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Current Affairs (February 26- 2022)

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Posted On : 2022-03-05 23:07:20

Current Affairs

February 26- 2022

The Hindu Coverage

GS-2

  • The perfect storm
  • Inflection point for the West­led global order
  • Radiation spike in Chernobyl: Ukraine
  • Biden nominates Ketanji Brown Jackson to SC

GS-3

  • ‘India said to eye rupee trade to offset sanctions on Russia’
  • ‘War has put Indian coffee exports to Ukraine in jeopardy’

The perfect storm

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The combative advent of the Russian military into Ukraine early Thursday has predictably spooked markets across all asset classes the world over. Oil prices surged to an eight-year high of around $105 a barrel, stock markets tumbled with the Indian bourses crashing nearly 5% on Thursday and the rupee dipping perilously close to the 76 to a dollar mark.

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  • The flight to safety amid all this mayhem propped up India’s favourite yellow metal to a 15-month high. Domestic stock indices that have already been witnessing tumultuous swings in recent weeks as global inflation flared up and the US Federal Reserve signalled faster throttling of ‘easy money’ liquidity, did pare some of these initial losses on Friday.
  • But multi-layered uncertainty will keep investor nerves on edge, as will the diplomatic fallout of how the UNSC decides to tackle Russia in its vote, with the western world seeking strict condemnation and sanctions, while India has thus far preferred not to take a side.
  • There could be double-edged economic ramifications for those sitting on the fence if the extent of sanctions against Russia are intensified. This could deter Indian interests, be it in terms of trade financing, investment flows and even banking transfers as calls to bar Moscow from the SWIFT global payment network grow louder. For now, Russia’s oil exports have not been explicitly targeted yet.
  • India’s imports of petroleum products from Russia are only a fraction of its total oil import bill and thus, replaceable. But getting alternative sources for fertilizers and sunflower oil may not be as easy.
  • Exports to Russia account for less than 1% of India’s total exports; pharmaceuticals and tea could face some challenges, as will shipments to CIS countries. Freight rate hikes could make overall exports less competitive too, but it is the indirect impact on the trade account that is more worrying.
  • The surge in crude oil prices will drum up India’s inelastic oil import bill, and gold imports could jump back up and keep the rupee under pressure. Trade and current account deficits may be jeopardised, although forex reserves are healthy.
  • The biggest concern, for India, however, remains the impact of oil prices on inflation, and the unravelling of the Budget math which hinges on average oil prices of $75 a barrel.
  • The RBI’s assertion that retail inflation had peaked at 6.01% in January, as well as its growth-accommodative stance may need a rethink with oil prices 11% higher since its February 10 monetary policy review.
  • On the fiscal side, the Government, which has been conservative in its revenue assumptions in the Budget, has the room to pre-emptively cut domestic fuel taxes to nip inflationary expectations, stoke faltering consumption levels and sustain India’s fragile post-COVID-19 recovery through this global churn.

Inflection point for the West­led global order

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  • The Ukraine crisis has come to a head with Russia biting the bullet and launching “a full-scale invasion of Ukraine.” Even as the United Nations Secretary-General António Guterres was warning that the world was facing a “moment of peril” and calling for “restraint, reason and de-escalation” to avoid “a scale and severity of need unseen for many years”, Russian troops that had massed on Ukraine’s borders for months now were preparing to launch an assault on Ukraine — after Russian President Vladimir Putin recognised the Russian-backed, rebel-held areas of Donetsk and Luhansk as independent and even challenged the historical right of Ukraine to exist.
  • Mr. Putin continued to insist that he was open to “direct and honest dialogue” but with every step of the escalatory ladder he climbed, he ensured that dialogue was becoming difficult to sustain. And the Russian Foreign Ministry even suggested that the idea that Russia is to blame for the crisis in Ukraine is an invention by the West. But the invasion has now happened in full view of the international community, with Mr. Putin saying that Russia did not plan to occupy Ukraine and demanding that its military lay down their arms. Launching a “special military operation” and alleging that Ukraine’s democratically elected government “had been responsible for eight years of genocide”, Moscow’s seeming goal is demilitarisation and a “denazification” of Ukraine.

