Kanwal Sibal, India’s former Ambassador to Russia, focuses on where the West went wrong, Putin’s calculations, and how the world is shaping up to the new realities.

The global focus is moving back to Europe, but in my view, in a negative way. The West failed to construct an inclusive, security architecture in Europe after the demise of the Soviet Union. There were many promises made to former Soviet President Gorbachev by a host of Western leaders that NATO will not go an inch beyond East Germany. That was one of the political basis for the unification of Germany. This narrative is sometimes contested because this promise was not written down. But Matlock, the former US ambassador to Russia has confirmed that this promise was given by various leaders including the British.

Eminent American scholars who dealt with Russia and the issues of NATO enlargement over the years, like George Kennan, Robert Gates and William Burns—today the CIA director—have been emphatically speaking against the East-West expansion of Europe and have characterized it as a grave error by the West, which would inevitably invite a Russian response.

It also needs to be mentioned that after the demise of the Soviet Union, Russia actually wanted to become part of NATO. Even President Putin in his earlier years of the presidency wanted that. He thought of himself as a European and Russia as a European country. But this was spurned by Europe. The Western and American point of view was that there was an opportunity to permanently weaken Russia geopolitically. They thought it must not be missed when Russia was weak and is incapable of any response. They wanted to isolate it from Europe.

Interference and expansions
They have been five expansions of NATO, in phases, since the demise of the Soviet Union. I was the Indian Ambassador in Russia when Putin at the Munich Security Conference in 2007 gave a very impassioned speech against the expansion of NATO. This was not heeded. In 2008, Georgia and Ukraine were offered membership of NATO. The Georgian President at that time, Saakashvili, thought he had some encouragement because of the offer of membership. So he tested the waters. The result was that Russia took military action and two separate Republics, which were historically not part of Georgia became independent republics—Abkhazia and South Ossetia. These were recognized by Russia. So Russia had very clearly drawn a red line, but this was ignored.

In 2014, Ukraine witnessed the Maidan protests, which resulted in the overthrow of Yanukovych, a legitimately elected president. The protest was openly supported by United States. The Assistant Secretary in the State Department at that time, Victoria Nuland, who is now the US under-secretary and is visiting India, distributed cookies to the Maidan protesters. That was gross interference in the internal affairs of another country.

Ukraine: The eastern & western parts
As a result, Russia annexed Crimea. Objectively speaking, Crimea has always been thought of as an integral part of Russia. In 1954, when former Soviet Union Premier Khrushchev, who was a Ukrainian, was the General Secretary, to commemorate the 300th anniversary of the treaty between the Czars and the Crimean Tatars, this territory was made part of Ukraine. But it was one country. It’s like a reorganization of our own states in 1956.

There are ethnic, religious and linguistic divisions between Western Ukraine and Eastern Ukraine. This is a fact of life.

Then there is this issue between the Eastern Ukraine and Western Ukraine. The fact is that parts of Western Ukraine, historically, have never been part of either Soviet Union or Russia. They’ve been part of the Austro-Hungarian Empire or the Lithuanian Empire or part of Poland. They are Catholics. So there are ethnic, religious and linguistic divisions between Western Ukraine and Eastern Ukraine. This is a fact of life.

The Eastern Ukrainians are ethnically Russian or Russian-speaking. They identify themselves with Russia. That is the origin of the conflict in Donbas. The Ukrainian nationalists have been absolutely adamant not to yield an inch in terms of the constitutional amendment to respect the rights of the people of Donbas and recognise Russian language as a national language.
After 2014, after the annexation of Crimea, there were the Minsk agreements 1 and 2 which were brokered by France and Germany and which were ratified by the UN Security Council. For seven years, these have not been implemented because the Ukrainian nationalist government is dead set against it. One can understand them. Perhaps, they want to retain the entire territory as their Sovereign national territory.

Stopping NATO
After that, in 2019, despite all this background, the Ukrainian Parliament decided to make a constitutional amendment and apply for membership of NATO and EU as part of their Constitution. Because of the annexation of Crimea, the West decided to start arming Ukraine and training their army. The British Ambassador said on television that their special forces have trained 16,000 Ukrainian military personnel. Lots of arms have gone into Ukraine. In fact, without Ukraine being a de-facto NATO member, it is being treated as a member of NATO.

After the Afghan fiasco, Biden simply cannot accept another political and strategic defeat in Europe.

Putin said, “I have been opposing the expansion of NATO over the years. You never listened to me. I have tried to deal with this peacefully for seven years. We’ve not been able to move forward on Donbas. Now, I will have to use force to make you listen to me.” He made some draft proposals to the Americans. He didn’t want to talk to the Europeans because his view is that the Europeans have no say in the matter.

