Tag: Ukraine

  • How Azerbaijan Found the Nerve to Stand Up to Russia

    How Azerbaijan Found the Nerve to Stand Up to Russia

    Russia is floundering on all fronts. Humiliated on the battlefield and steadily losing once-friendly nations in Europe, it faces mounting economic hardship, forced to sell its resources at cut-rate prices to China and India. Yet perhaps the greater indignity lies in the defiance of its former satellite states—once obedient, now emboldened to seek new alliances. The war in Ukraine, one of Putin’s most catastrophic miscalculations, has become a lingering nightmare for the Kremlin. Countries that once deferred to Moscow now openly challenge its authority. The latest to break ranks is Azerbaijan, a small but strategically significant Caucasus nation long dependent on Russia. As tensions rise over the downing of an Azerbaijani passenger jet, the standoff is yet another sign of Moscow’s eroding influence over its former empire.

    Azerbaijan has every right to be outraged after losing its citizens in what it considers a Russian mistake. Few, however, could have anticipated that the fallout would escalate into a full-blown standoff.

    On December 25, an Azerbaijan Airlines plane crashed near Aktau, Kazakhstan, killing 38 people after being rerouted across the Caspian Sea from southern Russia. In the aftermath, Azerbaijan’s president, Ilham Aliyev—a close ally of Vladimir Putin—accused Russia of accidentally shooting down the aircraft with its air defense system. He condemned Moscow for attempting to conceal the incident for days, calling the response shocking, regrettable, and a legitimate cause for indignation in Baku.

    In an unusual move, Putin expressed condolences and referred to the crash as a tragic incident, though he stopped short of admitting Russia’s responsibility—a response that only deepened Azerbaijan’s anger.

    Tensions have been high since the incident. On Wednesday, the APA news agency, closely tied to the Azerbaijani government, reported that Baku was preparing to take Russia to international court over the alleged downing of the plane. The agency disclosed that facts and evidence were being collected, with preparations underway for an official appeal. The article also delivered a pointed criticism of Moscow, accusing it of trying to evade responsibility for the incident.

    The report revealed that Azerbaijan had identified both the individuals who gave the order to fire and those who followed through with it. The article implied that Russia was trying to craft a scenario similar to the Malaysia Airlines incident, drawing a parallel to Moscow’s ongoing denial of responsibility for the 2014 downing of Malaysia Airlines Flight MH17 over eastern Ukraine. APA warned that unless Russia publicly acknowledged its role and took responsibility, Baku would escalate its response.

    The article, widely believed to have been published with the approval of local authorities in tightly controlled Azerbaijan, appeared a day after a report from Kazakh officials, which revealed that the plane had sustained external damage and had numerous holes in its fuselage. The report, however, was carefully worded and refrained from specifying the cause of the damage, including to the plane’s stabilizers, hydraulics, and trim systems. 

    On Thursday, tensions further escalated when Azerbaijan ordered Moscow to shut down the Russian House cultural center in Baku. The center, operated by Rossotrudnichestvo—a Russian federal agency viewed as a tool of Russian soft power and often suspected of functioning as a front for espionage and covert operations—was the target of this action. Simultaneously, Azerbaijani state media reported that Baku had sent a rare shipment of non-military aid to support Ukraine.

    What gives this small state, traditionally within Russia’s sphere of influence, the courage to engage in a dispute with the mighty Russia? Several factors are at play. First, Russia’s downfall is a significant motivator. When the war in Ukraine began, many expected that Ukraine would fall within a month, but now, three years later, Ukraine is still standing strong and has become a major ally of the West. Meanwhile, states like Sweden and Finland who refused to join the west previously  have joined NATO, and Russia has been unable to block them. Militarily, Russia is no longer perceived as a superpower, and Azerbaijan believes it can withstand challenges from Russia.

