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Subject: International Relations

  • Places in news: Luxembourg

    Prime Minister has pitched for strengthening ties to further ramp up economic engagement between India and Luxembourg.

    Mark the location of Luxembourg. Since it is a landlocked country, there can be a question asking its bordering states.

    Luxembourg

    • Luxembourg is a small European country, landlocked by Belgium, France and Germany.
    • It’s mostly rural, with dense Ardennes forest and nature parks in the north, rocky gorges of the Mullerthal region in the east and the Moselle river valley in the southeast.
    • Its capital, Luxembourg City, is famed for its fortified medieval old town perched on sheer cliffs

    Why Luxembourg?

    • Luxembourg is one of the most important financial centres globally.
    • Several Indian companies have raised capital by issuing Global Depositary Receipts at the Luxembourg Stock Exchange.
    • Luxembourg-based investment funds hold substantial banking and asset management market share in portfolio investments in India.
    • It is also the third-largest source of Foreign Portfolio Investments (FPI) in India.

  • Challenges from the RCEP despite staying out of it

    India’s challenges from RCEP didn’t end by staying out of it. Remaining out of the RCEP has several implications for India. This article discusses such challenges.

    What RCEP mean for the region

    • The RCEP was finally signed by its 15 members on the sidelines of the Asean Summit last week without India.
    • This would make it a trade deal that includes the ten Asean economies, and all of Asean’s bilateral FTA partners, except India.
    • It would create new market access for China and Japan-the two largest economies of the group.
    • China, Japan and Korea were negotiating a trilateral trade pact, which now might become inconsequential following RCEP.
    • In this respect, RCEP would actually produce much greater market access outside of the Asean, among non-Asean members China, Japan and Korea.
    • Asean’s specific market access gains would be over and above those that are already available through various Asean+1 FTAs.
    • Additional market access gains would be more with respect to China, in terms of the additional tariff coverage and concessions that RCEP would provide.

    Implications for China

    • Apart from the additional preferential access it obtains, it is also able to pull off strategic dividends.
    • As the RCEP proceeds, it would establish China’s decisive say in writing the rules of trade in the region through the RCEP.
    • And this is precisely what the US would be wary of.

    Implications for the U.S.

    • President Obama had pitched the Trans-Pacific Partnership (TPP) as an obvious and essential alternative for counterbalancing Chinese strategic domination of the regional trade game.
    • The US was taken out of the TPP by President Trump.
    • The remaining members managed to salvage the deal, largely due to the spirited leadership provided by Japan and Australia.
    • While the TPP survives as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).
    • But CPTPP is incapable of being a strategic counterweight to China, and the RCEP.
    • Nothing other than a CPTPP that includes the US would be able to counterbalance China in economic size and strategic clout.

    Way forward

    • The Quad—a security partnership between the US, Japan, India and Australia—is looking to expand beyond defence and assume broader strategic proportions.
    • Geopolitics is contributing significantly to the construction of economic alliances, including the reorganisation of regional supply chains.
    • Due to these factros, search for an Indo-Pacific trade and economic compact is likely to hasten following the conclusion of RCEP.
    • Following RCEP, and the almost non-existent possibility of returning to its fold, India too, might find itself working actively on moving towards an Indo-Pacific trade deal.
    • The RCEP, which has a sizeable number of key Indo-Pacific economies like Japan, Australia, Korea, Vietnam and Indonesia, would need to stick to these countries to stick to the trade agreement after its ratification.

    Conclusion

    RCEP might actually force the U.S to look at returning to CPTPP much more proactively than it might have imagined. It would also, expectedly, look at India to join the bloc. That would be another challenge to navigate. India’s challenges from the RCEP might have increased in spite of staying out of it.

  • India-Canada relations

    Track 1.5 dialogue

    •  The third round of India-Canada Track 1.5 Dialogue, comprising senior diplomats, officials and independent experts, will be held on a virtual platform.
    • This promising interaction represents a major, deliberate endeavour to boost the bilateral relationship.

