Weaponised economies, beyond the theatre of war & more

News: Time and again developed countries have weaponised the global economic system. Every time countries have taken a lesson and changes have taken place.

25 years ago, IMF forced many east Asian countries facing foreign exchange shortage into conditions that Indonesia faced a near collapse. So, the East Asian countries since then took a lessons and accumulated mountains of foreign currency reserves.

Same situation was faced by India, when US weaponised wheat supplies against famine-stricken India in 1960s, as a punishment for criticizing the Vietnam invasion. India took a lesson and pushed ahead with the Green Revolution to become self-reliant in wheat production.

Thus, countries have a tendency to overlook the peace-time benefits of trade, when they are confronted with blackmail. Russia has been put into same situation after Ukraine invasion, west has weaponised global trade against it. So, there will be repercussions.

What can be repercussions of weaponizing trade against Russia?

Sanctions may leave Russia weakened and its defence industry possibly unable to maintain its cutting edge. Its sanctions-hit economy could also become an unreliable supplier to India.

There is a possibility that Russia accepts a Chinese embrace or even form a military axis with Beijing and Islamabad.

What are the options with India?

Accepting western rules, even if they are selective against non-Western societies. However, with India’s long memory of racism and colonialism and cultural autonomy, it will be difficult to accept rules framed elsewhere.

Focusing on self-reliance. However, there is a trend that inward-looking economies don’t do well. Also, it won’t be easy due to:

1. Lack of alternative to the dollar-based supply chains.
2. India is import-dependent for energy.
3. West dominates all major international institutions.
4. Even India’s indigenously developed weapons systems require significant import content. For example, Tejas’s engine is made by General Electric, the navy’s ships have engines from Ukraine

Although, India has developed some indigenous technological solutions like Unified Payments Interface, but it is not that significant.

Russia has tried to build a “fortress economy” in response to sanctions since 2014, but remained vulnerable. The alternative of selective integration may work better by creating mutual inter-dependence of countries.

Source: This post is created based on the article “Weaponised economies, beyond the theatre of war & more” published in Business Standard on 5^th March 2022.