In a global game of political chess, Russia is pulling diplomatic strings to garner support from countries like India, urging them to intervene and prevent Russia from facing financial isolation due to its invasion of Ukraine. The Kremlin is employing behind-the-scenes pressure, leveraging defense and energy deals to dissuade these nations from supporting moves that could label Russia as a pariah state. With mounting tensions and the looming threat of economic repercussions, this article delves into the intricate web of global politics and explores the potential consequences of Russia's isolation.
The Financial Action Task Force's Role:
The Financial Action Task Force (FATF), an inter-governmental organization responsible for combating money laundering, suspended Russia's membership in February. Now, Ukraine is advocating for the inclusion of Russia in the FATF's "black list" or "gray list," which would classify it alongside nations such as North Korea, Iran, and Myanmar. Such a designation would exacerbate Russia's economic isolation and impose strict regulations on member states, banks, investment firms, and payment processors. Consequently, these entities would be obligated to exercise enhanced due diligence and adopt countermeasures to safeguard the international financial system.
India's Neutral Stance:
India, among several nations in the Global South, has maintained a largely neutral stance regarding Russia's aggression against Ukraine. This balancing act was recently observed at the Group of Seven (G7) summit in Japan, where Indian Prime Minister Narendra Modi and Ukrainian President Volodymyr Zelenskiy met for the first time since the conflict began. While India's position remains unchanged for now, the meeting likely discomforted Russian President Vladimir Putin, who himself faces restrictions on travel due to the invasion and an arrest warrant issued by the International Criminal Court.
Russia's Warning and India's Response:
Earlier this month, a Russian state agency conveyed a warning to Indian counterparts, highlighting the potential negative consequences for cooperation in defense, energy, and transportation if the FATF implements new measures against Russia. The agency specifically urged India to vocally oppose Ukraine's efforts to blacklist Russia during the upcoming meeting. It emphasized that even inclusion in the lesser "gray list" would pose significant difficulties. However, the response from India to these warnings remains undisclosed, as neither the Russian nor Indian governments have commented on the matter.
Russia's Projects at Stake:
Russia identified several key projects involving India that could be jeopardized if further measures are implemented. These projects include cooperation between oil giant Rosneft and Nayara Energy Limited, exports of Russian weapons and military equipment, joint aviation projects proposed at the Aero India 2023 exhibition, technology and energy cooperation at India's Kudankulam nuclear power plant, and cargo transportation services linked to the development of a North-South trading corridor by Russian Railways' RZD Logistics and the Container Corporation of India. These areas of collaboration hold strategic importance in the Russia-India partnership, making their potential disruption a matter of concern.
Economic Implications:
While the United States and its allies have already imposed numerous sanctions on Russia, the Kremlin has managed to mitigate the economic impact by strengthening ties with neutral countries such as China and India. However, if Russia is blacklisted by the FATF, these countries would face substantial challenges in maintaining business relations, further intensifying the economic strain on Russia. India, in particular, heavily relies on Russia for defense supplies, given the absence of a payment mechanism that complies with US sanctions. Additionally, India has capitalized on discounted Russian oil after price caps were imposed and European supplies were rejected.
The FATF's Gray List and International Repercussions:
The FATF's "gray list" poses its own set of challenges. A report by the International Monetary Fund in 2021 revealed that countries on the gray list experience a significant reduction in capital inflows due to increased monitoring requirements. The inclusion of Russia in this category would have far-reaching consequences, potentially disrupting its commitments to India in terms of weapons supplies and other collaborative projects.
Russia's Diplomatic Outreach:
Senior Russian officials have been actively engaging with partner governments, urging them to oppose any proposals that could lead to Russia's blacklisting or gray-listing. However, these efforts are shrouded in secrecy, and sources have requested anonymity due to the sensitivity of the matter. Russia has highlighted India's "special credibility" within the FATF and expressed disappointment that India did not voice opposition to Russia's suspension earlier. This highlights the level of importance Russia places on India's support in this critical situation.
FATF's Perspective:
The FATF, headquartered in Paris, has stated that Russia remains "accountable" for implementing the organization's standards even after its suspension. The body has committed to reviewing and potentially modifying the restrictions at each plenary meeting. However, Ukraine has welcomed the suspension and continues to advocate for Russia's inclusion in the FATF's black list. On the other hand, Russia's ambassador to the US has expressed concerns, viewing these developments as a dangerous step that could potentially disrupt the global architecture for countering the financing of terrorism.
Conclusion:
As the geopolitical landscape continues to evolve, the delicate dance between Russia and countries like India becomes increasingly crucial. Russia's efforts to prevent its financial isolation highlight the stakes involved for both sides. The outcome of the upcoming FATF meeting will have significant implications for Russia's economic standing and its partnerships with nations around the world. Whether India and other countries will choose to align with Russia or adhere to international pressure remains uncertain. The global community awaits the decision of the FATF and the subsequent consequences it may bring for Russia's financial future.