Putin’s proposals to be United States are:

• No further enlargement of NATO
• No NATO deployment of forces or weapons in countries that joined NATO after 1997
• Consultative mechanism should be set up.
• A hotline should be set up between the United States and Russia.
• There should be no deployment of intermediate nuclear forces. (Incidentally, this treaty has been reneged by the United States)
• No NATO military activity in Ukraine or Eastern Europe in the Caucasus and Central Asia
• Nuclear weapons should be only on the national territory of countries. In other words. The United States should move out their nuclear weapons from Europe.

We can understand that the United States would have never accepted the totality of these demands or even the core of these demands. So United States said, , ‘Well, in terms of strategic stability, which means positioning of strike weapons in Eastern Europe and all that, we can negotiate and have some fresh disarmament agreements but there is no question of denying NATO membership to Ukraine because NATO will continue to follow an open-door policy.’

Also, after the Afghan fiasco, Biden simply cannot accept another political and strategic defeat in Europe. The transatlantic alliance is vital for the Americans and Europeans. If Biden demonstrated his helplessness in yielding to Russia’s demands, his presidency will be virtually finished. So one can understand the reasons of US refusing to accept Russia’s proposals. Leave alone the United States, even the Baltic states, Poland and Slovakia would have never accepted this kind of a compromise. On both sides, for whatever reasons, inevitably, it was leading to an inexorable conflict on the ground.

Making Putin a villain
The US-Russia relations have been full of tensions for a long time. It’s nothing new. Obama was extremely dismissive of Russia. He said the US was facing three problems: terrorism, Ebola and Russia. He demeaned Russia and a host of sanctions were imposed on Russia. Trump followed suit despite his efforts to find some kind of a position of dialogue with Russia. But because of many toxic issues in US domestically, he couldn’t do that. Also, in order to prove that Russia had not helped him anything in the elections, he also imposed sanctions on Russia, on the ground that there have been Russian interference in US elections. The Democrats think that they lost four years of governance because of Russia’s interference in US elections. Especially Blinken and Nuland will not forget this.

Putin had been demonised for long. All sorts of things are being said about him. The Russian leadership is convinced that the West wants regime change in Russia.

Putin had been demonised for long. All sorts of things are being said about him. The Russian leadership is convinced that the West wants regime change in Russia. It is very clear to my mind that though not necessarily realizable, this is the ambition of the West, just as they brought about regime change in Ukraine. They thought that if Ukraine became a very successful democratic experiment, then the Liberals and the Europeans in Russia would get encouraged. That is the reason why Navalny, who is a nobody, is lionised as if he is the core of opposition in Russia that can destabilize the regime. The matter has been taken to the United Nations Security Council, the UN General Assembly and the UN Human Rights Commission.

Hitting a low in diplomacy
It is unfortunate that diplomatic norms have been breached. You can’t call a Head of State—like President Biden did—a war criminal. You’re closing the doors of any dialogue if you descend to this level, in terms of dealing with someone of Putin’s stature.

Now there is much more supply of arms. There’s a lot of encouragement being given to the Zelensky, who’s a comedian-turned-President. He is now demonstrating how successful he is in theatrics on the international stage. He keeps changing his mind every day. The West is building him up as a hero. He speaks to the US Senate, European Parliament, German Bundestag and British Parliament. They all encourage him.

This is not the way to find a negotiated solution; you are encouraging a man who’s a puppet in the hands of forces he can’t control. But since he is a damn good actor and he won the election on the basis of his theatrics, he has been able to mobilize a lot of sympathy and support as a man who stands against Russia.

As a result of this, Germany has shut down for the time being the Nord Stream after resisting initially, which I thought was very honourable. They have now been compelled and pressured to supply even arms to Ukraine. I think with the increased defence budget, they’ll buy F35 from United States. The US Defence Industry, of course, will be delighted.

The question of refugees is very legitimate and unfortunate. There is a lot of sympathy, not only in Europe but elsewhere because already 3.5 million refugees have entered Poland and other countries and if the Germans receive 8 million as they expect, that will really be a disaster for the European economy.

One-sided coverage on media
The other point I want to mention is that what we see is real NATO standard information war that is being conducted. It is totally one-sided. It is so unfortunate that our own TV channels and mainstream press have fallen prey to it. There is simply no balance in reporting. This is a lesson for us, in the future.

