The Ukraine-Russia conflict will require continuing prudent diplomacy and economic planning
Russia’s unprovoked assault on Ukraine, which completes six months tomorrow, came at a singularly inopportune time for a world recovering from the economic impacts of a global pandemic. The fact that the conflict shows no signs of ending is worse news as the global economy continues to lose momentum. Russia’s inroads into the east and south of Ukraine and its staying power against stringent Western sanctions and the arming of Ukraine with sophisticated weaponry have proven an unexpected dynamic. With predictions of an imminent Russian withdrawal and/or the overthrow of President Vladimir Putin proving premature, the prognosis is gloomy. At the centre of the conflict is Europe’s ability to wean itself off its heavy dependence on Russian oil and gas, particularly the latter. The sharp spike in global fossil fuel prices immediately after the conflict offered a wake-up call on the long-term impacts. Now, though the prices have cooled somewhat, partly on account of subdued demand from a slowing global economy, the price of gas, which is used principally for heating, remains volatile as the European winter approaches.
These global ructions have inevitably translated into expected and unexpected challenges for India. The country’s consistent abstinence from censuring Russia in successive US resolutions has paid off in terms of access to Russian oil at low rates, making that country briefly India’s top supplier and eventually compelling West Asian suppliers to cut prices for Indian buyers. But natural gas remains an uncertain play, with Europe now increasingly competing for larger shares of key West Asian suppliers such as Qatar to replace Russia. This is not only keeping prices elevated but has implications for India’s own gas economy — its subsidised cooking-gas scheme and, no less important, the major expansion of its city gas distribution projects for which heavy investments in expanding import terminals and pipeline networks have already been made. India may yet be shielded from the more deleterious impact of Europe’s demands for a little more time since it has long-term contracts with Qatari suppliers, but the future of gas supplies once these contracts expire remains an uncomfortable issue. India’s plans to rely on gas in its journey from fossil fuels to renewables may well be delayed.
The configuration of geo-politics as a result of the war is also unlikely to bode well for India. In the light of Western opprobrium, the pre-war “no-limits” friendship treaty between Russia and China has strengthened to the extent that the former is being described as a “vassal” state of the latter. Since the treaty was essentially an anti-US one, New Delhi’s deepening relations with Washington via the Quad and, more recently, the Indo-Pacific Economic Forum offer a point of vulnerability. It is possible that Russia may no longer stay a neutral observer of China’s steady border incursions and provocations. The fact that India is still Russia’s largest buyer of defence equipment could balance the equations somewhat — though a substantial amount of spares are sourced from Ukraine, which is being steadily reduced to rubble — as will India’s longer materiel shopping list from Nato countries. The Ukraine-Russia conflict will require continuing prudent diplomacy and economic planning.