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  • Greenhouse Gases and Dietary Changes

    Greenhouse Gases and Dietary Changes

    Vijay Sakhuja                                                                                       July 22, 2019/Commentary

    The 21st century has been rightly labelled the ‘Climate Century’ and there is visible urgency to contain global temperature rise to 2˚C or below. Among the many initiatives currently underway to achieve that, deep cuts in global emissions in greenhouse gases (GHG) have been suggested.

    One of the major contributors of GHG is the livestock sector; in particular, beef and cattle milk production result in anthropogenic GHG and represent 65 percent of the sector’s emissions i.e. 41 and 20 per cent respectively totalling about 4.6 giga tonnes carbon dioxide (CO2) equivalent. Meanwhile, pork, poultry and eggs contribute less than ten percent each. Besides, there are other closely associated producers of GHG in this sector such as cattle feed production and processing, enteric fermentation from ruminants, manure storage and processing, and the balance is attributable to the processing and sector supply chains.

    According to the Food and Agriculture Organization (FAO) of the United Nations, nearly half of the global agriculture production is consumed by live stock and just 37 per cent is for humans. Another study by the American Oil Chemists’ Society (AOCS) provides some very alarming outcomes and notes that it takes about 7 kilogram of grain in dry weight to produce 1 kilogram of live weight for bovine, around 4 kilograms for 1 kilogram of live weight for pigs, and for poultry it is just over 2 kilograms. Furthermore, the United States Department of Agriculture notes that agriculture takes up 80 to 90 per cent U.S. water consumption, and the Environmental Working Group observes that one pound of eggs require 477 gallons of water and almost 900 gallons for one pound of cheese. If that be so, it is fair to argue that there is otherwise surplus plant-based food available for humans.

    Livestock as a source of food is expected to grow in the coming years. This is driven by the projected increase in global population from 7.6 billion is expected to reach 8.6 billion in 2030, 9.8 billion in 2050 and 11.2 billion in 2100. Consequently, any strong growth in the livestock sector to support the protein requirements of the growing population would result in higher GHG emissions. This necessitates urgent interventions to reduce emissions and can be achieved through sizeable reductions in the production and consumption of beef and cattle milk and balancing it with higher production of pork and poultry. However, that may not be sufficient.

    In recent times interesting and promising initiatives by both the public and private sectors to promote agro-vegetable based diet among the people has been noticed. For instance, in the US, the sale of dairy and related products witnessed eight per cent drop from $14.7 billion in 2017 to $13.6 billion in 2018. One of the reasons for this drop has been the consumer shift toward plant-based alternatives for milk from oats, cashew, almond and soy. The US market trends suggest that the plant based dairy alternatives are currently valued at $17.3 billion and could double by 2023. The current meat value chain is about $1,900 billion and the livestock economy is a promising domain. Nearly 1 billion people are involved in the rearing, processing, distribution and sale of livestock, with half of those reliant on livestock for their livelihood. Significantly, livestock sector constitutes only 40 per cent of the agriculture as a whole that makes up approximately 3 per cent of global GDP.

    While vegetarianism has been in vogue for a long time, it is veganism which is fast gaining popularity particularly among the Western countries such as the U.S., Canada, the UK and some countries in Europe. The vegan diet is being prompted on at least three counts; first is the issue of human health and a number of scientific studies have confirmed the benefits of plant-based diet that reduces the risk of chronic illnesses and diseases; second is the issue of sustainability and the international community has come to realize the critical need to reduce GHG emissions; and third is the growing understanding among the humans of the sustainability of veganism. In fact the vegan food industry is investing in vegan fashion, vegan leather to replace animal hide footwear and numerous other such products are making debut in the international market and gaining popularity among people at large.

    This has led to a war between meat industry and vegan lobbyists who are promising options such as vegan meats, cheeses, milks, and other products. For instance, global plant milk market is expected to grow from over $8 billion in 2016 to $21 billion by 2024 and would be led by soy and coconut milk.

    Finally, consumers are increasingly concerned about the impacts that animal-based foods have on land and water use, human health and above all on the environment, particularly in the context of GHG.

    Dr Vijay Sakhuja is Trustee, The Peninsula Foundation, Chennai. 

    Photo by Helena Lopes from Pexels

  • China’s Climate Diplomacy and Energy Security

    China’s Climate Diplomacy and Energy Security

    Sakshi Venkateswaran                                                                                July 14, 2019/Analysis

    In the last two years, China has become the leading destination for energy investment. A significant portion of this investment lies in the renewable energy sector of China that has undergone rapid development, accounting for about 45% of global investment(126.6 billion) in 2017. The country overtook Germany in the production of solar panels and solar energy generation in 2014 and in 2015 China’s production of wind energy accounted for one third of global wind energy capacity and needless to say, China has always dominated the market in the production of hydro energy. This has led to widespread speculation of the country being a “renewable energy superpower” following a report by the Global Commission on the Geopolitics of Energy. It has also taken active steps to combat climate change in the form of revamping its energy policies. However, these positive shifts are not without issues. China still remains a net importer of coal and highest emitter of greenhouse gases. This article attempts to understand China’s climate change diplomacy against the backdrop of its energy security concerns and if there is any truth to China becoming a renewable energy superpower.

    The 2018 UN Intergovernmental Panel on Climate Change (IPCC) report highlighted that there was only 12 years to control global warming temperatures to 1.5 °Cfollowing which even a half degree rise would prove catastrophic in the form of unprecedented floods, droughts and millions being pushed towards poverty.  Even maintaining the 1.5 °C would require a complete overhaul in the energy, transportation, infrastructure and industrial sectors and global carbon emissions would need to reach net zero by 2050. The Paris Climate Accord was instrumentalized with the intention of capping carbon emissions and containing global warming temperatures below 2 °C. Since the Paris Agreement in 2015, perceptions toward climate change has seen massive shifts following extreme weather patterns in several countries. For one, the US has been strong in their intention to withdraw from the Paris Agreement while several others have taken steps to address climate change by decisive shifts in environmental and energy policies. Chief among them has been China’s actions to counter the climate crisis by investing in renewable energy.

    With a population of more than 1.4 billion and a boom in growth since the 2000s, China has been experiencing rising living standards and industrialization. As a consequence, China’s energy consumption has seen a surge as well. Historically, China’s major sources of energy have been its vast domestic coal reserves and imports of crude oil and natural gas from Russia and Middle East. This has resulted in China competing with the US for the position of being the largest emitter of carbon dioxide. In acknowledgment of this, the Chinese have been the first to invest billions in renewable energy.

    China’s Energy Landscape

    China’s investment in renewable energy began as early as 1949 with the construction of the world’s largest hydroelectric plant, the Three Gorges Dam over the Yangtze River. The reason the Chinese shifted towards hydroelectric energy was the rising dependency on imports and harmful effects to the environment due to the usage of coal. Prior to the Sino-Soviet split in 1960, China had been importing close to 50% of its oil from the Soviet Union. However, a combination of losing the Soviet’s support, economic collapse and a shift from being a net exporter of oil to being a net importer in 1993 accelerated China’s desire for energy self-sufficiency. Since the 2000s the country’s oil and natural gas imports from Russia and Middle East have exhibited a dramatic increase. In 2016 China’s imports of crude oil reached a record high of 68%while natural gas imports hit 33% in 2017.

    Concern regarding the emission of greenhouse gases and inefficient use of coal for power generation prompted a shift in the subsequent energy policies that China released. The Chinese established several economic and technological policies to promote energy conservation. An energy saving branch consisting of a three-tier system was set up within the central and local governments and enterprises in the 1980s. Under the 1988 Energy Conservation Law numerous policies were implemented beginning with the ‘Energy Conservation Propaganda Week’ in an attempt to increase energy efficiency and energy conservation. The government also began providing loans and tax incentives to entrepreneurs who developed small hydropower and wind power plants.

    Even the 13th Five Year Plan by the Energy Bureau of China revealed its plans to restrict coal to 58%of its energy mix by 2020 as opposed to previous levels of more than 60%. The country’s shift to renewable energy has garnered itself the title of being the world’s renewable energy superpower”; a title that has increasingly found its way into academic and policy circles.

    China’s Climate Diplomacy

    Climate change or rather, the climate crisis has metaphorically lit a fire under the member states signed on to the Paris Agreement to combat the greatest threat posed to mankind. Germany has rallied several EU member states to achieve “climate neutrality” by 2050 with net zero carbon emissions. Amidst mounting public pressure and weekly climate protests by students (Fridays for Future), several governments have convened in Bonnin Germany from June 17th to 27th of this year for a climate summit to address the carbon emissions. China has been proactive in that regard; having already shifted to electric vehicles and invested in technologies of carbon capture and storage among other initiatives. China’s share of electricity generation from renewable energy accounted for 26.4%in 2017. The country has also made large investments in the power sector in Africa, specifically for electricity generation in the last 20 years. They contributed up to 30% of capacities of which 56%of the total capacity comprised of renewable sources in 2016.

    Given these numbers regarding renewable energy and its position on climate change, it might be reasonable to speculate that China’s behavior in the international system — its dispute over the South China Sea (SCS) with the Southeast Asian countries, challenging the established status quo of the US as a superpower, the Belt and Road Initiative (BRI) and increasing energy diversification in Russia, Central Asia, Latin America and Africa — is an attempt at addressing its current energy insecurity.

