International Relations This Week: Episode 98

International relations is a very important segment of the UPSC syllabus. In this series, we present an analysis of the most important international issues and developments that occurred over the past week relevant for the IAS exam. In this article, you can learn more about the looming crisis in Bangladesh, BIMSTEC vis-a-vis SAARC and their relevance, China – Saudi Arabia relations and other important developments.

TABLE OF CONTENTS

1. Looming Crisis in Bangladesh
2. BIMSTEC v/s SAARC
3. Price Cap on Russian Oil
4. China-Saudi Arabia relations
5. Europe’s concerns about US Inflation Reduction Act

1. Looming Crisis in Bangladesh

Context:

Tens of thousands of protesters took to the streets of Bangladesh in the first week of December 2022.

Details:

• The protesters are demanding the resignation of the Prime Minister of Bangladesh Sheikh Hasina and the eventual dissolution of Parliament thereby calling for fresh elections in the country.
• The mass protest is supported and capitalized on by the opposition party – the Bangladesh Nationalist Party (BNP) which has accused PM Hasina of failing to address rising fuel prices and the cost of living for the general public.
• Even though the elections in Bangladesh are due in late 2023 or early 2024, BNP fears the polls would be rigged under the ruling Awami League. Therefore, they are demanding the dissolution of the parliament and fresh elections under the caretaker government.

Historical Background of Bangladesh:

• Post India’s partition, Pakistan comprised two geographically and culturally separate areas to the east and the west with India in between. However, due to several administrative challenges and cultural differences, East Pakistan demanded a separate sovereign state. This resulted in the Liberation of Bangladesh.
• India supported the nationalist faction (Awami League) in the liberation war of Bangladesh. 
• However, during the period from the mid-1970s to 1991, military rule in Bangladesh fuelled anti-India sentiments. 
• The Bangladesh Nationalist Party (BNP) won the elections in Bangladesh and formed the government. The hostilities against India continued as BNP was largely anti-India and pro-Pakistan.
• The consequences of hostile relations during military rule and rule of BNP:
  • Bangladesh harboured several anti-India forces.
  • Several proposed projects like India-Bangladesh-Myanmar Trilateral highway and gas pipeline were derailed.
  • Transit access to North East India was denied.
  • The volatility in the border areas increased.
  • There was a rise in several issues like the water sharing dispute of transboundary rivers.
• During the period of 1996-2001, Bangladesh was ruled by the Awami League, which is seen as a pro-India political party. This resulted in the improvement of India-Bangladesh relations.
• Again from 2001 to 2006, BNP ruled Bangladesh and the relationship between the two neighbours weakened.
• Since 2009, Sheikh Hasina-led Awami League has won three consecutive elections. This has been a golden period for the relations between Bangladesh and India.

India-Bangladesh relations post-2009:

• The relationship between India and Bangladesh deepened after 2009.
• The Government of Bangladesh declared that the country would not be used by any forces inimical to India’s interest.
• Bangladesh also acted against several insurgent groups of North East India that operated from Bangladesh’s soil like Bodo, Mizo National Front, NSCN, ULFA, etc.
• The cooperation was also extended in countering cross-border terrorism and insurgency.
• Several actions were taken to improve border management and issues like drug trafficking, cattle smuggling, illegal migrations, etc. and these were jointly tackled.
• The economic relations between the two countries flourished. There are also negotiations for a Free Trade Agreement.
• The connectivity has also increased, helping Mainland India to connect with North East India.

