Opinion – Fall of Ruble and its takeaways for India

Russia’s economy is crashing and the Ruble is witnessing a free fall. It has several implications for India and that’s what I shall present here.

Before getting into the implications, a quick sneak at the reasons:

  • Stagnation of the Russian economy since 2013.
  • Drop in global oil prices due to the “global oil politics”.
  • Crimean annexation and the increase in Russian military expenditure.
  • Western imposed economic sanctions in the light of the Ukrainian crisis hurting the Russian economy.

Its implications for India are as below:

  • Emergence of the new age Cold War and a threat to global order and peace.
  • Russia’s “Pivot to Asia”
    • Negative implications
      • Russia’s closer ties with China are not very much in India’s interests. It must be remembered that it was the hostilities between China and Russia that fared well for India, which received significant support from Russia during the erstwhile Cold War era.
      • China’s expansionist plans would receive a greater boost with Russia as her ally. It would also boost China’s energy starved economy with the rich Russian energy and other mineral reserves.
      • Russia’s defense exports to Pakistan is a major concern for India as Pakistan is notorious for “diverting” the military weapons to the state sponsored terrorists.
      • Russia may no longer play the supporter of India’s cause in UNO in various issues like Kashmir problem and boundary dispute with China.
    • Positive implications: (This to a large extent depends on how India fits in into the Russia’s “Pivot to the East” policy)
      • India can strengthen her defense, infrastructure and energy ties with Russia. The same has been invigorated during the recent Putin’s visit to India in December 2014 which saw a series of agreements in the areas of defense, energy ($10 billion oil deal and setting up more n-power plants) and technology (like Space).

Role that India must play in this age of changed geopolitics:

  • Strengthening the platform of RIC (Russia, India and China) Summit, joining the Shanghai Cooperation Organisation (SCO), greater ties with Eurasian Economic Union (by hastening the negotiation process for signing an FTA with it) etc., so as to ensure that Russo-China relations do not become a matter of concern for India.
  • India emerging as a significant partner in Russia’s Pivot to Asia without sacrificing India’s “Non-Alignment” character in what seems to be the new dawn of a Cold War.
    • Strengthening defense ties – aligning with India’s “Make in India” campaign through several weapons co-development initiatives (like the Fifth Generation Aircraft and choppers). The recently hiked FDI in defense sector to 49% can also be used in this regard.
    • Strengthening energy ties, particularly oil and nuclear.
  • New economic opportunities in the form of trade relations with Eurasian Economic Union. A Free Trade Agreement (FTA) is under negotiations in this regard.
  • Greater cooperation on Afghanistan post the withdrawal of NATO forces as its peace and stability is necessary for all the nations of the region. India can play the Russian card to impose pressure on China and especially Pakistan to prevent the latter from playing the card of “good Taliban” in Afghanistan.
  • By playing a balanced role in sync with her policy of Non-Alignment, India can strengthen her claim to the permanent seat in UN Security Council.
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