    China claims the entirety of the SCS on the basis of historicity, what they refer to as the nine dash line; a claim that is contested by several countries in Southeast Asia. According to reports by the World Bank the SCS has proven reserves of natural gas and oil. China’s rising energy security concerns over the Malacca Strait, Strait of Lombok, Sunda and Ombai Weitar and the Persian Gulf compound its behavior regarding the SCS as more than 50% of China’s trade travels these waters. Another issue that arises is US’s presence and influence it wields in the region.

    In the last 10 years China’s imports of crude oil from the Middle East has been on the decline. Russia, Angola, Brazil and Venezuela have increasingly taken up a major portion in China’s energy mix (14%, 12%, 5.1% and 4% respectively). The influence that the US wields in the Middle East and the general instability pose a very credible threat to China’s imports. Recently, with the US unilaterally leaving the Iran nuclear deal and the return of sanctions on the country, any state continuing to trade with Iran has been under economic fire from the US (China, India, Turkey etc.). In such a scenario China’s focus on renewable energy would prove an alternative as well as a challenge to the US’s power in the international system. 

    Addressing the climate crisis has been on the agenda of energy policies of several countries. That China has taken a massive step towards that end impacts US’s credibility on that front. The Trump administration has made their position on climate change explicitly clear with their decision to withdraw from the Paris Climate Accord. China’s renewable energy generation will damage US’s optics. Barring this, investment in renewable energy could have an effect on the economies of oil rich countries in the Middle East. China’s ambitions to challenge the existing global order by strengthening their military and economy depend upon its strategies to combat their energy insecurity. Hence, the strategic value in investing in renewable energy.

    However, China’s energy shifts do not come without its own set of logistical issues. In spite of leading most of the world in the production of wind, solar and hydro energy, the percent of these in domestic electricity generation remains low. Only 19.2%, 3.8% and 1.2% of hydro, wind and solar power was utilized for domestic electricity generation in spite of a net installed capacity of 344 GW, 148.6 GW and 77.5 GW respectively in 2016. Though there has been incremental rises in these numbers, China still has a long way to go before attaining energy self-sufficiency. China still relies on heavy imports of coal from its neighbours such as Australia, Mongolia, Indonesia and Russia. The country’s usage of coal rose by 1% in 2018 though its share in the energy mix decreased to 59%, a 1.4% decrease from 2017.

    Conclusion

    The blame and burden for finding a solution to the climate crisis cannot solely rest on the shoulders of developing economies contrary to frequent statements made by the US President who blames Russia, China and India for climate change while ignoring the US’s emission of greenhouse gases. The bottom line is that the US and most of the West had almost 200 years to industrialize and develop their economies. Countries such as India and China have only experienced industrialization and a developing economy in the last 50 or so years. In such a situation, the scale to measure with whom the blame for climate change lays is skewed. Specifically in the case of China, a burgeoning population drove the need for rapid growth. Therefore, it is still a commendable fact that China has been environmentally conscious in the development of its economy. It remains one of the few countries on track to meet the Paris Climate Agreement targets for carbon emissions. 

    All this aside, it is rather premature to refer to China as a “renewable energy superpower” at this point in time. The numbers regarding the use of renewables in domestic electricity generation do not paint a picture of a country poised to change its energy dependency from fossil fuels to renewable energy. China’s goal of becoming a global superpower by 2049 does not just include powering up economically and militarily. Even a developed economy implies growth across the entire country and not just in certain provinces, as is the present situation in China. But it is increasingly becoming evident that any country that reaches their target to combat climate change along with being an economic and military powerhouse stand to become a global influencer and dictate the terms of the international system. If recent developments are any indication, China needs to continue its sustained efforts at decarbonization to attain the influence and recognition it seeks from the international community.

    Sakshi Venkateswaran is a Research Intern at The Peninsula Foundation.

    Image by Skeeze from Pixabay.

  • Venezuela’s Collapsing Economy: Victim of Geopolitical Games

    Venezuela’s Collapsing Economy: Victim of Geopolitical Games

    Manjari Balu and M Matheswaran                                                                     June 23, 2019/Analysis

    The collapse of Latin America’s oil-rich country, Venezuela, epitomises the probable debacle of a socialist regime while the geopolitical strategies espouse the power struggle at the cost of the economy. After the death of Hugo Chavez in 2013, Nicolas Maduro, the hand-picked successor of Chavez took overthe office to preserve the “petrostate” status of Venezuela.  USA, backed by Brazil, Canada and many other countries, have recognized the opposition led by Juan Guaido as the interim president and have questioned the legitimacy of the Maduro government. Venezuela’seconomy depends to the extent of 95 per cent on oil exports and the dwindling oil prices in 2014 deepened the latent crisis, an inevitable consequence for a socialist government with illiberal economic agendas. Chavizmo rose to fame with a brand of Bolivarian revolution that promised to reduce poverty and deter the US in interfering in the country’s functioning.

    Economic Collapse: Paradox of Largest Oil Reserves and Economic Mismanagement

    Venezuela is a prime example of what economic mismanagement, impractical socialist measures, and corruption can do to a country that is wealthy with natural resources. At 300, 878 million barrels of proven oil reserves, Venezuela has the largest amount of proven oil reserves in the world. The country’s economy is largely tied to its oil wealth and was one of the richest in Latin America until a few years ago. Economic collapse has led to a huge humanitarian crisisunseen in the country’s modern history. IMF has predicted that Venezuela’s inflation rate will reach 10 million per cent in 2019, becoming one of the worst cases of hyperinflation in modern history.

    TheTransformation Index that evaluates the political and economic transformation of a country, has ranked Venezuela 110 out of 129 nations with a score of 3.27 out of 10. In addition to criticizing the poor state of the economy, it also reported that the state-sanctioned crime rates have spiralled. The current catastrophic economic crisis and political chaos is the result of a pervasive economic mismanagement and an economy rooted in a single commodity, petroleum.

    Inflation was 1,30,000 per cent in 2018 and the economy has contractedby 22.5 per cent, indicating the dire status of the economy. The economic future of the country continues to be bleak and the debate has converged to the geopolitical relevance of the issue. Data on money supply is a key element to understand the inflation rates in an economy and Venezuela has refused to publish money supply data in the past years. A recent data suggests that  12 trillion BsF (Bolivares Fuertes) were printed exposing the economic ruination.

    Initial denial by the Venezuelan government about the crisis never let aid flow in, recent acceptance of humanitarian aidhas tripled the aid budget. With poor socio-economic indicators as a major challenge, Venezuela is further saddled with huge external debt as a problem to be solved by the new dispensation, be it Maduro led government or any other successor. Currently, Venezuela’s external debt stands at  150 per cent of the total GDP.

    American Sanctions, Food Imports, and Falling Aid

    Few consider the problem to be homegrown in Venezuelaand many blame the US for artificially creating the hyperinflation.  The US justified the economic sanctions to bring down Maduro regime and accused him to have caused upheavals since 2014 and the controversies besieging election manipulation by Maduro’s party substantiate the allegation. Political funding for a coup against the regime change in Venezuela was extensively promoted by the Bush administration. The protraction of political interest led to imposition of anti-democratic sanctions,  and reiterates the hegemonic strategy that the US continues to pursue.

    The recent economic sanctions imposed on the state-owned oil company, Petroleos de Venezuela SA (PdVSA)  by the US has exacerbated Venezuela’s problems in its oil production- the output is expected to fall by 33 per cent in 2019. Investigation of Venezuela’s oil production before and after the economic sanctions suggests the production has been on downtrend even before the sanctions.  

    Private investments and productivity in agriculture dropped alarmingly as the socialist government led by Chavez nationalized agribusiness and industries and encouraged food imports.  Seventy per cent of the food requirements were met by imports. According to the United States Department of Agriculture, Venezuela is one of the potential markets for the US to export agricultural produce, and accounted for 21 per cent of total agricultural imports of Venezuela. However, as the economy collapsed, over-dependence on imports for food began to tell. In 2016, food imports fell by 72 per cent and reports state that people have lost an average of 8.6 kgs of weight due to food scarcity.

     

    China’s Extractive Relationship with Venezuela

    Majority of the loans are from China and Russia and their servicing or repayments are tied with its oil revenue. It is estimated that Venezuela owes around 13.5 billion USD to China as of 2019. Under Chavez leadership, China and Venezuela laid a financial foundation by crafting  “China-Venezuela Joint fund” known as the FCCV. The central bank of China alone loaned 42.5 billion US dollars from 2007-2012 to Venezuela. The compounded bilateral interest incentivized China to support even when the Venezuelan economy faltered in 2014. China further escalated its commercial interest byloaning a sum of $4 billion as cash for oil deal paying little attention to the projected contraction in the Venezuelan economy. In the year 2017, Maduro announced ambitious planning to spend 70 percent of the total budget on social schemes to address food scarcity. While the quixotic socialist paradigm was impressive during Chavez’s tenure the public soon realized the huge dent made in the economy by imprudent  social spending.