    Second, there’s the economic factor. Beyond the surface, Russia’s economy and businesses are struggling under the weight of sanctions. Tying Azerbaijan’s economy to Russia could cause trouble for Azerbaijan’s business interests as well. However, distancing itself from Russia opens up more economic freedom for Azerbaijan. This newfound confidence is also fueled by Azerbaijan’s growing role in the West’s energy plans, especially after the EU sought alternatives to Russian fossil fuels.

    Azerbaijan’s stance is also part of a broader regional trend. Its longtime rival, Armenia, publicly broke with the Kremlin after Russian peacekeeping forces failed to prevent Azerbaijan from seizing control of Nagorno-Karabakh in 2023. Armenia became the first country to leave the Russia-led Collective Security Treaty Organization (CSTO) and began turning to the West and Iran for support. Recently, Armenian Prime Minister Nikol Pashinyan even hinted at pursuing EU membership.

    In neighboring Georgia, thousands have taken to the streets, pushing for Western support. Azerbaijan, however, is not necessarily looking to Europe for support. With Turkey, a key ally and fellow ethnic partner, in power, Azerbaijan sees strengthening its ties with Turkey as a route to greater Western alignment. This shift also reflects a broader change in the Middle East, where Iran’s influence, along with Russia’s, is waning. More countries, including Lebanon and Syria, are gravitating toward pro-Western governments, and Azerbaijan could easily join this trend.

    Many still believe that President Aliyev is playing a delicate game, leveraging his close ties with Moscow to manage the situation. By escalating tensions with Russia, he may be attempting to redirect public anger over the incident, easing pressure on his regime and preventing mass protests. Despite the apparent standoff, Azerbaijan and Russia remain deeply intertwined economically and politically, and some caution against assuming a complete break.

    In recent years, Azerbaijan has solidified its economic ties with Russia, with Moscow increasingly dependent on Azerbaijan as a crucial transit hub. Perched on the Caspian Sea, Azerbaijan facilitates the movement of goods to and from Iran and the Persian Gulf, helping Russia circumvent Western sanctions and tap into new markets. While some in Moscow hold out hope that a genuine apology could mollify tensions and restore the status quo, one cannot help but wonder: Has Azerbaijan grown strong enough to challenge the once-unstoppable Russia? Or could it be that Russia’s grip has weakened to such a degree that even a small power like Azerbaijan now dares to stand in opposition?

  • Mutual Defense Treaty Pulls North Korea into War

    Mutual Defense Treaty Pulls North Korea into War

    Russia is now short of men. They never anticipated, even in their distant dreams, that the war in Ukraine would last this long. After two and a half years, the death toll on the Russian side is high, and the conflict shows no signs of an immediate ceasefire, creating serious challenges. Russia has tried to boost recruitment, including from countries like Nepal. People living in poverty are being sent to the frontlines, despite having no interest in Ukraine or the war beyond the promise of some money.

    As the governments of these countries take steps to curb this recruitment flow, primarily under pressure from the West, Russia has adopted alternative measures, including enlisting its long-term ally North Korea in the war. Russia and North Korea recently formalized a significant treaty focused on military cooperation. Under this pact, North Korea plans to send troops to Ukraine to support Russia’s war efforts. With the treaty now ratified by both governments, North Korea’s entry into the Russia-Ukraine war is official.

    On Monday, North Korean leader Kim Jong-un signed and officially ratified the landmark mutual defense pact with Russia. The treaty, first signed on June 19 during Russian President Vladimir Putin’s famous state visit to Pyongyang, commits both nations to provide immediate military support to each other, using all means necessary, in response to any act of aggression. Kim hailed the pact as a milestone, calling it an alliance that will elevate Russia-North Korea relations to unprecedented heights. The world, especially Russia and North Korea’s adversaries, now watches closely, concerned about how this alliance will impact ongoing conflicts and global stability.

