Success of Modi’s ‘Act West’ Policy Opens Doors to Gulf Potential

Prime Minister Narendra Modi deserves full credit for his West Asian diplomacy. With the exchange of visits by the Indian and Israeli Prime Ministers within six months, Modi’s most recent visit to Palestine, Oman and UAE, and the upcoming visit of Iranian President Hassan Rouhani, India has skillfully stepped over the numerous fault lines in the region.

Our ‘India First’ approach is likely to yield significant payoffs for India’s security, economic well-being and global standing.

India’s West Asia Balance

This is, by far, the most important external region for India, providing oil and gas that constitute 65 percent of energy imports, USD 35 billion in remittances from 9 million Indian nationals working there, and taking up 20 percent of our bilateral trade. With more than 700 flights a week, the region is, through the web of history, contemporary links, trade and expatriates, virtually a neighbour of India.

You may quibble with Modi’s ideological affinity for Israel’s distasteful policies, but when you do the math, you will see that Modi has, by and large, maintained an even keel in India’s relationship with the region.

There has been criticism that Modi’s visit to Palestine was a bit of ‘tokenism’ at play. Even so, given their plight, the visit by an Indian Prime Minister, howsoever brief, would have been a heartening one in the minds of the beleaguered Palestinians.

Not to mention, this gesture would also act as a signal to the other countries of the region, that despite ideological affinities with Israel, the BJP government would not abandon the long-term perspective.

Notwithstanding the economic aid and political support we give to the Palestinian cause, we are not big players in the prolonged end-game for the Palestinian state. There, it is entities like the US, Russia and the EU that count.

Foreign Investment from Gulf Region

During his last visit to UAE in 2015, Modi made a strong pitch to attract investment in India’s infrastructure. As a result, in 2017, the Abu Dhabi Investment Authority put USD 1 billion into the special HDFC affordable housing scheme, USD 1 billion in the NIIF, and USD 300 million in a renewable energy project.

Major port operator, DP World, announced that it would add another USD 1 billion to its existing USD 1 billion investment in India in May 2017. DP World has invested in five international gateway ports in India already.

This time around, India got its first oil concession in the Gulf. An OVL-led consortium got a 10 percent stake, out of the 40 percent available in the Lower Zakum field. And we finally sealed the strategic petroleum reserve agreement – which means that we should soon have six million barrels of UAE crude in our caverns in Puddur, near Mangalore. Significantly, among the agreements is a commitment by DP World to set up a major inland container terminal in J&K – a significant message to the troubled state.

India-Oman Longstanding Ties

The UAE’s role in Indian security goes beyond oil supply lines and expatriate population alone. The UAE is an important partner in our efforts to combat organised crime, smuggling and, most importantly, counter-terrorism. Since 2011, both countries are bound by an agreement on security cooperation.

But though the UAE has been willing to give up Indian terror suspects, they are less cooperative on issues relating to Pakistan, whose clandestine services allegedly use the Emirates as a gateway to push illegal currency and money to militants in India.

India and Oman have had strong ties throughout history. A look at the map will show you why. Unlike other Gulf countries, Oman is our neighbour across the Arabian Sea and opens out into the Gulf of Oman, which faces Pakistan and the Indian Ocean. It faces Chabahar in Iran and Gwadar, the Chinese-run port in Balochistan, Pakistan. Incidentally, between 1783 and 1958, Gwadar, a small peninsula with a fishing village, was actually a part of Oman.

India’s Economic Ties with Gulf

India and Oman signed a treaty of friendship navigation and commerce as far back as 1953. The special element in the relationship have been our defence ties. We signed an MOU on Defence Cooperation in December 2005 (renewed in 2016) and established a committee which has had nine rounds of meeting since its establishment in 2006 to enhance this cooperation.

India has had an arrangement for the Operational Turnaround (essentially berthing) of ships involved in anti-piracy patrols and for technical support for landing and overflight for Indian military aircraft. The two countries regularly carry out naval, coast guard and army exercises.

Economic relations are no less important. The USD 969 million Oman-India Fertilizer Company is India’s largest joint venture abroad, having been established in 2006. India imports the entire production of its urea and ammonia.

