Valdai Club

To win the war of economies, where the enemy has all the trump cards — from a solid share in world trade to the printing press of the world’s reserve currency — we need, as military theory teaches us, an asymmetric strategy. It is useless to try to break through the sanctions wall: you need to learn how to get around it by interacting with the structures of the shadow economy, writes Alexei Kupriyanov.

A little over 75 years ago, Jawaharlal Nehru, barely out of prison, submitted for publication The Discovery of India, his fourth major work written in prison. It marked the end of what could be called his “prison cycle”, which included Letters from a Father to His Daughter, Glimpses of World History, and Autobiography. In these books, the future Prime Minister of India outlined a coherent concept that would serve as the basis of all future Indian foreign policy. He posited that before the colonial conquest, India was one of the world’s superpowers, but then, due to internal disagreements and a lack of understanding by its rulers of the importance of unity in the fight against an external threat, it fell victim to the British conquerors. After gaining independence, India’s main goal would be to regain its lost status as a great power, and stand on par with other major great actors.

Now, in 2023, India is closer than ever to achieving this status. Last year, it overtook its former metropole, Great Britain, in terms of GDP, becoming the fifth largest economy in the world; this year it overtook China in terms of population. All other signs of global status are there (except for manned space exploration and a permanent seat on the UN Security Council): an Arctic and Antarctic programme, possession of nuclear weapons, a successful space programme, and interests around the globe. In many ways, India owes this success to the strategic insight of its elites and their ability to negotiate with each other: whoever is at the helm, they still continue the course outlined by Nehru, only slightly correcting it depending on the changing situation in the world. Thanks to this approach, India managed to manoeuvre in time in the early 1990s, when its largest strategic partner, the USSR, disappeared from the world map.

Instead of sliding into crisis in the wake of the Soviet Union’s fall or enduring the whole set of humiliations that usually follow defeat in a war, New Delhi, through a series of skilful manoeuvres, managed to fit into the new world order, and find a niche for its economy. The growing need for IT specialists of various profiles has allowed the Indians to launch a large-scale expansion in the global service market, take advantage of globalisation, and ensure economy growth rates of up to 9.6% per year. Now the rate has ebbed somewhat, but such growth remains an unattainable frontier for many countries, including Russia.

Global India: two dimensions

India’s global ambitions have two dimensions: political and economic, and they differ both in their mechanisms for implementing the Indian presence and in its scale.

India’s political elites think of the world in terms of concentric circles: the immediate neighbourhood, the extended neighbourhood, and the rest of the world. The first includes the countries of South Asia (Nepal, Bhutan, Bangladesh, Myanmar, Sri Lanka, Maldives) and the Indian Ocean region (Seychelles, Mauritius), the situation and relations with which are critical for India’s security. New Delhi seeks to include them in its political and military orbit, in the event of a conflict, in one way or another it tries to restore the status quo that is beneficial to itself. So, in 1988, Indian special forces liquidated a coup d’état in the Maldives, a year earlier, India intervened in a conflict in Sri Lanka, and in the late 1990s supported separatists in Myanmar. The second circle includes the countries of East Africa, the Middle East, and Central and Southeast Asia, where large and medium-sized Indian businesses are most active. There, India primarily protects its economic interests. Finally, in the third area, New Delhi seeks to shape the image of India as a responsible great power that claims to be equal to the world’s heavyweights in deciding the fate of the planet.

This concentric scheme rests on a historical substratum which has been carefully prepared by Indian historians and experts. Like any polity of the Old World with a history stretching back more than three hundred years, the Indians feel comfortable when a reliable cultural and philosophical historical base is placed under their geopolitical constructs. That is why the Indian perception of the Indo-Pacific region is so local and limited by the waters of the Indian Ocean and the Western Pacific, and why Indian regional projects are so poorly combined with Chinese ones: if Beijing, in its initiatives to restore the Silk Road, focuses on the historically existing trade route between China and Europe, where the polities of Hindustan acted as transit points at best, then India looks to its historical role as the centre of an extensive trade network that covered the entire Indian Ocean, the Eastern Mediterranean and the Western Pacific.

In the economic dimension, everything is different. Indian business does not need a historical and philosophical base in order to spread trading operations around the world. Wherever there are representatives of the Indian diaspora (and they are present in almost all countries and regions of the world, including Russia and Latin America), sooner or later nodes of the Indian financial and economic system appear, despite being largely informal. The state has little control over this process: the structures that form the informal system have their own financial mechanisms (hawala /hundi) that allow transactions to be carried out without the participation of banks. This global India willingly explores new markets, invents new ways to avoid sanctions and takes risks where the authorities are not ready to do so.

Ways of interaction

The formats and ways of interacting with these two Indias are different, but they all require much more flexibility than Moscow has demonstrated so far. In the new geopolitical conditions, the survival of the Russian economy depends on the uninterrupted operation of sea and land routes, the erosion of the sanctions regime using all possible means, and maximum support for countries that in recent months have been called the “collective non-West” or “world majority” — that is, those who occupy a peripheral position in the existing political and economic system and are dissatisfied with their place in the world.

The interests of Russia and India in the political dimension coincide, but only partially. The Indian development strategy is long-term; within its framework, New Delhi solves several tasks. The key tasks are ensuring stable economic development, reaching third place in terms of global GDP, and securing India’s acceptance into the informal circle of great powers solving key world issues. The solution of the first task implies the building of economic ties with the USA, Europe, Australia and Japan, and attracting investments and technologies. At the same time, in order not to become dependent on the West, India seeks to expand ties with non-Western players, including Russia. The solution to the second implies clear rules of the game and a gradual transformation of a generally stable world order based on these rules, instead of its decisive breakdown.

Russia’s actions on the world stage make it difficult to solve these problems, forcing the Indian leadership to perform a miraculous verbal balancing act. On the one hand, to reproach Western countries for inattention to conflicts in other regions, while on the other hand, to call for a speedy end to the Ukrainian crisis, since “now is not the time for wars.”

The Indians don’t like Russia and China seeking rapprochement with Pakistan or their flirting with Islamabad, but most of all they don’t like the uncertainty. New Delhi would be happy if Moscow, after the end of the conflict, shifts its focus to the east, becoming an important player in the Indian and Pacific region.

The desire to ensure the security of trade routes, the rejection of restrictive measures, the mutual recognition of each other’s interests in the regions of the immediate neighbourhood, and the readiness for mutually beneficial cooperation on the entire spectrum of issues — these serve as the basis for Russian-Indian political interaction.

With the economic component, everything is more complicated and easier at the same time. To win the war of economies, where the enemy has all the trump cards — from a solid share in world trade to the printing press of the world’s reserve currency — we need, as military theory teaches us, an asymmetric strategy. It is useless to try to break through the sanctions wall: you need to learn how to get around it by interacting with the structures of the shadow economy. It will not be easy to do this, because the administrative machine of the modern state is simply not adapted to such forms of interaction. But there is no choice: in order to survive amid the new conditions, it makes sense for Russia to radically change its foreign economic policy by fine-tuning the mechanism of the FEZ and extending it to entire regions and creating a system of “black boxes” — closed quasi-market structures located partly in Russia, partly abroad, opaque to the watchful eye of Western financiers and intelligence agencies and allowing technology and investments to be pumped into Russia in circumvention of existing sanctions.

Of course, for a country with such a historically high level of centralisation, these actions will not be painless, but the game is worth the gambit.