    The treaty includes a preamble and 23 articles that outline cooperation in politics, trade, investment, and security. Article 3 specifies that if either nation faces a direct threat of armed invasion, both sides must immediately open bilateral negotiations to align their positions and plan practical countermeasures. Article 4 requires immediate military and other assistance from the other party if one nation enters a state of war due to an armed invasion, resembling NATO’s mutual defense clause. Article 10 focuses on fostering exchanges and cooperation in fields such as science and peaceful nuclear energy This clause is particularly intriguing for Kim Jong-un, who has a strong interest in nuclear weapons, likely motivating him to commit troops in return for advancements in weaponry.

    Five days before North Korea ratified the treaty, Russia’s parliament approved it in Moscow on November 6, signaling the growing importance of the agreement. Observers expect Russia to extend this strategy to include more of its satellite states, which may also join the effort if the war persists. Despite U.S. attempts to disrupt these alliances, many former Soviet countries continue to depend on Russia.

    Intelligence reports from South Korea, the United States, and Ukraine confirm that at least 11,000 North Korean soldiers have already been sent to the front lines to fight against Ukrainian forces. Most of these troops have been deployed to Russia’s Kursk region, which has been partially under Ukrainian control since Kyiv’s surprise incursion into Russian territory in August. Neither Moscow nor Pyongyang has directly commented on the presence of North Korean soldiers in Russia, but their involvement under the Mutual Defense Treaty has effectively expanded the war beyond Russia and Ukraine,  drawing North Korea into the conflict.

    North Korea’s involvement could potentially draw South Korea into the war in support of Ukraine, with growing fears that Japan might also join, further escalating tensions. Earlier this month, South Korean President Yoon Suk-yeol warned that he might send arms to Ukraine if North Korean soldiers are not withdrawn from Russia. However, many believe this scenario is unlikely. North Korea’s role in the war appears limited to sending troops to assist Russia in exchange for advanced technologies. Still, we must consider the possibility that they are all teaming up to prepare for a larger agenda.

  • Putin Still Seeks to Mediate Peace in the Caucasus

    Putin Still Seeks to Mediate Peace in the Caucasus

    A notable shift in sentiment is occurring among the populations of former Soviet countries, commonly known as the Russosphere. Younger generations, largely unexposed to Soviet propaganda, are increasingly influenced by Western ways of living. Eastern Europe, with the exception of Belarus, which still has a pro-Russian government, appears to be slipping away from Russia’s influence. Russia now fears it may lose its grip on the Caucasus next. The ongoing war between Russia and Ukraine has exposed Russia’s weaknesses, leading many to question its ability to act as the heir of the Soviet Union. Despite initiating the war two years ago, Russia has struggled to invade Ukraine and achieve its objectives, facing repeated humiliations. The Caucasus, a compact yet geopolitically pivotal region bridging Asia and Europe, once firmly under Russia’s sway, is now drifting towards Europe. In Georgia and Armenia, a growing Europhile sentiment is visible, as the people increasingly look westward, aligning their aspirations more closely with Europe Any significant move in this direction could pose a serious challenge to Moscow. Putin and the Kremlin seem to have recognized this changing mood and appear to be taking steps to address it.

    Russian President Vladimir Putin’s recent two-day visit to Azerbaijan makes it clear that he intends to maintain his role as a powerbroker in the Caucasus. However, whether he still has the influence to do so remains uncertain. Putin’s trip to Baku on August 18th and 19th occurred against the backdrop of Russia’s deteriorating strategic partnership with Armenia, where Yerevan has increasingly strengthened its political and security ties with the West, and a continuing Ukrainian offensive in Russia’s Kursk region. Despite these challenges, Putin adopted a business-as-usual attitude throughout his visit, highlighting the economic advantages of the Declaration of Alliance between Russia and Azerbaijan signed in 2022, just days before Russia’s unprovoked attack on Ukraine. Putin mentioned that cooperation could extend beyond energy to include industrial collaboration, transport, logistics, and light industry. Azerbaijani President Ilham Aliyev, in turn, highlighted Azerbaijan’s commitment to preserving and promoting the Russian language, noting that over 160,000 students were enrolled in more than 300 Russian schools in the country. He also acknowledged Russia’s peacekeeping role in the Nagorno-Karabakh conflict.