A lot of the fault lies on the Russian side. Everything they say is in Russian language. Nobody understands the Russian language. They don’t have any agencies which set out well-crafted English-language reports, which can be reproduced. So all the news that we get is from western agencies, western leadership and social media. It is very easy to cut and paste these things into our mainstream national press and all of us begin to believe them, because there is a reality on the ground of bombing or infrastructure being destroyed.

Will the Russians succeed?
I don’t believe that the Russian military has got stalled or they overestimated themselves. Their aim is to secure the Donbas region, secure the Black Sea Coast, make Ukraine landlocked and bring Ukraine economically down on its knees. Ukraine is the biggest country in Europe with 200,000 troops. You cannot control the whole of Ukraine and Russia is very careful. They don’t want to go to the Western Ukraine. Besides overstretching themselves, they don’t want to go close to NATO because some mistake can be committed somewhere in the heat of the battle and then the whole thing can become conflagrated into something bigger. Russia is achieving their objectives. Maybe, it is slower than what they thought. Maybe they’ve suffered casualties. But to say that they will not prevail is more wishful thinking than anything else.

The global impact
The world has suffered already a great deal because of the urges for war in Europe. We’ve had two World Wars, both of which are essentially European wars. They call it World War because of their colonies everywhere but they’re European Wars. Now you are creating a situation where potentially, there could be a Third World War and rest of the world will suffer.

The UNGA doesn’t reflect global opinion. There is pressure on countries to say ‘yes’ to sanctions. But most of the world is not behind these sanctions.

The damage to the world economy will be immense. Already, a lot of pressure is being built up. The sanctions have been really unprecedented. The oil prices shot up to $140 at one time. Every single dollar increase in oil price adds half a billion dollars to our oil bill. This is true of all the oil importing countries.
There is now great fear about potential famine in West Asia and especially in Africa, because both Russia and Ukraine are major exporters of wheat. Now wheat trade will get disrupted.

“The UNGA doesn’t reflect global opinion”
We talked about the rule of law but how can the sanctions, which are not approved by the United Nations, come into effect? They talk of pursuing international law or rules-based order. On what rules are these sanctions based? If it was UN approved, it is fine. India will abide by them because it’s our obligation under the UN Charter. Otherwise, what obligation do we have, especially as the sanctions hurt us?

The UNGA doesn’t reflect global opinion. There is pressure on countries to say ‘yes’ to sanctions. But most of the world is not behind these sanctions. I would also say that the arguments that are given by the West are contestable.
They say that Ukraine cannot be denied the choice of becoming a NATO member as if when Ukraine makes a decision, all other countries are bound by that choice. The other countries also have a choice. They have to judge the entirety of the situation before they accept the choice made by X, Y or Z. We also know from realpolitik that the choice can be engineered.

The double standards are very clear. After all, it’s not the first time that another country has intervened against the sovereign country. We’ve had Iraq, Libya, Syria and Afghanistan. We have seen destruction of infrastructure and civilian casualties and refugees in much larger numbers.

Freedom of expression is a core value of the West. But they have banned Russia Today and Sputnik news. Why? Let the people have access to other views. If you say it is state-controlled media, so is BBC. If you think that state-controlled media gives you biased news, I don’t know if you think that BBC, New York Times, Washington Post, The Economist or the Independent are not biased against us.

There is talk of borders in Europe getting changed, quite forgetting that Yugoslavia doesn’t cease to exist. It has been broken up into several states. Most of them have become members of NATO. It happened in Europe.
Another concern is what if Russia wants to create a sphere of influence? The counter to that is what if the extension of NATO or EU happens? Doesn’t that create a sphere of influence for the Europeans and the United States? So all these arguments are very debatable.

Two decades of Putin
Putin has been in power for 22 years. He acted in 2008 in Georgia, in 2014 in Ukraine and once again in 2022 in Ukraine. He intervened in Syria to prevent a regime change, intervened in Belarus, again to prevent the regime change, rightly or wrongly. He intervened in Kazakhstan recently at the request of its President. He intervened in Armenia in the conflict between Azerbaijan and Armenia, but other than these, he has not intervened in areas, thousands of miles away, which pose no direct security threat to them.

India’s stand and our national interests
India’s position on this has been criticized, that we are being neutral; that we have abstained in the UN Security Council and UN General Assembly. If you look carefully, our statements are muted, no doubt. They are understated but they’re all critical of what Russia has done.

We talked about the UN Charter, respect for sovereignty and respect for territorial integrity, but the focus is on abstention. Why did we abstain now? Our position is very difficult because our ties with the United States are very close. And they will, in course of time even become closer. In fact, US is the most vital partner in terms of India’s technology modernization, management best practices and investment. They also supply us high-end weapons, which are very necessary for maritime security. So there’s a whole range of domains in which India is now dependent on the United States. But there are also some critical domains in which we are dependent on Russia. About 60 to 70 percent of our defence platforms are Russian.

