READING BETWEEN THE LINES: Interpreting Trump’s Not-So-Subtle Threat To India To Do More In Afghanistan

The India-US relationship has conventionally been undergirded by commonly shared democratic traditions, despite periodic upheavals. Thanks to president Donald Trump, this is likely to change soon and acquire a transactional shade based on quid pro quo, where acknowledgement is contingent on favours extended.

This was evident when Trump unveiled his long overdue strategy for Afghanistan, a nettlesome issue that’s remained unresolved through the last four presidencies to now bedevil a fifth one. Apart from his trademark bluster and rhetoric, Trump’s speech revealed two distinct strands: a deal-based approach to achieving strategic objectives, and, a marked candour that separates his speech from the studied diplomatese of past presidents.

Obviously, no speech on Afghanistan and South Asia can ignore India. But, Trump’s hat-tip to India and its critical role in maintaining regional stability has acquired a new binary, apart from a foreboding tenor: “We appreciate India’s important contributions to stability in Afghanistan, but India makes billions of dollars in trade with the United States, and we want them to help us more with Afghanistan, especially in the area of economic assistance and development.”

This is a curious statement, tethering Indo-US trade to India’s help in Afghanistan, and can be parsed in multiple ways.

One, this is a clear and overt threat: cooperate or else. President Trump has been waving the trade flag in all his perorations concerning India. He has been unequivocal about seeking enhanced market access for US goods and services. The joint press statement issued during prime minister Narendra Modi’s Washington DC visit has him saying: “It is important that barriers be removed to the export of US goods into your markets, and that we reduce our trade deficit with your country.” Indo-US trade touched $114.8 billion during 2016, with India enjoying a $30.8-billion trade surplus. It would seem Trump has made India’s trade with the US contingent upon cooperation in Afghanistan.

There is a second aspect. India’s port and associated connectivity projects in Chabahar, south-east Iran, have been delayed. The port, and its rail and road linkages, are expected to provide India an alternative trade route to Afghanistan and other central Asian republics, bypassing Pakistan. The highway linking that port with Hajigak mines in Afghanistan is expected to facilitate movement of iron ore for Indian steel plants. The Afghan Iron and Steel Consortium, a group of six companies led by public sector Steel Authority of India and brothers Naveen and Sajjan Jindal, has won concessions for three iron ore mines, including projects to set up steel and power generating companies in the Hajigak region. Connectivity is expected to help operationalise the $10 billion project, which is beneficial for both India and Afghanistan.

Many similar Indian projects are either in limbo or progressing slowly due to a combination of factors: concerns over security, changing domestic political configurations in Afghanistan, and the global economic slowdown rendering initial cost and revenue estimates awry. A lot will, therefore, depend now on how the US plays its cards with Iran and how additional US boots on Afghan soil affect India’s spectrum of projects in the war-ravaged economy.

There is a third angle, albeit an unspoken one. There has been speculation for some time now that Trump’s Afghan adventure is fuelled by a desire to help US companies access the nation’s vast mineral resources, still unexploited. The minerals range from iron ore, copper, and zinc to precious gems (lapis lazuli, emeralds, rubies) and even rare earth minerals like lithium. Many of these are being illegally mined by the Taliban and other militant rebel factions, largely as a funding source. While many estimates about the value of minerals trapped under Afghan soil have been thrown around, it is believed that the lure of access to these resources is what changed a reluctant president’s mind about continuing the US’s engagement in Afghanistan.

Trump’s exhortation to India on Afghanistan could, thus, also be viewed as an implicit inducement: cooperate and we will allow you to share in the mineral spoils.

Finally, the Indian reference could be an attempt to placate the US’s strategic and political community, which has as many India supporters as opposers. Hence, the attempt to pack both “for and against” sentiments into a short and contradictory statement.

On its part, the Indian ministry of external affairs (MEA) has welcomed Trump’s Afghan initiative, though the gamely and cryptic approval is conspicuously silent on the noisy undertones of the speech. Any shades of glee detectable in MEA’s response, can, of course, be attributed to schadenfreude.

Trump has thundered against Pakistan and held out direct threats to that country. “We can no longer be silent The MEA’s respo about Pakistan’s safe havens for terrorist organisations, the Taliban, and other groups that pose a threat to the region and beyond…We have been paying Pakistan billions and billions of dollars; at the same time, they are housing the very terrorists that we are fighting. But that will have to change, and that will change immediately.”

The MEA’s official reaction welcoming issues of safe havens and cross-border terrorism was predictably pointed.

To be fair, the MEA’s response has been circumscribed by the duality in Trump’s speech. His bluntness on Pakistan is a break from usual president-speak: This is the first time that a sitting US president has openly used such harsh words against traditional ally Pakistan. At the same time, the ambiguity arising from the odd pairing used in the India reference, which is open to multiple interpretations, is bewildering. But it does reveal a slice of Trump’s foreign policy bias: a calculus that will increasingly be based on give-and-take.