    Convergence on China issue

    • Common challenges of the COVID-19 era accelerated the momentum of bilateral engagement.
    • Canada’s travails with China, starting with the arrest of Huawei’s chief financial officer in Canada in December 2018.
    • Later, the ‘hostage diplomacy’ practised by Beijing which arrested two Canadian nationals, has caused huge stress in Canada-China relations, turning Canadian public opinion against China.
    • This opened the door to a closer relationship with India.
    • In this backdrop, developments concerning the Indo-Pacific —  strengthening of the Quad and the growing interest of France, Netherlands and Germany to be active players in the region — are of immense relevance to Ottawa.
    • The forthcoming dialogue can deepen the India-Canada convergence on this issue.

    Principal area’s of bilateral cooperation

    • Canada-India merchandise trade exceeded C$10 billion in 2019.
    • Canada’s cumulative investment, including foreign direct investment and by Canadian pension funds, is a substantive C$55 billion.
    • Addressing virtually the ‘Invest India’ conference in Canada on  Prime Minister pointed out that mature Canadian investors have been present in India for many years and assured them that no barriers would come in their way.
    • Indian students are increasingly being educated in Canada, and a quarter million of them spent an estimated $5 billion in tuition fees and other expenses last year, a solid contribution to the Canadian economy.
    • Of 330,000 new immigrants accepted by Canada last year, 85,000 i.e. nearly 25%, were from India.
    • The Indian diaspora in Canada is now 1.6 million-strong, representing over 4% of the country’s total population.
    • The principal areas of bilateral cooperation are best defined by five Es: Economy, Energy, Education, Entertainment and Empowerment of women.
    • In particular, the digital domain holds immense potential, given Canada’s proven assets in technology — especially its large investment in Artificial Intelligence, innovation and capital resources, and India’s IT achievements, expanding digital payment architecture and policy modernisation.

    Conclusion

    Divided by geographical distance but united through clear common interests and shared values, India and Canada will begin their steady journey of progress, this time with a laser-like focus on common goals as well.

  • China-led RCEP takes off without India

    The Regional Comprehensive Economic Partnership (RCEP), a mega trade bloc comprising 15 countries led by China has come into existence.

    Try answering this:

    Q.Signing the Regional Comprehensive Economic Partnership (RCEP) agreement would have given more substance to India’s Act East policy. Analyse.

    About RCEP

    • Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement (FTA) between –
    1. The 10 members of ASEAN
    2. Additional members of ASEAN +3 = China, Japan, South Korea
    3. Members with which ASEAN countries have FTA = Australia, New Zealand
    • The group is expected to represent at least 30% of the global GDP and will emerge as the largest free trade agreement in the world.
    • It includes more than 3 billion people, has a combined GDP of about $17 trillion, and accounts for about 40 per cent of world trade.

    India’s reluctance

    • India’s ties with China in recent months have been disturbed by the military tension in eastern Ladakh along the LAC.
    • In the meantime, India has also held a maritime exercise with Japan, Australia, and the United States for the “Quad” that was interpreted as an anti-China move.
    • However, these moves did not influence Japanese and Australian plans regarding RCEP.

     Leverage for China

    • Despite the pandemic, the RCEP is certainly leverage for China and shows the idea of decoupling from China is not a substantive issue in a regional sense.
    • The agreement means a lot for China, as it will give it access to Japanese and South Korean markets in a big way, as the three countries have not yet agreed on their FTA.

  • UAE’s Golden Visa Program

    The United Arab Emirates will extend its “golden” visa system — which grants 10-year residency in the West Asian nation — to certain professionals, specialised degree-holders and others.

    Do you know?

     India is the world’s top recipient of remittances with its diaspora sending a whopping $79 billion back home in 2018 a/c to the World Bank.