    The defensive lending strategy adopted by China post Maduro’s electoral victory shifted the focus of investments to oil and oil-related infrastructure. Although China’s recent intervention in Venezuela’s domestic affairs is evident from the endorsement for Maduro,  oil supply has always been its priority over political rivalry in Venezuela. As China became more sceptical about Venezuela’s ability to repay the loans because of low oil production and the adverse impact of US sanctions, its capital flow to Venezuela shrunk.  Maduro had viewed relations with China to be based on ideological common ground, but China was focused on leveraging its abundant resources, which, in turn, contributed to the crippling of the economy of Venezuela. This asymmetric relationship between Venezuela and China thwarted expectations of Maduro to acquire more credit from China.

    For China, endorsing Maduro is not an option as far as its economic interest is concerned; increasing rebellion of Venezuelan people portends a threat to the Maduro government that could bring in democracy in Venezuela, which could make it a potential defaulter of past debts. The Chinese government is considered culpable for Venezuela’s crisis by many American policymakers, and are accused to have followedthe “debt trap diplomacy”. The investment strategy in Venezuela resembles the Angola model- Chinese government extends credit tied with oil. However, in the case of Venezuela, China is bearing the cost of overestimating the performance of Venezuelan economy.

    Russia’s All-Weather Ties

    As we see a pragmatic China becaming more cautious about the failing economy of Venezuela, Russia’s interest and the relationship go beyond just the commercial narrative. Russia ties with Venezuela are deep-rooted since the time of Chavez, and it has continued to bolster the failing Venezuelan apparatus for clear geopolitical reasons. Vladimir Putin has invested strongly on  Russia’s international image and prestige, especially while rebuilding Russia post the Yeltsin years. The first credit line of arms relations between Russia and Venezuelawas signed in 2006. Although the export of military equipment to Venezuela have reduced drastically by nearly 96 per cent in the past few years, Venezuela has been the largest buyer of Russian arms in the Western Hemisphere with a total estimate of $4 billion during Chavez years. Russia has made consistent efforts to support Maduro by deploying military presence in Caracas even as Venezuela’s economy took a downturn.

    Chavez and Putin deepened their political ties on common grounds of  supporting a multipolar world order, and Chavez expected tangible benefits for Venezuela out of this agreement. Oil deals between both the countries advanced asRussia’s largest crude oil producer, Rosneft, partnered with PdVSA for several projects. Rosneft holds 40 percent shares and plays an instrumental role in pivoting Russia’s foreign policy through sound investments in the West. Venezuela agreed to commit 49.9 percent of its share in Citgo, American subsidiary company in exchange for credit from Rosneft. Russian emphasis on the “strategic” importance of the alliance with Venezuela reveals Russia’s intention to strengthen its geopolitical presence in USA’s backyard. Putin’s domestic political image has become sharper with his strategic take on Venezuela.

    However, sanctions on Venezuela has severely restricted the ability of Rosneft to borrow or invest, thus escalating tensions between Russia and the US.  Much like in Syria, Putin has sent a strong signal to the US by deploying a small contingent of Russian military personnel in Venezuela.

    Pawn on the Chessboard of Great Power Politics

    Venezuela has become the strategic battlegroundfor geopolitical struggle between the USA, Russia, and China. Collapse of the Venezuelan economy does not augur well for China in the long-term. However, China will look to strengthen its ties with Venezuela through economic support as its energy needs have a critical link with Venezuela. USA’s ‘Manroe Doctrine’ and its ‘Roosevelt Corollary’  has fiercely opposed any external powers’ strategic presence in the Western Hemisphere. This policy has led the USA to be an interventionist in Latin American countriessince the 1960s. Not much has changed since then. Chavez’s Venezuela has been a major opponent of US hegemony  Putin’s Russia is looking to strengthen its presence in South America, and support to Venezuela forms the lynchpin of this strategy. While international community looks for peaceful resolution of the rapidly deteriorating situation in Venezuela, geopolitical competition of external players has ensured  power tussle continues in Venezuela. Political Victory of either Maduro or opposition would represent the triumph of their Global supporters, Russia or the USA.  The socialist seed sown by Hugo Chavez is haunting Venezuela with a dented economy and a crisis in leadership. The “Petrostate” desperately needs economic reforms and international support to rebuild its economy. Structural reforms to remove the bottlenecks of growth in the post-crisis period and opportune investments in potential areas would rescue Venezuela in the following years.

    Manjari Balu is a Research Analyst at ‘The Peninsula Foundation’.

    Air Marshal M Matheswaran (retd) is the President of TPF.

    Image Credit: BBC News

  • American Sanctions on Iran and the Underlying Oil War

    American Sanctions on Iran and the Underlying Oil War

    Adithya Subramoni                                                                                      June 24, 2019/Analysis

    In a shocking turn of events, America in 2018 announced its withdrawal from the Joint Comprehensive Plan of Action 2015. This came as a surprise to the international community for good reason, because subjecting Iran under harsh sanctions when they kept up their end of the bargain seemed like a punishment from the US for keeping up this good behaviour. President Donald Trump, calling towards the international community and specifically ‘like-minded countries’ for a team effort, said it was time to curb Iran’s state-sponsored terrorism. But his idea to get Iran to re-engage on this field was through the ‘maximum pressure campaign’. This strategy is unlikely to find takers owing to the fact that the nuclear issue and state sponsored terrorism are two completely different issues, and hence need to be dealt with separately. To charge Iran with state sponsored terrorism is completely misplaced. Iran has not caused any damage to US or its citizens in the last twenty five years. On the other hand terrorist acts affecting the US and its allies have almost always had a link to Sunni Islamic fundamentalism with its links to Saudi Arabian Wahabi organisations. The real motive is USA’s geopolitical targeting of Iran. Trump’s recent designation of the Iranian Islamic Revolutionary guard corps (IIRGC), a unit of the Iranian army, as a terrorist outfit defies all logic and may become counterproductive to the US interests, the very issue that Trump wants to safeguard.

    Iran’s support to Hamas is fundamentally a regional and geopolitical struggle with Israel, while the Sunni vs Shia conflict is a manifestation of the regional power struggle between Saudi Arabia and Iran. If the USA wanted to pressurise Iran on its support to militant outfits like Hamas, it should have ensured it has support of its allies and multilateral institutions. USA’s unilateral action on Iran does not have the support of other members of the P5 +1(Germany) as well as other oil-dependent countries. With the latest round of sanctions, countries with economies having exposure to Iranian trade industry are gearing up to take a major hit. This brings us back to the subject of concern, why take such hasty decisions impacting the global economy without consultations from other members of the P5 + 1?

    The exit strategy

    In 2018 shale oil catapulted America to the leading position amongst the oil producers. As companies in Texas adopted fracking technology to good use in optimising their oil production, America climbed up to the first position in the oil producers list, surpassing major oil producers such as Saudi Arabia,Russia, Iran and the UAE. Climbing up the oil ladder came at a cheaper price for America considering the OPEC countries, excluding Iran, and Russia had agreed to reduce their oil production to protect the free-falling price of oil. This gave America a free hand at capturing the oil market especially where the demand from emerging economies was increasing rapidly. The only barrier to becoming the largest oil exporter was qualms from the emerging economies and other countries who found the American alternative to be an extremely expensive replacement for their oil needs. With emerging economies deeply dependent on Middle Eastern oil sources, one of the options for America to increase the demand for its oil was by blocking Iran’s oil exports through sanctions. This could give multiple advantages to the US: one is to create economic pressure on Iran; second is to boost American oil exports by eliminating Iran’s oil supply from the market; and third is to strengthen its ally Saudi Arabia’s pursuit of regional domination by squeezing Iranian oil-based economy.

    America’s play on executing its exit and sanctions in such a speedy manner may be rooted in the fact that the major countries dependent on the Iranian oil are in the Asian continent. European countries such as France, Greece, Italy and Spain all combined import close to 500,000 barrels a day as opposed to China and India who import close to 600,000 barrels per day and 500,000 barrels per day respectively. With America limiting its oil imports primarily from Canada and Saudi Arabia, and the European Union sourcing two-thirds of its oil requirements from Russia and Saudi Arabia, American sanctions on Iran do not impact the energy requirements of the western power bloc significantly. Hence, it may have been an American expectation that other members in the JCPOA (P5+1) would support Trump administration’s move to scrap the JCPOA and resume the earlier hard line approach of sanctions on Iran. This, however, has not happened.

    Unfortunately for America, other members of the JCPOA did not see any justification in the logic and accusation given by the Trump administration and hence, there was no support forthcoming from them. Trump’s disdain for allies and his unilateral approach, virtually demanding complete acceptance from European allies bordered on disrespect and insult to the member countries’ sovereignty and pride. Reaction to Trumps position was one of disbelief and contempt, as his actions displayed, in their opinion, disregard and contempt for international norms and credibility. Quite clearly USA has sought to bulldoze its way through with utter disregard for international institutions and multilateralism, exploiting its domination of the global financial institutions, banking system, and the fact that the US dollar is still the world’s reserve currency.

