The HINDU Notes – 09th January 2020 - VISION

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Saturday, January 11, 2020

The HINDU Notes – 09th January 2020


📰 Analysis: What is next in Iran-U.S. conflict?

There are several scenarios that could lead to an all-out war

•Five days after Major General Qassem Soleimani, the Quds Force chief, was killed in a U.S. air strike outside Baghdad airport, Iran on Wednesday launched ballistic missile attacks at American troops in two military bases in Iraq.

•Iran’s Islamic Revolutionary Guard Corps has said that the attacks on the Erbil and Al-Asad bases were a retaliation for the killing of the General, who was one of the top military leaders of the country and the main architect of Iran’s foreign security and intelligence operations. Initial reports suggest that there are no American casualties, though damage and military assessments are still under way. Whether there were American casualties or not, this is a pivotal moment in the U.S.-Iran tensions as this is the first time Iran is launching a direct attack at the U.S. troops and owning it up.

•Practically, these are acts of war, though there’s no formal war declaration. First, the U.S. took out an Iranian military leader in a third country and now Iran has struck U.S. troops. Javad Zariff, the Iranian Foreign Minister, said, “Iran took and concluded proportionate measures in self defence under Article 51 of [the] UN Charter targeting base from which [the] cowardly armed attack against our citizens and senior officials were launched.”

•The Article allows states take action in self-defence when they are under attack. Mr. Zariff has added that Iran doesn’t seek “escalation or war, but will defend ourself against any aggression”.

Limited attack

•The Iranian response was expected. The call for revenge was reverberating throughout the procession rallies of Soleimani. A mosque in the Shia holy city of Qom in Iran had unfurled a red flag indicating that war was coming. Kataib Hezbollah, a unit in the Popular Mobilisation Forces (PMF), the umbrella organisation of Iraqi Shia militias that Soleimani helped build, had asked Iraqi forces to stay away from the bases that house American soldiers, indicating that U.S. troops in Iraq could be targeted. Iran has launched a calculated, limited strike that doesn’t cause much damage to the Americans but yet makes good on its pledge for revenge. It is an escalating step, but not yet an all-out war.

•By hitting the U.S. base in Erbil, the capital of the Iraqi Kurdistan, Iran may also be sending a message to Washington. Erbil houses not just American soldiers but also a large American consulate. The U.S. has deep ties with the Iraqi Kurdistan and it would like to keep some U.S. troops in the autonomous region even if its forces are forced to pull back from the rest of Iraq. It’s to be noted that most Kurdish lawmakers had boycotted Sunday’s Iraqi Parliament session in which lawmakers passed a resolution to expel American troops from the country. For the U.S., some troops in Iraq are necessary to retain its presence in Syria. So Iran’s message was that, ‘you’re not safe in Erbil’.

Possible scenarios

•So what’s next? If there are no American casualties, a red line drawn by President Trump — the latest spell of crisis was triggered by the death of an American civilian contractor in a rocket attack by a pro-Iran militia in Iraq — he could shrug the Iranian response off and choose not to retaliate, which could be a de-escalating step. But there are several scenarios that could lead the conflict to an all-out war. First, if Mr. Trump orders air strikes inside Iran, it would trigger further military response from Iran and the conflict will immediately spiral out of control.

•Second, even if Mr. Trump steps back from further retaliation, Iran could target U.S. troops inside Iraq through its proxies such as the Badr Brigade and Kataib Hezbollah. That will drag the U.S. into a deeper conflict. Third, the Shia militias operate with relative autonomy. Tehran may not be micromanaging them. Infuriated by the loss of their commander, they could act without authorisation from Tehran against U.S. troops in Iraq, which could trigger a harsher response from the U.S. against Iran, dragging both countries into war.

•In the event of a war, the U.S. can carry out devastating air strikes inside Iran, while Iran could trigger multiple conflicts in the region through its proxies such as Hezbollah, the PMF and al-Houthis, besides launching ballistic missile attacks at the U.S. interests and allies. The Revolutionary Guard commander threatened on Wednesday before a mourning crowd in Kerman, Solaimani’s hometown, that Iran would set ablaze “the place the U.S. loves”, in a reference to Israel. West Asia remains on the brink.

