Tag: Sanctions

The Geopolitical Consolidation of Artificial Intelligence

Key Points

IT hardware and Semiconductor manufacturing has become strategically important and critical geopolitical tools of dominant powers. Ukraine war related sanctions and Wassenaar Arrangement regulations invoked to ban Russia from importing or acquiring electronic components over 25 Mhz.
Semi conductors present a key choke point to constrain or catalyse the development of AI-specific computing machinery.
Taiwan, USA, South Korea, and Netherlands dominate the global semiconductor manufacturing and supply chain. Taiwan dominates the global market and had 60% of the global share in 2021. Taiwan’s one single company – TSMC (Taiwan Semiconductor Manufacturing Co), the world’s largest foundry, alone accounted for 54% of total global revenue.
China controls two-thirds of all silicon production in the world.
Monopolisation of semiconductor supply by a singular geopolitical bloc poses critical challenges for the future of Artificial Intelligence (AI), exacerbating the strategic and innovation bottlenecks for developing countries like India.
Developing a competitive advantage over existing leaders would require not just technical breakthroughs but also some radical policy choices and long-term persistence.
India should double down over research programs on non-silicon based computing with a national urgency instead of pursuing a catch-up strategy.

Russia was recently restricted, under category 3 to category 9 of the Wassenaar Arrangement, from purchasing any electronic components over 25MHz from Taiwanese companies. That covers pretty much all modern electronics. Yet, the tangibles of these sanctions must not deceive us into overlooking the wider impact that hardware access and its control have on AI policies and software-based workflows the world over. As Artificial Intelligence technologies reach a more advanced stage, the capacity to fabricate high-performance computing resources i.e. semiconductor production becomes key strategic leverage in international affairs.

Semiconductors present a key chokepoint to constrain or catalyse the development of AI-specific computing machinery. In fact, most of the supply of semiconductors relies on a single country – Taiwan. The Taiwan Semiconductor Manufacturing Corporation (TSMC) manufactures Google’s Tensor Processing Unit (TPU), Cerebras’s Wafer Scale Engine (WSE), as well as Nvidia’s A100 processor. The following table provides a more detailed1 assessment:

Hardware Type	AI Accelerator/Product Name	Manufacturing Country
Application-Specific Integrated Circuits (ASICs)	Huawei Ascend 910	Taiwan
	Cerebras WSE	Taiwan
	Google TPUs	Taiwan
	Intel Habana	Taiwan
	Tesla FSD	USA
	Qualcomm Cloud AI 100	Taiwan
	IBM TrueNorth	South Korea
	AWS Inferentia	Taiwan
	AWS Trainium	Taiwan
	Apple A14 Bionic	Taiwan
Graphic Processing Units (GPUs)	AMD Radeon	Taiwan
Graphic Processing Units (GPUs)	Nvidia A100	Taiwan
Field-Programmable Gate Arrays (FPGAs)	Intel Agilex	USA
	Xilinx Virtex	Taiwan
	Xilinx Alveo	Taiwan
	AWS EC2 FI	Taiwan

As can be seen above, the cake of computing hardware is largely divided in such a way that the largest pie holders also happen to form a singular geopolitical bloc vis-a-vis China. This further shapes the evolution of territorial contests in the South China Sea. This monopolisation of semiconductor supply by a singular geopolitical bloc poses critical challenges for the future of Artificial Intelligence, especially exacerbating the strategic and innovation bottlenecks for developing countries like India. Since the invention of the transistor in 1947, and her independence, India has found herself in an unenviable position where there stands zero commercial semiconductor manufacturing capacity after all these years while her office-bearers continually promise of leading in the fourth industrial revolution.

Bottlenecking Global AI Research

There are two aspects of developing these AI accelerators – designing the specifications and their fabrication. AI research firms first design chips which optimise hardware performance to execute specific machine learning calculations. Then, semiconductor firms, operating in a range of specialities and specific aspects of fabrication, make those chips and increase the performance of computing hardware by adding more and more transistors to pieces of silicon. This combination of specific design choices and advanced hardware fabrication capability forms the bedrock that will decide the future of AI, not the amount of data a population is generating and localising.