    UK, France and Germany together set up Instex – Instrument in Support for Trade Exchanges, to facilitate the trade of medicines, medical devices and food supplies, which trades in Euro through a financial channel having zero exposure to the American financial intermediaries. This marked a milestone in the chapter of American supremacy, where its European allies took a stance against its imposing regime. Though the volume of trade is negligible, the all important European message is that it will not support the American unilateralism. In the absence of any European support, Trump administration should have recognised its folly of trying to impose its decision on its allies, but on the other hand it made it even worse by virtually threatening diplomatic ties with those countries. Others in the P5, such as China and Russia have agreed with the European counterparts to re-examine and review if necessary the terms of the 2015 JCPOA deal and look for ways to deflect and overcome the US sanctions. Iran too, has welcomed the idea and agreed to keep its end of the 2015 deal. Time however, is running out as Iran has demonstrated its loss of patience over the lack of progress on the issue, and has stated on more than one occasion, in the last six months, that it will recommence its nuclear fuel reprocessing and enrichment activities.

    Asian approach to the Iranian issue

    Asia is the largest customer of crude oil, importing 53% of the global total oil imports, translating to an approximate amount worth $628.2 billion. One major reason for this huge oil influx is the fact that Asia is home to the fastest developing economies such as China and India. Though China and India have maintained that they will continue to import oil from Iran, one issue that concerns all the countries importing Iranian oil is the availability of insurers willing to take up the risk for oil supply from Iran. Most insurers will be cautious to take up projects for fear of losing business and financial access in the West.

    With the ongoing trade war with America, China is fighting a dual war. For America, the opponent has been weighed down with two hurdles co-incidentally and conveniently. With the trade war impacting the export industry and sanctions on its oil supplier indirectly hitting the Chinese economy, China may chose well to hit back on America by disregarding the sanctions on Iran. Iran might just have earned itself a powerful ally because of American hegemony. Chinese imports of crude oil from Iran have surged to record levels in April and May. Iran is set to become China’s 2ndlargest supplier of crude oil.

    Steering the wheel of attention towards India, Iran is its third largest oil source. Particularly being an oil dependent emerging economy, the sanctions on Iran will force India to look at more expensive oil options. The six month credit line and insurance included price for Iranian oil made it the most lucrative oil supplier in the business. Another issue that has come to India’s doorstep is the longevity of the rupee account based trading system with Iran using the UCO Bank. UCO Bank being the only bank with no exposure to American financial channels is the only means for continued Iran-India trade relations. In light of the US sanctions, India reduced its oil imports to turn eligible for a sanction waiver. This sanction waiver came to an end on 02May 2019, and oil imports stopped owing to the election period as well. Now the primary concern for the new Indian government is to prioritise the Iran issue. Iran is accountable for thirty percent of India’s exports, and given that the rupee account is fuelled by the INR deposited in favour of oil imports from Iran, the systematic reduction of oil import also creates a proportional fall in demand for Indian exports, owing to the curb of Iran’s purchasing power. Since the end of the sanctions waiver, India has stopped import of Iranian oil, hopefully only as a temporary measure.

    At the same time, a diplomatic concern that arises for India is its interest over the Chabahar port. Chabahar Port is a major investment arena for India to create a transportation corridor connecting Asia as well as the land-locked Afghanistan with the rest of the world. Though India plans on disregarding the US Sanctions and continuing business through the UCO Bank and Iran’s Pasargad Bank, attention needs to be paid to resolve the reducing Iranian imports, not only to secure India’s exports but also to show Iran the commitment India has towards its diplomatic ties with them and its vested interest in operating the Chabahar Port. Going ahead with the possibility that China would disregard the sanctions on Iran, a reduction in Iranian imports could weaken Iran’s ties to India and pave the path to strengthen Iran-China ties. This would particularly be drastic for India, if Iran were to give China operational rights to the Chabahar port. Needless to say, this would bring in interference from Russia, who wouldn’t be thrilled with the loss of regional trade autonomy to China.

    Approaching the dénouement

    From a bird’s eye view, the rising conflicts in the West Asian region, with Saudi Arabia and the UAE being the main champions who support the efforts for a change in Iran’s regime, Iran finds itself in a cornered situation amongst its neighbours. If cornered, both strategically and economically, Iran could resort to using its strategic location to choke the Strait of Hormuz by planting sea mines or through any other obstruction mechanism. Though unlikely, as it would put Iran in a very hostile situation with rest of the world, it cannot be ruled out as an extreme last resort measure. This could create major international crisis. It would, as a start contribute to the run up in oil prices and owing to supply security – it is possible that USA stands to benefit immensely in such a crisis.

    On the other hand, by imposing sanctions on Iran, America has pushed India to an uneasy corner. Owing to regional ties, it plays to India’s strength to take care of her interests by dealing with Iran and securing operation of Chabahar port. On the other hand it is essential to keep India’s ties with America on an even keel. If it refuses to acknowledge India’s ground interests and resorts to the muscle power of sanctions, China may end up as the beneficiary with a fortuitous win with Chabahar port, leading to an ultimate strategic loss to India and the US.

    The situation calls for global introspection into imposing sanctions by a country due to its phenomenal control over the world’s financial channels and the domination of the USD international trade. But this round of sanctions just might be the one where countries figure out alternate solutions together; considering the European initiative of Instex, Asian methods such as the trade using rupee account, Russian and Chinese support towards Iran; to finding a more cooperative and equitable solution that enables the world to trade outside the control of America. The sanctions may have just provided the edge to catalyze the changing world order, but the question is who’ll sit on the throne of the high table when the rubble settles? Or will it be, as it seems more likely, a more cooperative and less competitive, multi-polar world order?

    Adithya Subramoni is interning at ‘The Peninsula Foundation’. She has a Bachelors degree in Commmerce  from Christ College, Bangalore.

    Photo Credit under a Creative Commons Attribution 4.0 International License.: english.khamenei.ir

  • TPF Conference India and the Indian Ocean Region

    TPF Conference India and the Indian Ocean Region

    TPF Conference

    “India and the Indian Ocean Region: Dynamics of Geopolitics, Security, and Global Commons”

    Venue: WCC, Chennai

    Registration

    08:15 to 09:00

    Speakers

    Inaugural Session (9:00 to 10:45)

    dr-lilian-i-jasper
    Dr Lilian Jasper

    Principal, WCC, Chennai

    Dr Lilian Jasper
    Welcome Address
    air-marshal-m-matheswaran-avsm-vm-phd-retd
    Air Marshal M Matheswaran

    President, The Peninsula Foundation, Chennai

    Air Marshal M Matheswaran AVSM VM PhD (Retd)
    Presidential Address and Overview
    ashok-kumar
    Vice Admiral Ashok Kumar

    AVSM VSM Vice Chief Of Naval Staff HQ

    Vice Admiral Ashok Kumar AVSM VSM Vice Chief of Naval Staff
    Inaugural Address

    Prof Kanti Bajpai

    LKYS of Public Policy, NUS, Singapore

    Prof Kanti Bajpai
    Key Note Address

    COFFEE BREAK

    10:45 to 11:10

    Special Lecture 11:15 to 12:00

    Dr. Padma Subrahmanyam, Padma Bhushan awardee/Classical Dancer
    India’s Art & Culture in IOR

    Session I (12:00 to 13:30)

    Cmde Uday Bhaskar (Retd) – Director, Society for Policy Studies, New Delhi

    Indian Ocean: Culture, Civilizations and Connectivity

    Mrs G Padmaja – Former Regional Director, National Maritime Foundation, Vizag

    Topic: Historical and Cultural Dynamism of the Indian Ocean

    Dr. Vijay Sakhuja – Trustee, The Peninsula Foundation, Chennai

    Topic: Cargos and Commodities: Then and Now

    Dr. D Dhanuraj – Chairman, Centre for Public Policy Resrarch. Cochin

    Topic: Impact of Trade and Migration Flows: Past and Present

    LUNCH BREAK

    13:00 to 14:15

    Session II (14:15 to 15:45)

    Dr. TCA Raghavan – Director General, Indian Council for World Affairs, New Delhi

    Power Politics in IOR: Geostrategies and Geo-economics

    Dr Lawrence Prabhakar – Associate Professor, Madras Christian College, Chennai

    Topic: Competing Pivots: China, US, Japan, Russia, India and the EU

    Dr Arvind Kumar – HOD, Department of Geopolitics, Manipal University

    Topic: Geopoltics of Energy in the IOR

    Dr Jabin Jacob – Associate Professor, Shiv Nadar University, Noida

    Topic: China’s BRI: Contrasting Responses

    COFFEE BREAK

    15:45 to 16:00

    Session III (16:00 to 17:30)

    Vice Admiral Shekhar Sinha (Retd)- Trustee, India Foundation, New Delhi

    India’s Strategic Interests in the IOR- Maritime Security, Power Projections and Evolving Partnerships

    Cmde Somen Bannerjee – Senior Fellow, Vivekananda International Foundation, New Delhi

    Topic: India’s Maritime Security and Power Projection

    Amb Antonio Chiang – Policy Advisor to the President; Board Director, Institute for National Defence and Security Research

    Topic: Strategic Partnerships: India and ASEAN

    Group Captain PB Nair – Directing Staff, Defence Services Staff College, Wellington

    Topic: Air and Space: Dimension of India’s IOR Strategy

    End of Day 1 – 17:30

    Network Dinner (By Invitation)

    19:30 to 22:00

    Gold Sponsors

    Event Sponsors

    Speakers

    Panel Discussion (9:00 to 11:00)