    Golden Visa Programme

    • The “Golden Card” programme is open to investors and “exceptional talents” such as doctors, engineers, scientists, students and artists.
    • The visa categories include:
    1. General investors who will be granted a 10 years visa
    2. Real estate investors, who can get a visa for 5 years Visa
    3. Entrepreneurs and talented professionals such as doctors, researchers and innovators: 10 years Visa
    4. Outstanding students — will also be permitted residency visas for 5 years
    • All categories of visas can be renewed upon expiry.

    Benefits for India

    • The Indian expatriate community is reportedly the largest ethnic community in the UAE, constituting roughly about 30 per cent of the country’s population of around nine million.
    • Though most of the Indians living in the UAE are employed, about 10 per cent of the Indian population constitutes dependent family members, according to the Indian Embassy.

  • Shanghai Cooperation Organisation (SCO)

    In an indirect reference to the Chinese infrastructure projects in PoK, our PM has urged members of the Shanghai Cooperation Organisation (SCO) to respect “territorial integrity” and “sovereignty”.

    What is SCO?

    • After the collapse of the Soviet Union in 1991, the then security and economic architecture in the Eurasian region dissolved and new structures had to come up.
    • The original Shanghai Five were China, Kazakhstan, Kyrgyzstan, Russia and Tajikistan.
    • The SCO was formed in 2001, with Uzbekistan included. It expanded in 2017 to include India and Pakistan.
    • Since its formation, the SCO has focused on regional non-traditional security, with counter-terrorism as a priority.
    • The fight against the “three evils” of terrorism, separatism and extremism has become its mantra. Today, areas of cooperation include themes such as economics and culture.

    Try this PYQ now:

    Q. In the context of the affairs of which of the following is the phrase “Special Safeguard Mechanisms” mentioned in the news frequently?

    (a) United Nations Environment Programme

    (b) World Trade Organization

    (c) ASEAN- India Free Trade Agreement

    (d) G-20 Summits

    India’s entry to the SCO

    • India and Pakistan both were observer countries.
    • While Central Asian countries and China were not in favour of expansion initially, the main supporter — of India’s entry in particular — was Russia.
    • A widely held view is that Russia’s growing unease about an increasingly powerful China prompted it to push for its expansion.
    • From 2009 onwards, Russia officially supported India’s ambition to join the SCO. China then asked for its all-weather friend Pakistan’s entry.

    Tap to read more about SCO

  • What is OPEC+?

    Oil prices jumped by close to 10% for its biggest daily gain in almost six months after news of a highly effective vaccine against COVID-19 and Saudi Arabia’s assurance that an OPEC+ oil output deal could be adjusted to balance the market.

    About OPEC

    • OPEC stands for Organization of the Petroleum Exporting Countries.
    • It is a permanent, intergovernmental organization, created at the Baghdad Conference in 1960, by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.
    • It aims to manage the supply of oil in an effort to set the price of oil in the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.
    • It is headquartered in Vienna, Austria.
    • OPEC membership is open to any country that is a substantial exporter of oil and which shares the ideals of the organization.
    • Today OPEC is a cartel that includes 14 nations, predominantly from the middle east whose sole responsibility is to control prices and moderate supply.

    What is OPEC+?

    • The non-OPEC countries which export crude oil along with the 14 OPECs are termed as OPEC plus countries.
    • OPEC plus countries include Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan.
    • Saudi and Russia, both have been at the heart of a three-year alliance of oil producers known as OPEC Plus — which now includes 11 OPEC members and 10 non-OPEC nations — that aims to shore up oil prices with production cuts.

    Why OPEC plus came into existence?

    • When Russia concluded the Vienna Agreement in 2016, the Russian leadership believed that it would help prepare the country for the Russian presidential elections in March 2018.
    • Higher oil prices ensured the Kremlin’s financial capacity to lead a successful electoral campaign.
    • This changed the regime’s priorities – from satisfying the needs of the general population to ensuring the sustainability of the Kremlin’s alliance with powerful tycoons, including that controlling oil production.
    • For Saudi Arabia, turning what had been an ad hoc coalition into a formal group provides a hedge (protection) against future oil-market turbulence.
    • For Russia, the formalization of the group helps expand Putin’s influence in the Middle East
    • However, both reportedly aimed at causing a drop in oil prices in order to hit US shale producers, who have continued to benefit from OPEC production cuts by expanding their market share.

