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The intensifying Putin-Obama clash over Ukraine is turning into a new struggle for sway in Asia reminiscent of the 20th century’s zones of influence. Presently, the two prizes there are China and India.
Despite its great dependence on exports to the US, China is beyond Washington’s political influence because of deep strains of nationalism and considerable military power combined with economic strength.
Washington can confront China to set limits on Beijing’s assertiveness in Asia but it cannot coerce Beijing into acquiescence on any matter. Reasons include the American economy’s significant dependence on Chinese credit and vast markets as well as aversion to the risks of military confrontation despite Beijing’s provocations in the Asian neighborhood.
In comparison, India is still is weak enough both in economic and military terms to be enticed into Washington’s orbit despite nearly six decades of mutual suspicions. Those suspicions have diminished since 2000 and Delhi is moving quietly into an undeclared strategic partnership with the US, partly because of its fear of China’s rise.
The latest sign of warming relationships is President Barack Obama’s planned visit to Delhi in January 2015 as the prime guest at India’s Republic Day ceremony. He will be the first US President to be invited to the ceremony and will also be the first American President to visit India twice. The carefully prepared visit is likely to bring both countries closer together in the economic and military spheres.
But President Vladimir Putin will start a visit to Delhi on Wednesday for an annual India-Russia Summit. This summer, Indian Prime Minister Narendra Modi called his country “India’s best friend”. Both sides will sign up to 20 pacts and establish a long-term vision for collaboration in defense and nuclear energy.
Indian officials say the visit will instill new dynamism of “special and privileged” ties with Russia and set foundations for greatly increased trade. India already buys almost two-thirds of its weapons from Russia.
Before the Putin-Obama clash over Ukraine, India-Russia summits (this week is the 15th) were routine affairs because of Russia’s greater interest in economic ties with the European Union rather than India or China.
Moscow was circumspect in its relationship with China because of a long history of Chinese distrust and large hurdles in the way of tightening economic ties or supplying weapons to Beijing. It was easier to develop closer economic ties with European neighbors during the past 22 years.
That ease has now receded. Putin had to make large changes following the US-led European attempts to damage Russia’s economy through painful financial and other sanctions, in addition to isolating Moscow on the global diplomatic stage.
His first steps were to reach several binding agreements with China to build new pipelines to supply oil and gas to that ravenous economy over the next 40 years. These agreements involve over $100 billion in investments and could result in about $1 trillion in oil, gas and other trade with China over the coming half century.
The historic agreements make Russia subservient to Beijing in the longer term for both finance and markets. Yet Putin is opting for that rather than continuing dependence on the EU, which currently provides nearly half of Russia’s oil and gas revenues.
There is little love lost between Moscow and Beijing but Putin sees Europe as being economically and militarily subservient to Washington and is pivoting eastwards because of distrust of the Obama administration.
The main reasons for turning to Chinese finance are closure of Western financial sources to Russia and the threat of still tougher sanctions that might prevent unfettered access to the dollar clearing system. To avoid that humiliation, Putin is moving towards denominating trade in the Chinese Yuan, which Beijing wants to build as a rival in Asia to the dollar and euro.
New structures are being prepared to create investment facilities with seed capital of at least $90 billion provided by China and capacity to finance nearly $800 billion in infrastructure in Central, South and South East Asia. India is negotiating to enter all those new China-led structures, which exclude the US so far.
These are early days and Moscow’s eastward pivot may not seriously erode economic relations with Europe if the Ukraine crisis is resolved in ways acceptable to both sides. But statements by Obama and Germany’s Angela Merkel do not presage an early settlement. French President Francois Hollande has also decided not to deliver two major warships to Moscow despite long standing contractual commitments.
Some hope that economic recession will force Putin to be more conciliatory because oil is currently below $70 a barrel, far below the $100 per barrel price said to underlie Moscow’s budget calculations. But it was just $25 a barrel when he came to power and that did not prevent him from pressing on with assertiveness against the US.
Instead of backing down in the face of Western sanctions, Putin was very combative in his state of the union speech last week. So the West’s coolness is unlikely to dissipate soon. In turn, Moscow is moving more forcefully to become an Asian power instead of reaffirming Russia’s European roots.
As the world largest country, stretching from Europe to far shores of Asia, Russia’s long-term dependence on China will have incalculable consequences for global economic and political order.
India is rapidly increasing ties with the US but may resist becoming a pawn in a new global struggle between Washington and Moscow. Russia is far less powerful than the US on every count but India lives in its neighborhood, far from America.
Despite his preference for the West, India’s new nationalist Prime Minister may start to back away if Washington’s clash with Moscow intensifies and Obama seeks wider support to punish Putin over Ukraine.