    Topic – India’s Strategic Approaches in IOR: Between Aspirations and Contradictions

    Moderator

    Air Marshal M Matheswaran AVSM VM PhD (Retd)

    Prof Kanti Bajpai – Panelist

    Dr TCA Raghavan – Panelist

    Amb Antonio Chiang – Panelist

    Lt Gen SL Narasimhan – Panelist

    Cmde Uday Bhaskar – Panelist

    COFFEE BREAK

    11:00 to 11:15

    Session IV (11:15 to 12:45)

    Dr. Joshua Thomas – Deputy Director, ICSSR, NERC, Shillong

    International Cooperation and Global Commons

    Dr Suba Chandran – Professor and Dean, School of Conflict and Security Studies, NIAS, Bangalore

    Topic: Cultural Legacies and Competing for Zones of Influence: India, China and External Powers

    Rear Adm S Shrikande AVSM (Retd) – Goa

    Topic: International Institutions: SLOCs, Chokepoints, Freedom of Navigation

    Rear Adm K Swaminathan – FOST, Southern Naval Command, Cochin

    Topic: India’s Ability to Provide Net Security and Balance Global Public Goods

    LUNCH BREAK

    12:45 to 13:45

    Session V (13:45 to 15:15)

    Lt Gen SL Narasimhan – Director General, Centre for Contemporary Chinese Studies, MEA

    Transnational Issues, Threats and Challenges in the IOR

    Dr R P Pradhan – Associate Professor, BITS, Goa

    Topic: India and the Blue Economy: Evolving Partnerships

    Dr Arabinda Acharya – Associate Professor, International relarions, NDU, Washington

    Topic: Non Traditional Security Threats: Piracy, Maritime Terrorism, Climate Change, Illegal, Unreported and Unregulated (IUU) Fishing, Illegal Immigration, and Smuggling of Arms and Drugs

    AVM Ashutosh Dixit – AD Commander HQ, Southern Air Command, IAF, Trivandrum

    Topic: International and Regional Cooperation in Disaster Management

    COFFEE BREAK

    15:15 to 15:30

    Valedictory Session (15:30 to 17:00)

    Air Marshal M Matheswaran AVSM VM PhD (Retd) – Chairman and President, The Peninsula Foundation, Chennai

    Topic: President’s Introduction

    Dr TCA Raghavan, IFS (Retd) – Director General, Indian Council of World Affairs, New Delhi

    Topic: Valedictory Address

    Brigadier Albert Pakianathan VSM and Bar – Director- Research and Admin, The Peninsula Foundation, Chennai

    Topic: Vote of Thanks

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  • Strategic Autonomy and the Looming Oil Crisis

    Strategic Autonomy and the Looming Oil Crisis

    Kamal Davar                                                                                             May 31, 2019/Commentary

    The new Modi government will have to speedily contend with a serious foreign policy challenge on its hands.

    That this ordeal comes in the wake of some underplayed serious economy problems currently facing the nation will compound the problems for India which imports over 80 per cent of its burgeoning oil needs.

    Thus, if the looming crisis in the Persian Gulf between an arrogant US and an equally defiant Iran does not get resolved peacefully, ominous ramifications await the region, the world and all those nations which import crude oil from Iran.

    The genesis of the current crisis between the US and Iran has its roots in the Joint Comprehensive Plan Of Action (JCPOA) which was agreed upon by Iran and six western nations in 2015, led by the US, to curb Iran’s nuclear programme, which boils down to deterring Iran from developing nuclear weapons. But in May 2018, the US, under its mercurial President Donald Trump, chose to renege on this treaty as Trump felt that this was the “worst deal ever negotiated.”

    It is also a fact that Iran did not violate any norms of the law as regards this agreement.

    Meanwhile, the US allowed some nations, including India, which import oil from Iran a six-month waiver, which ended on May 2, 2019. As a consequence of the US action, oil prices the world over have jacked and soon its adverse effects will be felt in India as inflation will hit the already strained Indian economy. Over a 10 per cent hike in global oil prices has already taken place in the last one month and a crippling escalation in oil prices ahead is well on the cards.

    Notwithstanding any US pressure on India, the unalterable fact of Iran’s strategic significance to India in the region remains beyond question. India imported 24 million metric tonnes of crude from Iran in the 2018-19. India was Iran’s second largest buyer of crude last year, while Tehran was the third largest supplier to India after Iraq and Saudi Arabia (11 per cent of a total of India’s oil imports).

    Additionally, Iranian crude comes with a longer credit period and cheaper freight owing to Iran’s geographical proximity to India and, thus, Iranian oil remains the best option for India in more ways than one.

    Higher oil prices also make the Indian rupee weaker, making imports to India costlier. Importantly, that Iran-India collaboration in the development in the vital Chabahar Port in Iran will give India vital ingress to Afghanistan and the Central Asian Republics cannot be understated.

    Meanwhile, the US has rushed the formidable USS Abraham Lincoln carrier-borne Task Force to the Persian Gulf region and undertaken certain prophylactic steps in case war breaks out.

    The Iranians, too, have mounted some small-range anti-ship missiles on their warships. Iranian President Hassan Rouhani recently said that his nation is facing acute pressure from international sanctions, dubbing it a “war unprecedented in the history of the Islamic revolution.”

    The US has also branded Iran’s elite Revolutionary Guards as a foreign terrorist organisation. A war of words has broken out, with President Trump declaring that if “Iran wants to fight, that will be the official end of Iran. Never threaten the United States again.”

    Replying back sternly, Iranian Foreign Minister Javad Zarif retorted that Iranians have stood tall for millennia against aggression and that “economic terrorism and genocidal taunts won’t end Iran.” He added that “never threaten an Iranian. Try respect it works.”

    Importantly, even US allies have steered away from of taking any partisan positions with either the US or Iran. Meanwhile, oil-producing nations like Saudi Arabia, Kuwait, Mexico and the US itself have been requested to step up their oil production to cater for Iranian oil shortfalls.

    How this oil crisis will shape up to meet global demands is anyone’s guess.

    It is a strategist’s nightmare in conjuring up a scenario concerning the ramifications of a war between Iran and the US. The Persian Gulf is easily one of the world’s critically significant strategic waterways through which one-third of the world’s oil is transported.

    In the event of a war, Iran will definitely close the vital Straits of Hormuz for commercial shipping purposes, throwing the region’s economy out of shape — an eventuality which, hopefully, should not ever take place.

    Preoccupied with its General Election, India, as a major regional player, has so far not reached out to its strategic partner, the US, to impress upon it to defuse the crisis.

    Recently, the Iranian Foreign Minister made a trip to India to explain their position to India on the current standoff.

    India, however, need not succumb to any US pressures or take sides. India has an adequate financial standing and moral stature to play a peacemaker’s role. India must conscientiously follow the time-honoured policy of zealously guarding its strategic autonomy. Respect for India from nations even adversarial to each other — as in earlier decades — will follow automatically and some of India’s economic tribulations will also get simultaneously addressed.

    Let the new government in New Delhi bear in mind Iran’s more than significant strategic value for India in the region.

    The author, Lt Gen Kamal davar is a former DGDIA and is visiting Distinguished fellow at TPF. 

    This article was earlier published in The Tribune.

  • The Chinese diaspora in Europe: Serving the motherland from abroad

    The Chinese diaspora in Europe: Serving the motherland from abroad

    Andrei V Korobkov, Nikolaj A Sluka, and Pavel N Ivanov                          May 31, 2019/Analysis

    Europe, one of the largest immigration systems of the world, is experiencing currently a test of strength under pressure coming from a powerful new wave of migrants from the Muslim countries of the Middle East and North Africa (MENA) caused to a large extent by the Arab Spring.

    According to Eurostat, arrivals from the Middle East to the EU were estimated at 1.5 million in 2015 and 1.8 million, in 2016. With the accumulation of economic problems and the escalating ethnic tensions in many countries of the region, demands are intensifying for a strict limitation of immigration and the reorientation of migration policy towards the primary acceptance of highly qualified migrants while limiting simultaneously the admission of practically all other categories of immigrants, including refugees. During his term in office, Nicolas Sarcozi, the former President of France, spoke, in particular, of the need to switch from «suffered» to «chosen» immigration.

    Regardless of the growing realization of the problem’s acuteness by political elites, no effective measures have been introduced yet to deal with it. As a result, criticisms of European migration policies are intensifying. The problem cannot be limited to migration and minorities issues. These are not synonymous with poverty, unemployment, social frustration, and aggression that the Brits, for example, view as the root causes of pogroms in their cities, while considering white youngsters (chavs) as their main perpetrators. The crises also hurt representatives of the middle class, deepening the gap between them and the rich. This does not resolve the problems related to the integration and adaptation strategies, multiculturalism, cluster and dispersed settlement, and the links of those with the issue of social mobility or the lack of the latter.

    The challenge of multiculturalism still remains a headache for many Western European governments as well as for the supporters of tolerance and multiculturalism concepts in general.

    The challenge of multiculturalism still remains a headache for many Western European governments as well as for the supporters of tolerance and multiculturalism concepts in general. Prior to the start of the June 2018 EU leaders’ emergency summit, dedicated to the issues of migration, the French President Emmanuel Macron stated that the EU migration crisis has been transformed into a political one.