However, owing to the very high fixed costs of semiconductor manufacturing, AI research has to be focused on data and algorithms. Therefore, innovations in AI’s algorithmic efficiency and model scaling have to compensate for a lack of equivalent situations in the AI’s hardware. The aggressive consolidation and costs of hardware fabrication mean that firms in AI research are forced to outsource their hardware fabrication requirements. In fact, as per DARPA2, because of the high costs of getting their designs fabricated, AI hardware startups do not even receive much private capital and merely 3% of all venture funding between 2017-21 in AI/ML has gone to startups working on AI hardware.

But TSMC’s resources are limited and not everyone can afford them. To get TSMC’s services, companies globally have to compete with the likes of Google and Nvidia, therefore prices go further high because of the demand side competition. Consequently, only the best and the biggest work with TSMC, and the rest have to settle for its competitors. This has allowed this single company to turn into a gatekeeper in AI hardware R&D. And as the recent sanctions over Russia demonstrate, it is now effectively playing the pawn which has turned the wazir in a tense geopolitical endgame.

Taiwan’s AI policy also reflects this dominance in ICT and semiconductors – aiming to develop “world-leading AI-on-Device solutions that create a niche market and… (make Taiwan) an important partner in the value chain of global intelligent systems”.3 The foundation of strong control over the supply of AI hardware and also being #1 in the Global Open Data Index, not just gives Taiwan negotiating leverage in geopolitical competition, but also allows it to focus on hardware and software collaboration based on seminal AI policy unlike most countries where the AI policy and discourse revolve around managing the adoption and effects of AI, and not around shaping the trajectory of its engineering and conceptual development like the countries with hardware advantage.

Now to be fair, R&D is a time-consuming, long-term activity which has a high chance of failure. Thus, research focus naturally shifts towards low-hanging fruits, projects that can be achieved in the short-term before the commissioning bureaucrats are rotated. That’s why we cannot have a nationalised AGI research group, as nobody will be interested in a 15-20 year-long enterprise when you have promotions and election cycles to worry about. This applies to all high-end bleeding-edge technology research funding everywhere – so, quantum communications will be prioritised over quantum computing, building larger and larger datasets over more intelligent algorithms, and silicon-based electronics over researching newer computing substrates and storage – because those things are more friendly to short-term outcome pressures and bureaucracies aren’t exactly known to be a risk-taking institution.

Options for India

While China controls 2/3 of all the silicon production in the world and wants to control the whole of Taiwan too (and TSMC along with its 54% share in logic foundries), the wider semiconductor supply chain is a little spreadout too for any one actor’s comfort. The leaders mostly control a specialised niche of the supply chain, for example, the US maintains a total monopoly on Electronic Design Automation (EDA) software solutions, the Netherlands has monopolised Extreme UltraViolet and Argon Flouride scanners, and Japan has been dishing out 300 mm wafers used to manufacture more than 99 percent of the chips today.4 The end-to-end delivery of one chip could have it crossing international borders over 70 times.5 Since this is a matured ecosystem, developing a competitive advantage over existing leaders would require not just proprietary technical breakthroughs but also some radical policy choices and long term persistence.

It is also needless to say that the leaders are also able to attract and retain the highest quality talent from across the world. On the other hand, we have a situation where regional politicians continue cribbing about incoming talent even from other Indian states. This is therefore the first task for India, to become a technology powerhouse, she has to, at a bare minimum, be able to retain all her top talent and attract more. Perhaps, for companies in certain sectors or of certain size, India must make it mandatory to spend at least X per cent of revenue on R&D and offer incentives to increase this share – it’ll revamp things from recruitment and retention to business processes and industry-academia collaboration – and in the long-run prove to be a lot more socioeconomically useful instrument than the CSR regulation.

