A certain narrative is building up in the West, in which India is being portrayed as a villain, along with China, in the ongoing war in Ukraine. A recent article in The New York Times read ‘In Russia’s War, China and India emerge as Financiers’. This is more than disingenuous, and it is vital for things to be put in perspective.
Europe- Russia’s biggest funder
Three things must be taken into account. One, Europe continues to be the biggest financier of Russia’s war effort, because European countries continue to buy Russian gas and Russian oil. Sure, they have decided to phase out purchases of Russian oil that is not delivered through a pipeline, but it is not easy for them to stop buying Russian gas in the near future.
Thanks to the sanctions on Russia, and the uncertainties of war, the price of oil has shot up. The price of gas has gone up, too. So, European importers of Russian oil and gas pay higher prices for the hydrocarbons they import from Russia. Some estimates put the European payment to Russia for hydrocarbons at $1 billion a day.
There are serious limits on how much of Russian gas India or China can buy, even if they wanted to. Gas has to come through pipelines, or through LNG terminals. The pipelines in place are already pumping gas to China as much as they can. LNG capacity has been fully utilised, given the shortage of gas from the beginning of the last winter, long before the beginning of the war in Ukraine on February 24. Fresh liquefaction plants, shipping terminals, regasification plants at importing nations, and LNG tankers, kitted out to transport liquefied gas at low temperatures and appropriate pressure, will have to be built, to transport extra gas without the help of pipelines.
This will take time. Italy and Germany are dependent on Russian gas, and continue to import large quantities from Russia, paying higher prices because of the spike in gas prices.
If someone wants to identify a non-oligarch financier of Russia’s invasion of Ukraine, they would have to look in Europe, not in Asia.
Global oil prices stabilized by India and China
The second factor to be highlighted is that to the extent India and China buy Russian oil, they help stabilize global oil prices. If the average Joe in the US suddenly turns eloquent in a language register he did not pick up in Sunday school, whenever he takes his truck to the gas station to fuel up, it is useful to bear in mind that his decibel levels would be even higher, if India and China did not buy Russian oil.
To the extent India and China buy oil from Russia, they cut back on their purchase of oil from other sources. This quantity of non-Russian oil released from consumption by India or China adds to the pool of oil available for purchase by others. This additional supply lowers the price of crude.
Additionally, India is a major exporter of refined petroleum products. Indian exporters of petrol and diesel are able to produce and export to their full capacity, thanks to the availability of cheaper oil from Russia. This extra availability of petrol and diesel from India helps bring down these fuel prices globally.
Rising Food Prices
The third factor is the rising price of food. Inflation across the world is being fuelled by price increases in energy and food. Food prices have gone up essentially thanks to Western boycott of Russian grain, sunflower oil, and fertiliser. But if you listened only to the BBC, you would think world food prices have gone up because the Russians have blocked export of Ukrainian wheat.
Russia has been, in the recent past, the world’s largest exporter of wheat, more than 37 million tones in 2020. Ukraine, the fifth-largest exporter, exported less than half of that. European sanctions on exports from Russia have cut off the world’s largest export supplies of the grain.
Even if we concede the logic that Europe has to penalize Russia for its invasion of Ukraine, it would not justify the blockade of grain exports from Russia.
If Europe can continue to import oil and gas from Russia, even as they have imposed sanctions on Russia, why would they not allow the World Food Programme to import wheat from Russia? They blame Russia’s blockade of Ukraine’s Black Sea ports for the inability of export Ukrainian grain. In fact, Ukraine has mined the Odessa port to thwart Russian naval forces. Ukraine is certainly entitled to fortify its ports against external aggression.
However, if the UN agencies and Western leaders were actually concerned about the sudden paucity of grain for distribution by the World Food Programme, on which several African nations depend, why don’t they strike a deal with Russia to export grain from a port in Crimea, controlled by Russia, and clear of Ukrainian mines? Ukraine would be able to export its wheat and sunflower oil, countries dependent on imports for grain and edible oil would get their supplies, food prices would cool, central banks would lose an element of compulsion to raise interest rates, and world growth would get a boost.
Russia is not a major exporter of wheat alone. Like Ukraine, Russia is a major producer and exporter of sunflower oil. It is one of the largest exporters of fertilisers, corn, and barley. All these exports have been throttled by Western sanctions, raising food prices now and in the next crop season, as well.
Higher oil prices affect food prices, too, and not just through higher transport costs. As oil prices rise, more corn gets diverted to the production of ethanol. This lifts the price of corn. Corn is a major component of chickenfeed. Chicken becomes more expensive, in turn. Along with edible oil prices, the price of oil cake also goes up. That puts upward pressure on animal feed. Milk and meat prices go up, soon enough.
It is high time India led other developing countries in a collective demand that the West exempt food of all kinds from their sanctions on Russia. If Europe can exempt Russian gas from its sanctions, it can very well exempt food that matters even more for the developing world.
Let us put aside the sanctimonious blame game by the West, and demand an end to sanctions on food.
First published in Moneycontrol West must put aside its sanctimonious blame game, and exempt food from Russia sanctions on June 28, 2022.
Read another piece on Financial Reporting by TK Arun titled Strengthen Financial Reporting with Data Consent in IMPRI Insights
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About the Author
TK Arun is a Senior Journalist and Renowned Columnist.