    With this background, immigration to Europe from China remains to a large degree an invisible one. This is explained partially by the different scale of the incoming migration flows as well as by their origins. In 2016, the Chinese comprised just 3% of 76 million international immigrants residing in Europe. While the huge potential scale of the Middle Kingdom’s population mobility is well understood, that country traditionally prefers to act «in the shadow zone.»

    In contrast to Muslim immigration, caused to a large extent by the Arab Spring and thus having a forced, push character in the countries of emigration, the Chinese immigration could be characterized as a product of a merger of the ideologies of the receiving states, relying on the concept of multiculturalism, and the sending country, pursuing the «going out» policy.

    With a relatively long history of Chinese immigration to Europe, experts concentrate their attention on its most recent wave, the so-called New Immigration that started at the inception of China’s economic reforms and the policies of Openness. This migration wave is marked by a balanced gender structure and high shares of younger age cohorts, well educated and highly qualified people, aiming at the assimilation within the European societies, allowing them to find a job within the prestigious segments of labor market. This migration wave has significantly boosted and qualititatively transformed the process of the ethnic diaspora formation in the region. Exactly this New Migration is defining the main quantitative parameters of the diasporaand is responsible for the formation of the «model ethnic minority» stereotype that has become deeply ingrained in American public consciousness.

    There also exists another “shadow” component of this migration flow represented by the industrial workers and service personnel who as a group have quite different demographic parameters and are marked by the relatively low levels of educational achievement, well being, and language proficiency. This latter group also includes undocumented migrants. This is a different and quite poorly explored up to this point area of research.

    The emergence of deep fracture lines separating the host countries’ native populations and the politically and socially deprived immigrants who differ in language and religion – the concept defined in classical Political Science as mutually reinforcing cleavages – is less likely in this situation, marked by quite heterogeneous structure of the immigration flow.

    The fact that the main immigration flow is centered on a relatively narrow group of receiving states reinforces contrasts in the territorial distribution of the Chinese diaspora in Europe.

    The fact that the main immigration flow is centered on a relatively narrow group of receiving states reinforces contrasts in the territorial distribution of the Chinese diaspora in Europe. Its overall numerical strength has an expressed meridian gradient, declining in the West-East direction, and nearly directly correlates to the geography of the economically developed and populous countries. More than 98% of the diaspora is located in just 10 countries, while 50% lives in the UK and France. Large Chinese communities have been formed in Germany and the Netherlands as well as in Italy and Spain — the latter being the countries that have relatively recently offered amnesties for illegal immigrants. On this background, less visible are the countries of Northern and, especially, Eastern Europe, that for the first time opened their borders for Chinese immigration just in the 1990s. The exception represent just Hungary and Romania, having a relatively higher share of the Chinese in their modern immigration flow structure.

    The «Chinaization of Europe» issue is acquiring a partially local character in the context of escalating leadership struggle among the world’s major powers in the framework of transition to the third global integration cycle. It is important that China is viewing emigration in the context of its «going out» strategy and in combination with other «soft power» mechanisms, involving the cooperation with European states in various fields — economic, investment projects, research and development, educational, socio-cultural etc. More than that: official Beijing is incrementally cutting on the projects that were designed to promote migrants’ repatriation or aimed at the replenishment of the human capital reserves, and is transiting to a large scale «Serve the Motherland from Abroad» stategy. The main task is to form the China-centered interlayer as a factor of state influence in host countries with high levels of ethnic communities’ concentrations. In the future, the representatives of such influence groups are expected to become deeply ingraned into the social, political, and economic life of the receiving countries in order to be able to lobby China’s interests in case of necessity. Thus the main emphasis will be made on preserving and strengthening the diaspora’s national consciousness, promoting China’s future global political and economic superiority.

    Andrei Korobkov is Professor of Political Science and International Relations at Middle Tennesse State University, USA. He is a non-resident, visiting Distinguished Fellow at TPF.

    Nikolaj A Sluka is Professor of Geography at Moscow State University, Russia.

    Pavel N Ivanov is pursuing his MS (Geography) at Fudan University, Shanghai, China.

    This article is published earlier in BRE Review of University of TURKU.

    Photo by Vladislav Vasnetsov from Pexels

  • India’s Farm Distress: Priority and a Challenge for the New Government

    India’s Farm Distress: Priority and a Challenge for the New Government

    Manjari Balu                                                                                                         May 30, 2019/Analysis

    A deliberate campaigning strategy of the National Democratic Alliance (NDA) led by Prime Minister Narendra Modi has yielded an expected victory in the 2019 Lok Sabha election. The election season had sparked off many appealing promises; one of them pertains to, agriculture, the most critical sector of the Indian economy. The agriculture sector contributes to 12.2 % of the GDP (it has fallen from 17.6% in 2004-05 to 12.2% in 2016-17) for the year 2017-2018 and roughly employs 50 % of the total workforce. The agrarian structure continues to suffer while political parties competed on the delusory promises during the campaigns. NDA government with a special focus on agrarian society has branded its promise to double each marginal farmer’s income by 2022. A pedestrian cash transferscheme has been propelled during the interim budget to provide INR 6000 (per year) to all the marginal farmers who hold less than 2 hectares of land. A valid scepticism about the promise stems out of the fact that there exist an unavailability of data about the farmers’ income and all the political parties refuse to talk about the farmers’ current income. Cash transfer scheme being an attempt to mollify the accumulated antipathy among the public especially farming community has to be scrutinized and put under the radar for substantial discussion.

    Agriculture Distress and the Marginal Farmer

    According to last published NSSO figures for the years 2012-13, farmers’ income averaged out to INR 6,424. Extrapolating the past data to arrive at the 2018-19 income using Compound Annual Growth Rate (CAGR) to the nominal gross value added components of agriculture, cash transfer of 6000 would account for merely 6 % of the total farmers’ income. The Chief Economic Advisor claimed that the annual transfer to marginal farmers would be 17 %, an assertion backed with no clarification. The nebulous methodology to estimate income seems to question the effectiveness of such a policy instrument to address the perennial agricultural distress.

     The agrarian economy has been volatile over the past few years and the well-being of the farmers have always been the litmus test to review the performance of the sector. Around 87 % of the farmers are small and marginal farmers with less than 2 hectares of land holding, this figure seems to be swelling- indicating an objective failure of the land consolidation reforms in the past few years.

     There is a steady decline in the population engaged in agriculture to the total percentage of employment since the beginning of the independence. Displacement of agriculture labours to other sectors is inevitable if there is a gradual policy shift to mechanization of agriculture and capital formation, the eventual effect of the investment is ought to be reflected in the productivity. But between the years 2011 and 2015, agriculture workforce declined by 12.6 million, and the labour force increased by 14 million but total employmentin the economy increased only by 12 million. The incongruity in the figures proves the inability of the nonfarm sector to absorb residual workers out of work. Further, it is erroneous to premise the out of work farm labourers as an ultimate result of only innovation in agriculture. Status of unemployment has to be confessed and measures to provide employment has to be prioritized. It is apparent that the incumbent administration is resorting to the same banal and anodyne prescriptions that preceded it in its attempt to curry favour with the agricultural voter base, which had been promised employment during the 2014 election.

    The incessant crisis is evident from the past records of famers’ suicide data published by National Crime Records Bureau; however, the report faces severe criticisms for underreporting deaths. Though there are various socio psychological reasons for suicides, indebtedness has been considered the primary cause of death. A mere addition of cash transfer might marginally ameliorate farmers’ debts but heavy dependence on informal credit system requires the government to resolve the gaps in current credit system.

    Policy Challenge – Dealing with the Debt Problem

     The Debt Asset Ratio (DAR) indicates the quantum of indebtedness among farmers, since 1990 the ratio has increased at an astounding rate of 630 % in 2013. One commonly posited explanation for the skyrocketing DAR is the excessive informal borrowings by the farmers while the asset value remains stagnant. The perpetual ignorance by the government to address the structural issues over decades pushed the farmers to demonstrate a protest and subsequently resulted in the electoral setbacks of BJP post the protest.

    The apprehension is beyond agricultural and institutional policies, food inflation rates have fallen from 12.9 percent from 2013-14 to 0.13 percent in 2018. Even though the low inflation rates benefit the consumers in general- it would also imply the low food prices would be way below the input costs and return on private investment would be less if not non-existent. Government’s efforts have had little effect on keeping the inflation at a steady rate; the extreme movements of the inflation rates exacerbated the condition of the agrarian economy. The Government has announced to fix Minimum Support Price (MSP) at 50 % above the cost of production as per the recommendation of agricultural scientist Dr.Swaminathan. However, the recent protest placed a demand to change the method of arriving at the MSP figure. Pseudo free market behaviour from the government side has altered the market structure and mostly worked against the welfare of the marginal farmers. While the APMC (Agricultural Produce Marketing Committee) controls the MSP, the small farmers are expected to reach out to the market with a higher transaction cost and end up with much lower revenue. The state has failed to acknowledge the governance failure and continues to place MSP in an equivocal position in every budget. Cash transfers schemes have been placed in the budget with a similar ambiguity in terms of its impact on agricultural productivity and growth. There is a paucity of literature that provides a lucid explanation for execution of cash transfer. A recent study conducted in the rural parts of poor Indian states with 3,800 samples concluded that only 13% of the respondents preferred cash transfer over public health care facilities. Though it is not as same as providing cash transfer to farmers, similar schemes in the past have failed to create a sanguine impression and has made the beneficiaries dubious about such ambitious policies. The sample is also not a true representation of the agrarian community, sector which has been victimized for decades and would vote for short term benefits that risks stagnant productivity and falling workforce.

