Three contemporary developments have challenged India’s engagement with the world and its security concerns in the past 24 months. The first was the decision by China’s Xi Jinping to pick a line from a map in imagined history and send 100,000 troops and more to alter the current political equation in the Himalayas. This was a whimsical and perverse exertion of power that resulted in a bloody clash and a still continuing face-off between Indian and Chinese troops. Xi’s actions then were no different from Vladimir Putin’s in recent days, both yearning for the expanse of empires past or even mythical. The global reaction, though ostensibly sympathetic to India, was timid when compared to the current aggressive response to a similar Russian effort to change the politics of Europe.
Continuing economic engagement with China and appeasement of the Dragon to the detriment of its partners and allies defined the western world’s response. The differential between geopolitics in Europe and geopolitics in Asia has been underscored again in stark terms. The frenzied media coverage and careless commentary continue to reinforce how values and ethics vary when ethnicity and geography change. This must affect the assessments of the West’s partners in the East.
Next, in August 2021, the world’s mightiest superpower, the United States (US), finalised an unethical and tragic arrangement with a band of terrorists, and deserted Afghanistan overnight. Women rights, individual freedoms and the “values” that were propagated while waging the so-called liberal war against terror, were all discarded in favour of what was expedient. The professors of democracy and the radical Taliban found common cause and sent Afghanistan back to the 1990s. For India, terrorists armed with American weaponry were no longer just a threat scenario but a reality at its door — one it would have to handle by itself.
The differential between geopolitics in Europe and geopolitics in Asia has been underscored again in stark terms. The frenzied media coverage and careless commentary continue to reinforce how values and ethics vary when ethnicity and geography change.
And now, Putin has decided to go one up on Joe Biden and take Europe back to the early 20th century. Russian troops invaded a sovereign country to enforce a political writ driven solely by the desire to preserve Russia’s influence over geographies that increasingly disagree with the politics and propositions of the Kremlin. While Russia’s fears of the purpose and method of the North Atlantic Treaty Organization (NATO)’s expansion must not be discounted, use of force and violation of a country’s sovereignty cannot be acceptable as an expression of disagreement.
The invasion of Ukraine has put India in an unenviable position of choosing between what is right and what it believes is right for itself. India’s tough words on Russian action in its statement at the United Nations Security Council (UNSC), even as it abstained from voting, demonstrated this. Yet this is insufficient for many in the liberal West who seek India to be part of the normative liberal order, as well as of a performative chorus against Russia.
The invasion of Ukraine has put India in an unenviable position of choosing between what is right and what it believes is right for itself.
What is more striking than India’s predictable vote is the mood on the street and views of the commentariat. It seems that the memories of the feeble support on China and the shenanigans in Afghanistan are still fresh.
The US invasion of Iraq in 2003 had triggered loud political debates and voices against India’s then position on American intervention. This time, the convergence across the normally sharp political divide is palpable and must be a moment for reflection for many.
Several questions confront New Delhi. First, does strategic autonomy equal neutrality, or is it the freedom to choose what is best for the country at any given time? Can we disregard growing strategic expectations from partners? What are the dependencies that are being created by our economic and security choices? Which of them are inimical to our interests? And, how can we integrate this aspect as we make choices in a multi-layered world?
Finally, there is a question for the trans-Atlantic order. Its tough line on Russia’s military adventurism, gaming of economic relations, and cyber and information operations have been compelling. Will it hold this line when it comes to China’s actions? Or will the happenings in Asia continue to be appraised through a “dollar”- driven values framework?
Trusted connectivity, diversified sources of materials and components and resilient financial and trading arrangements are no longer buzzwords but a strategic imperative requiring all of India’s consensus, including within its business community, lawmakers and all stakeholders.
But the single most important learning through the pandemic years and the three geopolitical developments that have created turbulence for India is the burial of the post-war assumptions of the century past that undergirded our modern societies and indeed the global project that was born around the same time as India’s Independence.
Between China, the US and now Russia, we have witnessed the weaponisation of everything. Innocuous supply chain components for electronics, minor supplements for medicines, components for vaccine packaging, energy and gas grids, SWIFT system and currency and minerals and sundry materials have all been used for political coercion, waging war, or for undermining others’ interests.
Prime Minister Narendra Modi’s call for Aatmanirbharta (self-reliance) has acquired a new salience and ironically, achieving it requires astute global interlinkages and perhaps even more dense global networks for a country that houses a sixth of humanity. Trusted connectivity, diversified sources of materials and components and resilient financial and trading arrangements are no longer buzzwords but a strategic imperative requiring all of India’s consensus, including within its business community, lawmakers and all stakeholders.
The emergence of new technologies has digitalised markets, societies and nations. Once perceived as a strength, this proliferation of technology is now also a vulnerability. It has made tech-governance more political and social, and less about the traditional modes of regulation such as permissions, standards and tariffs.
India is among the most technology adept nations, a function of its people’s comfort with IT products and services as well as its late-mover advantage. It must now engage with a spectrum of evolving needs around law and regulation. This is necessary to accelerate population-scale opportunities and address widespread risks.
Three sets of issues emerge here – understanding the nature of technology-linked risks; assessing the challenges to governance; and being imaginative in embracing new modes of regulation.
Three sets of issues emerge here – understanding the nature of technology-linked risks, assessing the challenges to governance, and being imaginative in embracing new modes of regulation.
Improved access is credited with enabling financial inclusion, efficiency in education and healthcare, and fostering local e-commerce as well as global trade. However, a large user base is also a double-edged sword. As a result, corrective interventions need to be nimble and at digital velocity and population scale. Legacy regulation is simply ineffective.
This is best illustrated by problems plaguing social media platforms. A 2021 study found a high rate of social media misinformation in India, and attributed this in part to the country’s higher Internet penetration rate, driven by smart phones. Between June-July 2021 alone, Facebook received 1,504 user complaints in India – with a significant proportion of these related to bullying, harassment or sexually inappropriate content. Concerns are also emerging across other digital ecosystems, such as online gambling and crypto-assets. The mobile phone is a communication device, a crime scene and also an unsafe personal space.
Several state-level laws regulate or entirely prohibit betting and gambling. However, research suggests India is among the top five countries in terms of income potential from online gambling, and that the domestic online casino market may grow by 22 per cent each year. People from several states, such as Maharashtra, Telangana and Karnataka, are among the most frequent visitors to online gambling websites. The market for illegal betting and gambling in India is highly lucrative, with some estimating its value at USD 150 billion.
Offshore gambling websites often channel black money, engage in illicit transactions and launder wealth through financial intermediaries. Their operators are invariably based outside India, which makes it difficult to enforce the writ of the state. Recent investigations by bodies like the Enforcement Directorate have revealed instances of locals being hired to open bank accounts and trade through various online wallets, revealing gaps in due diligence mechanisms.
For the digital economy to flourish, it is important to evolve approaches that help resolve systemic and structural risks. It is time to reassess what is good, what is bad and what is ugly in this new digital landscape. Online gaming and online gambling must not be conflated. Similarly blockchain and sensible DeFi must not be clubbed with predatory crypto-gaming. After all, if we don’t embrace disruptive technology markets through sensible regulation, others will. A failure to capitalise may see India lose key avenues for economic growth and investment. India risk environment will then be shaped by external jurisdictions, some inimical to the country.
For instance, there are approximately 15 million crypto-asset investors in India, with total holdings of INR 400 billion. However, the regulatory and policy uncertainty has compelled crypto-asset entrepreneurs and exchanges to look to operate in more favourable markets. Exchanges such as Cryptokart, Koinex and ZebPay have exited the Indian market. ZebPay, for instance, is now headquartered in Singapore. In late 2021, many crypto-asset founders in India were considering moving their businesses to either the UAE or Singapore.
What we need today is new thinking and a new imagination of the digital world as not merely a virtual extension of the real, but an entirely different paradigm.
By banning cryptocurrencies altogether, nations such as China have missed the bus. India must leverage its position as the world’s third-fastest growing technology hub and seize the opportunity created by Beijing’s command and control ethos that is antithetical to innovation. India can and should become a global norms shaper in tech.
Tech regulation at population scale is akin to writing a new constitution for a digital nation. What we need today is new thinking and a new imagination of the digital world as not merely a virtual extension of the real, but an entirely different paradigm. There needs to be a clear-eyed understanding of what is legal, what is illegal and what may be illegal and yet requires regulations to serve and protect users and citizens.
