Modi turning Indian nonalignment policy into a business model

Subrahmanyam Jaishankar is the first career diplomat to serve as India's external affairs minister. Unlike many of his predecessors, he has also had experience in the private sector, serving as president of global corporate affairs for the Tata Group for about a year just before taking up his current role.

His unique background, coupled with the "Make in India" and "Atmanirbhar Bharat" driven by the administration of Prime Minister Narendra Modi to promote foreign investment and self-reliance, respectively, are reshaping Indian foreign policy.

Indian neutral position on Russian invasion of Ukraine has been the subject of considerable debate and discussions in media and policy circles. Many experts have attributed India's stance to its Cold War-era policy of nonalignment and its bonhomie with Russia, which dates back to those days.

The Indian government has justified its position as serving the country's national interests, rather than being a consequence of ideology. Its real geo-economic considerations go beyond realpolitik.

Unlike preceding administrations, the Modi government is not seeking to have one foot with the global South and one with the West in deference to the principle of nonalignment, nor is it motivated by what its developed-country partners call shared values.

Rather, behind the veneer of India's balancing act are trade and economic interests, particularly in terms of energy, defense, pharmaceuticals and high technology.

India is now poised to be the fastest-growing major economy this year, with the International Monetary Fund last week forecasting a gross-domestic product rise of 6.8%. This would be more than double the pace of China or the world as a whole at a time when developed countries look poised to enter recession.

Many economists have attributed India's strong growth to rising domestic consumption and its relative success at controlling inflation. But notably, the Indian finance ministry credits purchases of discounted Russian oil as a key factor in the country's strong macroeconomic performance.

Beyond cheap oil, India is also taking advantage of the growing geopolitical fractures to sell more arms abroad, increase space cooperation and develop markets for its pharmaceuticals.

Latin America has been a particular new area of focus, with the government setting up new consulates in Paraguay and the Dominican Republic and a state-owned fuel retailer looking to Brazil's Petrobras for supplies.

Visiting Argentina last month, Jaishankar pointedly used that country's name for the Falkland Islands, Islas Malvinas. This was not just a show of solidarity with a fellow member of the global South but part of a sales pitch for the Tejas fighter jet made by state-owned Hindustan Aeronautics.

Buenos Aires aims by year-end to finalize a decision between competing models, including offers for the US F-16, Russia's MiG-35, and the JF-17 made jointly by China and Pakistan.

The Tejas is billed as an affordable alternative to the F-16 and other Western fighters, and even to the JF-17. Priced at US$42 million a plane with an operating cost of around US$4,000 an hour, the Tejas is the cheapest lightweight combat aircraft available.

Indian Defense Minister Rajnath Singh promoted the Tejas on a visit to Egypt last month and other ministers have been traveling to the country as well. Hindustan Aeronautics is preparing to open its first overseas marketing office in Malaysia and considering adding others.

The Philippines, meanwhile, earlier this year finalized a US$375 million deal to buy supersonic BrahMos missiles from the Defence Research and Development Organisation (DRDO), another Indian state-owned arms producer. Vietnam is also a target market for Indian defense companies.

Indian arms makers have other advantages besides price over their established American rivals in pitching to countries in the global South. US arms makers are handcuffed by Washington's alliance policies, which fracture the world into camps. Thus the DRDO is working on a deal to sell Pinaka Mark-II guided missile systems to Armenia, a longtime Russian ally.

India's participation in the new I2U2 grouping with Israel, the US and the United Arab Emirates also shows how economic interests are taking precedence over past ideological priorities, in this case, support for the Palestinian cause.

That effort now yields little economic benefit for New Delhi while the I2U2 in July set plans for a US$2 billion series of food-sector industrial parks in India and a US$330 million renewable energy project in Modi's home state of Gujarat.

Modi's vision of "Make in India, make for the world" still faces many hurdles, including the country's aversion to free trade deals and other protectionist policies, but turning top government officials into business development managers charged with cultivating foreign markets is one way to advance the effort.

Indian concept of a multipolar world can be more than geopolitical balancing between global powers but also a geoeconomic endeavor carefully crafted to take advantage of different opportunities in each country.

 

 

Pakistan Stock Exchange: Investors remain on sidelines

During the week ended on October 21, 2022, the focus of investors remained on the current account position, besides the upcoming FATF plenary. The benchmark index remained flat and closed at 42,213 points, up 0.6%WoW. The average volume for the index continued downward trajectory, dropping to 228 million shares down 14.4%WoW.