It should also not escape anyone that the human civilisation, with all its genius and promises of man-machine symbiosis, has managed to put all its eggs in a single basket that is also under the constant threat of Chinese invasion. It is thus in the interest of the entire computing industry to build geographical resiliency, diversity and redundancy in the present-day semiconductor manufacturing capacity. We don’t yet have the navy we need, but perhaps in a diplomatic-naval recognition of Taiwan’s independence from China, the Quad could manage to persuade arrangements for an uninterrupted semiconductor supply in case of an invasion.

Since R&D in AI hardware is essential for future breakthroughs in machine intelligence – but its production happens to be extremely concentrated, mostly by just one small island country, it behoves countries like India to look for ways to undercut the existing paradigm of developing computing hardware (i.e. pivot R&D towards DNA Computing etc) instead of only trying to pursue a catch-up strategy. The current developments are unlikely to solve India’s blues in integrated circuits anytime soon. India could parallelly, and I’d emphatically recommend that she should, take a step back from all the madness and double down on research programs on non-silicon-based computing with a national urgency. A hybrid approach toward computing machinery could also resolve some of the bottlenecks that AI research is facing due to dependencies and limitations of present-day hardware.

As our neighbouring adversary Mr Xi says, core technologies cannot be acquired by asking, buying, or begging. In the same spirit, even if it might ruffle some feathers, a very discerning reexamination of the present intellectual property regime could also be very useful for the development of such foundational technologies and related infrastructure in India as well as for carving out an Indian niche for future technology leadership.

References:

1. The Other AI Hardware Problem: What TSMC means for AI Compute. Available at https://semiliterate.substack.com/p/the-other-ai-hardware-problem

2. Leef, S. (2019). Automatic Implementation of Secure Silicon. In ACM Great Lakes Symposium on VLSI (Vol. 3)

3. AI Taiwan. Available at https://ai.taiwan.gov.tw/

4. Khan et al. (2021). The Semiconductor Supply Chain: Assessing National Competitiveness. Center for Security and Emerging Technology.
5. Alam et al. (2020). Globality and Complexity of the Semiconductor Ecosystem. Accenture.

June 10, 2022

Sanctions on Russia Are a Tool That Must Be Calibrated Like Any Other

If de-dollarisation occurs, the impact will be felt wide and far. Severe sanctions are a double-edged sword which will impact every nation.

Russia’s invasion of Ukraine has been condemned by the majority of countries in the United Nations. NATO has not intervened militarily since that runs the danger of a wider conflagration with the possible use of nuclear weapons. So, instead, the NATO powers have supplied Ukrainian forces with weapons and imposed severe sanctions on Russia. Evermore sanctions are announced every week.

It was said that this would degrade Russia’s capacity to wage war by freezing its assets held in Western banks. Also, its earnings through trade would decline and impoverish it. It was also argued that the Russians would be hurt through multiple channels – higher inflation, the inability of its citizens to get dollars, a collapse in prices of financial assets, like, shares and so on.

Thus, while Russia is attacking militarily, the West is hitting back through economic means. Further, there is also a cyber and media component to the war. It is perhaps the first war on multiple fronts. Will the Russians be hurt enough to stop the war? Can one draw lessons from the sanctions against Iran?

[powerkit_button size=”lg” style=”info” block=”true” url=”https://thewire.in/economy/sanctions-on-russia-are-a-tool-that-must-be-calibrated-like-any-other” target=”_blank” nofollow=”false”]
Read More
[/powerkit_button]

April 20, 2022
TPF Analysis Series on Russia – Ukraine Conflict #1

The Peninsula Foundation is releasing a series of analysis papers on the Ukraine-Russia conflict to help the public have a better understanding of the geo-political and security dimensions underlying the conflict. The first paper of the series will introduce you to an overview of the historical, political and humanitarian aspects of the ongoing conflict which is snowballing to be a major conflict and a turning point in Europe’s history since World War II.

Russia – Ukraine History

Russia and Ukraine have had a long interwoven history, since as early as the 18th century. One of the most contested territories, Crimea, was first annexed by the Russian empire in 1783 back when it was controlled by the Crimean Khanate. The territory then became a part of the erstwhile Soviet Union in 1921, to be later controlled by Nazi Germany for a brief period in 1942. Following the end of World War II, the autonomous status of Crimea was dissolved as it now became a province of the USSR, but was later handed over to Ukraine as a goodwill gesture by Nikita Khrushchev in 1954 to mark the 300th anniversary of Ukraine’s reunification with the USSR.