To use a real-world analogy, since the 1990s, many countries including India have consistently distributed condoms and undertook safety campaigns among sex-workers without legalising prostitution or made available safe syringes to drug users without legalising the act. For governments and regulators, the role is no longer one of a gatekeeper that has the ability to prevent or permit activities online; it is becoming more of an ecosystem shaper and reducer of public bads.
By taxing cryptocurrency assets but not recognising these as legal tender, India has shown some welcome flexibility. It would do well to retain this nimbleness and become a co-curator of relatively safe tech platforms, services and products of the future that respond to Indian jurisdiction rather that off-shore the production of risks along with the rewards.
The talk of values is not new to German foreign policy-makers. But the Russian invasion on Ukraine seems to have finally led Germany to walk the walk. The last week has been both frenzied and path-breaking in German politics.
On 22 February, Germany’s Chancellor, Olaf Scholz—a Social Democrat from Hamburg—called for a halt to Nord Stream 2, in response to Russian President, Vladimir Putin’s, provocations in Eastern Ukraine. This was dramatic at several levels: Germany’s energy dependence on Russia had tended to make some politicians—including Scholz’s predecessor, Angela Merkel (a Christian Democrat)—wary of pulling the plug on the pipeline project. Scholz deserves even more credit for having made this break with Germany’s Russia policy in the context of party politics: The Social Democrats had come under critique in the past for being too soft on Russia (Russlandversteher).
Germany’s difficult past had led it to ban the export of weapons to conflict-zones; in keeping with this practice, the country had blocked Estonia from sending arms to Ukraine last month.
Since the outbreak of war in Ukraine on 24 February, Olaf Scholz has taken three further remarkable steps. First, after some hesitation, he has agreed to the inclusion of a ban on SWIFT transactions with Russia. This is a strong and costly signal to send to Russia as it will also have financial implications for Germany. Second, Germany’s difficult past had led it to ban the export of weapons to conflict-zones; in keeping with this practice, the country had blocked Estonia from sending arms to Ukraine last month. Olaf Scholz engineered an unprecedented shift. In a stirring speech at a special session of the German Parliament on 27 February, Scholz stated that Germany, by supporting Ukraine, will stand on the side of Europe, democracy, and the “the right side of history”. Amongst the concrete measures he outlined, sending military supplies to Ukraine was key: “Russian invasion marks a turning point. It is our duty to support Ukraine to the best of our ability in defending against Putin’s invading army”. Germany will now be supplying anti-tank weapons and Stinger missiles to Ukraine. And third, just as significant is Germany’s announcement to increase its NATO defence spending, thereby signaling the emergence of Germany as a security actor.
In a country where deliberative democracy is exalted (sometimes to a point where it amounts to being a strategy to doing nothing or muddling through), and the burden of history is high, the swift turn towards taking greater responsibility through action cannot be underestimated. Scholz’s leadership has been critical to this development, though he is undoubtedly helped by his coalition partners in the Green Party, who have come to power on a platform of principles and values. Germany’s proactive role is invigorating for us to observe, and is perhaps also serving as a catalyst for the European Union: Witness the unprecedented decision by the EU to purchase weapons for Ukraine.
One could still take issue with the timing of all this: It would have indeed been better to signal such resolve to Putin before his attack on Ukraine, thereby, deterring war in the first place. But at a time when Germany seems to be finally walking the walk of values, it is time to not look behind, but fare forward.
Germany’s proactive role is invigorating for us to observe, and is perhaps also serving as a catalyst for the European Union: Witness the unprecedented decision by the EU to purchase weapons for Ukraine.
It is clear that Scholz has understood the importance of hard power, in a way that his predecessors had not. As a dedicated European, he also knows that the Putin’s aggression towards Ukraine is a threat to European security as a whole. The question remains though, will he be able to extend his gaze to the global stage, and exercise much-needed leadership there? Putin is not the only authoritarian with grand designs in his neighbourhood; President Xi has been displaying similar adventurism towards Taiwan. The Ukraine crisis has brought these two players even closer, thus far. Will Scholz be the Chancellor to break out of the European platitudes of “partner, competitor, and rival” and finally call out China, just the way he has with Russia? As Mayor of Hamburg, Scholz was able to successfully attract Chinese investment to his city. As the Chancellor of Germany, he now has the onerous task of building a governance architecture that will secure the continent—and like-minded, democratic partners—from Chinese expansionism.
In the third decade of the twenty-first century, democracies face a new adversary — technology. Technology was once seen as a force for good, which could bridge the gap between the state and restless streets. Today, owned and controlled by large enterprises and extra-territorial governments, that very technology sometimes undermines the foundations of democracy, where it functions as a public sphere and a vibrant information exchange.
Much of the world has blearily woken up to big tech’s ambitions, expansion and unaccountable power to shape the human condition. A few companies, dotted on America’s West Coast (henceforth referred to as big tech), now possess the ability to harness the digital gold rush — along with the equally overwhelming influence on discourse in democratic societies. In parallel, a rising China, with its rapid successes in building a vibrant technology ecosystem, has unleashed plans to dominate innovation, high technology and the global perceptions ecosystem (henceforth referred to as red tech).
Technology from the West Coast of the United States and technology that seeks to serve the Chinese Communist Party (CCP) have both chosen to pursue their defined objectives with little thought for constitutional systems and laws in third countries. As such, much of the democratic world is at risk of being caught in the vice-like grip of big tech and red tech. It is, therefore, time for democratic societies to discover and examine means to secure an open and free global technological ecosystem that serves all shades of democracy.
Technology from the West Coast of the United States and technology that seeks to serve the Chinese Communist Party (CCP) have both chosen to pursue their defined objectives with little thought for constitutional systems and laws in third countries.
Why the Battle for Tech Matters
The threat that big tech poses to democracy is multifaceted. First, major social media platforms — Twitter, Facebook, Google and others — curate, promote and curtail information received by and, indeed, even the opinions of citizens in democratic societies. This power over speech and expression, and therefore over our politics and polity, is unrivalled in history (Baer and Chin 2021). While US steel, big oil and big tobacco were brought to heel by domestic regulations and national governments, the transnational reach of big tech has made it much harder to circumscribe (Lago 2021).
Operating outside rules and regulations prescribed by sovereign constitutions, social media platforms now exercise a worrying level of influence without accountability. Big tech has deplatformed controversial political figures such as Donald Trump (Byers 2021); censored content, a decision that internal ombudsmen disagree with (Eidelman and Ruane 2021); and has encouraged an engagement-based content ranking system that has allowed everything from disinformation about coronavirus disease 2019 (COVID-19) to hate speech to spread (Harris 2021). Platforms are free to decide whether they function as private hosting platforms or providers of a vital public utility; they cannot be both. Yet, they pick and choose between the two functions as it suits them.
National governments have not been asleep at the wheel. From New Delhi to Canberra, they have tabled regulations to rein in social media behemoths. In every instance, platform enterprises have chosen to obstruct, obfuscate and outmanoeuvre regulatory efforts (Clayton 2021). Left unregulated, our digital commons may become a noxious space that suffocates democracy, rather than being the promised breath of fresh air.
The future of democratic societies will also be decided by the contest with China in high technology. This competition runs deeper than China’s desire to build “national champions” that can outcompete the Googles and Apples of the world. To Beijing, China’s technology capabilities directly serve interests, ideologies and inclinations of the CCP (Tyagi 2021). Even as the Great Firewall of China allows the CCP monopoly control over ideas and over truth among its own citizens, China’s ever-increasing reach and economic expansion provides the party the ability to pervert and undermine the public sphere of other nations.
Platforms are free to decide whether they function as private hosting platforms or providers of a vital public utility; they cannot be both.
From harnessing artificial intelligence (AI) in the form of facial recognition technologies to vastly expand its citizen surveillance system (Davies 2021) to deploying those very capabilities against Uighur minorities in Xinjiang (Mozur 2019), the CCP will not shy away from deploying tech to reinforce strict authoritarian control at home. Overseas, “wolf warriors” (Martin 2021) insert themselves into every global debate of consequence and Chinese money power prevents Western media or social media from acting against such insidious and troubling participation that aggravates cleavages in other societies.