The article was originally published in qz.com and can also be read here

The Budget Sidesteps Geostrategic Risks

Arun Jaitley’s budget seems to contain very little—by way of either allocations or strategic intent—to mitigate risks that endanger the Indian economy

Both the budget document and the Economic Survey have painstakingly detailed risks that endanger the Indian economy and can disrupt growth and employment impulses. Yet, the budget seems to contain very little—by way of either allocations or strategic intent—to mitigate these risks. The focus seems to be on surmounting immediate electoral challenges and neutralizing near-term policy distortions like demonetization.

Both Union finance minister Arun Jaitley and his chief economic adviser Arvind Subramanian see major risks emanating from the external sector. Jaitley’s budget lists multiple Fed rate hikes likely in 2017, commodity price uncertainty (especially crude prices) and “…signs of increasing retreat from globalization of goods, services and people, as pressures for protectionism are building up”. The Economic Survey also underlines the last two risks.

Given these clear and visible risks, it would be fair to expect defensive action, especially in areas of India’s strengths. The budget small print belies that belief.

Start with this year’s Economic Survey, which identifies clothes and shoes as ideal candidates for low-skill, high-employment manufacturing potential and for occupying crucial trade space being vacated by China. The survey also finds India has competitive advantage in these two items despite myriad challenges—such as domestic labour laws and tax structure, or the duty preferences enjoyed by competing countries in key buyer markets.

Given the Survey’s clear strategic direction, check out allocations for the commerce and industry ministry under the expenditure budget. Jaitley and his team have allocated only Rs0.01 crore to the Footwear Design and Development Institute, compared with Rs109.99 crore in 2015-16 and Rs25 crore in 2016-17. The institute provides skilled human resources and technology development to the leather and footwear industry. The Indian leather development programme (ILDP) gets a higher allotment of Rs500 crore, compared with Rs235 crore in 2015-16 and Rs400 crore in 2016-17. But then the ILDP focuses on improving the raw material base for leather units and the Survey actually shows non-leather footwear has achieved higher exports than leather footwear.

This is not the only mismatched allocation in the commerce ministry. There’s a token entry of Rs0.50 crore against the project development fund, which the ministry created with the Exim Bank to promote Indian private sector investments in Cambodia, Laos, Myanmar and Vietnam (commonly referred as CLMV nations) as part of Prime Minister Narendra Modi’s “Act East” policy. The creation of the fund was announced by Jaitley in his second budget in February 2015. There are, of course, no follow-up remarks in subsequent budgets.

The budget documents are littered with such examples. The geo-economic strategy, drawing from Modi’s repurposed foreign policy, betrays an excessive strategic reliance on select developed countries which could be a risk. The readout from the White House after US President Donald Trump’s brief telephone conversation with Modi reiterates that the US “…considers India a true friend and partner in addressing challenges around the world.” While these “challenges” remain undefined, Trump’s recent trade policy announcements now renders this alliance vulnerable. While it might be too early to declare doomsday, India needs a hedging strategy which includes exploring alternative markets.

And, yet, the budget sidesteps this obvious alternative. Take the example of Chabahar port in Iran, to which India has attached great geostrategic significance. The port offers India a land bridge to Afghanistan and Central Asian markets that bypasses Pakistan, and can become an alternative route to north Europe via Russia. Unfortunately, India continues to drag its feet on Chabahar, even though India and Iran started discussing it in 1997 and signed the first agreement in 2003 as part of the Delhi Declaration. This was further consolidated through a Trilateral Transit and Transport Corridor agreement signed during Modi’s visit to Iran in 2016.

Chabahar port has been allotted only Rs150 crore under the ministry of external affairs, compared with Rs100 crore in 2016-17. One could argue that since the project is being executed by special purpose vehicle Indian Ports Global Pvt. Ltd, a joint venture between Jawaharlal Nehru Port Trust (JNPT) and Kandla Trust, it might make sense to identify capital allocation to these two ports. The two ports have been allotted Rs1,850.30 crore and Rs393.90 crore for 2017-18, against Rs562.38 crore and Rs130.18 crore, respectively, during 2016-17. But there’s a catch: Both amounts have been listed under the head “IEBR”, or internal and extra budgetary resources, which means the government will not contribute any money and the two ports will have to generate these amounts from profits, loans and equity. Importantly, both ports are also implementing significant expansion plans (the JNPT’s plans include two new container terminals, two dry ports in Wardha and Jalna, and a special economic zone, among other things) and it is moot how much funds they can spare for Chabahar.

Is India going deliberately slow on Chabahar, given the Trump administration’s recent statements and executive order against Iran? India’s on-now, off-now engagement with Iran may have pushed the country closer to China through a joint military cooperation agreement and possible One Belt, One Road connectivity. The budget lost an opportunity to make some critical course corrections.

The article originally appeared in Mint newspaper on February 8, 2017, and can also be read here