The agreement for the Indian Navy access to Duqm port’s Naval Dockyard is a useful development, but some Indian media commentary has needlessly painted this as a major move against China, not knowing that a Chinese company has signed a project to develop a USD 10.7 billion industrial city near the port. Indeed, last year, the Omanis had to get an emergency USD 3.6 billion loan to balance their general budget from a group of Chinese banks.

And in neighbouring UAE, the Chinese are in an even bigger way, building a giant container terminal and setting up several free zones.

‘Act West’ — India’s Very Own Policy

Duqm is a relatively small port – the largest tag goes to Port Salalah, which is in the western part of the country near Yemen and strategically located at the cross-roads of trade between Asia and Europe. However, Sohar, a deep sea port that has a free zone, is Oman’s fastest growing port.

In contrast to ‘Act East’ where India is tying up with countries like the US and Japan to enhance its clout, the ‘Act West’ policy is India’s own. Unlike the Indo-Pacific where the US leads, here, we lead and shape our own policy which is, in some instances clearly at odds with the Americans.

Unlike them, we do not recognise Jerusalem as Israel’s capital, and neither are we willing to take a hostile stand towards Iran. This will be evident later this week, when the Iranian president lands in New Delhi.

And unlike the Indo-Pacific where the payoffs are limited, West Asia offers us vast energy resources that are vital for our development, investment opportunities for our corporates, and jobs by the millions for our skilled and semi-skilled workers, engineers, and managers. Iran offers us a platform for connectivity to Afghanistan, Central Asia and beyond to Europe, and countries like Oman help us extend our reach into the western Indian Ocean.

The Quint February 14, 2018

The Trump force

President Donald Trump signed a budget bill last Friday  which will lead to the US Department of Defense’s (Pentagon) biggest budget. The defence expenditure will go up to  $ 700 billion this year and $ 716 billion in 2019. This year alone, the Pentagon will get $ 94 billion more than last year. Unlike the past when wars led to a jump in defence spending, this time around the increase is aimed at a range of overhauls and upgradation—training, high-tech missile defences and nuclear weapons.

There are many critics of this massive expenditure, some who point out that infant mortality rates in the US are the highest in the developed world. The US has many other problems that could do with the money—a crumbling infrastructure, opioid epidemic, poor healthcare services for the poor. But Trump has from the outset indicated that he would seek a sharp hike in defence spending as part of his America First vision.

But the US is also driven by its self-image as the world’s hegemon and in its new national defence strategy last month, the US Secretary of Defense called for more money to ensure that the US retains its military edge globally. Following the US National Security Strategy issued in December, the defense strategy says that the challenge now is that of states like Russia and China who are trying to undermine American power.

This puts an end to the limits on defence spending placed by the so-called process of budget sequestration initiated in 2013 under the Budget Control Act of 2011 to tame America’s budget deficits. Under this, defence spending would be cut $ 500 billion in a 10 year period. Spending would be cut evenly between domestic and defence programmes with half affecting non-discretionary expenditure like weapons purchases, base operations and construction work, and the rest to mandatory spending such as regular payments,  social security and Medicaid.

Though subsequent bipartisan deals in the US Congress ensured that the cuts were not drastic, they nevertheless put US expenditures at what we could call austerity levels. In any case war funding was not affected by the sequester and since this was not well defined, it was used to get around the sequester.  Also pay and allowances of military personnel and some of their benefits were exempted.

So, over the years exercises were curtailed and the repair of bases postponed and new weapons purchases delayed. All this was the outcome of the Republican Party’s theological belief that deficits were bad for the economy.But Trump has been a critic of the  BCA and said, not only would he undo it, but boost defence spending dramatically. So in their budget negotiations, the Democrats have insisted that budget relief for the Pentagon should come along with an equal relief to the social programmes. Such is Trump’s command of the Republican Party that it has tamely gone along with the new budget proposals, with little or no concern for the deficit.

In the last few years, the pressure on the US to spend more of defence has been growing on account of China. Speaking while introducing the new National Defense Strategy, US Secretary of Defense, James Mattis noted, “If you don’t get resources, then your strategy is nothing more than a hallucination.”

