Géopolitique, Réseau, Énergie, Environnement, Nature
Non-alignment: The BRICS' New Bargaining Chip
Issue #2
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Issue

Issue #2

Authors

Tim Sahay

21x29,7cm - 91 pages Issue #2, September 2022

War Ecology: A New Paradigm

On March 25th, as Russia’s war in Ukraine intensified, the Chinese foreign minister Wang Yi visited New Delhi and entreated “If China and India spoke with one voice, the whole world will listen. If China and India joined hands, the whole world will pay attention.” In April, European Commission President Ursula von der Leyen made her first trip to the neutral Indian capital, where she laid the groundwork for several weeks of frenetic dealmaking on a sweeping agenda ranging from defense to green manufacturing.

In a whirlwind three-day tour of Germany, Denmark and France the following month, Prime Minister Narendra Modi won concessions that Indian policymakers have coveted for well over two decades. Seven European heads of state forked over climate investments, tech transfers, and weapons deals, putting flesh on the bones of a moribund EU-India strategic partnership.

In Berlin, Chancellor Olaf Scholz announced a €10 billion green partnership to help India achieve its 2030 climate targets and high-tech transfers. In Copenhagen, Nordic countries inked wind and solar deals, green shipping and green cities investments. In Paris, Macron signed a deal 1 to invest in India’s green hydrogen hubs, boosted Indo-French military-industrial aircraft and ship deals, while EDF moved forward a long-pending partnership to build six EPR-1650 nuclear power reactors in Jaitapur. This followed India’s momentous $42 billion investment deal with Japan for EVs, green hydrogen/ammonia, and heavy industry transition 2

The timing of these rapid concessions is no accident. Modi is negotiating an emerging global order in which the divorce of China, Russia and the West provides a golden opportunity for dealmaking. As the world splits into new Cold War blocs — which look strikingly like old Cold War blocs — the old Indian grand strategy of nonalignment is reemerging 3 . And this time, the rise of China assures that the new counter-hegemonic bloc will enjoy considerably greater resources than did the old communist powers.

That emboldened confederation stretches beyond the subcontinent. India’s last 30 years of catchup growth were achieved under U.S. primacy. Along with other developing nations who have interests independent of Washington’s, India worries about the coercive underbelly of American hegemony. Brazil and Indonesia, leaders in orchestrating past nonalignment movements, are also taking advantage of their new pull. Europe should not underestimate the interest of postcolonial elites in charting an independent course. 

Friction with the West is assured. But diplomats in the developing world are prepared to pay to avoid a costly and risky confrontation with the Sino-Russian axis. In other words, developing countries’ answer to the West’s question, “do you want to contain China with us?” is probably “yes”. But the answer to the question, “do you want to contain China and Russia with us?” is probably “no”.

In the decade after 9/11, the U.S. Treasury, National Security Agency and Commerce Department developed a Panopticon over the key networks of globalization: Surveillance over finance through Treasury’s Office of Foreign Asset Control and SWIFT payments system; over information, through Snowden’s Silicon Valley internet 4 ; and over supply-chains, through the export control list of technologies 5 . Key choke points 6 were located and operated in the advanced industrialized states of the G7. Meanwhile, U.S willingness to weaponize the dollar system 7 against troublemakers escalated. The signal to developing countries was clear: when threatened, the United States resolved to tightly control the technologies underpinning economic growth and military superiority.

G7’s command of key technology remains the source of its hard power. It demonstrated that by the design of economic warfare sanctions 8 after Russia’s invasion of Ukraine. While sanctioning Russia’s central bank assets and SWIFT cut-off signaled financial war 9 , a technological iron curtain fell, shutting high-tech exports to Russia’s economy. The G7 targeted supply of silicon chips from Korea & Taiwan to ground Russia’s military (chips are a key component of military hardware), while critical airplane parts were restricted to ground Russia’s aviation. 

Little wonder, then, that developing countries are adopting a stance of nonalignment to secure 10 the same key technologies – fighter jets, green technology, chips, submarines, nuclear, pharma, 5G – that could power their catch-up growth. The map of countries that remained neutral on Russia sanctions is no bleeding-heart protest for global justice, but a hard-nosed security play. Before signing up to the West’s new financial-technological-military regime, they intend to extract maximum concessions. Threats to exit, as any bargainer knows, confer power.