    With Russia’s strained relations with Armenia, the central question during Putin’s visit was whether Moscow could still play a meaningful role in brokering peace between Baku and Yerevan. Putin certainly seems eager to try. At one point, he expressed to Aliyev his willingness to facilitate efforts to delimit and demarcate the Armenian-Azerbaijani border, as well as to broker a peace deal. Putin clearly does not want to see himself-or Russia-sidelined in the peace negotiations.

    Even though Russia can influence Armenian politicians with business ties to Moscow, significant discontent remains among the Armenian population. Many Armenians view the loss of Nagorno-Karabakh as a betrayal by Russia, believing that Russia now favors Azerbaijan, thus undermining their historical Orthodox alliance. It is important to recognize that public sentiment may differ from the views of their politicians. Putin and Russia have a vested interest in Azerbaijan due to its rich natural resources and its strategic position as a route from Turkey and the Middle East to Russia for money and investments. This interest aligns with Putin’s ambitious North-South Corridor project, which aims to boost direct trade with Iran and India, bypassing intermediaries. This initiative could help offset the loss of business with Europe and reduce Russia’s current overreliance on China, which greatly benefits from this dependence. Thus, Azerbaijan is a top priority in the Caucasus for Russia, even though Moscow does not want to lose Armenia entirely. If Russia cannot settle its issues with Armenia, it is likely that Armenia will turn more towards the West. With both Georgia and Armenia moving away from Russian influence, Russia faces severe security risks.

    Russia’s historical involvement in the South Caucasus underscores the necessity of its participation in the peace process. However, Armenian officials, who have accused Moscow of failing to uphold security guarantees during the Second Karabakh War, appear reluctant to accept further Russian involvement. On August 19, a representative from the Armenian Foreign Ministry criticized Russian diplomats for making biased and disrespectful remarks about Armenia and questioned Russia’s commitment to fostering constructive engagement between Armenian and Azerbaijani officials. It also seems that as countries increasingly challenge Putin and Russia in the region. On this occasion,  Putin is attempting to maintain a presence and their importance through his diplomatic meetings in Baku.

  • Significance of Narendra Modi’s Visit to Ukraine

    Significance of Narendra Modi’s Visit to Ukraine

    There was significant uproar from the Western world when India’s Prime Minister, Narendra Modi, visited Vladimir Putin in July, despite his bold criticism of Russia’s actions during the meeting. The Indian opposition also condemned Modi, viewing the visit as a clear departure from India’s long-standing non-alignment strategy, upheld since the Cold War. However, Modi defended his decision, stressing the importance of the India-Russia relationship and highlighting several agreements that would benefit the Indian economy. By choosing Russia for his first bilateral meeting after securing his third term as Prime Minister, Modi underscored the significance he places on this relationship, but it drew heavy criticism from Ukraine and the Western world.

    As a counter to his trip to Russia, Narendra Modi made a historic visit to Kyiv, the capital of Ukraine, on Friday. During the visit, he assured Volodymyr Zelenskiy of his readiness to act as a friend in facilitating a peace deal to end Russia’s war in Ukraine. Modi’s visit has sparked hope among peace advocates, as he is seen as having significant influence with Vladimir Putin, unlike other Western leaders who have previously attempted to broker a peace agreement.

    This trip marks the first visit to Ukraine by an Indian leader since the country gained independence from the Soviet Union in 1991. It comes after a period of strained relations, as Zelenskiy had criticized Modi’s recent visit to Moscow, which coincided with a Russian missile strike on a children’s hospital in Kyiv. During his visit at Kyiv, Modi expressed respect and support for Ukraine’s sovereignty and territorial integrity, calling it India’s highest priority. He also emphasized that he had told Vladimir Putin during their July meeting that problems cannot be resolved on the battlefield and that the war could only be ended through dialogue and diplomacy.