Putin versus the West

  • Hours before the invasion, the western countries had imposed a new round of sanctions against Moscow (targeting Russian individuals and banks linked to Mr. Putin’s regime), and German Chancellor Olaf Scholz suspended certification of Nord Stream 2, a major gas pipeline between Russia and his nation. But clearly it had no real impact on Mr. Putin’s calculus.
  • United States President Joe Biden, in his response to the invasion, has suggested that Washington and its allies would respond in a united and decisive way to “an unprovoked and unjustified attack by Russian military forces” on Ukraine. But the future course of action for the West remains rather murky. Perhaps because of this, Charles Michel, the head of the European Council, has continued to insist on the need “to be united and determined and jointly define our collective approach and actions”. The European Union has announced a “massive” package of sanctions as it comes to terms with “the darkest hour in Europe since the Second World War”.
  • Where Mr. Putin has shown resolve and a single-minded sense of purpose, the West has been incoherent in its response — not being able to present a united front, and worse, not even speaking the same language at times. For Mr. Putin, this is a moment to use Ukraine to highlight his broader demands of restructuring the post-Cold War European security order. For the West, this has been a moment when it has been found wanting — a lack of imagination, lack of will and lack of leadership, all rolled into producing a lackadaisical response to the one of most serious security crises in decades.

General disarray

  • Mr. Biden’s leadership has been found wanting. For all his talk of leading through coalitions, all he has to show for is a disarray in the European ranks. Where Germany has been reluctant to allow North Atlantic Treaty Organization (NATO) allies to ship German-origin weapons to Ukraine, France has used this moment of crisis in trying to showcase its own leadership credentials.
  • French President Emmanuel Macron has been talking of the European Union taking decisions independent of the U.S. in an attempt to showcase its ‘strategic autonomy’. The trans-Atlantic alliance has barely functioned despite all those who had argued that it was the fault of U.S. President Donald Trump fracturing this partnership. It turns out that even Mr. Biden has not been able to build the trans-Atlantic engagement around common objectives to be pursued collectively.

The energy factor

  • Moreover, the EU’s energy dependence on Russia is a reality that has to be factored into strategic considerations. With the EU importing 39% of its total gas imports and 30% of oil from Russia, and with the Central and Eastern European countries being almost 100% dependent on Russian gas, the reasons for internal EU dissonance are not that difficult to fathom.
  • Where Russia repeatedly made it clear that it remains willing to even use the instrumentality of force to attain its diplomatic objectives, the singular refrain from the West has been that it has no intention of escalating. In such a scenario, the initiative is always with the side that can demonstrate a willingness to ratchet up tensions. Mr. Putin is willing to take significant strategic risks which the West is not ready to do. And, as a result, the initiative since the very beginning of this conflict has been with Russia.
  • The West has been left to respond reactively to the developments around it. And it is in the very nature of great power politics that smaller and weaker nations such as Ukraine struggle to preserve their very existence.

A strong Beijing

  • This ineffectual western response has emboldened not only Russia but also China as the focus of the West is in danger of moving away from the Indo-Pacific. The Russia-China ‘axis’ is only getting stronger as the two nations seem ready to take on the West that seems willing to concede without even putting up a fight.
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  • It was this week in 1972 that U.S. President Richard Nixon shook hands with Chinese Premier Zhou Enlai and radically altered the contours of the global order by reshaping the extant balance of power. It allowed China to emerge as the leading global economic power and helped the U.S. in winning the Cold War.
  • Today, the balance of power is once again in flux, and as China develops a strategic partnership with Russia, the future of the West-led global order will be defined by how effectively it responds to the crisis in Ukraine. The tragedy of great power politics is unfolding in Europe but its embers will scorch the world far and wide, much beyond Europe.

