The efficient market hypothesis, by which all that participants know gets instantly priced in, has been rattled yet again by another bout of geopolitical volatility. Uncertainty is up. Barely a year-and-a-half after Russia invaded Ukraine, the US-led world order has been challenged in West Asia, possibly by Iran, whose proxies dot the region. Might a third theatre of conflict, should China move to ‘re-integrate’ Taiwan, be next? Last week, US President Joe Biden alluded to a larger plot in play. “I’m convinced one of the reasons Hamas attacked when they did—and I have no proof of this, just my instinct tells me—is because of the progress we were making towards regional integration for Israel,” he said at a press meet, “and regional progress overall.” If truth has already been the first proverbial casualty of the Israel-Hamas war, a prosaic one could come to be the India-Middle East-Europe Economic Corridor (IMEEC) announced during the G20 summit in New Delhi, a trade route intended to aid India’s emergence as a global supply hub. That the US issued a public reminder of this, just as its national security advisor Jake Sullivan referred to the four-nation Quad as well as the I2U2 (with the UAE, US, Israel and India) in an op-ed, could be interpreted as a call-out for New Delhi to cast its lot with America in a new bipolar scenario unfolding as Cold War II. Should we? And if so, on what terms?
Any shift from neutrality would depend on our calculus of interests. Two global changes are relevant. First, a putative Russia-Iran-China axis has seemed increasingly tilted towards serving the aims of Beijing, which represents today’s anti-US pole, appears to be betting on an ‘Asian century’ to reshape the rules set by the US post World War II, and has done much to alienate India. And the recent slowdown of China’s economic emergence is cold comfort at best. Second, Washington has wisely given up its earlier ‘with-us-or-against-us’ hubris to woo India as a ‘swing state’ instead of a committed military ally, given our steadfast insistence on strategic autonomy. While the US may have picked Aukus as its spearhead for East Asia, with the Quad more of a talk shop, those two factors are pushing us closer to the West. It would also be consistent with our recent trade orientation. Yet, a clear Western tilt would also risk us being left isolated in an Indo Pacific that may starts developing Chinese characteristics. China’s border threats are one thing, but its naval bases around our peninsula (including one in Djibouti) appear aimed at control of key shipping lanes, a contest in which West Asia’s role may prove pivotal. What Al-Qaeda’s terror attacks of 9/11 and America’s furious response could not achieve, an eruption of the ‘Arab street’ against the region’s US-allied regimes, might Israel’s battery of Gaza bring about? Our scenario planners need to work out likelihoods.
As America’s siren song gets louder, New Delhi should buy time to finesse its approach. Externally, it must make it clear that our armed forces will never be put at foreign command, even as it advises the US and Israel that military restraint would help foil the shake-up plans of their adversaries, assuring the US-set world order a better chance of seeing off challenges. Internally, India’s ruling party should actively quell any mixing of the crisis in West Asia with the religious divisions of domestic politics, for that would only restrict our capacity to engage other players and secure our interests in the long-term. Leaders must lead, not be led.
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