Crimea: White Russian refugees gathering at a Crimean port during the Russian Civil War.

Image: Library of Congress, Washington, D.C.

With the dissolution of the Soviet Union in 1991, many had expected Boris Yelsten to take up the issue and bring back Crimea to Russia, but instead, the Crimean parliament proclaimed the independence of its territory in May 1992, a proclamation only to be annulled by Ukraine. Over twenty years later, a similar referendum, with most of the Crimean population voting to join Russia – a referendum declared illegal by Ukrainian and European governments alike. What followed next was a dramatic escalation with the deployment of the Russian Black Sea Fleet.

Some have argued that NATO’s expansion towards the East is the primary cause of the war, since the organisation was formed primarily to counter the Soviet Union during the Cold War. While it must be acknowledged that such expansion was to be viewed by Russian officials as a provocation even back in the 1990s, the arguments, however, also take away the agency of states in Eastern Europe with most of them ‘demanding’ to join NATO, eager to reap the benefits of the West’s economic system. Over the years, several small states, including Georgia, Ukraine, Uzbekistan, Azerbaijan and Moldova, have seen their relationship with the West as a tool to bring regional stability, and increase their bargaining power against Russia.

Events leading up to the war

2021 was a year of security challenges that shook the world amid an ever-mutating Covid-19 pandemic. In October 2021, Russia started moving its troops and military equipment closer to the Ukraine border rekindling concerns of a potential invasion. By mid-December 2021, Russia’s Foreign Minister, Sergey Lavrov released a set of security guarantees and assurances to be met by the U.S. and NATO in exchange for non-intervention in Ukraine. Putin also threatened unspecified ‘military technical’ measures if the West fails to accede to his demands. Putin’s major demands were; (i) Ban on Ukraine entering NATO, (ii) No further expansion of NATO in the Eastern European region, (iii) Withdrawal of any troops or weapons deployed in countries which entered NATO after 1997 (Poland, Estonia, Lithuania, Latvia, and the Balkan countries), (iv) No NATO drills to be conducted in Ukraine, Georgia and Central Asia without prior agreement with Russia. Although NATO was formed to counter the USSR during the Cold War, it continued its expansion into Eastern Europe territories even long after the dissolution of the USSR. Putin was threatened by the continuous NATO expansionism, the security implications and the loss of the Russian sphere of influence in Eastern Europe.

The U.S. and NATO immediately rejected these main demands warning if Russia invades Ukraine, there will be serious retaliation and Russia will be met with a ‘massive forceful package’ of economic sanctions. Ukraine’s Foreign Minister Kuleba had said that although they were expecting and already experiencing aggressive Russian cyber-attacks and destabilisation of the Ukrainian economy, the number of Russian troops on the border was ‘insufficient’ and the build-up was missing some key military indicators to execute an imminent ‘full-scale invasion’ of Ukraine. Many experts and theorists also opined that despite Putin’s bold demands and his game of brinkmanship, the reality of war was in question.

On 21st February, in a televised address Putin said that ‘Ukraine is an integral part of Russia’s history’ and declared the regions of Donetsk and Luhansk as independent Republic States and sent Russian troops into those regions for ‘peacekeeping’.

The beginning of February showed some positive signs of diplomacy or at the least maintenance of the status quo between Ukraine and Russia despite the West’s declining Putin’s demands. However, it was only calm before the storm. On 21st February, in a televised address Putin said that ‘Ukraine is an integral part of Russia’s history’ and declared the regions of Donetsk and Luhansk as independent Republic States and sent Russian troops into those regions for ‘peacekeeping’. As a response to this, the US and other NATO members imposed economic sanctions on Russian parliament members, banks and other assets and Germany decisively halted the Nord Stream 2 gas pipeline project.