The US Department of Defense says that it needs larger stockpiles of munitions, more modern and effective systems to defend US bases in Asia, more sea and airlift to project forces and move them about in the vast spaces of the Pacific, upgrade their AWACS and battle management systems, more ships and fifth generation aircraft. On a longer term, they need to keep up their technological edge in the face of Chinese advances in AI and cyber.

Over the years the Chinese have developed an impressive capacity to raise the cost of the US intervention in areas close to the Chinese mainland through what is called the Anti Access Area Denial (A2/AD) systems. Just like India, the Americans have been busy using their military to fight terrorism, meanwhile their adversaries like Russia and China have created networks of long-range missiles, radars, cyber and space systems that are designed to keep the Americans from projecting power to their shores.

The American military is by far the most powerful today, but what the Chinese and the Russians have done is to increase the cost they would have to pay to intervene in regions like the Baltic Sea or the South China Sea. They would make the US to hesitate to intervene on behalf of, say, Taiwan, the Philippines and Vietnam and open them up for greater bullying by China.

In 2014, the US announced that it would come up with an offset strategy emphasizing futuristic systems using AI and machine learning. But this is touch and go, because Russia and, more so, China, have also invested hugely in these areas. Fighting what the Chinese call “informationised” wars will be at the heart of military conflict. Everything will crucially depend on the dominance of the electro-magnetic spectrum.

Greater Kashmir February 12, 2018

How an India-Japan alliance can help counter Chinese dominance

India's Act East policy has an obvious dilemma — China. How does India cope with the position of strength it occupies in the ASEAN and beyond and the unfolding of the Belt and Road Initiative? China’s trade is more than five times that of India. Further, China has important leverages with most ASEAN countries because of its pole position in the South China Sea and as an upper riparian of the Mekong river.

The answer that is emerging is: a partnership with Japan. Over the decades, Japan has built up huge equities in Southeast Asia. This is through its official Overseas Development Assistance (ODA) loans and grants, Japanese private sector investment, as well as the activities of the Japan-led Asian Development Bank (ADB). Typical of the Japanese, their approach has been low key and emphasised developmental and economic goals over geopolitics.

Investments

However, Japan is now being pushed to a leadership role in Asia following the election of Donald Trump as US President. His pull-out from the Trans-Pacific Partnership (TPP) undermined the economic basis of the biggest planned pushback against China’s expanding footprint in the region. So Japan took the initiative to revive the gathering minus the US. Further, it has announced several measures to promote the construction of “quality” infrastructure, an obvious dig at the flaws in many Chinese projects.

At a side event at the UNGA meeting in New York in September 2017, Kentaro Sonoura, special adviser to the Japanese PM, outlined his country’s initiatives for promoting “quality infrastructure investment”. He announced that Japan would boost the $110 billion (Rs 7,06,434 crore) fund it had created in 2015 for a five year period in Asia, to a sum of $200 billion (Rs 12,84,426 crore) that would be offered for the same period, but globally. In addition, Japan’s concessionary yen loans had been doubled to 2 trillion yen (Rs 1.18 lakh crore) since 2015. This would provide access to large sums of financing for economic and social projects on terms more favourable than the market.

Japan has been a huge economic presence in the region for decades and a major factor in its prosperity. The attraction of ASEAN region for Japan has only grown in recent years as Japanese businesses have faced difficulties in operating in China. More important, perhaps, is the fact that wages in many ASEAN countries are lower than those in China. So observers note there is a transfer of Japanese firms from China to the ASEAN region.

In 2014 and 2015 Japanese FDI to the region has steadily grown, and is usually more than double of that of China. Japan has long led the Manila-headquartered Asian Development Bank to aid development of the Asian region. It offers money at near-market terms to lower to middle-income countries and at very low-interest rates to lower income countries.Transport corridors

Besides Japanese governmental initiatives, the ADB is itself making moves to counter the power of China’s Belt and Road Initiative. With the help of the Japan International Cooperation Agency (JICA), the ADB has created Leading Asia’s Private Sector Infrastructure Fund (LEAP) in 2016 with the aim of leverage and complementing money to non-governmental projects which can range from public-private partnerships to joint ventures and project finance. The focus is to be on energy, water, transport and health.