As China’s economic influence and technological capabilities have grown, it has sought to influence and manipulate global publics. China’s official media, governmental entities and diplomats have leveraged open platforms such as Twitter to peddle disinformation on the origins of COVID-19 (Associated Press 2021). China’s influence operations have also extended to election interference in Taiwan (Kurlantzick 2019), and they are increasingly inserting themselves in other countries as well. According to Freedom House, China has used its technological capabilities, in tandem with its economic and political power, to launch a massive influence operation that is gaming democracies from the inside out (Cook 2020).
Red tech is clearly an extension of the CCP’s global ambitions. For example, global standards bodies and multilateral organizations have been flooded with standards proposals by Chinese tech firms that would enshrine CCP values into the fundamental architecture of the internet (Gargeyas 2021). At the United Nations, Huawei and other Chinese state-owned enterprises have led advocacy for a “New IP” to replace the existing TCP/IP (Transmission Control Protocol/Internet Protocol) structure of the internet (Gross and Murgia 2020). Industry analysts have expressed concern that this new structure, with inbuilt controls that would allow for vastly increased governmental interference, is fundamentally at odds with the open internet of today.
According to Freedom House, China has used its technological capabilities, in tandem with its economic and political power, to launch a massive influence operation that is gaming democracies from the inside out (Cook 2020).
The ascendance of Chinese standards and tech also worries global actors for other reasons. While the United States and the European Union have enabled the creation of penetrated and argumentative democracies — wherein all countries and civil society organizations can advocate for the regulation of big tech or the promulgation of General Data Protection Regulation (GDPR) standards — China has no equivalent political structure. In fact, China’s intemperate wolf warrior diplomacy, which has precipitated clashes with Australia (Ryan 2020), Sweden (BBC News 2018) and France (Seibt 2021), among others, demonstrates that China has little tolerance for dissenting views or for reciprocal tolerance of criticism.
The Regulatory Void
Despite the high stakes and clear threat, regulation has failed to keep up. Major powers have not come to the fundamental realization that regulations must be both political and functional. Technology regulations driven by industry may have prized functionality, but both big tech’s subversion of regular constitutional processes and democratic debate as well as red tech’s brazen advancement of the CCP’s agenda demand regulation to recognize and return to its political roots.
Part of the reluctance to commit to a more political vision of regulation stems from overdependence on a China that dominates major global economies and the tech innovation ecosystem (Pletka and Scissors 2020). Given the massive size of the Chinese market, its capable and growing technology product and service lines, and Beijing’s willingness to use market access as leverage, many dither in enforcing regulations that exclude Chinese technology from specific sectors and functions. Others feel that government interference and politicization in regulatory matters could result in the fracturing of the global tech innovation ecosystem altogether (Schneider-Petsinger et al. 2019).
Technology regulations driven by industry may have prized functionality, but both big tech’s subversion of regular constitutional processes and democratic debate as well as red tech’s brazen advancement of the CCP’s agenda demand regulation to recognize and return to its political roots.
However, the return to more political regulation to oversee technology in the days ahead is inevitable. Simply, it is part of a well-established historical cycle. As Caetano Penna (2022) points out, every technological revolution has generated cycles of exuberance that leave contemporary social forces and political institutions in disarray. Only later does society mobilize to reshape institutions to suit a new era. Such regulation in service of societal goals has always been a key determinant in the evolution of industrialized societies. The spread of communication technologies in the boom from the 1980s to 2008 represented a cycle of exuberance. Today, however, technology possesses the power to fundamentally remake, disrupt and destabilize societies. AI-enabled machines threaten to put millions out of work and social media platforms, with a little Chinese help, have the potential to undermine democracies.
What Does a More Political Vision Look Like?
States, civil societies and general publics will have to take back control of the conversation over technology from tech companies. Part of this process will be nationally led and the rest multilateral. Domestic polities need to debate and hammer out a national consensus on some key issues, including on whether to enshrine privacy as a fundamental right. Assuming privacy is guaranteed, what level of privacy would suit their purposes? Who should own and have access to data? Who decides, and through what process, whether particular ideologies and groups should have access to the public commons?
In parts of the world where this debate is ongoing, robust data protection and privacy laws have been framed. While Canada now holds major tech platforms to the same transparency standards as traditional broadcasting groups (Solomun, Polataiko and Hayes 2021), Australia (Choudhury 2021) and India (Saran 2021) have adopted more stringent social media rules aimed at forcing big tech to comply with national-level regulations and directives on content. Nations would also have to debate the merits and benefits of the existing open internet model versus competing visions such as China’s New IP proposal. Each of these decisions would require clear choices by citizens who have, thus far, been excluded from conversations by governing elites and technology companies.
Domestic polities need to debate and hammer out a national consensus on some key issues, including on whether to enshrine privacy as a fundamental right.
At the multilateral level, bringing politics back into regulation will help safeguard data and democracies. An excellent example of political regulation is the European GDPR data architecture. Even firms outside the European Union that provide services to EU citizens find themselves subject to the European Union’s fundamentally political vision of privacy for its citizens (Nadeau 2020). The GDPR has also allowed for another political choice: flows of data will be free within the European Union but will be subject to protections upon leaving its borders.1 In effect, the European Union has erected a robust regime of protection that privileges countries that share a similar vision of privacy and data protection.
The European Union’s economic, political and normative leverage, popularized through the “Brussels effect,” has effectively forced other regimes to make way for it, with numerous countries enacting similar procedures. As such, the European experience in norms and standards setting is useful. Countries that share similar political visions of internet governance, disinformation and other aspects of technology policy can come together multilaterally to make the vision prevail globally. And disruptive players such as China, still new to the standards game, must make their peace with liberal democratic norms — or risk being left out in the cold.
Robert Fay suggests key digital powers come together to form a multilateral body, the Digital Stability Board (DSB), which would enact digital policy in much the same way that the Financial Stability Board helps design and monitor the implementation of key financial policies while assessing risks and vulnerabilities in the global financial system (Emanuele 2021). A DSB would lead discussion on regulating data value chains, countering misinformation and the development of cutting-edge technologies such as AI (ibid.). Given the transnational nature of the challenge posed by big tech’s dominance, a forum such as the DSB would be well suited to lay down the rules of the road on regulation and reining in major tech platforms.
Countries that share similar political visions of internet governance, disinformation and other aspects of technology policy can come together multilaterally to make the vision prevail globally.
While such a DSB would be useful to manage hostilities with powers such as China, another interesting proposal comes in the form of a group of 1o leading democracies, or D10. Proposed by British Prime Minister Boris Johnson (Fisher 2020), a D10 grouping would significantly source equipment for key technologies such as 5G from countries within the partnership. It could also develop a shared approach on key threats facing democracies, including countering disinformation, penalizing purveyors of influence operations such as China (or even Russia and other countries) and devising workable regulations for social media platforms that strike a balance between fighting fake news and preserving freedom of expression.
Ultimately, the introduction of the D10 to digital policy debates would signify a shared political vision, born out of democratic values, toward building the digital economy and regulating malcontents in the system. Good, old-fashioned democratic politics remains a primary driver even in the digital age. Wolves and wolf warriors hunt in packs; open societies need to respond with similar unity of purpose.
This piece builds on an intervention by Samir Saran at the Summit for Democracy on December 10, 2021.
If a weary international community—reeling from unanticipated challenges and unprecedented disruptions in the early 21st century—was looking forward to a stabilising start to the 2020s, its hopes were short-lived. COVID-19 continues to weave its way through borders and continents, felling victims and flummoxing governments. Two years down the line, it is increasingly clear that we have to learn to live with the virus, as it shows signs of transitioning to become endemic. A “new normal” where COVID-19 does not cripple communities, countries and whole continents is the future, even as vaccine inequity makes the possibility of more lethal variants imminent.
But even before COVID-19 forced us to radically rethink and redo the way we live our very lives, a certain tiredness had been evident. Generational and geographical shifts in the balance of power, rapid advances in technology-led innovations, and existential global risks like climate change have all strained the capacity of prevailing international norms and institutions. These have left them looking wilted, if not withered. Now, these norms and institutions have all but shattered from the strain of the pandemic. There is no percentage in stating the obvious, yet it must be reiterated: The international community needs new ideas, anchors and torchbearers to reinvigorate globalisation and strengthen global co-operation.
Towards this end, only asinine assessments of a future world order as the century turns 20 would ignore the crucial role of India in shaping this decade, and determining the trajectory of the decades to follow. Our endeavour with this series of essays is to capture the ideas and ethics driving contemporary Indian diplomacy; examine the methods and contours of India’s engagement with the world; and, offer a prognosis of India’s future as a leading power.