  • Armenia, Azerbaijan agree on peace deal

    Armenia and Azerbaijan agreed on a deal with Russia to end fierce clashes over Nagorno-Karabakh after a string of Azerbaijani victories in its fight to retake the disputed region.

    Ending up the bloodshed

    • During the course of the conflict, over 1200 have lost their lives as per the Nagorno-Karabakh authorities, while thousands have been displaced.
    • Since the conflict started in September, multiple ceasefire agreements have been signed between the two sides, but none so far have been successful.
    • The deal is meant to end the conflict between the two nations.
    • Russia’s role in the conflict has been somewhat opaque since it supplies arms to both countries and is in a military alliance with Armenia called the Collective Security Treaty Organisation.

    What is the Nagorno-Karabakh region?

    • Straddling western Asia and Eastern Europe, Nagorno-Karabakh is internationally recognised as part of Azerbaijan, but most of the region is controlled by Armenian separatists.
    • It has been part of Azerbaijan territory since the Soviet era.
    • When the Soviet Union began to collapse in the late 1980s, Armenia’s regional parliament voted for the region’s transfer to Armenia; the Soviet authorities turned down the demand.
    • Years of clashes followed between Azerbaijan forces and Armenian separatists.
    • The violence lasted into the 1990s, leaving tens and thousands dead and displacing hundreds of thousands.
    • In 1994, Russia brokered a ceasefire, by which time ethnic Armenians had taken control of the region.

    Consider this PYQ:

    Q.The area is known as ‘Golan Heights’ sometimes appears in the news in the context of the events related to: (CSP 2015)

    a) Central Asia
    b) Middle East
    c) South-East Asia
    d) Central Africa

    Who controls it?

    • While the area remains in Azerbaijan, it is today governed by separatist Armenians who have declared it a republic called the “Nagorno-Karabakh Autonomous Oblast”.
    • While the Armenian government does not recognise Nagorno-Karabakh as independent, it supports the region politically and militarily.

    Ethnicity and the conflict

    • Ethnic tensions from decades ago have a crucial role in the dispute.
    • While the Azeris claim that the disputed region was under their control in known history, Armenians maintain that Karabakh was a part of the Armenian kingdom.
    • At present, the disputed region consists of a majority Armenian Christian population, even though it is internationally recognised as a part of Muslim-majority Azerbaijan.

  • Unfurling India’s foreign policy concerns

    The article analyses two major concerns of India which would be influenced by the policies adopted by the next U.S. President. 

    Concern for India

    • What policy President-elect Joe Biden will adopt in its foreign policy will has bearing on India.
    • There are two foreign policy issues which are of great concern and interest — China and Iran in that order.
    • For the world, the equation between the United States and China may be the relationship of the greatest consequence.
    • For India, the most consequential relationship is not with the U.S. — as is sometimes claimed — but one with China.
    • What happens in greater West Asia will always remain of concern, but those interests will not be affected one way or the other by who is the President of the U.S.

    Quad dynamics and China

    • In the Trump years, India signed all the ‘foundational’ agreements with America.
    • India also bought billions of dollars worth of military hardware from them.
    • India resisted converting the Quad into a primarily military or strategic grouping, and is in fact aimed solely at containing China.
    • The Quad is an anti-China coalition.
    • How far it can be successful in containing the Dragon remains to be seen.
    • India’s External Affairs Minister has stated, India will not join any military alliance.
    • However, given the fact that all the other three, and perhaps five or six in future, are already in strategic alliance with one another and with the U.S., it is highly likely that India too will be forced to agree to some form of military alliance at a future date.
    • But no external power would want to get involved on our side in case of major hostilities with China.
    • On the other hand, if there is a major skirmish or worse in the South China Sea, the other members of the Quad will expect us to join them in fighting China, in an area far removed from our shores.