There are a number of connectivity schemes unfolding in the ASEAN region and the Japanese, whether through ADB or their ODA, have been playing a significant role. For example, the EastWest Economic Corridor funded by ADB is creating a road transport corridor linking Da Nang port in Vietnam with north-east Thailand through Laos. A southern economic corridor links Bangkok with Ho Chi Minh City and the port of Vung Tao through Cambodia. There are several such ongoing projects.

In India

The Japanese have been active in connectivity projects in India such as the Delhi-Mumbai Industrial Corridor and have recently begun funding road construction in the Northeast, emphasising linkages to Myanmar and Bangladesh and are studying the feasibility of the Chennai-Bengaluru Industrial Corridor.Indian schemes such as the Kaladan Multimodal Project or the Trilateral Highway to link the Northeast to Thailand via Myanmar are anemic. With the infusion of Japanese money and expertise, we can put some real life into our Act East slogan. India and Japan’s ambitious strategic partnership is not limited in trying to link South and South-east Asia, but make a broad thrust from towards Africa. The Asia-Africa Growth Corridor has a canvas that rivals that of the Chinese BRI stretching as it does from Japan to Southeast and South Asia towards East Africa.

Mail Today February 12, 2018

The BJP Is Playing With Fire, It's the Decency of Ordinary Indians That's Saved Us So Far

The fact that communal violence is rising in India is not hidden. Even the government acknowledges that there has been  a steady uptick in communal incidents. In response to a question in parliament on Tuesday (February 6), minister of state Hansraj Ahir disclosed that as many as 111 people were killed and nearly 2,500 injured in 822 communal incidents in 2017, as compared to 751 incidents in 2016 that took the life of 97 people and 703 in 2016 when 86 were killed.

It is not surprising that this is happening , given the deliberate strategy of polarising the populace through a variety of means ranging from cow protection to tiranga yatras, where gangs of young men barge into Muslim localities armed with the national flag (and a sprinkling of saffron ones as well) and raise anti-Pakistan slogans to taunt Muslims.

Even foreign policy is being held hostage to this, in the manner that Pakistan is consciously conflated with Muslims and a drumbeat of hostility is being maintained towards Islamabad for what are clearly electoral purposes, as became evident during the recent Gujarat assembly elections or earlier through the so-called surgical strikes in the Uttar Pradesh poll.

Despite, or perhaps because of, this, what is striking is the common sensical and decent approach of the common man. This has come out most recently through two incidents.

In the Kasganj incident, a tiranga yatra clashed with a flag-hoisting ceremony in a Muslim neighbourhood on Republic Day, leading to the death of a young Hindu man, Chandan Gupta. Thereafter, Muslim houses and businesses were deliberately attacked and set on fire. The situation was so troubled that even the governor of UP, senior BJP functionary Ram Naik termed it a ‘blot’ on the state.

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Whatever the Adityanath government may have said or done since to control the situation, what stands out is the steady refusal of the Gupta family to use the incident to promote communal hatred. Gupta’s bereaved sister Kirti told the Times of India that “there should be an end to ‘tiranga yatra’ if it’s leading to violence”. For her pains, Kirti said that her family had been threatened by unknown persons.

The other incident relates to an honour killing in Raghubir Nagar, New Delhi. A young Hindu man, Ankit Saxena was stabbed to death by the family of a Muslim girl he was in a relationship with. Once again, the bereaved family has gone out of its way to insist that the incident should not be given a communal tone. Efforts are being made by some communal elements to demand the expulsion of Muslims from the locality, but they are being stoutly resisted by residents.

What has been happening  has been graphically brought about by two courageous district officials. In the first instance, a district magistrate in Bareilly Raghavendra Vikram Singh spoke of  the “very strange trend” where people “take out processions by force through Muslim dominated localities and raise anti-Pakistan slogans” in a Facebook post. Subsequently the post was deleted.

Another young officer, Rashme Varun, posted on the provocative tactics of hiding behind the tricolour and the mask of nationalism to promote the “bhagwa (saffron)” agenda. No doubt, the officers exceeded their brief in posting on a political issue in this manner.