For more information on India-Bangladesh relations, read here: India-Bangladesh Relations

Economic Crisis in Bangladesh:

• A couple of years ago, Bangladesh displayed a successful economic growth story. It was projected that Bangladesh would become a Developing Country in the near future (upgrading from the Least Developed Country status).
• However, the country is facing several domestic challenges like high corruption, economic slowdown, rising debt, and increasing inflation that has made the cost of living higher for the common public.
• Several external factors like Russia’s invasion of Ukraine and the Covid-19 pandemic have further worsened the situation for the country.
• The economic situation is such that the country is forced to take assistance from the International Monetary Fund (IMF). This has made Bangladesh the third country in India’s neighbourhood that is suffering from a severe economic downturn.
• The opposition party is capitalizing on this economic situation of the country and protesting against the ruling party and raising anti-incumbent sentiments among the public. 
• It should also be noted that there were deaths of several protesters including various activists and several members of the opposition party further fuelling the hostilities.

2. BIMSTEC v/s SAARC

Context:

December 8 is commemorated as SAARC Charter Day.

Introduction:

• SAARC and BIMSTEC are two regional organizations in South Asia.

South Asian Association for Regional Cooperation (SAARC):

• SAARC was established in 1985 in Dhaka, Bangladesh.
• The primary objective of the grouping was to promote regional integration and economic cooperation in the South Asian region.

For more information on SAARC, read here: South Asian Association for Regional Cooperation (SAARC)

Failure of SAARC:

Since 2014, no SAARC summit has been organized. Many experts are of the view that SAARC has become a failure. The major reasons cited for this are India-Pakistan relations and Pakistan.

• The fragile relations between the two countries in the region have hampered the smooth functioning of the grouping. For instance, 2016 was a turning point for the organization as the Pakistan-sponsored Uri attack compelled India to take a SAARC minus Pakistan approach.
• There have been many instances when Pakistan has opposed or derailed India’s proposals in the forum. For example, Motor Vehicle Agreement and South Asian Satellite.
• As a result, India has focused on other regional groupings like the Bangladesh-Bhutan-India-Nepal (BBIN) grouping and the Bay of Bengal Initiative on Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).

BIMSTEC:

• BIMSTEC was established in 1997 through the Bangkok Declaration.
• BIMSTEC is a sector-based organization, which has several sectors for cooperation like trade, technology, energy, transportation, tourism, and fisheries.
• It acts as a bridge between South Asia and South East Asia.
• In April 2022, the BIMSTEC charter was adopted at the Colombo Summit. Furthermore, Master Plan for Transport Connectivity, supported by the Asian Development Bank was also adopted at the summit. 

For more information on BIMSTEC, read here: BIMSTEC

Image Source: Times of India

Significance of BIMSTEC for India:

• It is an alternative grouping in South Asia (Substitute for SAARC), that allows India to play a leadership role in the region.
• It aligns with India’s Act East Policy.
• India has prioritized BIMSTEC since 2016, thereby bypassing the hostile neighbourhood.
• BIMSTEC helps in tackling regional challenges like disasters, humanitarian assistance, security, etc.

For more information on SAARC vs BIMSTEC, read here: BIMSTEC vs SAARC: RSTV – The Big Picture

3. Price Cap on Russian Oil

Context:

The implementation of the price cap on Russian crude. 

Details:

• Western countries including G7 nations, the European Union (EU), and Australia (together referred to as Price Cap Coalition) have agreed to a price ceiling of $60 per barrel of seaborne Russian Urals crude oil.
• In an effort to punish Russia for invading Ukraine and limiting the profits accruing to Russia from oil exports, Price Cap Coalition has imposed the price cap. However, they also want to keep some Russian oil flowing in the global market so that supply is not drastically impacted and the energy prices are not further pushed. 
• Thus the concept of a price cap is proposed, above which accessorial services like ship insurance, vessel clearances, etc. would not be provided to freighters carrying Russian oil.

Russia’s Response:

• Russia initially responded by saying that the impact of the price cap on its output would be minimal.
• However, later it was reported by Russian media that a mechanism was being worked in Russia to ban oil exports to countries that are supporting the price cap.
• Moreover, Russia is also considering a floor price against the price cap. 
  • A floor price intends to ensure that it did not sell below the price cap level.
• This contrasting approach of both blocs would put Russian oil buyers, who want European insurance and other services to continue, in a serious bind.

