March 19 (Bloomberg) – On Wednesday, Indian government officials said that state-controlled Indian Oil Corp. had reached a deal to buy 3 million barrels of oil from Russia’s Rosneft Oil Co. at a 20% discount to global prices. This is a drop in the ocean of India’s oil needs, which stood at 4.5 million barrels a day in January. Still, if a payment system in rupees is worked out that insulates the transaction from sanctions placed on Russia, much more could follow.
The United States isn’t happy. White House spokesperson Jen Psaki said India should worry about how it will feature in the history books when the story of the Ukraine invasion is written. If this one deal leads to more, you should expect questions about whether the West has reposed too much faith in India.
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Yet India has equal cause to wonder if it’s placed too much faith in the West. Even as Europe and the U.S. congratulate themselves on the speed and effectiveness of their sanctions against Russia, they seem blind to the impact of these sanctions on the rest of the world.
To India and many other developing countries, Western powers and the institutions they dominate appear to have different standards for conflicts close to home. While the World Bank has been slow to address the concerns of other war-torn nations, it has put together a $700 million package for Ukraine in record time. Some economists say the International Monetary Fund may be skirting its norms to send $1.4 billion in emergency funding to Ukraine.
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Meanwhile, those same Western nations are proving themselves poor stewards of the global commons. Take the cutoff of several Russian banks from the SWIFT financial messaging system. We have grown accustomed to thinking of interbank communications as a global utility; they’ve now been turned into a tool of Western foreign policy.
This was a unilateral decision by the countries that control SWIFT which, besides the U.S. and Japan, are all European. Little thought was given to how countries such as India, which rely on SWIFT to pay for oil and fertilizers from Russia, would manage the fallout. It should come as no surprise that India’s reaction has been to look for a way around the sanctions by settling trade with Russia in rupees and rubles.
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Criticizing India for continuing to buy oil from Russia is especially galling, given that European nations have yet to wean themselves off Russian energy supplies either. And, unlike them, India can hardly afford such bills. If oil remains above $70 a barrel for months, the rupee will collapse, the government will run out of spending money, inflation will skyrocket and the country will have to start worrying about a balance of payments crisis.
We have lived through this sort of disruption at least twice before, in 1991 and 2012. Yet our supposed partners in the West do not seem to recognize that avoiding another one is a major national priority.
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