Under the rubric of ‘India@75: Aspirations, Ambitions, and Approaches’, ORF has curated 18 essays written by some of the world’s finest minds, representing former heads of state and government, members of parliament, heads of international institutions, leaders from business, and experts from academia and media. Between them, they have studied India’s evolving relationship with new geographies, its engagement with new domains of global governance, and the human imperative that must define India’s rise.
Few predict the path ahead will be easy for India, or that latent and legacy challenges confronting this nation can be ignored. Indeed, most assessments in this volume suggest disquiet and uncertainty. Amrita Narlikar begins her essay with a cautionary note on world affairs. “Multilateralism is facing a crisis of unprecedented proportions,” she writes, “It manifests itself in a fundamental questioning of the very value of multilateralism within countries and deadlocks in negotiations in multilateral organisations.” But this global crisis, she argues, also begets opportunities for India. C. Raja Mohan agrees and asserts that this period of churn offers India the opportunity to shed the temptation to act alone and actively build new coalitions and consensus with other powers. But this will depend, he argues, on how quickly India can restructure its traditional worldview.
As Harsh V Pant writes in this essay, this restructuring is already underway, as “India’s past diffidence in making certain foreign policy choices is rapidly giving way to greater readiness to acknowledge the need for a radical shift in thinking about internal capability enhancement by leveraging external partnerships.”
As the world’s centre of gravity shifts from the Atlantic system, India’s engagement with both emerging and old geographies acquires new salience. And this is where the new external partnerships are actively taking shape. Central among these is the dynamically evolving Indo-Pacific construct which, as Premesha Saha posits, will weave communities, markets and states from the East Pacific to East Africa into one strategic geography. How India adapts its “economic structure” to these realities and implements its “commitment to prevent hegemony in the oceans”, argues Kwame Owino, will determine its ability to lead these new regions.
But shaping new geographies will also require India to manage certain old relationships. The Indo-Pacific should not be seen in isolation—its markets and communities are also rapidly integrating with the Eurasian supercontinent. Steven Blockmans laments that the India-EU relationship has underperformed given its potential to anchor democratic and rules-based governance in greater Eurasia. Solomon Passy and Angel Apostolov boldly make the case for exploring the possibility of a dialogue between NATO and India, indicating just how drastically—and rapidly—the mental maps of the world are morphing.
There is a common thread that binds these analyses: A keen interest in India’s evolving relationship with the US and China. These three nations will, after all, rank among the largest three economies by the middle of this century. The turbulent Twenties will see the dynamics of this power triangle assume centre stage. The US sees India as a partner in its endeavour to neutralise an increasingly aggressive and expansionist China. Jane Holl Lute argues that India “has understood China’s principal strategic aim to replace the United States as the most consequential security power in Asia”. While India’s choices will undoubtedly implicate the balance of power between the US and China, India will most likely chart its own course in international affairs.
ORF Distinguished Fellow Rajeswari Pillai Rajagopalan highlights India’s behaviour in international negotiations on outer space as a primary example. In every significant process—from the UN GGE to the EU CoC—India has argued for greater multilateralism while actively discouraging behaviour that is “inherently destabilising”. I would add India’s engagement on cyber governance, particularly on emerging technologies, to this list. Although technological systems are rapidly unravelling, India has sought to frame rules for its digital economy that both serve its development interests and preserve interdependence. As Trisha Ray writes, “New Delhi must prepare to shape, rather than be shaped, by these shifting geopolitical winds.” Others remind us that much work still needs to be done. Renato Flores urges India to learn lessons from its RCEP withdrawal, shed traditional hesitations, and emerge as a leading advocate for multilateral trade.
India’s most significant contribution to the global commons will be providing sustainable livelihoods to its own people, and its battle against climate change. Indeed, Oommen Kurian & ShobaSuri begin their analysis with the proposition that success or failure in implementing the global SDG agenda is dependent almost wholly on India achieving its own targets. India already produces nearly half of all global vaccines and is a leading voice on IPR reform, as Khor Swee Kheng & K. Srinath Reddy note, making it essential for global health security. India will also be tasked with achieving livelihood goals for itself and the world in a carbon-constrained world, which is why Jayant Sinha argues that India can no longer rely on the ‘farm to industry’ model of development.
Instead, Nilanjan Ghosh asserts that India’s own goal of becoming a US$10 trillion economy, which is both equitable and inclusive, is only possible by following through on the SDG agenda. All of this, according to Adil Zainulbhai, will be powered by India’s already immense digital infrastructure, innovation capabilities and skilled workforce as it leverages the Fourth Industrial Revolution to its advantage. “India’s green transformation,” asserts Mihir Sharma, “will have to be led by the decisions of its people and by the energy of its private sector.”
It is these twin imperatives—achieving sustainable development and the climate change agenda— that make India a very different type of ‘rising power’. Its path to prominence will not be defined by military dominance or coercive economic capabilities. Instead, India’s rise will be characterised by its ability to provide solutions, technologies and finance to emerging communities in urgent need of new models of economic growth and social mobility. It is this ‘new economic diplomacy’, Navdeep Suri believes, that will define India’s foreign policy priorities in the decade ahead.
Underwriting India’s foreign policy will be its civilisational identity as a democratic, open and plural society. Arguably the most abstract of all its foreign policy tools, India’s own ability to retain social cohesion while providing economic growth and development will, as Prime Minister Stephen Harper observes, help “lead the world as a whole to greater prosperity and peace”. Indeed, each essay has this very sentiment at its core—the importance of India’s rise for its own people, its region, and indeed as a model for the world in this century.
We hope these essays will provide an intellectual stimulus to debates and discussions that will undoubtedly contribute to shaping our collective future, examine our contemporary challenges and allow us a moment to learn from the journey so far. The world in the 2020s demands more from us. Indians must be ready to deliver.
A decade ago, the Arab Spring levelled the divide — even if briefly — between the Palace and the Street. Powered by social media, the age of digital democracy was upon us. Technology has since become the mainstay of civic activism. Not only are more voices heard, but elected governments are also more responsive to them. And indeed, in many countries, more people are participating in politics than ever before. From attitudes and approaches of platforms and governments to the proliferation of intrusive technologies that invade personal spaces, the gains of the past decade are nevertheless being undermined. The past year or so has made us acutely aware of the weaknesses and threats to digital democracies. Some of these need a coordinated global response.
First, the very platforms that have fuelled calls for accountability often see themselves as above scrutiny, bound not by democratic norms but by bottom lines. The fact is acquisition metrics and market valuations don’t sustain democracy. The contradiction between short-term returns on investment and the long-term health of a digital society is stark. If hate, violence, and falsehoods drive engagement, and, therefore, profits for companies and platforms, our societies are indeed on shaky ground.
To make technology serve democracy, regulation will have to be completely rethought. Big Tech boardrooms must be held to standards of responsible behaviour that match their power to influence and persuade. Moreover, any accountability framework must be global. The global south lives with and depends on technology platforms designed in the north. These platforms have been visibly taken to task by lawmakers and institutions in the countries of their design. Does the larger cohort of users in the developing and emerging democratic world have recourse to such action? And is this denial tenable and fair?
Most democratic constitutions around the world, while protecting expression, do so with safeguards that are meant to secure peace and co-existence in societies that have histories longer and more storied than America’s.
Second, much of Big Tech is designed and anchored in the United States (US). Understandably, it pushes American — or perhaps Californian — free speech absolutism. This is in conflict with laws in most democracies — including in the US after January 6. Most democratic constitutions around the world, while protecting expression, do so with safeguards that are meant to secure peace and co-existence in societies that have histories longer and more storied than America’s.
This American approach to freedom of expression imposed on other democratic societies, at velocities facilitated by technology, is a formula for serious disorder. If American Big Tech wishes to emerge as Global Tech, it must adhere to global democratic norms. Its normative culture must assimilate and reconcile, not prescribe and mandate. In the absence of such an understanding, a clash is but inevitable. It must be emphasised that the fault line would be social norms, not the benefits of technology.
If global democracy and global tech are to coexist, the global south must sit at the high table when regulations are designed and as ethics are embedded in algorithms. Today, the global south’s participation in policy and design decisions that shape our tech future is like the map of vaccinations in our pandemic world — significantly underrepresented in democratic Africa and Asia.