Implication and Response of India:

• India’s Russian oil import was only around 0.2% of total oil imports in 2021-2022. 
• However, Russia served as India’s top oil supplier in October and November. It was reported that in November, India bought 53% or nearly 3.7 million tonnes of all the seaborne Urals crude that Russia exported.
• India has reiterated that it will continue to buy oil from Russia, keeping its national interests at the fore. It has stoutly defended its import of crude from Russia.
• India has also highlighted that the price cap is only going to impact countries like India that are dependent on seaborne imports and will not affect the European countries that largely depend on pipeline-based imports of Russian crude.
• To bypass the impact of the price cap and volatility of oil markets, countries like India and China, which are large importers of Russian crude can use their own shipping vessels.

For more information on the Price Cap, read here: Sansad TV Perspective: Russian Oil Price Cap

4. China-Saudi Arabia relations

Context:

Chinese President Xi Jinping visited Saudi Arabia. 

Details:

• The President of China Xi Jinping visited Saudi Arabia and the two countries signed several bilateral agreements.
• This symbolizes the deepening ties between China and Saudi Arabia.
• It should be noted that Saudi Arabia is the world’s top oil exporter whereas China is the world’s biggest energy consumer. Saudi Arabia is the top oil supplier to China.
• Presently, China is Saudi Arabia’s largest trading partner, with bilateral trade worth $87.3 billion in 2021.

Implications of the growing China – Saudi Arabia relationship on India and the U.S.:

• The growing relations between China and Saudi Arabia mark the emerging divide between Saudi Arabia and the United States.
• India’s cooperation with Saudi Arabia in several sectors like sharing intelligence and investment will be significantly impacted.
• Saudi and Chinese companies are jointly involved in various projects of the Belt and Road Initiative(BRI) which is opposed by India.
• They also share close military and security ties by trading in arms and weapons. 
• China and Saudi Arabia are also strengthening their relations in the field of technology like Cloud computing, Artificial Intelligence, green energy, etc.
• A total of 34 investment agreements were signed which will strengthen economic ties between the two nations as well as bring Saudi Arabia into the fold of China’s Belt and Road Initiatives.
• The two countries reiterated that they will continue to firmly support each other’s core interests.

5. Europe’s concerns about US Inflation Reduction Act

Context:

Several European countries have raised concerns over the US Inflation Reduction Act, the latest being France. 

Background details:

• The Inflation Reduction Act (IRA) was signed into law in August 2022.
• It is a $430 billion package of federal spending, tax breaks, credits, and levies, aimed at fighting climate change, reducing healthcare costs, and making large corporations pay their “fair share” in taxes.
• Experts opine that the Act is a scaled-down version of Mr. Biden’s ambitious Build Back Better plan that did not get the senate’s approval at the end of 2021.
• Besides its goal of bringing down inflation, the Act is the biggest climate action package in the history of the United States. 
• The act earmarks $370 billion for climate-focused funding and investments aimed at reducing emissions by around 40% below 2005 levels by 2030.
• In the context of healthcare-related provisions, the Act extends expiring Medicare subsidies to 13 million Americans and intends to bring down the cost of prescription drugs, for which Americans pay two to three times more than citizens of other countries.

For more information on IRA, read here: 7 Dec 2022: UPSC Exam Comprehensive News Analysis

Challenges for Europe:

• Europe is concerned about the IRA’s possibly “discriminatory” provisions and seeks a quick solution before they come into effect at the start of 2023.
• The members of the European Union (EU) fear that the IRA tax credits and subsidies to electric vehicles and other green product makers in North America and free-trade partner countries put European companies at a disadvantage and may push them to move critical parts of their supply chains to America.
• The IRA raises fears of companies moving to the U.S. and causing a major long-term impact on Europe’s economy.

Read more International Relations This Week articles in the link.

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