Major news flows during the week included: 1) Q1FY23 Current Account deficit down by 37%YoY, 2) Trade deficit shrinks by 30.2%YoY in September, 3) Gas sector circular debt bloats to Rs1.5 trillion, 4) Pakistan receives only US$88 million assistance against US$816 million flash appeal, 5) Pakistan seeks rescheduling of US$27 billion debt and vi) country’s foreign exchange reserves inches up to US$13.250 billion.

The top performing sectors were: Tobacco, Close-end Mutual funds, Synthetic & Rayon, Modarabas and Power Generation & Distribution, while the least favorite sectors were: Woolen, Textile Weaving, Sugar & Allied Industries, Oil & Gas Marketing and Automobile Parts & Accessories.

The top performing scrips in the KSE-100 were: PAKT, HGFA, PGLC, SNGP and AKBL, while laggards included: BNWM, SHEL, HCAR, NRL and SRVI.

Foreigners emerged the biggest sellers, offloading US$3.4 million followed by Banks & DFI (US$1.5 million), Mutual funds (US$1.3 million), Companies (US$0.4 million) and Other Organizations (US$0.2 million). While Individuals, Brokers and Insurance Companies were on the buying side, with a net buy of US$5.4 million, US$0.9 million and US$0.6 million respectively.

Amid the volatile local political situation, the name of the game is waiting and seeing. If the political turmoil dampens, some may view it as a bull-trigger for the market, while the potential of anarchy may keep some away. Moreover, with the outcome of the FATF plenary scheduled to be announced on Friday night, the result will boost/suppress the market.

It is likely that the country will be removed from the grey list of the global money laundering and terrorism financing watchdog, which will in turn increase the flows of foreign funding into the equity market.

The PKR continued its decline which started last week and lost 1.1%WoW owing to the speculation regarding changes in the Finance Ministry. Keeping in view the uncertainty, near-term outlook for the equity market remains hazy as both bear and bull-run triggers loom overhead.

United States accuses Iran aiding Russia

The White House on Thursday accused Iran for supporting Russia in attacks on Ukraine with Iranian drones launched from Crimean Peninsula with on the ground assistance from military trainers.

National Security spokesperson John Kirby raised concern that Russia will seek to acquire advanced conventional weapons from Tehran as it faces military supply shortages under pressure from Western sanctions. 

“We can confirm that Russia’s military personnel that are based in Crimea have been piloting Iranian UAVs [unmanned aerial vehicles], using these to conduct strikes across Ukraine, including strikes against Kyiv in just recent days. We assess that Iranian military personnel on the ground in Crimea assisted Russia in these operations,” Kirby said.

“There’s extensive proof of their use by Russia against both military and civilian targets in Ukraine, yet both Iran and Russia continue to lie about it,” he added. 

Kirby said that the US cannot offer exact numbers on how many Iranians are in Crimea, adding that it’s a relatively small number but that they are providing tech support while the Russians pilot the UAVs for attacks. 

“Russia has received dozens of UAVs so far, and will likely continue to receive additional shipments in the future,” he said.

He added that the administration is exploring new sanctions and that the Department of Defense is looking actively at potential air defense solutions for the Ukrainians.

Russian attacks with Iranian kamikaze drones have terrorized Ukraine over the past two weeks, with civilian casualties and infrastructure, including residential buildings, energy and water supplies, destroyed by the explosive-laden drones.

Ukrainian President Volodymyr Zelensky has pleaded for supporting countries to send more air defense systems immediately.

The US and NATO said they are working to quickly send more air defenses and anti-drone technology to Ukraine, while other air defense systems from Spain and Germany are said to have recently arrived.

Ukrainians have pleaded for more, in particular to Israel for its Iron Dome missile defense system, which is considered one of the most successful air defense systems at targeting indiscriminate fire. 

Israel has rejected sharing the Iron Dome a decision that Kirby said was their sovereign right. 

He said the Pentagon is looking hard at what what’s in the realm of the possible, for air defenses for Ukraine, including, as I said earlier, what could be possible from allies and partners.

 

CENTCOM commander visits US ballistic missile submarine in Arabian Sea

US CENTCOM Commander General Michael Kurilla visited the USS West Virginia nuclear-powered ballistic missile submarine at an undisclosed location in international waters in the Arabian Sea on Wednesday, United States Central Command announced.

Kurilla was joined by Vice Admiral Brad Cooper, Commander of the US Navy's Fifth Fleet and NAVCENT. Kurilla received a hands-on demonstration of the capabilities of the vessel during the visit.

These submarines are the crown jewel of the nuclear triad, and the West Virginia demonstrates the flexibility, survivability, readiness and capability of USCENTCOM and USSTRATCOM forces at sea" said Kurilla.