Finally, the greatest danger to the freedom our democracies enjoy is from authoritarian regimes that exploit our liberties and turn them against us. In the real world, Peng Shuai is under house arrest. But in the virtual world, she is presented as being free and happy. Wolf warriors have given a whole new meaning to the phrase “virtual reality”. Recently, an Indian speaker at a transportation conference in China found her microphone turned off because she questioned the Belt and Road Initiative. We are in an unprecedented political landscape where authoritarians weaponise our debates even as we are silenced in theirs. Would any country allow another to open an embassy if it did not have reciprocal rights in the other capital?
The global south’s participation in policy and design decisions that shape our tech future is like the map of vaccinations in our pandemic world — significantly underrepresented in democratic Africa and Asia.
We are living in that perverse reality already. China’s media and government handles conduct aggressive diplomacy in our digital public sphere while we are denied the right to do so in theirs. Beijing and other authoritarian regimes are omnipresent in our digital lives. Their handles bombard us; their chosen narratives besiege and colour the truth. How can we prevent such regimes from gaming the public sphere, and from this perversion of institutions, academia, media, and tech platforms? Their presence on our platforms represents a systemic challenge and a security risk. It must be responded to.
The alleged disruption of America’s elections in 2016 will be child’s play as compared to what may happen in 2024. That year, India, the US and the European Union Parliament will all hold elections — the first such coincidence in the age of digital democracy. We face a perfect storm of misinformation and manipulation. Confronted by wolf warriors, the rest of us can’t be lambs to the slaughter. Open societies have always stoutly defended their borders. Now, they must safeguard these new digital frontlines. At the Summit for Democracy — called by President Joe Biden and addressed by, among others Prime Minister Narendra Modi, it was apparent to all that the democratic world needs to get its house in order. Even as democracies attend to this they need to ensure that other’s don’t burn the house down.
By investing now to build a green, resilient and inclusive economy, countries can turn the challenges of COVID-19 and climate change into opportunities for a more prosperous and stable future.
The decade following the 2009 global financial crisis was characterised by growing structural weaknesses in developing countries, which have been further aggravated by the COVID-19 pandemic and climate change, worsening poverty and inequality. These weaknesses include slowing investment, productivity, employment, and poverty reduction; rising debt; and accelerating destruction of natural capital. The pandemic has already pushed over 100 million more people into extreme poverty and worsened inequality. The effects of climate change are expected to push an estimated additional 130 million people into extreme poverty by 2030.
COVID-19 and climate change have starkly exposed the interdependence between people, the planet, and the economy. All economic activities depend upon ecosystem services, so depleting the natural assets that create these services, eventually worsens economic performance.
The decade following the 2009 global financial crisis was characterised by growing structural weaknesses in developing countries, which have been further aggravated by the COVID-19 pandemic and climate change, worsening poverty and inequality.
Figure 1: Global income losses due to the COVID-19 pandemic
A business-as-usual recovery package that neglects these interlinkages would not adequately address the complex challenges that confront the world nor its structural weaknesses and would likely result in a lost decade of development. Targeting socioeconomic, climate change and biodiversity challenges in isolation is likely to be less effective than a coordinated response to their interacting effects. A continuation of current growth patterns would not address structural economic weaknesses and would erode natural capital and increase risks that affect long run growth. As the depletion of forests, oceans, and other natural assets worsen, the cost of inaction is becoming more expensive than the cost of climate action and it is the poor and vulnerable who are most disadvantaged by it.
The GRID approach
The solution is to adopt a Green, Resilient and Inclusive Development (GRID) approach that pursues poverty reduction and shared prosperity with a long-term sustainability lens. This approach sets a recovery path that maintains a line of sight to long-term development goals; recognizes the interconnections between people, the planet, and the economy; and tackles risks in an integrated way. Research from the University of Oxford, World Economic Forum and Observer Research Foundation has all shown that a green recovery will not just be beneficial for combating climate change but also offer the best economic returns for government spending and yield development outcomes. The GRID approach is novel in two respects.
First, though development practitioners have long worried about poverty, inequality and climate change, the GRID approach pays particular attention to their interrelationships and thus, on the cross-sectoral nature of critical development policies. Second, achieving GRID implies simultaneously and systematically addressing sustainability, resilience and inclusiveness. GRID is a balanced approach focused on development and sustainability and tailored to each country’s needs and its Nationally Determined Contributions (NDC) objectives. Such a path will achieve lasting economic growth that is shared across the population, providing a robust recovery and restoring momentum on the Sustainable Development Goals (SDGs).
Research from the University of Oxford, World Economic Forum and Observer Research Foundation has all shown that a green recovery will not just be beneficial for combating climate change but also offer the best economic returns for government spending and yield development outcomes.
Recovering from COVID-19 with GRID
The pandemic has inflicted a particularly harsh blow on developing economies. Most urgently, a fast and fair vaccine rollout is critical to an L-shaped recovery. Vaccine access and deployment presents challenges unprecedented in scale, speed and specificities, which will require strong coordination.
Looking ahead, setting a path to GRID will require urgent investments at scale in all forms of capital (human, physical, natural, and social) to address structural weaknesses and promote growth. Special attention is needed on human capital development to rebuild skills and recover pandemic related losses, especially amongst marginalised groups. While the pandemic has amplified the challenges of providing education for all, it has also highlighted how disruptive and transformational technologies can be leveraged in addition to traditional in person learning to help education services withstand the unique pressures of this time.
Recovery packages are an opportunity to prioritise investments in the infrastructure needed to develop and roll out transformative technologies.
Women must be at the center of the GRID agenda as powerful agents of change. Education for girls, together with family planning, reproductive and sexual health, and economic opportunities for women will accelerate the green, resilient and inclusive dimensions of development.
Technology and innovation will play an essential role in promoting low carbon growth. Recovery packages are an opportunity to prioritise investments in the infrastructure needed to develop and roll out transformative technologies.
One takeaway from Glasgow has been that securing green finance at scale will be essential for the GRID agenda. However, developed countries found it difficult to secure the necessary funding for developing countries to implement the green transition to sustainable and equitable development.
But there may be a silver lining. The global economy is awash with excess savings estimated at around $3.9 trillion that are earning negative or low returns and there are $46 trillion of pension funds in search of reasonable returns. The low carbon transition may offer an opportunity for investors, especially as the returns to green investments begin to exceed investments in more conventional technological choices.
Necessity and urgency of systemic investments and transformations
Transformational actions will be needed in key systems — for example, energy, agriculture, food, water, land, cities, transport and manufacturing — that drive the economy and account for over 90 percent of greenhouse gas emissions. Without significant change in these sectors, neither climate change mitigation nor sustained and resilient development are possible. Such a transition, by addressing economic distortions, will promote greater economic efficiency and reduce adverse productivity and health impacts, leading to better development outcomes.
Domestic resource mobilisation can also be increased by enhancing tax progressivity, applying wealth taxation, and eliminating tax avoidance. There is also a need for greater selectivity and efficiency in spending.
But the fruits of the transition may not be evenly distributed and will require a range of social and labour market policies that address adverse impacts, safeguard the vulnerable and deliver a just transition. The GRID approach, therefore, supports a transition to a low carbon economy while considering countries’ energy needs and providing targeted support for the poorest.
Significant reforms of fiscal systems will be needed to mobilise domestic resources and finance the transition. Taxes on externalities are a large and unused source of potential revenue, which can create incentives for the private sector to invest in more sustainable activities. Domestic resource mobilisation can also be increased by enhancing tax progressivity, applying wealth taxation, and eliminating tax avoidance. There is also a need for greater selectivity and efficiency in spending.
A strong private sector involvement will be needed. The scale of investment needed far exceeds the possibilities of the public sector. Reforms are needed to remove constraints to private investment in appropriate sectors and technologies. Thus, at the country level, a strong partnership and dialogue between the public and private sector is urgently needed. And further developing and implementing green financial sector regulation, such as reporting standards and green taxonomies, can help harness investors’ increasing appetite for sustainable investments, which offer both measurable impacts on the environment and society.
However, sustainable and substantial flows of finance across borders will need to supplement domestic efforts. Multilateral development banks (MDBs) and Development Finance Institutions (DFIs) must focus on catalytic and transformational investments in priority areas to develop green, inclusive and resilient project pipelines that support economic growth, and job and income generation. On this front, MDBs can help lower risks for private capital through guarantees and blended finance. But at the end of the day the most effective way to attract private capital is through policies that correct distortions that render environmental destruction profitable.