‘Special Military Operation’

On 24th February, Putin announced a ’special military operation’ and Russian forces launched missile and artillery attacks on major Ukrainian cities including Kyiv. Ukrainian Foreign Minister affirmed that Russia has launched a ‘full-scale invasion of Ukraine’, following which Ukraine shut down its entire airspace as a response to the Russian operation in Donbas. The West imposed further sanctions on Russia including but not limited to, removing select Russian banks from the SWIFT system, freezing the assets of the Russian Central Bank and curbing products exported to Russia.

Zaporizhzhia is a vital asset in fulfilling Ukraine’s energy requirements with six nuclear reactors with a capacity of generating 950MW per reactor. Capturing Zaporizhzhia nuclear power plant would have been a major plan of the invading forces given its strategic nature.

Nearly four weeks since the Russian Federation launched a ‘special military operation’, the situation on the ground in Ukraine continues to remain dire. The United Nations Human Rights Monitoring Mission in Ukraine (HRMMU) has been responsible for documenting civilian casualties in Ukraine since 2014. In the span of three weeks, Ukraine’s infrastructure and cultural heritage have suffered irreparable damage or been completely destroyed. The ceaseless shelling by Russian forces of cities and hospitals have exacerbated the human toll.

According to a press briefing released by the Office of the High Commissioner for Human Rights (OHCHR), civilian casualties as of 26 March 2022 stand at 2,909 – 1,119 people killed and 1,790 injured.

The OHCHR assesses that actual figures might be higher than what is currently being reported as they wait for figures to be corroborated. Most of the civilian casualties are reportedly caused by explosive weapons with a wide impact area. This includes shelling from heavy artillery and multiple-launch rocket systems and missile and air strikes.

In a rather unexpected move, on 4th March, 2022 the Russian forces attacked and captured the Zaporizhzhia nuclear power plant, located in Energodar, Ukraine. Zaporizhzhia is a vital asset in fulfilling Ukraine’s energy requirements with six nuclear reactors with a capacity of generating 950MW per reactor. Capturing Zaporizhzhia nuclear power plant would have been a major plan of the invading forces given its strategic nature.

The Russian attack on the nuclear plant raised alarm bells among nations and nuclear watchdogs. Intense shelling on the complex caused a fire in one of the training buildings. Reports have noted the damage to multiple locations within the complex. The Ukrainian government was quick to act and called it an “act of terror”. Contrary to Ukrainian claims, the Russian Ministry of Defence spokesperson Maj. Gen. Igor Konashenkov claimed that the entire event was a sabotage act by the Ukrainian forces. With Chernobyl captured very early in the invasion, the attack on Zaporizhzhia nuclear power plant raises questions about the safety and security of nuclear infrastructures during times of crisis.

On March 9, 2022, a hospital in Mariupol that also housed a maternity ward came under attack. It was reported that at least 4 people were killed in the bombing, including a pregnant woman. Presently, Mariupol is seeing some of the fiercest attacks, since the port city is a strategic target for Russia. It is estimated that some 300,000 people are trapped with supplies running low. The Russian Federation’s offer of safe passage out of Mariupol for the Ukrainian people has been summarily rejected by Ukraine’s Deputy Prime Minister Iryna Vereshchuk who was quoted saying, “There can be no question of any surrender, laying down of arms”.

Other areas to have been hit include Kyiv, Kharkiv, Borodyanka, Ochakiv, Sumy, Mykolaiv, Odessa etc. On March 1, the Central Freedom Square in Kharkiv was bombed that leaving both the administrative building and surrounding structures destroyed. On 14 March the Ukrainian health minister Viktor Liashko reported that nearly 100 hospitals had been damaged. As of 17 March, the World Health Organisation (WHO) has verified 44 instances of attacks on healthcare facilities in Ukraine.

West’s Sanctions

The global media coverage of the invasion can be best described as a cacophony of partisanship. The western media has been charged with accusations of brushing off Russian security concerns and, of course, brazen racism. It has followed its own orientalist approach to present the crisis as a result of Russian imperialism.