Countries like China, India, Indonesia, Brazil, South Africa, Mexico, Saudi Arabia, and the UAE refuse 11 to sacrifice their national interests of security and development to punish Russia 12 . Most importantly, they believe their bargaining power in the new Cold War will result in sweeter trade, technology & weapons deals from the West. These countries will account for three-fourths of the world’s population and 60 percent of the world economy by 2030. They have aspirations for regional dominance and believe a non-aligned position better serves their national interests. They are also betting that the West will tolerate their foot-dragging compliance with sanctions on Russia, and refrain from imposing secondary sanctions (sanctions for breaking sanctions) for that defiance.

What purpose does their non-alignment stance serve? Firstly, powering future growth through transfer of core technologies. Secondly, boosting security through transfer of advanced military hardware. Thirdly, strengthening of bargaining hand in trade negotiations with export-dependent Europe & a U.S seeking geo-economic allies 13 in an anti-China, anti-Russia bloc. Fourthly, securing essential commodities like food, energy, metals & fertilizers from the new Russian-Chinese bloc. Lastly, strengthening of bargaining hand in restructuring 14 debt to Western & Chinese creditors during a punishing global dollar debt crisis that threatens their sovereignty.

India’s “national champion” conglomerate Reliance, owned by Modi-backer Mukesh Ambani, symbolizes developing countries’ relationship with the G7. 15 years after China became the Manchester of the green industrial revolution with Western partnerships, Asia’s richest billionaire has decided to catch up. Ambani’s Jamnagar refinery is currently making billions importing Russian crude oil and exporting refined products – diesel and petrol – to the West. The same Reliance site at Jamnagar has received Western green technology transfers even as it flouts Western sanctions. Reliance has invested more than $60 billion of its own money and $10 billion in partnerships and acquisitions to manufacture hydrogen in electrolysers (Danish firm), solar PV wafers (German firm), solar panels (Norwegian firm), grid-scale battery (US firm), iron-phosphate battery (Dutch firm). 

How India manages its foreign partnerships to participate in green supply chains depends fundamentally on Dubai. The United Arab Emirates is the new London for Russian-Indian-Chinese-MiddleEastern capital. U.A.E’s President Mohammad bin Zayed has positioned the Gulf Kingdom as a Wild Wild West offshore jurisdiction for all oligarchs & merchant banks who are worried about Western sanctions coming for them. Gulf petrostates are set to gain an additional $1.3 trillion in petro (dollar) exports over the next four years. Dubai offers a workaround for sanctions, using commodities payments settled in Yuan, Rupees, and Roubles, to bypass dollars. Gulf sovereign wealth funds – UAE, Qatar, Saudi Arabia – aim to invest in energy transition across Eurasia. It’s the old world — the same Indian-Arab-European sugar, spice, cotton trade route used for centuries — back with a bang. 

Under President Joko Widodo, Indonesia is taking control of its abundant energy transition minerals 15 , incentivizing investment in processing facilities to move up the value chain and shifting the world balance of economic power. While the dream of becoming an electrostate is new; the tools are old. Indonesia, one of the founding members of the Non-Aligned-Movement, is copying the developmentalist state miracles of the East Asian Tigers 16 and the 1970s nationalization drives of OPEC countries. To howls of outrage by the European Commission at WTO, Jokowi banned exports of nickel 17 , forced international companies to refine and process domestically and sought technology transfer to state-owned enterprises. 

Indonesia has the largest nickel reserves in the world, with a majority of reserves controlled by its state-owned mining company, MIND ID. While the EU, Brazil’s Vale and US’s Ford and Tesla initially sought to secure unprocessed nickel from the country, Indonesia insisted on grabbing more of the value-chain by creating an EV-producing national champion. Indonesia Battery Corporation, a newly created producer of batteries for electric vehicles, has struck partnerships with China’s CATL and South Korea’s LG to obtain critical technology required to process battery-grade nickel. 