A breakdown of communal peace in UP and this part of northern India can only have the most serious consequences for the region and the country. If a handful of militants in Punjab, a state where the Hindus are a large minority, could hold the north hostage for an entire decade between 1985 and 1995, consider the consequences of militancy in a region from New Delhi to the Nepal border comprising of the districts of Saharanpur (Muslim population 41.95%), Meerut (34.43%) Moradabad (47.12%), Bijnor (43.04%), Jyotiba Phule Nagar (40.70%), Muzaffarnagar (41.30%), Rampur (50.57) and Bareilly (34.54) – which would together constitute the area of a country as large as Albania.

This is a fraught region, historically. Its elites played a significant role in the creation of Pakistan, but the average Muslim voted with his feet and remained in India. Yet, for the role of a handful of their co-religionists, their descendants have been placed in a permanent purgatory, with their religion and culture derided and their nationality questioned.  The region has witnessed repeated instances of communal violence – Moradabad in 1980, Meerut in 1982, 1987 and 1990-91, Bijnor in 1990, and Muzaffarnagar in 1988 and 2013. In many instances, the clash arose out of trivial events, but in some, there was deliberate provocation.

So far, these instances have been in the form of cycles of violence. Even though there was significant loss of life, they were brought under control. But given the current dispensation in the state, which is seeking to create a vote bank of the majority, there is danger of mass violence which would be nothing but disastrous.

The primary lesson of the bloodletting of Partition should have been the importance of learning that for the subcontinent to flourish, its various communities must be at peace, something that is as much the responsibility of its minorities, as its huge majority community.

The Indian Muslims of today are not going anywhere. According to a study conducted at the University of South Australia, the population of Hindus in India will rise 36% to 1.03 billion in 2050, while that of Muslims will go up 76%  to 310 million, the largest in the world. The Hindus will still be a huge majority comprising 77% of the population, even though nationally the proportion of Muslims will rise from 14% to 18%.

By now it should be clear that high population growth is a function of backwardness. The challenge this presents is obvious.

The lesson from these figures is that people will simply have to get along. Fantasies of “ghar wapsi” or expelling Muslims to Pakistan and Bangladesh, are precisely that – illusions. In this crowded region of South Asia, we must find sufficient space to swim together, or we are doomed to sink separately.

Short-term polarisation for electoral gain is the worst of the options that our politicians confront. But, sadly, unless they soar to the level of statesmen like Jawaharlal Nehru,  they usually tend to take the lowest path.

The Wire February 11, 2018

NDA Govt Has No Reason to Be Secretive About Rafale Deal

Having cut my teeth as a defence reporter, I dealt with the so-called Bofors and HDW procurement scams from their inception. Even though no one has been convicted for anything in either case, all I can say is that I suspect every deal involves money beyond the actual cost of the product. Some call it a commission, facilitation money, and yet others, a bribe. The fact is that the defence business is cut-throat.

Even minus bribes or facilitation, because of the effort that goes in long design and development cycles and years of hawking your product around arms exhibitions across the world, companies find a way of 

 The only category that is probably free from this taint is a Foreign Military Sales (FMS) deal with the US because there the US government is the buyer and usually an American company is the seller as well. No one dares cross Uncle Sam, through the “Fat Leonard” scandal suggests that crooks can often find ways around the tightest of situations.

There is another category of acquisitions where costs and details are hidden because they relate to strategic programmes, such as those relating to the development of a nuclear propelled submarine or missiles. Other government-to-government deals are not sacrosanct either.

How the Rafale Deal Unfolded?

There have been several cases where no questions were asked and none given — Mirage 2000 or the Sukhoi MKI. Some years ago, the government blacklisted companies from Germany, Switzerland, Russia, Singapore, and Israel on charges of bribing an ordnance factory official. One would imagine that these companies’ products would not require “other considerations”, but clearly they do.

As for the Rafale deal, it is important to separate the old and the new. The old deal to fill the Medium Multi Role Combat Aircraft (MMRCA) requirement was for 18 aircrafts in a flyaway condition with 108 to be made in India progressively through transfer of technology.

This won the competition against the Eurofighter, the Boeing FA18, F-16, Gripen and the Mig 35, and was ready for price negotiation. In 2011, Rafale and Eurofighter were shortlisted, and the former named the winner in 2012.

Thereafter price negotiations began on a complex deal, but in 2014, a new government came to power in New Delhi and short-circuited the old deal.

On a visit to France, Prime Minister Modi personally took charge and announced that the IAF would now buy only 36 aircraft off the shelf, no technology transfer would be required.