    The Paradox of Indian Agriculture

    Indian agriculture faces many challenges and is a paradox. India has the second largest area of 159 million hectares in the world as arable land, next only to the United States.  India is the second largest producer of Rice, Wheat, fruits and vegetables. India is the largest producer of bananas and mangoes. Export of agricultural products have ben growing at over 4% year on year. Despite all this there has been great volatility in agricultural economy over the last decade. Growth has been uneven, marginal farmers find farming becoming very uneconomical, and there has been significant decline in marginal farm holdings from 2.27 hectares in 2002 to 1.07 hectares in 2015. While big farmers have sustained themselves well, it is the marginal farmers who have continued to face increasing stress. While many encouraging policies and financial support schemes have been announced, in reality the implementation has been ineffective if not shoddy. Most planned investments and financial assistance have not reached the desired target populace.

     Investment in agriculture GDP has declined from 3.3 % in 1980-81 to 2.9 % in 2013-2014 while the subsidies on fertilizers has increased by 15 times in the same time frame after adjusting to inflation. Fertilizers subsidy accounts to 47 % of the total subsidy in the budget for the year 2017-2018 and amounts to almost Rs.70,000 crore.  Shenggen Fan and Ashok Gulati in their landmark studyto compare relative benefits of investments versus subsidies used a well-established statistical method ‘multi-equation system’. For every 10 lakh invested in agriculture pulled 328 people out of poverty and every one rupee spent on Research & Development increased the agriculture GDP by Rs11.20. The study also suggests that the inefficient input subsidies have actually been more counterproductive by hindering new investments and choking agriculture growth. Member of NITI Aayog and a renowned agronomist, Ramesh Chand had commented that research and development spend in India is not far behind China, a statement that calls for a reality check. For two decades India’s R&D spending as a percentage of GDP has been around 0.6 % while China spends around 2.1 % and Israel with the highest percentage if 4.2%. In absolute terms India invests 5 times lower than China and Israel. An effort on research & development is rather ostensible given less attention in the budget allocation.

    Conclusion : Need for Effective Policy Actions

     There is a conspicuous need for the government to assess the impact of cash transfer to farmers as a policy with various dimensions. The extent to which it can reconcile the distress in farming sector has to be scientifically proved to justify the quantum of investment for execution.  Heavily subsidized agriculture and loan waiver always helped with political victory but the fundamental crisis has been unceasing. Even an elementary study on trends in agriculture seems to highlight that it requires prompt moves and strong long term goals. Policies’ pertaining to agriculture has to be a parcel of broader strategies. Tactics of transferring cash with minimal sanction from experts reserves its place only as a political expediency.

    Marginal farmers and fragmented landholdings are the bottlenecks that prevent effective modernisation of Indian agriculture. The government will need to play a major role in evolving policies that create inclusive solutions to overcome the problems of marginal farmers. Agriculture in India continues to be in the grips of manual and subsistence farming without farm mechanisation or technological inputs. Average landholdings have shrunk from 2.28 hectares in 1970 to 1.08 hectare in 2015 (NABARD). Promoting cooperative farming will allow small and marginal farmers to take advantage of their family labour. Corporate farming, meanwhile, could allow economies of scale to kick in at lower thresholds.

    Yet again, hollow electioneering masquerades as policy with the advent of the great festival of democracy.  Now that the new government is in power, it is time that agriculture is given the due attention it deserves with a long-term strategy to resolve the problems of marginal farmers, fragmented land holdings, and the urgent need for rapid modernisation of agriculture and a national policy on water resources management.

    Manjari Balu is a Research Analyst at ‘The Peninsula Foundation”. She holds a degree in economics. Opinions expressed are the author’s own.

    Photo by Nandhu Kumar on Unsplash

  • Qatar Rafale Issue: Getting a Realist Perspective

    Qatar Rafale Issue: Getting a Realist Perspective

    M Matheswaran                                                                                                       May 23, 2019/Commentary

    Over the last two weeks, much has been written about the controversy emanating from the possibility of Pakistan Air Force pilotshaving trained and flown the Rafale aircraft in France. A lot of concern has been expressed about the operational capabilities of the Rafale being compromised. One needs to examine this carefully. A better understanding of technology would make it easy even for the layman to appreciate and deduce from available open source knowledge what  modern aircraft are capable of. Given this, one can imagine what a trained and experienced fighter pilot would be capable of deducing, and hence evolve his tactics, by visually observing and studying various parameters of the aircraft, leave alone flying it. Hence, to get a realist perspective of this situation, we need to examine various factors, particularly Qatar-Pakistan relations.

                But first take a look at the technical issues. The Rafale is a 4.5 generation aircraft. Its design, in terms of its clean aerodynamics and an optimal design to create minimal radar signature, would make it clear to any professional that this is an aircraft capable of exceptional manoeuvring. It is also an established fact that amongst all 4.5 generation aircraft, there would be very little difference in terms of combat performance. Quite obviously, the most critical elements of the aircraft consist of its sensors, avionics systems, radar, and weapons. Both India and Qatar have contracted for similar version of aircraft, F3R.The systems and weapons have some similarities but also major differences. Modern fighter aircraft are systems intensive and function as system of systems.

                Features that are common to both Qatar Air Force and Indian Air Force Rafales are primarily the RBE 2-AA AESA radar, SPECTRA self-protection suite, IFF with full Mode-5/Mode-S compatibility, Elbit’s TARGO-II Helmet Mounted Display System, and some of the most critical weapons such as Meteor BVRAAM, Mica air-to-air missile, and SCALP air-to-ground long-range cruise missile. Anyone who flies the aircraft will, obviously, get to know the full functioning, performance, and envelope of the systems and the weapons. Most critical would be the intimate knowledge of the AESA radar and the important weapons. However, one must understand that deeper technical knowledge of systems like the radar would not be available to Qatar. Given the long-standing relationship between France and Qatar, any high level systems programming and integration would be retained by the French. This has been the practice in the past, and it is so with most Arab countries. Additionally, AESA radar configurations and source codes are highly secure and it would be virtually impossible for anyone to break into it, even if we assume that Pakistani pilots and technicians would make an attempt to do so, which is very unlikely. Weapon envelopes would certainly be known in the course of training on them. Training on systems like SPECTRA, while providing its functional knowledge, does not compromise any security. The crux of SPECTRA lies in its threat library programming, which is exclusive to the host nation, and on response algorithms that will not be open to anyone other than the designer.

                Indian Rafales, however, will have significant security measures. These lie in completely different secure communication systems that would be incorporated, and India’s own secure datalink capability that would be incorporated. Qatar Rafales would have the Link-16 compliant datalink systems, which India will never incorporate. As the French Rafales upgrade to F4 status, much of those upgrades may become available to India, and IAF aircraft will become uniquely different and highly secure with its own NCW architecture. In terms of EO designation and Recce pods, Qatar Rafale will have the Lockheed Martin’s Sniper pod while IAF have the well-proven and advanced Litening-4 EO pod integrated. EW capabilities and hence, EW tactics and strategies will be completely different for IAF’s aircraft. Unlike in the past, this contract envisages French cooperation and full access to integrating additional weapons and systems of India’s choice, which will make the aircraft considerably different.

                So what should we make of the news about Pakistani pilots flying the Rafale in Qatar and subsequent denial by the French ambassador in India? As for Pakistani pilots sizing up the Rafale against the F-16, it is a non-issue as the two are just not comparable. The upgraded F-16s of PAF is of Block-50 standard at best, and that is clearly one generation behind Rafale. The concern, therefore, is irrelevant.

    One must take into account various regional geopolitical issues to get a realist perspective. Qatar is a small country of 2.8 million inhabitants, with nearly 80% of the population located in the capital city of Doha. With highest per capita GDP in the world, Qatar focuses on rapid development towards first world status, and displays its ambitions in playing a geopolitical role, punching well above its weight much like Singapore. Doha has been host to major international events, and will be hosting the FIFA 2022.

                Considering that Qatar is a tiny kingdom on the Arabian peninsula, Saudi Arabia has always tried to dominate and control the state as a subordinate. Qatar has successfully dismissed these attempts by breaking out and engaging countries at the global level. It has made itself a major diplomatic player, a generous donor of foreign aid, and a leader in modernising education in the region. It has maintained strong relations with Iran and Turkey as much as with other Islamic states. It has sought to balance different groups and organisations with a moderating influence and has sought to push for peace in the region. These efforts, and the overwhelming popularity of ‘Al Jazeera’ has riled countries like Saudi Arabia, Egypt, Bahrain, and UAE into sanctioning Qatar and curtailing diplomatic relations.