    Zelenskiy warmly embraced Modi and described his support for Ukraine’s sovereignty amid Russian aggression as critical. Zelenskiy posted on X that history was made with Modi’s friendly and symbolic visit, which coincided with the eve of Ukraine’s Independence Day celebrations. The two leaders stood together in front of a memorial dedicated to Ukrainian children killed by Russian missiles. During their official talks, they discussed Zelenskiy’s 10-point peace plan, which he has presented to the international community, according to India’s foreign ministry. The plan includes the withdrawal of Russian troops from occupied territories, reparations, and war crime tribunals for Russian generals and political leaders. Ukrainian officials are also preparing to organize a second peace summit this year, with Saudi Arabia being considered as a possible venue. Ukraine views building effective relations with countries of the global south as crucial, believing that a just resolution to the war is in everyone’s interest.

    Reports indicate that Indians have been recruited from both sides to fight in the war, with casualties reported. With high unemployment remaining a significant issue in the overpopulated country, more Indians are reportedly ready to join the conflict. However, India’s economy has benefited substantially. Since Russia’s full-scale invasion of Ukraine in 2022 and the subsequent Western sanctions, India has imported large volumes of discounted Russian oil, which has been processed by Indian refineries and sold globally.

    Although India has gained economically, Modi has consistently sought to portray his government as a neutral peace broker. Critics accuse India of merely performing a balancing act with Russia, provoking considerable anger among Western countries. Nevertheless, some political analysts believe that India’s actions are a strategic response to the Kremlin’s growing partnership with China, India’s primary geopolitical rival, leading to a reassessment of its foreign policy.

    Modi’s visit comes as both Russian and Ukrainian forces are making notable advances. Recently, Ukraine launched a surprise incursion into Russia, and its forces now control a 1,250 sq km area within Russian territory, around the town of Sudzha. Around 130,000 Russians have fled the region, with fierce fighting continuing in Korenevo and other frontline villages. This incursion – the first by foreign troops into Russia since World War II—has been more successful for Kyiv than expected. The Russian military’s response to the Kursk incursion remains unclear. As the conflict escalates into a new phase, Modi’s visit to Ukraine is likely to have a significant impact on India’s relations with both Russia and the West.

  • Is Russia Going to Lose the War?

    Is Russia Going to Lose the War?

    While Russia began its full-scale invasion of Ukraine in February 2022, following a series of military operations that had previously annexed significant parts of Ukraine and involved multiple instances of intimidation, everyone expected that the mighty superpower, Russia – the heir to the great Soviet Union – under the strong leadership of Putin, would complete its objectives in a matter of months. It was widely assumed that they would overthrow the Zelensky government and erase any trace of Ukrainian identity from the earth. The initial momentum seemed to confirm this, as almost the entire coast of the Black Sea and the capital, Kyiv, were severely struck, with buildings reduced to rubble, people dying, and many fleeing the country. When the western cities of Ukraine were also attacked, many predicted that Russia’s victory was inevitable and Ukraine was doomed.

    However, the Ukrainian soldiers, along with the government led by Zelensky, a former comedian determined to defy Putin’s ambitions, resisted fiercely. With full support from the United States and Europe, in the form of money and weapons, Ukraine forced Russia to retreat from the captured territories, including areas near the capital. Now, Russia finds itself confined almost entirely to the areas it had seized before 2022. In a remarkable turn of events, and perhaps the biggest blow to Russia, a superpower once considered capable of challenging even the United States, Ukrainian forces have begun entering Russian territory and capturing land. This has become a major humiliation for Russia. And yet, it still seems unbelievable – could Russia actually lose this war?