    Approach towards China

    • If Mr. Biden adopts a more conciliatory approach towards China, India may find ourselves in a difficult situation.
    • We do not want China to be permanently hostile to us; it will absorb huge resources, human and material.
    • The strong rhetoric employed in relation to China will need to be tempered.
    • Public opinion which has been worked up against China may make it difficult to do so immediately but the government is efficient in managing and moulding public opinion.

    Approach toward Iran

    • It may be difficult for Mr. Biden to quickly reverse Mr. Trump’s adventurist policy towards Iran.
    • It may not be possible for him given the domestic compulsions, to readopt JCPOA in its original form.
    • But he will surely, if slowly, engage Tehran in talks and negotiations through Oman or some other intermediary, to reduce tensions in the region.
    • India may be able to buy Iranian oil, and sell our pharma and other goods to that country.
    • The government may also feel less constrained in investing openly in oil and other infra projects in Iran, including the rail project in which Indian Railways Construction Ltd has been interested.

    Conclusion

    While India can’t expect the reversal of all Trump era policies, there will be certain changes in the stance adopted by the new U.S. President and India should be prepared to deal with it.

  • How a Biden’s Presidency may affect India?

    Donald Trump’s rise to the White House as well as his exit has led to a wide reactionary response in India.

    Also read:

    [Burning Issue] India US relations in the backdrop of recent hiccups

    (1) Economic Impact

    Trade

    • There are several ways in which the US economy, its health and the policy choices of its government affect India.
    • For one, the US is one of those rare big countries with which India enjoys a trade surplus. In other words, we export more goods to the US than what we import from it.
    • The trade surplus has widened from $5.2 billion in 2001-02 to $17.3 billion in 2019-20.
    • Under a Biden administration, India’s trade with the US could recover from the dip since 2017-18.

    FDI and FPI

    • The US is the fifth-biggest source for Foreign Direct Investment (FDI) into India. Of the total $476 billion FDI that has come in since April 2000, the US accounted for $30.4 billion — roughly 6.5 per cent — directly.
    • Only Mauritius, Singapore, Netherlands, and Japan have invested more FDI since 2000.
    • Apart from FDI the US also accounts for one-third of all Foreign Portfolio Investments (that is, investment in financial assets) into India.

    Ending protectionism

    • A Biden presidency may also see a renewed push towards a rules-based trading system across the world.
    • Instead of outright ad-hocism as was the case under Trump — as well as a move away from the protectionist approach that has been getting strong across the world.

    (2) Visa

    • For instance, how a US President looks at the H1-B visa issue, affects the prospects of Indian youth far more than the youth of any other country.
    • Under Trump, who severely curtailed the visa regime, thanks to his policy of “America First”, India had suffered the most.
    • That could change under Biden, who is unlikely to view immigrants and workers from India with Trump-like suspicion.

    (3) Technology

    • Other points of contention between India and the US are the tricky issue of data localisation or capping prices of medicines and medical devices.
    • These have a better chance of getting towards a resolution as we move away from the radical approach of President Trump to the pragmatism of a Biden presidency.

    (4) Diplomacy

    • Further, under the Trump administration, the US sanctions on Iran severely limited India’s sourcing of cheap crude oil.
    • For an economy such as India, which needs a regular supply of cheap oil to grow fast, a normalization of US-Iran relationship (and lifting of sanctions) would be more than useful.
    • On China, too, while the US apprehensions are unlikely to be fewer. It is more likely that a Biden administration will help India against China, instead of clubbing the two together.

    (5) Climate Action

    • Biden has promised to rejoin the Paris Climate Accord, and this may help countries such as India in dealing with the massive challenges — both technical and financial — on this front.