Radiation spike in Chernobyl: Ukraine

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  • Ukrainian authorities said on Friday that radiation levels had increased in the Chernobyl exclusion zone and warned the seizure of the nuclear plant by invading Russian troops could have terrible consequences.
  • Russian President Vladimir Putin on Thursday ordered his troops to invade Ukraine and on the same day they seized the Chernobyl nuclear power plant in one of the most radioactive places on earth.
  • Ukrainian authorities also said that they had informed the International Atomic Energy Agency that they had lost control of highly radioactive fuel rods from the power plant.
  • In the terrible hands of the aggressor, this significant amount of plutonium-239 can become a nuclear bomb that will turn thousands of hectares into a dead, lifeless desert, said Ukraines Environmental Protection Ministry.
  • The explosion in the fourth reactor at the nuclear power plant in April 1986 left swathes of Ukraine and neighbouring Belarus badly contaminated and led to the creation of the exclusion zone roughly the size of Luxembourg.
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Biden nominates Ketanji Brown Jackson to SC

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  • President Joe Biden on Friday, February 25, 2022, nominated federal appeals court Judge Ketanji Brown Jackson to the U.S. Supreme Court, making her the first Black woman selected to serve on a court that once declared her race unworthy of citizenship and endorsed segregation.
  • Introducing Ms. Jackson, Mr. Biden called her a “proven consensus builder” who has a pragmatic understanding that the law must work for the American people.”

Campaign promise

  • In Ms. Jackson, Mr. Biden delivered on a campaign promise to make the historic appointment and to further diversify a court that was made up entirely of white men for almost two centuries. He chose an attorney who would be the high courts first former public defender, though she also possesses the elite legal background of other justices.
  • Ms. Jackson would be the current court’s second Black justice — Justice Clarence Thomas, a conservative, is the other — and just the third in history. She would replace liberal Justice Stephen Breyer, 83, who is retiring at the end of the term this summer, so she wont change the courts 6-3 conservative majority.
  • She would be only the sixth woman to serve on the court, but she would join three others already there, including the first Latina, Justice Sonia Sotomayor.
  • In brief remarks, Ms. Jackson thanked Mr. Biden, saying she was “humbled by the extraordinary honor of this nomination. She highlighted her familys first-hand experience with the entirety of the legal system, as judges and lawyers, an incarcerated member and police officers.

‘India said to eye rupee trade to offset sanctions on Russia’

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  • India is exploring ways to set up a rupee payment mechanism for trade with Russia to soften the blow on New Delhi of Western sanctions imposed on Russia after its invasion of Ukraine, government and banking sources said.
  • Indian officials are concerned that vital supplies of fertilizer from Russia could be disrupted as sanctions intensify, threatening Indias vast farm sector.
  • India has called for an end to violence in Ukraine but refrained from outright condemnation of Russia, with which it has long-standing political and security ties.
  • Russia invaded Ukraine by land, air and sea on Thursday in the biggest attack on a European state since World War Two, prompting tens of thousands of people to flee their homes.
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  • Russian forces pressed their advance on Friday and Ukrainian President Volodymyr Zelenskiy pleaded with the international community to do more, saying sanctions announced so far were not enough.
  • This is a proactive move assuming that the conflict escalates and there could be a slew of sanctions in place, the source said.
  • In this case we would not be able to settle the transaction in dollars and so an arrangement has been proposed to set up a rupee account, which is being considered.
  • Funds in such accounts act as a guarantee of payment for trade exchanged between two countries, while the parties barter commodities from each other to offset the sum, the source said.
  • A similar arrangement, in which part of the settlement with Russia is in foreign currency and the rest is through local rupee accounts, was also being explored, said the banking and the government source.
  • Such mechanisms are often used by countries to shield themselves from the blow of sanctions and India had also used it with Iran after it came under Western sanctions for its nuclear weapons programme, the source said.
  • The programme was introduced in 2012 and worked well for several years.
  • The discussions on Russia were still at an early stage and formal talks had not yet begun between the two sides, an Indian government official said.
  • EU leaders agreed on Thursday to impose new economic sanctions on Russia, joining the United States and Britain in trying to punish Russian President Vladimir Putin and his allies for the attack. The sanctions impede Russias ability to do business in major currencies and target individual banks and state-owned enterprises.
  • The Finance Ministry did not immediately respond to a request seeking comment. None of the sources wanted to be identified as the discussions are private.
  • Russias exports to India stood at $6.9 billion in 2021, mainly mineral oils, fertilisers and rough diamonds, while India exported $3.33 billion worth of goods to Russia in 2021, mainly pharmaceutical products, tea and coffee.
  • Russia and Belarus usually account for nearly a third of Indias total potash imports. It would not be feasible to replace them amid a rally in fertilizer prices to a record high, a senior industry official told Reuters.