Multilateral development banks (MDBs) and Development Finance Institutions (DFIs) must focus on catalytic and transformational investments in priority areas to develop green, inclusive and resilient project pipelines that support economic growth, and job and income generation.
Climate change is a reality shaping lives as we speak and not a distant mirage that will materialise only in the future. From Pacific Island nations facing rising sea levels to the Sahel region struggling with longer dry seasons, climate change is changing lives of the poor and vulnerable across the world. The future for the world’s climate vulnerable groups will remain bleak unless we transform policy and economic thinking and secure the financing that is needed.
Countries face a historic opportunity to establish a better way forward. Despite the damage wrought by the pandemic, the exceptional crisis response offers a unique opportunity for a “reset” that addresses past policy deficiencies and chronic investment gaps. Crisis related expenditures can be used to invest in new opportunities, such as accelerating digital development, an expansion of basic service provision, improvements in regional supply chains, strengthening ecosystems services, and policies to catalyze job creation in growth sectors. Private sector dynamism and innovative financing will need to power the recovery and to create economic growth and employment through investment and innovation. Public-private partnerships and key upstream policy reforms can spur private investment (including FDI), support viable firms through restructuring, and enable the financial system to support a robust recovery through the resolution of non performing loans.
As the BRICS passes through a crucial milestone of its existence, celebrating 15 years of its formation, this report examines the initiatives launched since inception and makes recommendations for consolidating and streamlining the agenda.
The BRICS remains a prominent grouping in the global governance architecture due to the individual influence of each member-state and the collective size of their economies. The confidence in BRICS from within and the perceptions outside the grouping are shaped by its successes in institution-building and resource mobilisation. The highlight of BRICS’s success is its strong focus on issues of financial stability and global governance reforms, particularly in areas related to macroeconomic stability. These are supplemented by attention to sustainable development issues backed by finance and technology.
The BRICS agenda has witnessed a steady expansion of its scope ever since its inception. During the initial years, the agenda was focused on responding to the trans-Atlantic financial crisis with a special focus on multilateralism, particularly the need to reform the international monetary and financial architecture. Subsequently, the BRICS established the New Development Bank and the Contingent Reserve Arrangement, two flagship financial initiatives that remain the biggest success stories of the plurilateral to date. Notably, with the outbreak of Covid19 in 2020, there has been a special focus on responding to the pandemic and coordinating recovery.
Given the expanding scope, there is a need for consolidation and streamlining of the BRICS agenda. This will help address structural deficiencies and facilitate the smooth coordination for building consensus on key issues. To realise these goals, a thorough review of the BRICS cooperation mechanisms is necessary. This joint academic study presents an assessment of the various tracks under the BRICS framework, such that the grouping can better pursue the collective agenda of economic cooperation and sustainable development.
The year 2021 has been significant, with the Indian presidency underscoring ‘BRICS@15: Intra-BRICS Cooperation for Continuity, Consolidation and Consensus’ as the theme. The aspect of ‘consolidation’ received special attention. The Indian presidency also helped in concretising several action areas that had remained dormant. A case in point is the Agriculture Research Platform proposed by India at the 2015 Ufa Summit with a memorandum of understanding signed during the Indian presidency in 2016. This was launched in the virtual format in 2021, again during India’s presidency.
India’s presidency of BRICS in 2021 has set a definite example for streamlining of the BRICS agenda. As the agenda consolidates, future presidencies will find room for emerging themes that require urgent attention. Consolidation does not always only mean weeding out weaker sprouts, but to have comprehensive approaches towards setting common goals so that even relatively weaker initiatives can be scaled with resources. A preliminary assessment of the initiatives launched by BRICS is presented in this report.
As the price of natural gas reached record highs in the UK and Europe—trading at the equivalent of $200 per barrel of oil, and as economic activity in China has been curtailed by the country’s power supply crunch, central bankers and policymakers from across the globe are forced to confront significant challenges to price stability, with a focus on shielding households and businesses from an increase to the cost of transport and basic goods, while monitoring the potential for price pressure and supply chain bottlenecks to upend the global economic recovery. This is important at this time, for the ripple effects of disruptions to energy markets could amplify social and political fissures that are visible across the global landscape, and which might portend complex domestic politics as many countries head into elections in 2022.
Surging demand for natural gas—and shortages and bottlenecks to supply—have resulted in a corollary demand for oil products (referred to as gas-to-oil switching), thus driving up the price of WTI crude to seven-year highs. The skyrocketing commodity price environment has led one observer to point to the “revenge of the old economy”, according to which the collective noble efforts to move toward a cleaner, greener future fuelled by renewable energy have been stymied by a recent past of inadequate investment into the capacity and infrastructure of the hydrocarbons that power our economies.
Thus, even as COP26 has drawn to a close, and as policymakers, business leaders, and investors have left Glasgow with firm commitments to ostensibly advance the decarbonisation agenda, we are reminded of the extent to which our entire energy infrastructure still hinges upon the use of fossil fuels. This includes oil used for transport or power generation, or natural gas (or coal) for power generation, as well as natural gas deployed as “bridge fuel” to support the growth of renewable energy, including wind, solar, and hydrogen. This is effectively captured by what transpired in Germany earlier this year. In the first six months of 2021, the country increased its coal-based generation, which contributed 27 percent of the country’s electricity demand. The need to resort to coal-fired power generation is not unique to the case of Germany: the US has also posted the first annual increase in coal use for power generation since 2014. The combination of an asynchronous economic recovery, attendant shocks to demand, curtailments of supply, and surging prices in natural gas are contributing factors to rich income countries’ pivoting toward the use of coal. This illustrates one stark reality: hydrocarbons continue to underpin our global energy infrastructure. For all the talk of “stranded assets” and potential “dinosaurs of investment”, hydrocarbons still compose the lion’s share of energy consumption on a global basis.
What are the lessons to be learned from the recent power crunches? And what are the potential macro, socio-economic, and geopolitical implications as we navigate the energy transition? Amidst so much uncertainty and volatility, where are the opportunities for accord, as well as bright spots for investment?
Humility is also requisite as governments confront their energy interdependence with one another: again, despite record growth in renewable energy capacity, and surging climate financing, countries within the European Union are poignantly aware of their dependence upon natural gas imports—whether from Russia, Norway, or the US. And even despite its own domestic shale and conventional oil and gas production, the US continues to import hydrocarbons from countries such as Canada, Colombia, and Saudi Arabia. Similarly, even despite trade tensions, resource ties still bind China with Australia, with the latter having exported a record volume of natural gas to China in 2020. Thus, geopolitics remains at the very heart of the changing energy landscape. The inverse is also entirely true.
In the past, resource ties have been a source of tension; but, as we shall see, such bonds also have the potential to become a geopolitical salve, provided that the relationship is designed to be mutually beneficial to both parties. As we navigate the path toward net zero, and by seeking balance and diversification, our continued energy interdependence can actually spur opportunities for cooperation amongst policymakers, and for long-term investment and profit generation for enterprises and economies around the world.
The quest for resources to fuel industrial growth, military campaigns, and transport and urbanisation lies at the very heart of geopolitics. In considering the relationship between energy and geopolitics, the existence of resources is often associated with tension, be it in the form of border disputes, armed conflict, trade disputes resulting in embargoes, or interstate conflict or war. Access to strategic reserves of coal in Romania was a pivotal part of the campaign on the Western front during the Second World War. During the 1970s, energy-importing countries experienced the oil shocks related to the OPEC crises in the wake of the Arab-Israeli War, the Yom Kippur War, and the Iranian Revolution. Indeed, research shows that if a resource-rich country has an endowment of oil along its border with an “oil-less” country, then the probability of conflict between these two countries is higher than if there were no oil at all. Recent data also indicates that the presence of onshore oil might even portend a higher rate of conflict than the presence of offshore oil, as the potential for production and output to be seized by rebel groups is far higher on land than it is in deep-sea projects.
And yet, while asymmetric access to resources might spur tensions between countries, it can also be a geopolitical salve, by underpinning ties of trade, development, and civic diplomacy and even employment. Japan’s quest for resources to fuel its extraordinary manufacturing era from the 1960s onwards resulted in a mutual export of ODA (overseas development assistance) to southeast Asian countries such as Vietnam. One might also argue that Israel’s relatively recent discoveries of natural gas—and successive exports to Egypt—have also underpinned a normalisation of relations with Cairo, — a diplomatic rebalancing which has also been a key facet of improving relations between Israel and the UAE.
