarter of 2021 by the IEA. This showed that India would make up the biggest share of energy demand growth at 25 percent over the next two decades, as it overtook the European Union as the world’s third-biggest energy consumer by 2030. Several major new deals between India and the UAE – for which the U.S. also had high hopes at the time in its relationship normalisation process - followed shortly afterwards.

All was seemingly going well with the U.S. plan until just before Christmas 2021, when three very bad things happened all at once. The first was that U.S. intelligence sources identified that China had been building a secret military facility in and around the big UAE port of Khalifa. Based on classified satellite imagery and human intelligence data, U.S. officials stated that China had been working for several months to establish ‘a military foothold in the UAE.’ The second bad thing was that that Saudi Arabia was manufacturing its own ballistic missiles with the help of China. The third, as also analysed in depth in my last book on the global oil markets, was that Russian President Vladimir Putin had secretly orchestrated the signing of 28 investment deals between Russia and India during his visit to Indian Prime Minister, Narendra Modi. These deals included Russia, via state oil giant Rosneft, supplying almost 2 million tons of crude oil to Indian Oil, by the end of 2022, and several other oil, oil products, natural gas and liquefied natural gas (LNG) deals. 

The two countries also released a statement that: “[We have] reiterated their intention to strengthen defence cooperation, including in the joint development of production of military equipment.” Specifically, India stated that it would produce at least 600,000 Kalashnikov assault rifles – the weapon of choice for terrorists and militias across the Middle East and elsewhere – and that a 2018 contract for Russia’s S-400 air defence missile systems was being implemented. Quite what the reaction of CIA Director, William Burns, was to this trio of titbits has not been officially documented but one can assume that his enjoyment of his Christmas lunch was not as it otherwise might have been. It would also not have been helped by Indian Prime Minister Modi adding that: “We have set a target of US$30 billion in trade [with Russia] and US$50 billion in investment by 2025.”

Aside from the abysmal goings-on from India in the past week or so, India had already been busy cementing its relationship with Russia since its invasion in February 2022 at a time when the key aim of the U.S. and its allies was to isolate Putin through increasing sanctions to cause financial repercussions for his actions. According to industry figures, the end of 2022 had seen a sevenfold year-on-year increase in India’s imports of crude oil from Russia – up to 700,000 barrels per day (bpd), from 100,000 bpd in 2021. Additionally, just over a month ago, Russian LNG giant Novatek stated that it is open to accepting payments in Indian rupees for any LNG term deal it signs with Indian gas entities. Novatek’s chairman, Leonid Mikhelson, added that his company was in talks with India’s state-owned gas utility GAIL and other Indian companies for LNG term deals in this context.

By Simon Watkins for Oilprice.com

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  • Mamdouh Salameh on March 07 2023 said:
    India has never ever been in the United States’ fold to drift away from it. However, the United States did indeed try to make use of India as a strategic counterbalance to China but to no avail.

    The United States tried to persuade India to join a United States-led axis including UAE and Israel to counter the rising influence of China, Russia and Iran alliance but India jumped ship thus dooming it.

    India’s relations with Russia date back to the 1960s when the former Soviet Union provided huge economic aid to India and became the principal supplier of weapons to India’s armed forces. This tradition has continued under President Putin and expanded greatly particularly in energy. These relations have stood the test of time with India refusing to condemn Russia over Ukraine and also ignoring both Western sanctions against it and the price cap against its oil exports. Moreover, Russia and India have set a target of $30 bn in trade between them and $50 bn in investment by 2025. In February 2023 India imported 1.62 million barrels a day (mbd) of Russian crude thus enabling Russia to become the top crude oil supplier to India. Additionally, just over a month ago, Russian LNG giant Novatek stated that it is open to accepting payments in Indian rupees for any LNG deal it signs with Indian gas entities.

    Last week also saw a meeting between the foreign ministers of India and China at which both countries agreed to promote the improvement of relations between them. India is fully aware that improving relations with China benefits it politically, strategically and commercially far more than its relations with the United States particularly when it comes to border disputes involving two nuclear-armed neighbours. Moreover, both India and China are members of BRICS ( Brazil, Russia, India, China and South Africa) which is the world’s largest economic and trade bloc accounting for $78.63 trillion or 56,17% of the global economy based on purchasing power parity (PPP) in a vibrant region (Asia) with the highest growth rate in the world. BRICS includes among its members the world’s largest economy (china), the third largest (India) and the 6th largest (Russia), all based on PPP.

    India must be feeling winds of change in the world with China seeming to be gaining the upper hand in its attempts to replace the United States as the leading superpower of the world and the World Order transforming itself from a unipolar system led by the United States into a multipolar one being ushered in by China and Russia.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

Leave a comment




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