An Ethical view of the current Geo-politics behind the war on Ukraine Sunanda Sen

Recent developments on Russia’s  aggressive advances to Ukraine by launching a full-scale war has  generated different types and scales of responses in the world economy. Western Europe, supported by US as a NATO ally has installed various financial sanctions on Russia along with financial   as well as strategic help to Ukraine and the neighbouring East European countries  like  Poland and Hungary. The sanctions include a discontinuing of swift  facilities at banks for Russia, embargos on trade with Russia  and freezing of Russian assets or banking activities. In addition a resolution has been passed in the  Security Council of the United Nations  by the same group of countries urging an end to Russia’s aggression in Ukraine. While the resolution has  yet to yield results, the sanctions can have a perceptible impact on the Russian economy in the medium run. Russia, however has continued to remain defiant with official assertions that the country would track the path of self-reliance  it faced  , as  part of Soviet Union, during the cold war years.

India’s responses to the on-going destruction of humanity in Ukraine has been quite  different. Carefully taking a position which India considers   a neutral one, the country has refrained from  supporting the resolution  which seeks an end to war. The move, as held officially , follows the path of non -alignment which the country emulated in earlier years, largely in the context of the cold war . China and UAE also chose the same move, but obviously not on the same logic.

The other measure  which India is considering to take up, include the working out of an alternate   route  for trading with Russia in the face of the sanctions  faced by the country . In addition the plan intends to avoid the use of   US dollar as the   currency for settlement of trade and all payments. Ideas as are currently floating include the use of bilateral clearing arrangements which happened to be  a major vehicle for India’s trade with formerly Soviet Union and some CIS states  back from  the early 1950s . The arrangement was similar to the clearing arrangements the  European countries tried during the Inter-war years  as a major tool to contain trade within the region. The arrangement between India and the Soviet Union entailed the setting-up of a closed account to handle all merchandise as well as credit-related  transactions between the two , with rupee as the medium of all such dealings . It was ,of course, an  elaborate arrangement which did work to expand the volume of trade between the countries, often by making use of the export surplus, if any, in favour of  one partner to be used to provide additional demand for imports from the other. This was the main argument , as one of trade-creation, in support  of those agreements . In addition all  loans , largely provided by  the Soviet Union, created the space for what India was aspiring for as industrialisation. Collaboration of the   socialist state in the Soviet Union   matched the prevailing  interests of India . Above even worked in framing a draft of India’s  second five year plan  by  India’s economist Mahalanobis who followed  the model framed by the  Soviet economist G Feldman.  One can mention here the impressive steel plant which was set up as a public sector unit  in Bhilai. The use of the clearing arrangement made it easy for India to arrange for debt servicing as well as repayments , by exporting to Soviet Union. This created an added sphere for trade expansion. On the whole, the arrangement worked well, and in the face of  the reluctance of the West to accept any virtue in such deviations from the market principles of efficiency.

Changes taking place in   the Indian economy, slowly in direction of market, started creating problems in the smooth running of the arrangements. The devaluation of Indian rupee in 1966 was a major factor creating further troubles to the  smooth functioning of those agreements. The end came naturally with the  complete break-up of the Soviet Union in 1991.

Dwelling on India’s current position on the Russian war, one hears about some on-going talks for reviving the bilateral agreements India used to have with the Soviet Union  till it’s breakdown. The idea is to revive the Rouble-Rupee link of local currencies as in the past and using Indian Rupee rather than US dollar as units  of transaction as well as settlements. It is argued that the use of such a clearing account will help Indian exporters to get paid  against their export revenue , currently amounting $600mn,  which Russia finds difficult to settle in absence of swift facilities at banks. It is also argued that the move will both push the current level of $10.8bn   Indo-Russian trade   and help to settle India’s trade deficit of $5bn. At the back-stage of course there are arguments that such arrangements would help India in continuing with her imports of oil as well as the defence equipments from Russia, both considered vital in the context of what is viewed in India’s official circle as vital geo-political reality. Counting on further advantages, ideas are currently floated that a flexible rouble rate for the Rupee would bring in further advantages for India as the Russian currency goes through further depreciation.

While the talks are  not yet finalised and the situation in the war-front continues as devastating, one can offer some re-thinking on the matter. First, it  is  a misnomer that such agreements will bring back the modality as well as  the mutual interest prevailing in the earlier arrangements. Russia today is not what it was in the days of the Soviets – both in political as well as in economic terms. There is no question of using Russia’s trade surpluses to meet India’s payments deficits by  funding public sector infrastructures or otherwise. Nor is India , under extensive liberalisation, ready for such adjustments to help out the disappearing public sector units.  That a clearing account may not work between  the countries in the Brics group has been abundantly clear from experience. However,  saving Indo-Russian trade by using the bilateral trade  route may help India in continuing it’s procurements of the strategic items of defence equipment and energy sources from Russia.

We bring in here a further point which extends beyond economic issues. Is India obliged to continue economic relations with Russia in the face of the most barbaric attacks in recent times launched  on  another  country? Can we not open up alternate sources for those items, of course without  getting entrapped in the US-West European geo-political circuit ? The move, at least, will fetch us a  dividend of seeking an end to this devastating  war on ethical grounds !  Incidentally the resolution by the West in the Security Council contradicts itself when it fails to provide any concrete step towards that.   Can ethics be left behind completely in the current juncture of aggressive geo-politics?

* Sunanda Sen was a Professor at Jawaharlal Nehru University. She can be reached at sunanda.sen@gmail.com