A crude awakening: our enduring energy interdependence, and continued reliance upon fossil fuels
Such positive examples of resource ties are swiftly forgotten in times of crises. The underlying conditions that led to positive benefits to the political relationship in these two instances are also ignored. And so it is with the present power crunches ricocheting across the globe. With the asynchronous reopenings of economies in the wake of the COVID-19 pandemic—and amidst ongoing disruptions to supply (be it from underinvestment in hydrocarbons, weather-related events such as flooding, pandemic-induced stoppages to production, or port congestion)— we are reminded not only the extent to which our economies depend upon fossil fuels for power generation and for transport, but also, of the extent to which many countries remain deeply interlinked in patterns of energy interdependence.
The European dilemma regarding natural gas supply from the Russian Federation is instructive, but it must also be recognised that energy interdependence cuts both ways. As long as Russian gas is a competitive source for energy, then energy-hungry European manufacturing powers will need to engage with the leadership in Moscow; equally, as long as Europe has access to alternative sources of fossil fuels – even if not as cheap – Russia will need to retain an understanding of European red lines. This is what interdependence means. This insight is equally applicable to the energy interconnections of the future: China can be a useful partner in the energy transition, even if it is not the only one.
Indeed, for some policymakers, part of the allure of developing domestic renewable energy capacity was that it ostensibly would lead toward more enhanced energy independence. Ostensibly, extraordinary efforts in diplomacy might not be needed in such a green future, as countries would, in theory, no longer be reliant upon conflict-ridden territories to secure energy supply. Even in a net-zero future, this is perhaps to view the world through rose-coloured glasses: for the development of wind, solar, and hydrogen energy—or indeed techniques of greater energy efficiency—at an affordable cost is intrinsically related with garnering supplies, inputs, R&D, and human capital from different jurisdictions. Overly halcyon scenario-planning for domestic renewable energy capacity development often fails to incorporate these facts.
The shift from fossil fuel-based to renewable energy capacity does not end interdependence; it merely pushes interdependence to a different part of the energy mix. The dependence now shifts from hydrocarbons to metals and from ores to rare earths. Countries in Africa, Asia, Americas and Australia are likely to emerge as global mineral hubs, and the routes to ship these new commodities might pave new geostrategic highways.
In recent years, control over the production of rare earths has become a familiar site for geopolitical tension. In 2021, the Biden administration in the United States ordered a review of the country’s critical mineral supply chain; the recommendations included prioritising development financing for “international investments in projects that will increase production capacity for critical products, including critical minerals”. The administration’s concern is readily understandable, as shown in Table 1.
Table 1: China’s share in the rare earths supply chain
*Disaggregated data for neodymium was not available; the data for Rare Earth Concentrates (REO) has been used since neodymium is a rare earth metal.
Yet it is not just production of rare earths that will be relevant, but also the locations of their processing and other forms of value addition. These might emerge as the equivalent of present-day refineries and petroleum complexes, and their distribution potential linked to key consumption centres might lead to the birth of new geostrategic lynchpins such as the Straits of Malacca and of Hormuz. The notion that domestic renewable energy production would free countries from the intricacies of dependence is misguided – and a seminal mistake if it was to be the basis of new energy order.
Sunset on Malthus?
Part of the reason why the aspiration of energy independence retains its sheen is that our energy economics and policymaking continues to be suffused with a Malthusian legacy. Said another way, the spectre of scarcity continues to inform the way we think about energy and resources. The fear that “there will never be enough” renders misgivings about dependence—or else outright denial. A sense of energy insecurity –no matter how much it is brushed under the rug might also prompt a premature and imprudent vaunt into a disorderly energy transition, with a disproportionate focus on bolstering capacity at home. Such a policy would have little regard for the fact that climate change has been branded as humanity’s largest negative externality: in order to mitigate the situation, global actions ought to be in concert. Humility is thus needed not only in recognising the endurance of hydrocarbons within the energy mix, but also, but it is also implicit in our interconnectedness as we navigate the green transition. For the rich income countries, part of this humility also requires understanding the various ways in which the energy transition has the potential to deepen the chasm between the ‘haves’ and the ‘have nots’.
The haves and the have-nots: is the energy transition deepening the chasm?
The energy transition has the potential to create a deeper chasm between the standings of the ‘haves’ and the ‘have nots’ in the global macroeconomic environment. First, if we consider the traditional trajectory of industrial growth—that is, from agrarian activity to textile production, and then from heavy industry to light manufacturing, eventually segueing to services-oriented economies—the case can be made that for developing countries earlier on the maturity curve (such as Vietnam and India), stringent measures toward decarbonisation might actually thwart what would otherwise unfold as a full evolution of robust domestic industry. For the ‘price takers’ and for commodity-hungry countries, this might take the shape of premature restrictions on access to or use of resources to fuel domestic manufacturing activity.
And for the ‘price makers’—that is, commodity-rich exporting countries—the case can also be made that swift or unrealistic moves toward decarbonisation might rob oil and gas exporters from a significant base of output as well as a source of gross national income. In a country in which resource wealth underpins GDP, export activity, employment (both directly related to exploration, extraction and production of natural resources, as well as indirectly, via civil service salaries), national income, and sovereign and pension funds, the potential for social fissures to either manifest or to be exacerbated is clear.
It should be noted that history indicates that access or proximity to natural resources is not perfectly correlated with a trajectory of sustainable economic growth—hence the “Dutch resource curse”. Research from Brazil also indicates that oil endowments within a province or a municipality do not necessarily result in improved livelihoods for members of that community. Indeed, even in a lofty commodity price environment, such as at present, windfalls potentially reaped from higher export prices of oil and gas do not always translate into higher incomes for households within the exporting country.
This tension between environmental and the development agendas within emerging markets and developed economies (EMDEs) is also evident in the debate surrounding the potential carbon border adjustment tax (CBAT), as well as recent agreements on deforestation in COP26.
Home game: mitigating the domestic bias of climate finance
An effective, secure energy transition is currently undermined by the “domestic preference” evident within the realm of climate finance. In recent years of tracking climate finance flows, data from one leading industry body evidences that 76 percent of capital is invested in the same country in which it is sourced. Thus, despite various commitments and guarantees from bodies such as the G7 or the G20, a significant challenge remains regarding the ability for much-needed climate finance to cross borders. Certainly, a long-running trend of a domestic bias for investment is not limited to climate and infrastructure investments. Rather, it extends across sectors and asset classes, including real estate, energy, private equity, and venture capital. Whilst managing ‘sticky capital’ and the prospect of generating long-term returns, and building up enterprise and asset values, investors might harbor an inclination to place their money close to home—in other words, “where home-country risks are well-understood.”
As these authors have highlighted previously, playing close to home in infrastructure investing may not always be the least risky option. And yet, we have already motioned that the dawning age of renewables is not one of energy independence, but of a new kind of interdependence. Policymakers operating under the illusion of energy sovereignty are otherwise missing out on the opportunity to cultivate positive structures of interdependence which could potentially support their own geo-strategic aims – such links, might, in turn, spur opportunities for private investment.
Thus, we might witness a shift in incentivisation for private finance and the climate problem: such that sticky capital not only supplies the domestic market, but that it is directed outwards as well, perhaps even towards the geographies where host countries of finance might find mutually beneficial resource ties – such as the model of Japan and ODA in Southeast Asia, discussed earlier. As argued above, interdependence can be a salve for geopolitics as long as both sides gain in the energy or in the development equation. Such a value exchange – or what Michael Oakeshott refers to as an “enterprise association” – rests upon an understanding of interdependence – again, something that has been jettisoned in the lack of humility in the energy transition (something which is mirrored in the “domestic bias” of climate capital).
Such misconceptions have the potential to divert policymakers from a future of true sustainability, which involves the creation of resilience through diversification. Redirecting long-term flows of investment—including private capital—towards emerging market/developing economies will not necessarily be easy. Large sources of private capital in the global north – whether institutional capital or banks – will need a fresh set of incentives to invest in the energy supply chains of the future.
Moreover, recognising that these investments will likely be in new minerals, new processes, and new geographies, it is clear that old regulatory risk models may no longer be suitable. New market mechanisms to help enable a level playing field of investment in new energy materials are needed—which might take inspiration from the industry bodies which have developed over time in support of oil markets around the globe.