                Pakistan, which has very strong relationship with all Arab countries, has maintained a neutral stance in the Qatar-Saudi Arabian dispute, despite strong pressures from Saudi Arabia. Pakistan’s military presence in these countries, in terms of training local forces as well as providing fully deployed troops to augment local defences has been a long-standing practice. Pakistan Air Force pilots have regularly flown for the Air Forces of these states. Hence, access to military resources in terms of operational flying experience on these aircraft has been a huge advantage for PAF. Since the Iraq war in 1991, Qatar has sought to build a significant military capability, its Air Force in particular.

                While India and Qatar have excellent relations (Qatar meets nearly 60% of India’s LPG needs), to meet its military training and force requirements Qatar has engaged Pakistan’s services in addition to European and British professionals. All these pilots, essentially mercenary in nature, have become Qatar citizens as well. Qatar has provided air base for US air forces  at al-Udeid, 20 miles from Doha. The base services US Central Command, including US forces in Afghanistan and Syria. Qatar addresses Pakistan’s energy security significantly, and both nations have cultivated their relationship carefully. Qatar has allowed Taliban to set up office in its territory and has worked to encourage dialogue with all parties involved in the Afghan conflict. In return, Pakistan has been careful to balance its relations with all gulf countries, and values its engagement with Qatar highly, as the recent visit of Pakistan’s Prime Minister shows.

                For a very small state, Qatar is on track to building significant air power capability. After signing initial contract for 24 Rafales with French Dassault in 2015, Qatar placed additional orders for 12 more aircraft, making it a total of 36 Rafales. This was preceded by an earlier order for Boeing’s 36 Qatar advanced-variant Eagles from the USA for $ 12 billion, with an option to increase the order later to 72. In another major deal with BAe, Qatar concluded a contract for supply of 24 Eurofighter Typhoons and 9 Hawk advanced jet trainers, worth over $ 6.6 billion, with first payment made in Sep 2018. For an air force whose strength was just 2100 personnel in 2010 and just 13 Mirage 2000-5 fighters in early 2000s, this build up with three fleets of 4.5 generation aircraft and substantial increase in numbers is unprecedented. Qatar’s decision to go in for a seven-fold increase in its air power capability is curious and there are questions as to how this tiny air force will absorb the massive capabilities in which it is investing. More importantly, it is inevitable that it would need pilots on hire to fly these aircraft. This where the Pakistani relationship comes into focus. In addition work is already underway to increase the infrastructure  in terms of building an additional base and expanding existing bases at al-Udeid and Doha.

                Pakistani pilots who fly for Qatar air force may do so after being given Qatar citizenship. Unlike India, Pakistan allows dual citizenship passports. It is therefore, quite obvious that Pakistani pilots will fly all these aircraft being procured by Qatar. It is irrelevant whether they have been trained in France on Rafales contracted for Qatar, in all likelihood they would have. India, therefore, would do well to factor this reality in its calculations.

    The author is the founder Chairman of TPF, IAF veteran and former Deputy Chief of Integrated Defence Staff. Opinions expressed are the author’s own.

    A shorter version of this article was published in Deccan Herald.

    Image Credit – rafale.co.in

  • 91st Amendment: Impediment to Good Governance?

    91st Amendment: Impediment to Good Governance?

    Mohan Guruswamy                                                                                         May 23, 2019/Analysis

    Soon it will be loaves and fishes’ time when ministries will have to be distributed to accommodate personal aspirations. How many can partake in the feast is limited by the 91st Amendment. But does even this contribute to better governance? Perhaps this period of transition is just the time to consider the limitations of the 91st Amendment?

    On July 7, 2004, the 91st Amendment to the Constitution took effect. This meant that from that day on, the size of the councils of ministers at the Centre and in the states could not exceed 15 per cent of the numbers in the Lok Sabha or state legislatures. The logic underlying this amendment was quite obvious. The cost factor was not the issue, for in relation to the overall cost of government, expenditure on ministers is miniscule. The real problem is that with unlimited ministerships on offer, the destabilisation of governments was made easier. Unfortunately, there seems to be little realisation that too many cooks spoil the broth. Who can deny that our governments have so far only served up a vile and poisonous broth that has enfeebled the majority and kept the nation misgoverned?

    Even the National Committee to Review the Working of the Constitution (NCRWC), set up by the Atal Behari Vajpayee government, which recommended that the number of ministers “be fixed at the maximum of 10 per cent of the total strength of the popular House of the Legislature”, does not seem to have thought this matter through. But even its recommendation was tweaked a bit to fix the ceiling at 15 per cent, as we seem to have too many overly keen to be of greater service to the public by becoming ministers.

    It would seem that the only reason why the amendment was whisked through, and whisked through is the only description for it for it was hardly discussed in Parliament or in the media, was to afford political managers some protection against the clamor for berths in government. Like good politicians, they naturally expect to come out smelling of roses at the same time! But there could be an unstated reason as well, that might have to do with distribution of wealth. Too many thieves could reduce the individual take? That, and making ministerships too commonplace, only devalued the worth of the jobs.

    Whatever be the reason for the ceiling, good governance or management principles seem to have little to do with it. We have 543 MPs in the Lok Sabha, which means that we can have up to 81 ministers in New Delhi. With 787 MPs in both Houses, that means almost one in nine MPs can expect to be a minister. The states have in all 4,020 MLAs; opening up possibilities for around 600 ministerial berths for 4,487 MLAs and MLCs. Uttar Pradesh has the biggest Legislative Assembly, with 403 MLAs, while Sikkim at the other end of the spectrum has to make do with just 32 MLAs or just five ministers.

    Quite clearly, the persons who applied their minds to this amendment have not seen government as a responsibility that has to be sensibly shared and not as a basket of fruits to be distributed. No organisation that is meant to function can be designed on such a basis. Analogies are seldom entirely appropriate, but you will see what one has in mind when you consider the absurdity of limiting the number of functional responsibilities in a company to a function of the number of workers on the payroll. Management structures and hierarchies are based on assignment of responsibilities based on a division of work according to the technical and managerial specialisation of tasks. Thus a company might have heads for the production, marketing, finance, HRD, legal and secretarial, and research functions. In small companies, just one or two persons may perform all these functions, while in a large professionally-managed corporation there would be separate or even more heads of functional areas. But you just can’t link th
    is to the number of workers. The important thing is that management structures apportion tasks and responsibilities according to specialisation.

    Obviously, the management of government is a much more complex, with an infinitely larger set of tasks than the biggest corporation, however professionally managed it may be. But to divide the management of the state into 39 functional responsibilities, as is the case now, is to exaggerate that magnitude and complexity. It is as if in an automobile company making and selling cars, the person responsible for making gearboxes is at the same level as the persons looking after the paint shop or procuring accessories. As if this was not bad enough, all these would then be at the same level as the head of production or marketing or finance. Yet this is how the Cabinet is organised. There is a minister for rural development and a minister for panchayati raj as there are ministers for irrigation and fertilisers, sitting on the same table as the minister for agriculture.

    We know that all agriculture is rural and everything in the rural world revolves around agriculture, and so the case for separating the two goes straightaway. Besides, agriculture is about water, fertiliser, food distribution, food processing, agro and rural industries. And who has heard of forests in the urban areas? Thus, instead of having one person responsible for improving the lot of our farmers and rural folk, we have nine departments headed by nine ministers. They often work at cross purposes. Even if the ministers are willing, it will be almost impossible to make the bureaucratic structures march to the same beat. And so if the rural sector continues to languish, no one is responsible.

    This was not the case 50 years ago. In Jawaharlal Nehru’s first Cabinet there was only one minister for food and agriculture. The only agriculture-related function not with this minister was irrigation. Gulzarilal Nanda held the portfolio of planning, irrigation and power. But in those days additional power was intended primarily from hydel projects and it thus possibly made sense to have irrigation outside the food and agriculture ministry.

    Likewise, transport and railways was one ministry, while it has been broken up into five areas now. Some of them are ridiculously small. Take the ministry for civil aviation. Apart from Air India, Indian Airlines, Airports Authority of India and the DGCA, there is little to it. The first three are companies with full-time managers supposedly managing them. Since the ministry has little policy to make, it busies itself micromanaging the companies. And don’t the ministers for civil aviation just love that? The need for new aircraft and infrastructure have attendant benefits. And what is the need for a ministry of information and broadcasting when that means little more than Akashvani and Doordarshan? Mercifully, there is little by way purchases in I&B.

    By now it should be quite apparent that the 91st Amendment is not good enough as it just does not address the problem. We now need a 92nd Amendment that will marginally change Article 74(1) of the Constitution to read “there will be a council of ministers consisting of the ministers for home affairs, defence, foreign relations, agriculture ….” Article 75(1), that makes it incumbent for the President to appoint ministers on the advice of the Prime Minister, remaining as it is then makes the choice of the ministers entirely his or hers. While we are at it, we might want to look at Article 75(5) afresh and consider the merit of eliminating the stipulation of getting elected to either House of Parliament or legislatures. In this manner we could encourage Prime Ministers and chief ministers to induct professional and competent persons rather than be limited to professional politicians.

    But will the subject of a smaller and more functional government ever merit the politicians’ attention?

    The author is a Trustee and Distinguished Fellow at ‘The Peninsula Foundation’. He is a policy analyst and prolific commentator on politics, economics, industry, and security. He specialises on Chinese economy.

    This article was published earlier in Deccan Chronicle.