    Ukraine’s top commander, Oleksandr Syrskyi, reports that his forces have captured 1,000 square kilometers of Russia’s Kursk region, a strategically important area for Russia. Footage has surfaced showing Ukrainian troops waving their flags on Russian soil, delivering a significant humiliation to the once-mighty Russia – Goliath brought low by David. After initial confusion, Russia acknowledged the attack. Alexei Smirnov, the acting regional governor of Kursk, estimated that Kyiv’s forces had taken control of 28 settlements in an incursion approximately 12 kilometers deep and 40 kilometers wide. While this is less than half of Syrskyi’s estimate, Smirnov’s statement represents a notable public admission of a major Russian setback more than 29 months after Russia launched its full-scale invasion of Ukraine. The claims made by both sides could not be independently verified.

    Russian President Vladimir Putin acknowledged the situation and vowed a strong response to the attack, ordering his troops to dislodge the enemy from Russian territories. However, a week into the surprise assault, Russia is still struggling to repel the Ukrainian forces. Kyiv’s strategy of maintaining silence stands in sharp contrast to last year’s counteroffensive, which was widely anticipated for months and ultimately faltered against Russia’s defensive lines.

    It is certain that Russia will fight back with all its force to reclaim its territory and will likely launch further attacks in Ukraine to restore its strong image. Although Russia is a nuclear power with a strong arsenal, it seems that something is amiss in the Kremlin. Decisions are not being made swiftly, and there appears to be a lack of planned moves or coherent strategy from the Russian side. The Kremlin seems confused and not in a sound state of decision-making. Wagner’s who made initial momentum are sidelined after they attempted a coup, leading to the death of their leader, and the shortage of weapons and manpower on the Russian side has become evident, while Ukraine continues to advance each day.

    Even though we can’t predict who will win the war, analyzing the current situation suggests that the Ukraine war increasingly looks like a major blunder by Russia. Their economy has stalled, businesses have suffered, their superpower status is being questioned, and it now seems like Goliath is being humbled by David. From now on, Russia may need to respect Ukraine as a Slavic power capable of challenging the Russian Federation. Putin might start seeking a peace deal because they lack the manpower to deploy more troops to Ukraine and need to protect their vast country. Additionally, they don’t have enough funds to sustain the war effort indefinitely. If Ukraine continues to advance further, the Russian sphere of influence could collapse. There may even be secessionist movements within Russia if Moscow weakens, which would be easier in such a large country. Crucial times lie ahead for the Kremlin, and it is likely that the ongoing war will have a greater impact on Russia than on Ukraine.

    The chances of an all-out war, as anticipated by Russophiles, now seem to be simmering down. It appears that Putin doesn’t have strong support from Russian authorities, and the image of Russia has been damaged. Kyiv’s current actions seem to be aimed at gaining a stronger negotiating position in potential talks to end the war and halt Moscow’s offensive in eastern Ukraine. However, one thing is clear: the United States and NATO’s strategy has proven effective. They avoided a world war and further empowered Russia, but Russia has been humbled. While Russia will not surrender, as doing so would mean the loss of its superpower status, it is now being forced into negotiations.

  • Why is Modi’s trip to Russia significant?

    Why is Modi’s trip to Russia significant?

    Narendra Modi, Prime Minister of the world’s largest democracy, has chosen Russia for his first bilateral meeting after securing a third term in last month’s general election. The two-day visit, which included informal discussions, photo sessions, dinners, diplomatic talks, and the awarding of the highest civilian honor to the Prime Minister, holds considerable geopolitical importance. This visit sends important signals to the West, particularly as Western countries stand united in supporting Ukraine against Russian aggression, albeit with less attention to the situation in Palestine.

    India has never aligned with any major power bloc since becoming a republic, its leaders, irrespective of their political affiliations, have always maintained a warm relationship with Russia. Narendra Modi, who has been in power for the past 10 years, continues this policy. Over the last decade, the United States and Western countries have attempted to draw India away from its traditional alliances and towards a grand democratic alliance in Asia, including the West and Japan. However, Modi’s recent actions demonstrate India’s steadfast stance despite the evolving Asian political landscape. Modi also stated that the visit, his first since Russia’s full-scale invasion of Ukraine and the pandemic, aimed to cement the “Bonds of Friendship” between the two countries. He later enthusiastically described Russia as India’s “All-weather friend and trusted ally”. 