📰 A multilateral alternative, by Asia

The contours of the new order, with India and China as key players, should not be seen through a western prism

•After a gap of 200 years, Asian economies are again larger than the rest of the world’s combined. As India and China resolve their border dispute, Asia is providing the multilateral alternative to a world divided by values, and no longer by ideology.

•The phrase ‘Asian Century’ is said to have arisen in the 1988 meeting between Chinese leader Deng Xiaoping and former Indian Prime Minister Rajiv Gandhi, re-establishing relations after the India-China border conflict in 1962. It responds to the re-emergence of the two countries, leveraging size and technological competence to shape a new order that reflects their civilisational values which are distinct from those of the West. The travails of the West, for example, stagnating incomes of the middle class and also climate change, confirm that the global division is now based on values, as has been the case throughout civilisation. Even notions of a balance of power are a western construct, as the Asian giants have by and large lived in peace across the ages.

•China, in 2013, after attaining 15% of global wealth, announced the multilateral Belt and Road Initiative (BRI) and in 2014, launched the Asian Infrastructure Investment Bank, challenging the global governance paradigm. In 2015, emerging India established the International Solar Alliance, laying out a distinct global sustainable development framework, and seeking a triumvirate.

•The United States has recognised the ‘Asian Century’ bypassing multilateralism; its direct dealings with China and India and the Indo-Pacific construct are examples. The way the U.S. defined human rights solely in political and procedural terms, withdrew from climate change after shifting the burden onto developing countries and the forced inclusion of intellectual property rights into the trade regime illustrate the colonial origins of current multilateralism now being questioned by even its proponents and not just by Asia.

New frameworks

•The decisive shift responds both to the Asian growth engine and to Asian technology. Global competition is moving away from country-specific actions to fragmented competition, transformed by global value chains accounting for three-quarters of the growth in global trade over the 20-year period: 1993-2013. There is no provision in global trade rules for company-specific concerns where the global digital economy rather than countries are determinants of wealth and power. Imposing U.S.-determined national security standards on the world has led to only a handful of countries agreeing to ban Huawei 5G technology, has angered Europe over sanctions on companies building a gas pipeline from Russia; sanctions on Iran have affected India’s interests, impacting long-term relations and forcing a tacit choice between the two systems.

•China, which had never been fully colonised and is keen to get rich quick, has a head start over India in laying out a new multilateralism based on “common interests” as different from agreed goals of a negotiated treaty. The BRI bilateral agreements optimise, not maximise, financial returns with countries having an effective veto by remaining outside. Countries support the BRI — it covers the territories of 72 countries and 70% of the world population — as a network-based evolving process even with market-based interest rates because of benefits of connectivity and integration into Eurasian markets. Half of future BRI funding is expected from multinational corporations and multilateral banks, adding to their stake in solving difficulties.

Potential of BRI

•The BRI provides a strategic framework for new global institution building as its scope is as wide as multilateral treaties. For example, state-owned enterprises in infrastructure sectors in the BRI, with backing from national banks, are contributing to internationalisation of the Renminbi, enhancing China’s role in global economic governance.

•As the world leader in digital transactions China is developing block chain-based financial infrastructure in BRI countries and exploring an international block-chain currency for digital settlements without relying on the dollar, thus reducing U.S. leverage.

•With the speed and scale of such change, rising Asia remains wary of China and is eager, as is China, that India joins the Regional Comprehensive Economic Partnership, poised to become the world’s largest trading bloc because of the huge Indian market. With the U.S. military ‘pivot to Asia’, China is keen to resolve the border dispute with India to avoid constraints. The recent India-China Summit on boundary issues resolved to work out a “framework on a roadmap to a final solution on border issues”; India has rejected American opposition to Huawei taking part in 5G trials. The Indian government has allowed all applicants, including Huawei Technologies Co. Ltd, to participate.

New values

•The contours of the new order should not be seen through a western prism. In 2018, China was the largest supplier of goods to the U.S.; it has also been India’s major trading partner. Every big state has bilateral relations with all three, and they take part in limited sectoral cooperation on a regional basis. Even faraway NATO has recently discussed the implications of the rise of China; China, like India, is not part of any collective security system. Both the U.S. and China have regular high-level discussions on strategic issues with India, recognising its demographic, technological and resource potential to be part of a future global triumvirate.

