Türkiye, China and India galvanize their positions
Mikhail Shereshevskiy's analysis

ANALYTICS  22 December 2022 - 11:00

Amid the backdrop of the ongoing war in Ukraine, there is a group of countries that, keeping out of the conflict, derive huge financial benefits from the events and are quickly gaining political influence in the world.

Economists Yevgeny Suvorov and Sergei Guriyev ponder how the situation will affect the Russian budget and give a negative forecast. Guriyev notes: "In peacetime, it was thought that the Russian budget could be balanced at an oil price of $45 a barrel. Today, budget expenditures have grown considerably and the conjuncture has become more difficult. Thus, economist Yevgeny Suvorov believes that at an average oil price of $50, the budget will lose 5 trillion rubles. Suvorov cites $40 per barrel Urals as the lowest point below which the budgetary disaster begins. Since December, Russia has been selling oil to India at a price in the $32-35 range, which is close to the average production cost. In November, India accounted for 53% of its offshore oil exports; in December, India's share may exceed 70%. Conclusion: Russia is already selling most of its oil at a price close to its production cost. There is no choice: most of the wells can't be temporarily mothballed until better times, because in this case the field will be ruined, so they will produce and sell oil even at a loss to themselves".

But there is another side of the coin. Russia with the help of super-cheap oil subsidizes the new industrial economies - India, China, and Türkiye. The cheaper Russia sells energy resources to them (and it has no choice under sanctions, Europe refuses Russian energy supplies), the worse it will be, but the greater will be the profit of the business in these countries.

It is these three countries that have become the key beneficiaries in the situation after February 24. For the three growing giants trying to strengthen their influence in the Middle East and the Indo-Pacific region, the situation is optimal. And it's not just the benefit of drastically cheaper Russian energy resources.

According to some estimates, Türkiye today has doubled its trade turnover with Russia to $60 billion, so the fantastic figure of $100 billion (the future Turkish-Russian trade turnover was estimated at this amount by the most optimistic observers) no longer looks incredible. Russia has not only become the largest supplier of gas to the Turkish market, it satisfies a large part of Turkish needs for oil. Moscow is building the Akkuyu nuclear power plant in Türkiye which consists of four units at a total cost of 20-25 billion dollars and, according to The Wall Street Journal, Russia has provided Türkiye with a loan corresponding to that amount - a loan to build the plant.

The deal is extremely beneficial to Ankara, allowing it to solve several issues at once. On the one hand, Türkiye will modernize its energy infrastructure, providing conditions for further scientific and industrial modernization, industrialization, and urbanization. On the other hand, thanks to the Russian dollars injected into its economy, Ankara managed to more or less stabilize its currency, the lira.

India, China, and Türkiye are also counting on the fact that over time their companies will be able to fill the gaps in the Russian market left empty after the departure of Western corporations. Such cooperation looks risky and carries the potential threat of falling under US and European sanctions, so companies of these states are cautious. Nevertheless, there is potential for growth here.

But the benefits of the three rising Eastern powers relate not only to the economic sphere but even more to the political sphere.

According to Russian sinologist Alexander Gabuyev, "China can sit with its feet dangling from the Great Wall, watch the conflict and benefit from it". China was in the limelight of the hostile attention of the United States, which feared most of all its growing economic and military power. The US National Security Doctrine identifies the PRC as a strategic and multifaceted threat. However, the same doctrine today views Russia as the most "acute threat" to US interests - a threat that requires an immediate response. The US, which under both Obama, Trump, and Biden intended to concentrate its key resources and efforts in East Asia to contain China, has now turned its attention to Russia.

This problem has not only a financial aspect but also a bureaucratic one. The US top brass, busy around the clock with Russia and Ukraine, simply cannot pay much attention to China. Finally, the Americans are forced to make a choice, and since their policy is now directed primarily against Russia, they are not too eager to stir up conflict with China.

Thus, China can quietly observe the conflict, from time to time making statements along the lines of "we are for friendship, we are for peace" and maneuvering between Russia and the West, expanding its international influence. The PRC is not interested in regime change in Russia because it fears the emergence on its borders of another pro-Western force that Beijing will have to confront. But China does not want to interfere in the Ukrainian conflict on Russia's side either, as in this case, it would surely fall under US sanctions that could collapse its economy. In addition, with Moscow deeply involved in war and its ability to do anything else limited, China can put Russia on favorable terms for trade and political cooperation. It is to China's advantage that the conflict in Ukraine lasts as long as possible in its current format.

Türkiye has a special role to play. Even before February 24, Türkiye benefited from maneuvering between Russia and the United States, occasionally conditioning both. But today Türkiye's position has strengthened. In the eyes of both Russia and the collective West, involved in the confrontation with each other, its value has increased dramatically.

Türkiye keeps Russian warships out of the Black Sea, holds Russia back in Libya and Syria, and strengthens Azerbaijan by expanding its influence in such an important region for Russia as the South Caucasus, which Russia traditionally considers a zone of its influence. Türkiye supplies advanced weapons to Ukraine. At the same time, Ankara offers Moscow mediation services in Ukraine negotiations and is turning into a haven for Russian trade and investment, not to mention tourism. And now the Americans are unlikely to prevent Ankara from conducting major operations against the Kurds in northern Syria.

As for India, its benefits are probably the maximum. As mentioned above, India is becoming the main buyer of cheaper Russian oil. This country continues to cooperate with the Russian defence industry. India is the largest buyer of Russian arms (it also buys arms from the West and Israel). But most importantly, India is a key US partner in the Indo-Pacific region. India is a member of the American-established anti-Chinese military-political bloc, the "Quartet". This is the name of the quadrilateral security dialogue, QUAD, which includes Australia, India, the United States, and Japan. At a time when US resources are limited and directed elsewhere, India's contribution to containing the PRC has become truly invaluable. And this means that in the eyes of the US, India's international importance is rapidly growing.

So what will the Americans do - slap secondary sanctions on India for buying Russian oil or punish it for supplying arms from Russia? It is unlikely that the US will do so. Who cuts the hen that lays the golden eggs...

As long as the collective West and Russia are involved in the Ukrainian conflict, a group of countries is flourishing that benefit enormously financially and politically from what is happening. Are we not witnessing the emergence of new great powers today? When confrontation and struggle between different forces for hegemony in the world system intensify, a third party can benefit from it.

Caliber.Az