After Jokowi banned nickel exports in 2020, Chinese companies agreed to set up joint ventures in Indonesia with high-pressure acid leach (HPAL) technology. Jokowi’s next targets for the ‘ban-exports-and-nationalize’ treatment are tin (Indonesia is world’s second largest producer and the metal is used as solder to make electrical connections), aluminium (Indonesia is world’s fifth largest producer and the metal is used in electricity and cars) and copper (used in, well, everything electric)

These muscular expressions of non-aligned power are an incomplete counterweight force to U.S Sanctions on developing countries’ choices. The U.S. leveraged its place at the heart of the global financial system to influence global arms sales by threatening any client for Russian weapons with economic warfare. Indonesia ended up cancelling its purchases of Russia’s Sukhoi-35 fighter jets, despite Russian offers of a dollar bypass palm-oil-for-fighter-jets scheme. Instead, in a major defence spending escalation of $22 billion, Indonesia bought 36 U.S F-15s and 42 Rafale’s from France, along with 2 of France’s Scorpene submarines (the latter an emollient after France lost out on its sale of diesel subs to Australia). In 2021, Russia shipped two S-400 air-defence missile systems to India. It prompted a furious backlash from the U.S and threats to sanction India for the rupee-rouble deal. Calls for constructive, not coercive sanctions, remain unheeded. 

Perhaps most surprisingly, given his regime’s increasing closeness with the US, Brazilian President Jair Bolsonaro chose neutrality in the war. The material stakes may make this choice seem obvious: Brazil’s soy-corn-sugar-meat exporting complex, heavily dependent on Russian fertilizers 18 , has an enormous stake in preserving relations. Moreover, Brazil’s trade surplus with China is bigger than all its exports to the U.S. But the ideological current runs deeper. Lula’s government (2003-2010) had deepened relations with the U.S., BRICS, and other pink tide governments of Latin America. In 2011, the foreign minister boasted that Brazil had more embassies in Africa than did Britain. Its willingness to make friends in both the Pacific and North Atlantic has given it greater room of maneuver, as when it broke HIV/AIDS drug IP patents in favour of Indian generics.

Bolsonaro’s free-market faction has broken with that multilateralist tendency, siding against India, South Africa and China when that bloc demanded IP-free Covid vaccines at the WTO. It also joined the G7 on agricultural free trade policy, and has sat out IP fights. Yet the Brazilian right wing’s best efforts to quash protectionism were not enough to overcome the country’s long aversion to G7 coordinated schemes; Brazil still chose neutrality on Russian sanctions. Elites in Brasília would rather keep their options open and their commitments light. 

Green industrial growth compels some choice, however. Looking ahead, Brazil will need to prioritize either domestic industrialists or external allies, as it weighs whether to develop flex-fuel cars fed by homegrown sugarcane ethanol or batteries sourced from China, Indonesia, and the nearby lithium triangle. Brazil may defer choosing between North and South, but the choice between an inward-looking Brazil or an outward-facing one looks more inevitable.

There is a special irony to Brazil’s current right-wing capture. Under Bolsonaro, the country is perhaps the most cooperative, among its BRICS peers, with the G7-led order. But Lula, its charismatic former president, represents the developing world’s best shot at leading a global nonalignment movement. It will be up to that former unionist metalworker to forge a new coalition based on shared values. Whereas the old nonaligned movement was anchored on moral imperatives – decolonization, anti-racism, nuclear disarmament – the fledgling version lacks a positive social and ethical program. Instead, it stems from the cold commercial and security logic of development. Domestically, Lula’s return to power has been partly a reaction to Bolsonaro’s brazen contempt for women, environmentalists, and the poor. But whether Lula can sell Green industrial Brasilia to a global audience is a matter of inspiring the multi-ethnic working classes of other vast tropical democracies.

Developing countries will use this decade’s violently shifting geoeconomic conditions 19 to build on growth models pioneered last century, including industrial policy and developmental state capitalism. Expect states like India and Indonesia to keep conditioning their increasingly coveted cooperation and access to growing consumer markets on hard infrastructure deals.