In the UN Security Council or in other forums, if we keep voting against Russia and keep condemning it, it will mean a breakdown of our relations with Russia. With the 15,000 Chinese troops sitting at the border and if Russia starts slowing down spares or servicing or ammunition, what will be the state of our defence preparedness? Any responsible government has to weigh this and not simply satisfy the Americans or anybody else, by voting with them and score some brownie points. Our abstention causes no harm to the security of the United States, but our condemnation of Russia will directly cause threats to our security. Therefore, we have to weigh these two options.

India-Russia-China: The triangular balance
In the context of the ties between Russians and Chinese becoming closer and closer, there is a big problem for us because the triangular balance between India, Russia and China is getting destabilized in favour of China. Russia still values its relationship with us. It’s important for them to have us on their side. But if we go against them, then our ability to maintain some kind of Russian stakes in this triangular equation will become weaker and weaker and that will add to our security threats. In fact it will weaken our security. We are not fence-sitting. We are only protecting our national interests.

As a result of this crisis, US, Europe and Russia will become weakened and China will emerge stronger. The US arms companies have benefitted from the war. That US is now counting on China to isolate Russia and it shows its weakness. Nuclear weapons do not give a nation security but atmanirbhar can.

Bhaskar Bhat, Director, Tata Sons Ltd., delivered the keynote address at the MMA Annual Convention 2022. He spoke on the theme: “How India Can Make This Decade Its Own.”

The theme for the convention is about how India can make this decade its own. I believe it’s not India’s decade but it is India’s Century. It’s only a question of the ‘how.’ I don’t profess to know too much about the ‘how’ but I do believe, as most of us in the Tata Group have betted on and believed, in this economic engine called India. It’s a very unique engine. It has been on a growth path, irrespective of governments and global ups and downs for the last 31 years, starting from 91-92. We have had years of slow growth and years of extraordinary growth. But like the proverbial Indian elephant, it is growth and it continues to grow. One extraordinary indicator has been the performance of the Indian stock markets. I did not really believe, through my career, that companies’ market caps represent their performance but the reality is that hard money is put into the markets.

The great bull run
The performance of Indian stock markets during the Covid period is now legendary. The index has perhaps more than doubled, except for the last three weeks, thanks to the war in Eastern Europe. Why I refer to the stock market is because it is real money chasing ideas or investments or performance. It has put money into the hands of many middle-class Indians, apart from investors themselves. But more than that, it signifies the potential of the economy.

The demand on companies has increased because of attrition. But this is not like the great resignation that is happening in the western world, triggered by soul searching by young people on what they do at work and why they work.

As we come out of the pandemic, we have to be careful but let us not be fearful. One important indicator of the Indian response is the recent announcement of opening up of the scheduled international flights. It indicates the confidence that the Indian government has placed in the so-called reduction of the danger of the pandemic. Through these two years, starting from 23rd of March 2020, the Ministry of Health has been working with the aviation sector, which has very rightly regulated flying—stopping flights for some time, regulating the capacity utilisation compared to pre-Covid levels, and then reviewing the pricing by each airline. The government is confident of handling even any minor, local outbreaks or if there is any recurrence in a new form or a new variant of the Sars-Covid virus.

Consumption-driven economy
For the current year, in Tata view, it is going to be an 8.8 percent GDP growth. It varies depending on who has done the projection but it is still a growth and which is one of the highest in the world. It will be driven, as usual, by consumption to begin with and thereafter by a cycle of capex investments and investments by industry after they have covered the capacity utilization shortfall, which is of the order of about 35 percent on average. It is going to be a very steady but positive and continuous growth in consumption and consumer expenditure. The accumulated savings over the last two years are going to be available to households.

The second is the performance of our rural sector. Overarching on all that has been the fact that three fourth of our population—700 plus million people—have been vaccinated. For consumer confidence to come back, it has to start at the level of the individual consumer. The actions of the government lead to confidence among consumers to go out and spend. The high physical touch sectors like restaurants, retailing and travel, which were significantly impacted, are going to come back with a bang. We are already witnessing this in some of our companies and it’ll only improve.

Our per capita GDP is so much lower than many other countries, which are as large as us or larger, and some smaller than us. But our journey is only upward.

Stressed labour market
The labour market is on fire. The demand on companies has increased because of attrition. But this is not like the great resignation that is happening in the western world, triggered by soul searching by young people on what they do at work and why they work. In India, it is due to the red-hot economy of startups and technology companies who want new-age talent and young talents. It is a good time to be in the job market today. Of course, the skills have to be quite different from what they were earlier.