Conclusion: The Green Marshall Plan
The scale of the rebalancing required – of investment, attention, and financial flows – is vast. If anything, it should be compared to the Marshall Plan. That enormous effort, after all, had both pragmatic and idealistic motivations. On the one hand, it was necessary to assist a Europe devastated by war; on the other, it was essential that a liberal community be built that was strong and resilient in the face of the Soviet challenge. There are similar overlaps today between the realist search for security and the idealist requirements of climate action. A Green Marshall Plan has the potential to both stabilise international relations and create the diversification and resilience necessary to allow for durable interdependence during the energy transition.
For the energy transition to act as a geopolitical salve rather than as a source of discord, a Green Marshall Plan must have four characteristics.
First, it should be genuinely global in character. A global net-zero approach would understand that some regions might take longer on the fossil fuel transition because of the specifics of their development or their energy landscape. Nor should geographical factors be ignored: An archipelago like Indonesia will take longer to transition to solar energy and away from natural gas than a continental country.
Second, legacy energy infrastructure will need attention to help enable the success of the Green Marshall Plan, to make it implementable, and to scale it. As is evident in energy consumption patterns across the globe, fossil fuels remain a part of the energy mix, and a way of working toward a balanced and global green transition. Nor can sectors like mining be ignored: the Green Marshall Plan will likely have to go into a “dirty” sector, invest in new ways of mining and new materials to mine.
Third, the Green Marshall Plan is not just about blue-sky research into the possibilities of the future. It is about increasing investment in nuts-and-bolts manufacturing in underserved geographies as well – whether energy efficiency in the Asian steel producers of the future or new cobalt mining technologies in sub-Saharan Africa today. It is about enabling development of critical frontier technologies, as well as swiftly and sustainably spreading a green ‘know-how’ which is globally benchmarked.
And fourth, the Green Marshall Plan should embed energy resilience at its heart. Areas which have sped up their energy transition are those where it is seen as assisting in energy security. As these authors argued, dependence on a single source or vendor is antithetical to achieving long-term and sustainable energy security. As such, the strategic mapping of a secure energy future cannot exclude a China, with its strong presence in the rare earths supply chain, or a Russia with reserves of natural gas, or the countries of the Gulf, abundant in oil and gas reserves. Again, humility as well as diversification might render each actor a more responsible and empathetic participant in the global energy transition.
What we are recommending is an all-inclusive future. That will require the leaders of key nations to invest political capital in a new institutional framework that supports the energy landscape of the future. The International Energy Agency, OPEC, commodity exchanges and others defined and shaped the hydrocarbon world. The global energy transition requires new frameworks, organisations and political arrangements to underwrite our common journey ahead, which reflect the needs of multiple stakeholders, in both the private and public spheres. The G7’s B3W, the European Union’s Global Gateway, and the Indo-French International Solar Alliance all point to one imperative: of green arrangements underwriting green transitions. The world needs a new institutional structure: one that keeps the lights on in the 21st century.
This article was first published in The Economic Times Magazine
The narrative of a widening strategic gap between New Delhi and Moscow has been prevalent for some time now. Even within the strategic communities of Russia and India, there is an ongoing assessment of the importance of this bilateral engagement. Ahead of the upcoming India-Russia summit, this article delves into what is working for the relationship between the two nations, and what needs to be worked on.
It would be fair to say that the essential glue keeping the two together is strategic legacy. It is supplemented by a contemporary strand of political convergence in a world where both South Block and the Kremlin are actors, but also being acted upon.
One of India’s primary objectives in the coming decades is to prevent China’s hegemony in Asia. A multipolar world and a multipolar Asia are in its interest. Russia will strongly endorse this, and, for differing reasons, seek it. In its calculus, it would position the US as the principal protagonist to thwart. The Russians would not want to curtail China if that ends up enabling US influence. Therefore, there is a big picture convergence on a multipolar world order, even as India and Russia differ on relative roles of the poles shaping this order.
As of 2020, Russian weapons systems and equipment accounted for about 60 per cent of the inventory of the Indian armed forces.
This could change dramatically if Russia were to reach the conclusion that it is happy to sit in the court of the Emperor in Beijing as a junior partner. India sees this as unlikely. It hopes for a more independent Russian worldview that would not hesitate to differ with others, including China, in defence of its own interests. New Delhi is, therefore, continuing to invest substantially in this relationship, and in a number of areas.
The first and biggest is defence. As of 2020, Russian weapons systems and equipment accounted for about 60 per cent of the inventory of the Indian armed forces. While India is determinedly diversifying sourcing of military hardware, Russia remains a strong legacy player. Much of this is driven by spares and component upgrades. However, there have also been significant new ventures. These include the S-400 missile contract (on track for first deliveries this year); manufacture and co-production of four Project 1135.6 Frigates; manufacture of the world’s most advanced assault rifle – the AK-203 – under the ‘Make in India’ initiative; and additional deliveries of T-90s, Sukhoi-30 MKI, MiG-29, MANGO ammunition and VSHORAD systems. Russia is more involved with the ‘Make in India’ initiative in defence equipment than any other country.
India aims to increase import of oil from Russia, currently 1 per cent of all imports, to 4 or 5 per cent in the next five years.
The second area of convergence is energy. This includes not only hydrocarbons (oil and gas), but also nuclear. While India does import gas from Russia, a rapid increase is on the cards. If successful, the Vostok negotiations will bring India into one of the world’s biggest energy projects. India aims to increase import of oil from Russia, currently 1 per cent of all imports, to 4 or 5 per cent in the next five years. Another avenue is petrochemicals, where a Russian investment in the Paradip cracker plant and an Indian investment in Arctic LNG-2 are being explored.
The third area of mutual interest is high-technology. A proposal to establish a Joint Commission on Science and Technology Cooperation is being explored. It would encompass hi-tech areas like quantum, nanotechnology, cyber, AI, robotics, space and bio-technology. Pharmaceuticals, digital finance, chemicals and ceramics are all potential economic drivers of the relationship. Each of these is at the core of the fourth industrial revolution.
The fourth area of significance is food security. India leasing land in the Russian Far East, and cultivating it with Indian labour, offers a tantalising prospect. Russia is going through a demographic crisis and has notable human resources deficits. China has leased thousands of hectares of land in the Russian Far East. This is cultivated by Chinese farmers, whose produce is partially sold in the Russian domestic market and partially exported to China.
A proposal to establish a Joint Commission on Science and Technology Cooperation is being explored. It would encompass hi-tech areas like quantum, nanotechnology, cyber, AI, robotics, space and bio-technology.
A similar strategy can be followed by India. The government could negotiate an enabling arrangement with Russia but leave it to the private sector to execute. The Chennai-Vladivostok maritime connectivity corridor enhances scope for such cooperation.
This strategy would be a genuine win-win. India would contribute to its food security by reducing load on its resources (land, water, electricity) and providing opportunities to its excess farm labour. For Russia, dependency on China would come down, giving Moscow the strategic leverage that it needs and wants.
And here is where India needs to answer a strategic question. Is it willing to invest in the Russia story just as we celebrate Russia’s engagement with “Make in India”? India must write itself into the development text of the Far East and other parts of Russia through investments and expertise. There could be no stronger foundation for the relationship.
There is also an urgent need to overcome some recent angularities. The first is Afghanistan. At least till 15 August 2021, India and Russia had a serious disagreement, with Moscow unabashedly flirting with the Taliban. While both countries want stability in Afghanistan and curbs on export of terrorism and drugs, the perception in New Delhi is Moscow’s negotiators with the Taliban ended up become negotiators for the Taliban. That is a credibility problem for Russia to ponder.
India must write itself into the development text of the Far East and other parts of Russia through investments and expertise.
The second divergence is on the Indo-Pacific. It boils down to lack of trust. Russia does not trust India vis-à-vis the US, and India hears Russia reading from China’s script. This is a challenge to be addressed. Either country is the other’s flexibility mechanism, an arrangement that has stood the test of time. Russia’s ‘Greater Eurasia’ project and the Indo-Pacific are complementary and describe the same emergence: Of a new political moment and of a political geography that will seek a new alignment of interests and actors. Even as India and Russia carve new relationships, their sturdy partnership is a bank guarantee for both.
President Vladimir Putin’s visit to India is only his second trip abroad since the beginning of the pandemic. The first was to Geneva earlier this summer, for a summit with President Joe Biden. Coming to New Delhi to meet Prime Minister Narendra Modi is hugely symbolic and strategic. It indicates that the President knows India allows him a more equal partnership with China, even as Russia offers India room for its own endeavours.