Within that general trend are enormous variations in strategy 20 . Brazil’s emblematic program of development through social policy may be fully realized with Lula’s anticipated return to power later this year. India and Indonesia, meanwhile, have favored policies centered on buildout of electricity, roads, and ports, which can disregard human rights and bias deals toward powerful incumbents. In the extreme version, consider the Gujarat model 21 that has formed the basis of Modi’s aggressive electoral campaigns. 

Even as nonaligned countries negotiate within the new sanctions regime and find ways to use it to their advantage, one should not lose sight of the devastating toll of G7 sanctions 22 : a blunt instrument that has torn up supply chains and created inflationary pressures. When emerging market elites can parley these conditions to their advantage, it is impressive. But even the most creative trade deals struck under terms set by the G7 are insufficient buffers against food and energy price volatility, unleashed by deregulated commodity markets 23 run out of London and Chicago. Climate chaos 24 on every continent, meanwhile, compounds these tensions 25 , devastating the already threadbare lives of many. All the more reason, then, for the G7 to take a leaf out of the BRICS’ playbook 26 and coordinate investment 27 in long-term sustainable infrastructure.

Notes

  1. India-France Joint Statement on the occasion of the Prime Minister’s visit to France, Indian Ministry of External Affairs, 4 May 2022.
  2. India-Japan Summit Joint Statement Partnership for a Peaceful, Stable and Prosperous Post-COVID World March 19, 2022
  3. The Geometry of Fear in Eurasia India and the Logic of Non-Alignment, Policy Tensor, 28 March 2022.
  4. “United States of Secrets”: How the Government Came to Spy on Millions of Americans, PBS 2014.
  5. Overview of U.S. Export Control System, Government of the United States, 2009.
  6. Henry Farrell, Abraham L. Newman, Weaponized Interdependence: How Global Economic Networks Shape State Coercion, 01 July, 2019.
  7. Regime Change? Mona Ali, Phenomenal World, 27 April 2022.
  8. The Toll of Economic War How Sanctions on Russia Will Upend the Global Order, Nicholas Mulder, March 22, 2022.
  9. The Art of Monetary War. Sanctions and the new phase of economic combat, Dominik A. Leusder, 12 March 2022.
  10. Matthew P. Goodman, Matthew Reynolds, and Julianne Fittipaldi, Economic Security in Emerging Markets A Look at India, Vietnam, and Indonesia, CSIS, May 2022.
  11. Chad P. Bown, Russia’s war on Ukraine: A sanctions timeline, September 16 2022 PIIE.
  12. Shivshankar Menon, A New Cold War May Call for a Return to Nonalignment, Foreign Policy, July 1, 2022.
  13. Geoeconomics, Finnish Institute of International Affairs (FIIA), 2022.
  14. Tapering in a time of conflict: Trade and Development Report Update (March 2022).
  15. Géographies en transition, Jewellord T. Nem Singh, Monde Phénoménal, 29 juin 2022.
  16. Jewellord Nem Singh & Jesse Salah Ovadia (2018) The theory and practice of building developmental states in the Global South, Third World Quarterly, 39:6, 1033-1055.
  17. Overview of Indonesia’s EV downstream sector: A focus on nickel, Deloitte Indonesia Perspectives, Third Edition, February 2022.
  18. The Observatory of Economic Complexity, July 2022.
  19. Zoltan Pozsar,War and Industrial Policy, Credit Suisse, August 24, 2022.
  20. BRICS Neoliberalism: Past and Future?, Brown University, Spril 23, 24 2022.
  21. Chatterjee, E. (2022), New Developmentalism and its Discontents: State Activism in Modi’s Gujarat and India. Development and Change, 53: 58-83.
  22. The Sanctions Weapon. Nicholas Mulder, IMF, June 2022.
  23. How High Energy Prices Emboldened Putin, Tim Sahay, The American Prospect, March 22, 2022.
  24. Fact sheets, The Intergovernmental Panel on Climate Change (IPCC).
  25. Climate Change 2022: Impacts, Adaptation and Vulnerability, IPCC.
  26. Climate: An Outline of the New Era Emerges, Ben Beachy, Democracy, Spring No. 64.
  27. Investment and Decarbonation: Assessing Green Finance, Anusar Farooqui , Tim Sahay, Phenomenal World, 13 May 2021.