The West Virginia is one of six ballistic-missile submarines stationed at Naval Submarine Base Kings Bay, Georgia. The submarine can carry up to 20 submarine-launched ballistic missiles with multiple warheads. The submarine is equipped with Trident D5 submarine-launched ballistic missiles, each of which can be armed with up to eight 475 kiloton W88 nuclear warheads which can each be aimed toward a separate target. 

Each W88 warhead has a yield about 23 times larger than the "Fat Man" nuclear bomb dropped on Nagasaki. A blast caused by such a weapon would likely destroy most structures within a 4.9- to 6-kilometer radius and cause 3rd degree burns to people within about 8 kilometers of the blast site, according to the MIT Nuclear Weapons Education Project.

The announcement by CENTCOM was marked as unusual by analysts, as the US does not usually reveal the location of its ballistic missile submarines.

The visit to the USS West Virginia comes amid concerns that Russia could use tactical nuclear weapons in its continuing invasion of Ukraine and as Iran continues to provide drones to Russia for it to use against Ukraine and plans to provide ballistic missiles as well.

NATO is also holding its annual nuclear deterrence exercise over north-western Europe which will continue until October 30.

The exercise involves 14 countries and up to 60 aircraft, including fighter jets and surveillance and tanker aircraft. The exercise, called "Steadfast Noon," is hosted by a different NATO ally each year.

The visit also comes as China continues to up its rhetoric against Taiwan and as attempts to return to the JCPOA nuclear deal with Iran remain stalled.

On Monday, Robert Malley, the US Special Representative for Iran, told CNN that attempts to revive the JCPOA nuclear deal are "not on the US agenda as they have been stalled for two months due to Iranian demands.

"Iran is making demands that have nothing to do with the JCPOA and as long as that's the case the talks will be stalled," said Malley, adding that the US continues to believe that diplomacy is the best way to stop Iran from attaining nuclear weapons.

Rising diesel exports to Europe

Oil traders are ramping up diesel exports from Asia and the Middle East to Europe in October to profit from a wide price gap between the regions as weeks-long strikes at French refineries have tightened stocks, although a steep backwardation may cap volumes, according to trade sources and shipping data.

The price spread between front-month Singapore 10 ppm sulphur gasoil swaps and the ICE low sulphur gasoil futures contract, also known as exchange of futures for swaps (EFS) , was close to minus US$150 a ton on Wednesday, versus minus US$29 a year ago, data on Refinitiv Eikon showed, making it attractive for traders to send oil to Europe.

"East of Suez is sending everything they can ship... it's just a question of how much China exports in November," a Europe-based trader said.

For October, around 289,000 tons of gasoil will be loaded from South Korea and China to northwest Europe, up from 137,500 tons in September, ship tracking data from Refinitiv showed.

Exports from India and the Middle East for October to northwest Europe were at around 480,000 tons and 834,000 tons respectively, as compared to 361,000 tons and 511,310 tons a month ago, the data showed.

The trader estimated that Europe may import about 3 million tons (750,000-850,000 barrels per day) from east of Suez in November, of which the Middle East could account for two-third of the volume. Traders expect the bulk of supplies to Europe to come from India and the Middle East, on shorter shipping times.

Asia's top fuel exporters in South Korea and Taiwan have issued a flurry of spot tenders this month, while China will also step up diesel exports after Beijing increased allocation.

However, outages at TotalEnergies' refineries in France caused by worker strikes since September have led prompt diesel prices to surge versus those in future months, a market structure known as backwardation, posing risks to the value of oil cargoes that travel over long distance such as from Asia to Europe.

Steep backwardation, which is already deterring traders from storing diesel globally, may prevent the much-needed heating fuel from reaching Europe this winter as the region is scaling back on imports from top supplier Russia ahead of a European Union embargo in February.

"Some end consumers were stockpiling Russian diesel but now with French strikes, the market has tightened up and we have brutal backwardation," a Europe-based trader said.

"So there is a big commercial incentive to draw stocks, which will make it worse to buy diesel."

Northwest European diesel barge profit margins rose to over US$83 a barrel on Tuesday, a record high, amid supply tightness.

Already soaring diesel prices in the United States have led traders to divert several cargoes heading from the Middle East to Europe to the New York harbour area, further constraining supplies in Europe.

"European gasoil cracks could come down even further up to US$15 a barrel once the strikes end, making it risky for Asian barrels to head over here even on a prompt loading basis given the strong backwardation, although the arbitrage is technically open on paper," said Mark Williams, a research director at Wood Mackenzie.

 

OPEC Plus endorse output cut despite US coercion accusation

OPEC Plus member states lined up to endorse the steep cut to its output target agreed this month after the White House, stepping up a war of words with Saudi Arabia, accused Riyadh of coercing some other nations into supporting the move.