Same Aircraft, Two Different Deals

The same fighter is in the picture, no new variant or model. So price comparisons are not difficult and made easier by the fact that the Defence Ministry itself disclosed in 2016 that the basic price per aircraft would be approximately Rs 670 crore per aircraft, with the price going up to Rs 1,640 crore if you add weapons, spares, costs for special fitments asked for by India, and a commitment by Dassault that for five years, it will supply all the spares, components and technicians to keep the aircraft flying 75 percent of the time.

Those familiar with the issues know that there is nothing unusual in the “bells and whistles” costing more than the aircraft.For instance, take the Storm Shadow, a long-range stealthy ground attack missile or the Meteor air-to-air missile. According to a British Parliamentary question, each Storm Shadow fired in Libya cost Rs 7 crore each.

As for the Meteor, it is recognised as one of the most lethal Beyond Visual Range missiles around the world. Reportedly, India has sought other electronic enhancements each of which cost money. As for the 75 percent availability, this is crucial in a country whose fighter availability has sometimes dipped to 30 percent, and it comes expensive.

In 2015, speaking to the media, the then Defence Minister Manohar Parrikar had spoken of a figure which added up to around Rs 714 crore per fighter, considerably lower than the Rs 1,640 crore India is paying now. Of course, these are two different deals, but it is inconceivable that the Air Force requirement for “bells and whistles” have gone up so sharply in two years.

Opposition is Right in Demanding Answers

It is essentially the same aircraft and the same country buying them, so questions about its details are legitimate even if there are valid answers. Unfortunately, the government has decided to take recourse to a secrecy clause to block information, even to Parliament.

The Opposition is right to demand information on the pricing.

Providing information on the cost of an aircraft, its engine, missiles, radar warning receivers, radars, does not undermine the country’s security. What is secret is what is inside the sensors, its capabilities, algorithms and so on, which no one is asking for.

There should be no surprise that we are paying premium prices for the acquisition of one of the world’s best fighters. Certainly we will pay more than the French themselves are paying for it. That is because we will retrospectively also pay for its design and development. That is the price we pay for not having developed our own military aviation industry. Barring the US, all countries use exports to subsidise their domestic armament acquisitions.

IAF Should Get Its Priorities Right

The primary blame for the current state of affairs rests with the Indian Air Force, which ridiculously, and probably deliberately, combined six different kinds of fighters for a single requirement which was a cheap interim machine till the Light Combat Aircraft was developed. The two American fighters were 1970s vintage, the Gripen, Mig-35 and Rafale from the 1980s and the Eurofighter from the 1990s.

Of these, three were twin engine and the rest single engine. Of these the Gripen was probably the most suitable, but when you take two engines into account, the Eurofighter and Rafale were clearly superior.

If the old deal was about equipping several squadrons of the IAF with a cheap multi-role fighter, what is the new deal about ?

To me it would seem it’s about providing two squadrons for a nuclear weapons strike. Since the 1990s, that function had been served by rewired Mirage 2000s, which were, by 2014, obsolete. Penetrating hostile airspace with nuclear weapons is fraught business, and so only the best and specially equipped machines will do.But these are top secret matters, usually done with some subtlety, but Modi’s personal cancellation of the old deal and its preemptory replacement by the new did arouse suspicion.

Some of the suspicion around the current deal is because its offset clause would have Dassault spend some Rs 30,000 crore or 50 percent of the amount in developing manufacturing, design, training and maintenance facilities in India. The charge is that this money is destined for the Dassault-Anil Ambani joint venture that is coming up in Nagpur to make components for civil aircraft made by the French major.

The Ministry of Defence’s statement on Wednesday, however, insists that as of now Dassault has not chosen an offset partner. There is speculation, though, that some of the money may actually be used for a DRDO-SNECMA deal to create a powerful new jet engine as a successor to the Kaveri, which was revealed in November 2016.

Going by experience, it is next to impossible to determine whether there has been corruption or not. As the Bofors or the Westland helicopter deal revealed, the ways of the arms merchants are next to impossible to follow. You may get some low-level functionaries who got some “business development” money, but you are unlikely to reach the big bucks.

The Quint  February 9, 2018