•What are the implications of this state of flux? Asia formed two-thirds of world GDP, and colonialism, not stagnation, led to a decline of the Asian giants. Their re-emergence is not part of a global transformation of “westernization”. The border problem, too, is a remnant of colonialism and not the result of aggression.

•Clearly, the U.S., China and India will retain their civilisational models into the future. In Asia, differences will centre on overlapping priorities — security (the U.S.’s efforts to maintain hegemony), economic (China’s emphasis on connectivity, markets and growth) and equitable sustainable development (India-led framework of digital infrastructure designed as a public good). By 2030, there is every possibility of a triumvirate

•Asia, and Africa, former colonies with conditions closer to India than to China, are waiting for late-comer India, a civilisational state like China, to lay out its vision of a digital, cooperative, sustainable multilateral strategic framework to complement the frameworks of the other two powers. Early concrete moves for their simultaneous rise are in the global interest.

📰 The Indian Constitution’s unitary tilt

The Centre-State conflict over CAA in some places may lead to a fresh debate on the federal question

•The recent political developments around the Citizenship (Amendment) Act (CAA) and the National Register of Citizens (NRC) have revealed some of the most significant crevices of Indian federalism. Soon after the protests erupted, several State governments occupied by Opposition parties or partners of the Bharatiya Janata Party (BJP) declared that they would not implement the law. Further, in a somewhat unprecedented move, the Legislative Assembly of Kerala went to the extent of passing a resolution, stating that the law “contradicts the basic values and principles of the Constitution”. Indeed, the resolution is only symbolic, and has no legal ramifications. And, though the passage of any such resolution is not constitutionally barred, it may not be in tune with the federal scheme under the Constitution.

•Similarly, Article 256 of the Constitution obligates the State government to ensure implementation of the laws made by Parliament. If the State government fails to do so, the Government of India is empowered to give “such directions to a State as may appear... to be necessary”. The refusal to enforce the law even after the Centre issues directions would empower the President to impose President’s Rule in those States under Articles 356 and 365. The Supreme Court of India has also confirmed this reading of the law in S.R. Bommai v. Union of India — arguably the most significant case on Indian federalism.

Anti-CAA ads in West Bengal

•Another controversy arose in West Bengal, where the State government put anti-CAA advertisements on its websites. In an interim order, the Calcutta High Court directed the State government to remove those advertisements. The question — whether State governments are empowered to use public funds to campaign against a law made by Parliament — is open for final determination. In its final judgment, the High Court could bar the State government from campaigning against a parliamentary law.

•Therefore, neither the refusal to implement nor the official protests registered by State governments carry much legal force. However, we will be missing the forest for the trees if we fail to see the premise that has led to such proactiveness on the part of some State governments — the emergence of a dominant party at the Centre. Political analysts have offered various nuanced takes on what the rise of the Bharatiya Janata Party (BJP)’s dominance means for electoral politics. The impact of a single-party dominance on the functioning of our constitutional structure, however, receives little attention. For instance, Parliament, the avowed “temple of democracy”, has been reduced to a site for procedural formalities. At least the Lok Sabha appears to be an extension of the executive, rather than a mechanism for its accountability.

Power of brute Central majority

•This truncation of the role of Parliament in the face of single-party dominance is further facilitated by the poor understanding of the role of a parliamentary Opposition in Indian politics. Once the competition for people’s vote is over, it goes, the losers should step aside, respect the democratic mandate, and let the government do its job. The Opposition may question the government like ordinary citizens, or prepare for the next election, but should not meddle in governance. Any further interference by the Opposition, particularly in such polarised times, would risk inviting the labels of anti-national “seditious cabals”. The brute dominance of the ruling persuasion has dwarfed any semblance of Opposition politics at the Centre. This is manifested through the absence of the Leader of Opposition in Lok Sabha for six years in a row (a consequence of an archaic and arguably unlawful practice requiring a party to secure at least 10% of total seats to occupy the position of Leader of Opposition), the denial of an Opposition vote in the appointments to various anti-corruption bodies, etc. Further, with the Opposition failing to show any signs of resilience, national politics seems to be operating in the absence of any credible political check.