The United States last week said the cut would boost Russia's foreign earnings and suggested it had been engineered for political reasons by Saudi Arabia, which denied it was supporting Moscow in its invasion of Ukraine.

Saudi King Salman bin Abdulaziz said the kingdom was working hard to support stability and balance in oil markets, including establishing and maintaining agreement of the OPEC Plus alliance.

The Saudi Defence Minister, Prince Khalid bin Salman, King Salman's son also said the October 05 decision to reduce output by 2 million barrels per day (bpd) - despite supply tightness in oil markets - was unanimous and based on economic factors.

His comments were backed by ministers of several OPEC Plus member states including the United Arab Emirates.

The UAE's Energy Minister, Suhail al-Mazrouei, wrote on Twitter,"I would like to clarify that the latest Group decision, which was unanimously approved, was a pure technical decision, with NO political intentions whatsoever."

His comment followed a statement from Iraq's state oil marketer SOMO.

"There is complete consensus among OPEC Plus countries that the best approach ...is a pre-emptive approach that supports market stability and provides the guidance needed for the future," a SOMO statement said.

Kuwait Petroleum Corporation Chief Executive Nawaf Saud al-Sabah also welcomed the decision by OPEC Plus and said the country was keen to maintain a balanced oil market, state news agency KUNA reported.

Oman and Bahrain echoed the comment in separate statements.

Algerian energy minister Mohamed Arkab, meanwhile, called the decision historic and said that he and OPEC Secretary General Haitham Al Ghais expressed full confidence in it, Algeria's Ennahar TV reported.

In a statement to Reuters on Monday, Arkab said the OPEC Plus decision, was a purely technical response based on purely economic considerations.

Oil inventories in major economies are lower than when OPEC has cut output in the past. Some analysts have said that recent volatility in crude markets could be remedied by a cut that would help attract investors.

Umer Karim, a research fellow at the University of Birmingham, said OPEC countries are attempting to project unity.

"The emphasis on the word technical also suggests that these member states are sending a message to the US that they are not a party in this row between Riyadh and Washington," Karim said.

US National Security Council spokesman John Kirby on Thursday said that more than one" OPEC member had felt coerced by Saudi Arabia into the vote, adding that the cut would also increase Russia's revenue and blunt the effectiveness of sanctions imposed over its invasion of Ukraine.

King Salman said in an address to the Kingdom's Advisory Shura Council that the country was a mediator of peace and highlighted the crown prince's initiative to release prisoners of war from Russia last month.

Khalid bin Salman said he was astonished by claims his country was standing with Russia in its war with Ukraine.

 

Darnomics or Illusion

Without mincing words, allow me to say that Pakistan’s Finance Minister, Ishaq Dar, is busy in creating illusion that with his taking rein of finance an era of prosperity has begun. His premise that Rupee has got stronger against US dollar is nothing but gimmickry.

Let me remind my readers around the world that lately US dollar was made stronger artificially by the US administration. The US also wanted to create illusion that hike in energy prices around the world has failed in denting economy of the country.

One may recall that lately when OPEC Plus decided to curtail output, Joe Biden, President, United States was most furious. He knows that hike in motor gasoline is bringing down his popularity graph, which may led to defeat of his party in the mid-term elections.

Therefore, the attempts by Dar to show that Rupee is getting stronger are ‘misplaced’. In this endeavor, Pakistan is bound to lose more of its limited foreign exchange reserves.

This is also to remind him that in Pakistan there is a huge mismatch between the inflow and outflow of dollars. IMF tranche may have provided a breather, but the quantum of debt servicing is grossly unmanageable.

The brutal fact is that the recent floods have devastated country’s agriculture, displaced millions of people and their rehabilitation requires millions of dollars. If I am right bulk of the aid has come in kind and whatever paltry amounts have come is ’peanuts’ only.

This is to also remind the Minister that higher interest rate and persistent hike in electricity and gas tariffs are rendering Pakistani manufacturers, particularly exporters of textiles and clothing, uncompetitive in the global markets.

It is writing on the wall that imports will go up and exports will come down, widening the current account deficit. Since Dar has no control over imports, Pakistan’s only savior could be exporters. However, the lust to collect more PDL to bridge budget deficit is killing golden-egg layer, textiles and clothing industry.

Although, I am not an admirer of Miftah Ismail, any attempt to portray Dar as savior is like building an empire on the dead body of another person. If the readers are unable to understand this narrative let me say, “Miftah was used to announce all the bad decisions and Dar is being projected as a Savior”.

To conclude allow me to say, “The incumbent government has no clue whatsoever regarding pulling the country out of current economic crisis, all its policies can be termed ‘firefighting’ but the fire is too big and water is too little.”