Praveen Chakravarty is a Congressman curious about correlations, causes & consequences.
India is getting ready to welcome the leaders of the 20 largest economies (G-20) of the world. The year 2023 is India’s turn by rotation to be President of G-20. Leaders from the United States to Britain to European nations to Japan and Indonesia are all coming to India for the G-20 summit next week.
But, as I write this, there is talk that Chinese President Xi Jinping will not attend the summit. This will be a big blow to the summit and a sign of disrespect to India.
Recently, China’s Ministry of Natural Resources released the 2023 edition of its official “standard map” which egregiously claims India’s Arunachal Pradesh and the Aksai Chin plateau in eastern Ladakh as their territory, violating India’s sovereignty.
Also, recently, Xi snubbed Prime Minister Narendra Modi at the BRICS summit in South Africa when he tried to discuss the border situation with him. Earlier, the South African President went personally to receive Xi at the airport and bestowed his country’s highest award ‘Order of South Africa’ on him, while Modi was received only by a deputy leader and made to watch Xi being honoured and clap.
Recall, in 2020, when the whole world, including India, was struggling to deal with the Covid pandemic, China attacked our border in Arunachal Pradesh, renamed 11 places, killed our soldiers in Ladakh and came very close to waging a full-blown war against India.
This is a clear and worrying pattern of incidents. It is no secret that the China-India relationship is at its worst since the 1962 war and mutual hostility is at its peak. Despite all this, Modi has not said a word against China yet. What is more baffling is that the Modi government is actually helping China in its quest to be an economic superpower. Let me explain.
The global economy is built on the foundation of the US dollar as the reserve currency. Nations buy and sell goods and services from each other and pay in US dollars. Savings in various nations are stored by their central bank largely in US dollars. This is why a former French Finance Minister said the US dollar enjoys an “exorbitant privilege”. This privilege and trust in the dollar helped cement American hegemony in the global world order. Now, China wants to destabilise American hegemony by dethroning the US dollar. While America’s unilateral hegemony may be justifiably questioned, it is still not in India’s national interests to help China in its quest to replace America as the world’s superpower. Bizarrely, the Modi government is doing precisely that – helping the yuan dethrone the dollar.
Since the Russia-Ukraine conflict, Western nations, led by America, have imposed sanctions on buying Russian oil and imposed other economic roadblocks. In a bid to presumably fund and prolong the war, Russia discounted the price of their crude oil. Claiming that buying Russian oil would help the common Indian by lowering inflation and fuel prices, the Modi government has imported oil worth $44 billion from Russia since the war began, thereby aiding Russia prolong the Ukraine conflict.
However, the sanctions by the West presented a fresh impediment – how would India pay Russia for the oil? While India was used to paying for its trade in dollars, Russia was unable to accept it due to the sanctions, and the Indian rupee does not enjoy trust as a global currency due to eccentric moves like sudden demonetisation. This quandary opened the door for China, given its intimate relationship with Russia. Today, India’s purchase of Russian oil is being settled using Chinese yuan.
Over the past year, companies based in Argentina and Brazil have begun settling payments in yuan for goods purchased from China and other countries. Closer home, Bangladesh, too, is using the yuan for trade payments. China is using its economic clout to lure and coerce developing nations to stop using the dollar and instead use the yuan for trade settlements. India, as a trillion-dollar trading power, is a key player in determining this shift to Chinese yuan for global trade.
If India can settle its trade with Russia using the yuan, what stops China from demanding using the yuan for India-China trade? The lopsided trade relationship, where India imports seven times more than it exports to China, will make it impossible for India to refuse such a demand. In the context of China’s ambitions to emerge as a hegemon in the new world order, India shifting even just a portion of its trade to the yuan provides a big fillip to Chinese interests at the cost of India’s own.
What is even worse is that buying discounted Russian oil has not even benefitted the common Indian. Prices of essential goods, petrol, diesel and LPG have only gone up since the Russian war, not come down as promised by the Modi government. This is a consequence of two private companies – Reliance Industries and Nayara Energy -- purchasing nearly half of the discounted Russian oil, refining and exporting it back to earn a tidy profit.
Essentially, the Modi government is helping China in its global ascendancy by paying for Russian oil in yuan. In the process, it has disregarded Western sanctions, and all this has not even benefitted the common Indian; it has only helped two private companies amass huge profits. Why has India’s Prime Minister not said a word against China despite its military aggression, usurping Indian territory and inflicting personal humiliation on him and on the nation? Worse, why is Modi furthering China’s cause in its quest to divide and dominate global affairs by paying for Russian oil in yuan? What is it that China has on Modi that it seems to control him and get away with impunity?