•Arguably, such capture is not unprecedented. Time and again, our experiences with single-party dominance have shown that in the face of comfortable majorities, our constitutional structure reveals its tendencies to concentrate power. The concentration of power, dormant in the times of coalition governments, is not merely a bug introduced by the BJP, but is embedded into the very structure of the Constitution. A ‘Centrist bias’ of the Indian Constitution further augments the powers of the brute national majority. In the backdrop of a bloody partition and threats of “fissiparous tendencies”, it was probably justified for the founders of the Indian republic to be hesitant in instituting a stronger federalism. If we wanted to be together, the argument went, we could only have so much federalism.

Electoral federalism

•But over seven decades, there have been changes in ground realities. Over the last couple of years alone, we have seen repeated examples of huge vote swings between national and State elections, separated by only a few months, in the same constituencies. And that too against a dominant national party with unprecedented organisational capabilities. These have offered convincing evidence that Indian voters are not only nuanced in their voting choices, but can also reconcile their seemingly contradictory votes in national and State elections. In other words, federalism is not a mere legal division of powers; the democracy and voters, too, are becoming federal. This popular embrace of electoral federalism may be one of the most significant achievements of Indian democracy.

•Hence, thanks to electoral federalism, the “losers” of national politics can still win State elections and form legitimately elected governments. The State governments are thus filling the Opposition deficit at the Centre. With this shift of Opposition politics from New Delhi to State capitals, the politics of Opposition is likely to become the politics over federalism. Is the whole greater than the sum of its parts, as the Central government would want us to believe? Or are the parts going to determine the future of the whole, as State governments are likely to argue?

•The conflict that the CAA has triggered might become a template for future contestations over the federal question. While the politics seems to be ripe for advancing federalism, the law is likely to constrain such a development. We should not be surprised if the Constitution, a product of its time, falls behind the demands of democratic politics. The protesters are fighting for upholding the founding commitments of the Constitution. Ironically, the very Constitution that could ensure the fulfillment of the protesters’ demands is empowered to hamper federal politics. Perhaps there also lies a cautionary note against constitutional idolatry.

📰 Rising oil prices may hit Budget math

India currently imports more than 85% of its crude oil requirements

•The price of crude oil constituting the Indian basket has been increasing since October and is likely to exceed $70 a barrel this month on escalating U.S.-Iran tensions.

•Rising oil prices had already led to an increase in the prices of petrol and diesel by about 54 paise a litre and 83 paise a litre respectively since January 1, 2020. The Indian basket of crude oil was pegged at $59.70 per barrel in October 2019, rising to $62.54 per barrel in November and to $65.52 in December. It is currently hovering around $70 per barrel.

•The price of benchmark Brent oil went up to $71.75 per barrel after Iran retaliated against the U.S. by attacking the latter’s bases in Iraq, but softened to $67.50 a barrel after Iran said that it did not want to further escalate the tensions.

•“I think based on the demand-supply scenario, crude oil prices should be around $65 a barrel but we have to add a risk premium of $5 a barrel for few months due to geopolitical tensions between U.S. and Iran. I think Iran will play a proxy war with the U.S. in the coming months,” Mr. Abhishek Bansal, CMD, Abans Group of Companies told The Hindu. According to Mr. Bansal, higher crude oil prices is ‘bad news’ for the Indian economy that imports over 85% of its crude oil requirements. “Higher crude oil prices will be bad for our current account deficit and it will further tighten our fiscal situation. Further, divestment of oil PSUs will become difficult due to higher crude oil prices,” said Mr. Bansal.

Earnings impact

•Rising crude oil prices could impact corporate earnings of several sectors, including auto and oil marketing companies, according to analysts.

•However, Sanjiv Bhasin, director, IIFL Securities, believes that the market had already priced in crude oil prices for the above sectors.

•“Oil has been extremely over-bought and it’s the best time to sell crude oil as it neared $72 a barrel. I think crude will go down by the end of this month,” Mr. Bhasin said.

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