The West has swiftly responded by imposing sanctions; a course of action meant to deter and halt Russia’s actions in Ukraine. Germany’s Chancellor Olaf Scholz announced halting final approval for the Nord Stream 2 gas pipeline following Russia’s recognition of two breakaway regions of Eastern Ukraine – Luhansk and Donetsk.

On 8 March, President Biden, with bipartisan support, announced that the US would be banning imports of Russian oil, gas and energy. The UK also announced that it would phase out Russian oil imports by the end of 2022 on the same day. Both the US and the UK are working with their European counterparts to reduce dependency on Russian hydrocarbon imports. The European Commission responded to Russia’s aggression in Ukraine by stating that the EU countries would work to become independent of Russian energy imports “well before 2030”. Other economic deterrents imposed have been the ban on exports of luxury goods like vehicles, fashion and art to Russia by the UK and EU. The UK has also imposed a 35% tax on imports from Russia, including vodka. Russian oligarchs’ assets in the US, UK and the EU have been targeted. Sanctions have also been imposed on former Russian leaders, ministers and current members of the Russian Parliament.

Russian flights and private jets have been banned from the US, UK, EU and Canadian airspaces. The G7 countries have also stripped Russia of its “most favoured nation” status; a move that will impact Russia’s trade. Assets of most Russian banks have been frozen and some of them have been removed from the international financial system SWIFT. Other countries to have imposed sanctions on Russia include Japan, Taiwan, New Zealand, Australia and Switzerland. Australia moved to ban exports of alumina and aluminium ore, including bauxite to Russia. Russia relies on Australia for 20% of its alumina requirements – aluminium being a major export for Russia. Several energy, automobile, tech, financial, food and fashion companies have also halted operations in Russia – Exxon, Shell, Apple, Alphabet, Goldman Sachs, JP Morgan, Ferrari, Harley-Davidson, Nike, McDonald’s etc.

Globally, the impact of the Russia-Ukraine war has been felt in oil markets as prices continue to surge to well over $100 per barrel. Russia’s response to being hit with global sanctions has been to ban the exports of over 200 products, including telecoms, electrical equipment, agricultural, medical goods etc. However, this list does not include energy and raw material resources. It has also banned and blocked interest payments to foreign investors and dividends to overseas shareholders and also banned the sale of Russian stocks and bonds held by foreign investors. It has also passed a decree suspending the IP rights of ‘unfriendly countries’.

On 15 March, President Zelensky said that it must be accepted that Ukraine will not become a member of NATO, possibly appeasing one of Putin’s major security concerns. Additionally, on 15 March, Moscow announced its decision to withdraw from the Council of Europe after 26 years of membership, hours ahead of a formal decision taken by the Council to expel Russia over its aggression in Ukraine. The move also means that Russia will no longer be a signatory to the European Convention on Human Rights, depriving its citizens of the right to appeal to the European Court of Human Rights. A statement from the Russian foreign ministry cited that the EU and NATO had “destroyed” the Council of Europe and turned the organisation into an “anti-Russia policy tool”.

Russia also made the decision to sanction President Biden, Prime Minister Trudeau and several top US officials. The list includes Secretary of State Anthony Blinken, Defence Secretary Lloyd Austin, National Security Advisor Jake Sullivan, CIA Director William Burns, WH Press Secretary Jen Psaki and former Secretary of State and Democratic Presidential candidate Hilary Clinton.

The global media coverage of the invasion can be best described as a cacophony of partisanship. The western media has been charged with accusations of brushing off Russian security concerns and, of course, brazen racism. It has followed its own orientalist approach to present the crisis as a result of Russian imperialism. Popular Russian media channels such as RT and Sputnik have been banned by YouTube across Europe, essentially leading to the West dominating the information warfare, controlling the narrative and presenting a one-sided perspective to the world. The Russian Federal Service for Supervision of Communications, Information Technology and Mass Media, commonly known as the Roskomnadzor, released a statement informing media and other information sources that any publication regarding the ‘special military operation’ must only use the information received from Russian officials. Several independent Russian media outlets like Ekho Moskvy, InoSMI, Mediazona, New Times, Dozhd, Svobodnaya Pressa, Krym, Realii, Novaya Gazeta, Journalist, Lenizdat etc. were sent notifications by the Roskomnadzor on allegations of reporting false information regarding the actions of the Russian Army, shelling in Ukrainian cities and referring to the military operation as ‘war’, ‘invasion’ and ‘attack’. Nonetheless, some media houses have stood up to the pressure to report more appropriately.