    At Tuesday’s formal summit, Modi stated that he and Putin had covered everything from establishing new Indian embassies in Russia to enhancing trade cooperation. India’s significant imports of Russian oil, minerals, and arms, in exchange for Indian agricultural products, are crucial for sustaining the Russian economy amid stringent Western sanctions, alongside China. However, reports indicate that during informal discussions, Modi called for Russia’s withdrawal from the war and called for an end to the conflict.

    India and Russia anticipate enhanced cooperation as the North-South corridor becomes fully operational. India, with a market of 1.4 billion people and one of the world’s largest economies, presents significant opportunities for Russian businesses. Conversely, Russia offers a large and cost-effective option for Indian businesses seeking natural resources, fostering a mutually beneficial relationship. However, ethical concerns remain, as Modi’s visit was condemned by Ukraine, citing ongoing war crimes committed by Russia in Ukraine. Just hours before Modi arrived in Moscow, Russian airstrikes targeted Ukraine’s largest children’s hospital and other civilian sites, causing numerous casualties and prompting global condemnation. Ukrainian President Volodymyr Zelenskiy described it as “A devastating blow to peace efforts to see the leader of the world’s largest democracy embracing the world’s most notorious criminal in Moscow on such a day”.

    But the situation extends beyond Ukraine. Asia is undergoing polarization, and two blocs are  formed. The superpowers are already teamed up. One side includes Japan, South Korea, Taiwan, the Philippines, Saudi Arabia, Israel and the United States. The other side consists of Russia, China, Iran, Kazakhstan, and North Korea. The stances of India, Indonesia, and Vietnam are crucial but not yet clearly defined. With significant investments and diplomatic talks, these blocs are aligning more countries with them. Vietnam will likely join the United States bloc, and Indonesia is expected to lean towards the Russian bloc. According to reports, India is also moving towards an alliance with Russia, which will be a significant blow to the U.S. bloc.

    The U.S. recognizes the importance of India and has not criticized it, instead praising India for directly calling on Putin to stop the war, which indicates the U.S. still has hope in India. Historically, the U.S. was aligned with Pakistan, while India was connected to the Soviet Union and Russia from its formation. However, over the last decade, as Pakistan was ousted from the U.S. plan, the U.S. began to consider India more seriously. During Trump’s tenure, the relationship flourished, and there were reports that India leaned toward the U.S. side while Pakistan moved toward an alliance with China and Russia.

    After Trump, due to poor handling of foreign relations, India began returning to Russia’s side again. This shift will not be easy for India, as India and China now have serious disputes and appear to be enemy countries, both of which are important to Russia. If any issue arises between India and China, Russia’s stance will be crucial, as both countries are important to Russia. If Russia favors China, it won’t take long for India to switch sides to the U.S., given India’s existing relationships with U.S. allies Japan and Israel.

    The importance Modi places on Putin and the significance Russia attributes to India is the message conveyed by the recent meeting of both leaders. However, the U.S. will not abandon its mission with India. For its plan in Asia, the U.S. cannot rely on the U.K. and France anymore, so it needs superpowers from Asia. India is valuable for the control of Asia, particularly for security against China. If the Republicans return to the U.S. presidency, they will likely attempt to revive the relationship with India. From Russia’s side, even though they may prefer China, they will remain connected to India and ensure India stays neutral.

  • Russia Ukraine War: Russia’s Problem With Demand of Chinese Yuan

    Russia Ukraine War: Russia’s Problem With Demand of Chinese Yuan

    Russian businesses have been depending more and more on the yuan to meet their foreign exchange needs since Moscow was cut off from the Western banking system. As war is not looking to end soon, Yuan financing has become both expensive and scarce in Russia, creating a bottleneck for companies seeking foreign capital. This challenge adds to the existing burdens faced by these companies, including higher domestic interest rates and a looming wave of debt due this year.