‘War has put Indian coffee exports to Ukraine in jeopardy’

  • Russian forces pressed their advance on Friday and Ukrainian President Volodymyr Zelenskiy pleaded with the international community to do more, saying sanctions announced so far were not enough.
  • This is a proactive move assuming that the conflict escalates and there could be a slew of sanctions in place, the source said.
  • In this case we would not be able to settle the transaction in dollars and so an arrangement has been proposed to set up a rupee account, which is being considered.
  • Funds in such accounts act as a guarantee of payment for trade exchanged between two countries, while the parties barter commodities from each other to offset the sum, the source said.
  • A similar arrangement, in which part of the settlement with Russia is in foreign currency and the rest is through local rupee accounts, was also being explored, said the banking and the government source.
  • Such mechanisms are often used by countries to shield themselves from the blow of sanctions and India had also used it with Iran after it came under Western sanctions for its nuclear weapons programme, the source said.
  • The programme was introduced in 2012 and worked well for several years.
  • The discussions on Russia were still at an early stage and formal talks had not yet begun between the two sides, an Indian government official said.
  • EU leaders agreed on Thursday to impose new economic sanctions on Russia, joining the United States and Britain in trying to punish Russian President Vladimir Putin and his allies for the attack. The sanctions impede Russias ability to do business in major currencies and target individual banks and state-owned enterprises.
  • The Finance Ministry did not immediately respond to a request seeking comment. None of the sources wanted to be identified as the discussions are private.
  • Russias exports to India stood at $6.9 billion in 2021, mainly mineral oils, fertilisers and rough diamonds, while India exported $3.33 billion worth of goods to Russia in 2021, mainly pharmaceutical products, tea and coffee.
  • Russia and Belarus usually account for nearly a third of Indias total potash imports. It would not be feasible to replace them amid a rally in fertilizer prices to a record high, a senior industry official told Reuters.

‘War has put Indian coffee exports to Ukraine in jeopardy’

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  • The current crisis has put Indian coffee exports to Ukraine and neighbouring countries in jeopardy, the Coffee Board said on Friday.
  • So far, (April-Jan.) this fiscal, India had exported 6,604 metric tones of green bean, instant and roast and ground coffee to Ukraine and 23,519 metric tones to Russia. Coffee exports to Ukraine, in fact, peaked at 7,327 metric tonnes during fiscal 2018-19, and in 2019-20 it was 6,947 metric tonnes.
  • CIS countries were traditionally the major soluble/instant coffee importers from India. Russia currently accounts for 75% of this, while Ukraine alone has more than 20% share, according to data shared by Coffee Board.
  • “The Russia-Ukraine war will certainly impact Indian coffee exports to Ukraine and its neighboring countries,” said Dr. K.G. Jagadeesha, CEO and Secretary, Coffee Board.
  • According to coffee exporters, in addition to the immediate impact on exports, the war could also have an indirect and long-term impact on the overall coffee exports from India to Ukraine and neighbouring coffee markets
  • “The Russia-Ukraine war is likely to push up prices of fuel, metal/aluminium (instant coffee is mostly exported in metal cans and containers) and packaging materials. It could also spiral logistics costs,” said Ramesh Rajah, president of the Coffee Exporters Association. “This means, the overall cost of exports will certainly go up and buyers are sellers are already worried about it,” he said. “Also, all these are happening when the prices of packaging raw material had already gone up by 30% recently,” Mr. Rajah added.
  • Ukraine is one of the largest importers of coffee in that region, while Russia is one of the top 5 buyers of Indian coffee. “Although Ukraine is largely a tea-consuming country, it has a very mature coffee culture, thanks to Turkish and Ottoman influence,” he said. “The current uncertainty is certainly worrying, both for exporters and as well as importers of all varieties of Indian coffees,” he added.