The war in Ukraine could also leave lasting environmental damage, being a highly industrialised state. The threat of radiation resulting from an attack on any one of Ukraine’s nuclear plants could have devastating consequences. Carcinogenic dust from bombed buildings, groundwater contaminations from spilled chemicals and attacks on industrial facilities will have a lasting impact on the health of the people in the country.

UN Response

As Russian troops continue to shell Ukrainian cities, the various United Nations bodies have called for emergency meetings, albeit with no successful outcome to halt the war. In February 2022, a Security Council meeting calling for a resolution to condemn the Russian military operations and demanding an end to Russian attacks had similarly failed with the resolution having been vetoed by Russia.

Although Putin’s end may not justify his means, one needs to look at this crisis holistically and historically. Putin may have been the one to declare war, but the triggering and contributing events and actions by NATO and the US should also be taken into consideration while analysing this conflict.

However, the United Nations has been swift with its humanitarian response, an effort visible with its coordinated appeals calling for the allocation of an estimated USD 1.7 billion to help the Ukrainians. Dividing the allocation of funds into two categories – one for people within Ukraine, and the other for its comprehensive response towards refugees coming from Ukraine, the United Nations’ relief efforts have seen one of the most generous responses to its funding appeal. Further, as fighting continues amidst multiple rounds of talks between Russia and Ukraine, UN Agencies, including UNICEF, continue to supply humanitarian aid, including medical supplies to the country. As part of its cash-response strategy, the UN agencies have additionally planned to implement its program of cash-for-rent assistance, where they seek to provide the affected population with the resources to find themselves an accommodation, in order to avoid large-scale displacement.

Although Putin’s end may not justify his means, one needs to look at this crisis holistically and historically. Putin may have been the one to declare war, but the triggering and contributing events and actions by NATO and the US should also be taken into consideration while analysing this conflict. It seems to be that Putin has not entered into an all-out war yet, as his objectives and weaponry employed are limited. In the forthcoming series of analyses, The Peninsula Foundation delves into each of the facets of the conflict mentioned in this paper.

Featured Image Credits: The Times

NATO Expansion Image Credits: Statista

Russian General Image Credits: Moscow Times

UNSC Image Credits: Harvard Law Today

March 29, 2022
Sanctions on Russia: How will they play out?

The rich nations supporting Ukraine in its war with Russia have imposed sanctions on the latter. They cannot intervene militarily directly since that would lead to a much wider conflagration and a possible catastrophic Third World War, as the Russian Foreign Minister has warned. The North Atlantic Treaty Organization realizes that and has not sent its troops to Ukraine, in spite of pleadings by the Ukrainian government. Instead, it is providing arms and other support to Ukraine to resist the invasion. The situation remains dangerous and tricky.

Sanctions are supposed to punish the Russians for their aggression. It won’t halt the war but will it hurt the Russians enough that they will regret the invasion and not embark on future adventures? If the war drags on the costs could mount. This could lead to pressures for a regime change in Moscow and that may lead to a ratcheting up of the war. If sanctions are successful, will it be a lesson to China? Severe sanctions against Iran (0.3 per cent of the World’s Gross Domestic Product [GDP]) did not bring it to its knees. Given that the Russian economy is bigger (1.7 per cent of the World’s GDP) and much more advanced technologically, its economy may be much less impacted.

[powerkit_button size=”lg” style=”info” block=”true” url=”https://theleaflet.in/sanctions-on-russia-how-will-they-play-out/” target=”_blank” nofollow=”false”]
Read More
[/powerkit_button]

March 15, 2022
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 2^ndlargest 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

June 24, 2019
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.

May 31, 2019