    Two years following Russia’s exclusion from the Western financial system, major energy and mining corporations have significantly turned to the yuan to meet their foreign currency needs. China and Russia have notably reduced their dependence on the US dollar in bilateral trade. Over the past year, Chinese and Russian officials reached an agreement to conduct over 90% of trade between the two nations using Russia’s ruble or China’s yuan. This shift has ensured uninterrupted business, leading to a record $200 billion in total transactions between the two countries last year. Simultaneously, Russia’s trade with the US has witnessed a substantial decline, reaching a 30-year low.

    Despite China’s benchmark government bond yields reaching a two-decade low, the restricted yuan liquidity in Russia, coupled with heightened demand from importers, is resulting in increased borrowing costs. This financial challenge compels companies such as MMC Norilsk Nickel PJSC, Russia’s largest miner, to confront tough decisions—whether to secure expensive ruble funding or bear the rising expense of domestic yuan debt.

    Over the past year, Russia has experienced a more than twofold increase in its benchmark, leading to corporate borrowers contending with an additional 1.2 trillion rubles (US$13 billion) in debt-servicing costs. In the given the current circumstances, the average cost of debt is anticipated to rise.

    The volume of Russian corporate yuan bonds, primarily sold on the domestic market, nearly stalled in the final three quarters of the previous year, reaching the equivalent of 800 billion rubles, as reported by the Russian central bank. While loans in the Chinese currency surged to a record US$46 billion in 2023, their share in corporate credit portfolios remained in single digits.

    Yuan liquidity in Moscow is becoming scarcer, and its costs are becoming more volatile, indicating difficulties in expanding yuan lending for domestic banks. Faced with a deepening yuan liquidity crunch, Russian lenders have resorted to the central bank’s Chinese currency swaps, leading to a substantial increase in yuan funding costs. Industry experts suggest that if the deficit persists, it could result in a further uptick in yuan bond yields.

    Despite facing financial constraints, Russian companies have encountered difficulties in directly borrowing within China due to capital controls complicating the repatriation of funds abroad. Moreover, since 2018, they have refrained from issuing yuan securities like panda or dim sum bonds, a departure from the 11 such issues in the prior eight years. Even the government, despite years of planning its own yuan bonds, has encountered obstacles in discussions with China about securing loans in yuan.

    Chinese lenders, including the world’s largest by assets, Industrial and Commercial Bank of China Ltd. (ICBC), have notably increased their exposure to Russia through offshore branches. The Russian subsidiary of ICBC alone observed a five-fold surge in total local assets from the beginning of 2022 through October 1 of the following year, according to the latest data published by the Bank of Russia.

    The increased involvement of Chinese lenders presents a challenge to the financial stability of Russian corporations, heightening concerns about the potential depletion of capital for industries, particularly as refinancing needs sharply escalate. Despite recording robust profits, companies are grappling with constraints, further exacerbated by new export taxes imposed by the government to fund the war. This development undermines the advantages of a weaker ruble that had previously contributed to record margins.

    The elevated interest rates necessitate a more cautious approach by companies when considering investments that require substantial debt capital. This careful strategy reflects the impact of heightened borrowing costs on corporate decision-making and investment strategies.

    The current situation poses a setback for Russia’s and China’s endeavors to promote de-dollarization. Both nations now face the challenge of intensifying efforts to establish their currencies as substitutes for the dollar. The Russian ruble seems to be out of contention, while the limited availability of the yuan is a notable hurdle, despite Beijing’s progress in internationalizing the currency. People’s Bank of China has engaged in bilateral currency swaps with over 30 central banks, including those of Saudi Arabia and Argentina.

    The lack of yuan availability and the abundance of rupees for Russia  reveal hurdles in cooperation between major economies. Additionally, strained relations between China and India limit the possibility of mutual acceptance of their currencies. As major economies work towards cooperation, the realization of a viable alternative to the dollar appears distant.