Formalisation of economy
The third theme is the confidence that we all have in our elephant trudging along—maybe we’ll make the elephant even dance—is the formalisation of the Indian economy. That journey started several years back and it is a very determined and well-planned move.

We have had our problems with demonetisation and GST. But GST collections have been rising month on month. Even during some months of Covid, collections crossed 100,000 crores. Now we are crossing 130,000 crores. Formalisation of the economy is a very good sign as global investors look at investing in India as well.

Young at heart
The fourth theme that holds out great hope for India is the young population raring to go, not just to spend but to create new business models in this digital age. It’s an extraordinary change in India, which is the desire to make a significant impact in a selected sector of the economy. Not everyone succeeds but great and good ideas have found money and success. There are many lessons to be learned but these youngsters are not just young by age. They are young at heart as well, big risk takers, very hardworking and willing to get tripped at one hurdle and yet, rise and run again. That undercurrent in the economy bodes great news for everyone. It is very competitive. But India is such a huge market. Our per capita GDP is so much lower than many other countries, which are as large as us or larger, and some smaller than us. But our journey is only upward. In every sector—whether you take airlines or FMCG or fintech—the opportunities for transformation, change and improved consumer experience are only going to make it better and better.

3Cs – The key areas
Therefore, where should big investments need to be made? Based on what online and digital has shown us, I would drill down to three focus areas, namely: Convenience, Comfort and Cost. When I say convenience, Covid has showed us what we could do online comfortably sitting at home. You don’t have to venture out in a car and go to a retail outlet, park your car far away, walk to the retail outlet and purchase goods. Also, the cost of transactions has come down significantly, thanks to online.

Experience economy
All these are captured in ‘Experience.’ Globally, investments are going big time in experience economy. Consumers are willing to pay a multiple of what they were paying for a product, for the experience of acquiring that product. Nobody knows how it splits. But we know that premiums on brands and product categories are based on the functionality of a product. Sitting on top of that is the experience of the product, as well as the experience of transacting with a company in the purchase process; in the use process and in the after-sales service process both for a physical product or a service. If you take restaurants, it’s not the food alone. It is the experience of eating—sitting and getting served—that people pay for. The list goes on.
In experience economy, India has still not witnessed the kind of growth that we are going to see. The big fat Indian weddings where billions of dollars were flowing were on a back foot for two years. Now, it’s going to explode. The event itself at best or at worst, would be for two hours. But today, weddings last for four days. Each of them is sliced with a different experience, different theme, different dress, different jewellery and different food. So, we have to think in an innovative manner about the experience economy.

The emotional mix
In India, the Experience economy is mixed with what Indians are known for: Emotion. The number of movies made in India is not just about entertainment but emotions. So, when you mix experience with emotion, you get a bang for the buck, which is the product functionality, experience and emotion. All these combined gives India a unique position and economics for the companies.

The formalisation of economy, digitisation, globalization, atma nirbhar and the PLI scheme are all aligned towards making India stronger. There are debates about what is working and what is not working. But directionally, we are on the right path. I say this despite being involved in one of the most challenged sectors, which is aviation, where there is serious attempt by the government in trying to make structural changes through rationalisation of taxes and being thoughtful about networks, bilaterals and so on.
The DGCA and the Ministry of Health have made air travel safer, faster and comfortable and helped create the perception amongst Indians that air travel is not luxury travel anymore but the sensible way to travel. Of course, we have a great train network in India and also, our roads are improving.

Agility in uncertain times
But the point I want to credit the airlines with, is for their agility. Despite incurring 25,000 crores of losses year-on-year for the last two years, the aviation industry has delivered to the consumers’ requirement. Many of us had our own problems of refunds and flight cancellations. But the service has been on, throughout the pandemic despite the tough regulations. Industries like aviation, hospitality or retail have learnt to be agile, people-centered and to manage with the everyday uncertainty. People across industries, cities and nations across the globe had to face this uncertainty.

The harshness of our lockdown in 2020 created unprecedented pain to the migrant labour but we lived through that and the country came together to once again gather pace of growth. So it is a very India story.
As we look at India, it is no longer only limited to Chennai, Bombay, Bangalore, Hyderabad or Delhi. Thirty years ago, people in tier 2 and tier 3 towns had a much lower quality of life and lived with lower prices without demanding more. The people in towns have now proven that they are no less than their so-called city cousins, in aspiring for a better life. They have responded extraordinarily to availability of products, premiumization and quality. All these bode very well for the future and that is not going to last for only one decade. In my blue book, this is the India Century.