12

Jul

Modi's Skipped  SCO Summit Because of Chinese Move on  Yuan 

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Gopal Misra

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New Delhi, 12 July 2024

Many diplomats and foreign policy experts were surprised at Prime Minister Narendra Modi’s decision not to attend the summit meeting of Shanghai Cooperation Organization( SCO) in  Kazakhstan earlier this month. His decision had come for severe criticism and was considered detrimental to India’s international image. .

Now it is known that Modi’s decision was because of India’s reluctance to agree to Beijing's agenda to replace the American dollar with the yuan in exchanging goods and services among the member countries of the SCO.

Interestingly, some of the important members of the SCO, such as Iran, Russia and several central Asian countries are already using the yuan. Perhaps India is the major economy that has so far refused to be trapped in the ongoing currency politics from focusing on the US dollar.

The hesitancy of  Prime Minister Narendra Modi on the issue of attending the  summit of the Shanghai Cooperation Organization, SCO held on  July 3 and 4 can be attributed to this issue. The issue of Modi's participation, however,  finally ended with India's External Minister S.Jaishanker  deputed to lead the Indian delegation at Astana, Kazakhstan.

 

 

Article at a Glance

The Shanghai Cooperation Organization (SCO) is planning to replace the US dollar with the Chinese yuan in trade among its member countries. India, a major economy, has been hesitant to join this initiative, and Prime Minister Narendra Modi's initial reluctance to attend the SCO summit was seen as a sign of this.
However, India's External Minister S.Jaishanker will lead the Indian delegation at the summit. China's aggressive approach towards India, known as "Woolfish diplomacy," has its limitations, and India is not willing to be humiliated like it was in 1962.
India supports a multi-currency platform for regional trade, but the trust deficit with China remains. The SCO also aims to tackle terrorism, but it's unclear if countries like Pakistan and Iran will agree to joint actions.
India has been working towards closer economic cooperation with China, and it's hoped that China will adopt a more inclusive and friendly approach.

 

 

 

 Woolfish Diplomacy

It is for Beijing to realize that its current aggressive approach towards India, popularly called Woolfish diplomacy, has its limitations. It appears that despite being given adequate thrashing at the Nathu-La, the PLA created a standoff at the Sumdorong Valley in Arunachal. Despite Modi's friendly overtures, China challenged Indian forces at Doklam in 2017 and three years later in 2020, the PLA attacked Indian forces at the Galwan Valley in eastern Ladakh. The standoff has entered in fifth year, but the Modi Government couldn't lower its guard.

It was difficult for Beijing to ignore Modi's absence, who has been the main architect of growing economic cooperation in the region, especially with China's communist regime, perhaps more exploitative  than any capitalist system.

Perhaps It is high time that Beijing must realize that Modi cannot be humiliated . It also cannot afford to ignore India and its leadership in achieving its geo-political agenda, especially its determined bid to replace the US dollar with the Chinese currency, the yuan.

 

China has already made agreements with most of the SCO members comprising Iran, the Central Asian countries and Pakistan. The resource-starved Russia may concede to the pressure of China.

With its worldwide trade surplus, it is natural for Beijing to assert its position as an economic superpower. However, at the Summit  on July 4, the relevance of the Chinese currency in world trade was finally asserted before the top leaders of the region as well as in the presence of Russian President Vladimir Putin, Iran's Mohammad Mokher and Pakistani PM Shahbaz Sharif.

India has not opposed exploring the options for trading in other currencies, but she is not prepared to concede the replacement of the yuan by dollar. It may be recalled that the India-USSR trade was being conducted in rupees. Even after the collapse of the USSR, India maintained the previous rouble-rupee exchange rates, thus enabling the successor state Russia to obtain the essentials from India. Therefore, India would be supporting a multi-currency platform for regional trade, but the trust deficit regarding China continues to haunt the region.

 

Apart from being a vibrant forum for promoting trade and financial cooperation, the SCO also endorses joint action against the terrorists. It is unlikely that countries like Pakistan and Iran would ever agree to joint actions against terrorists, separatists and extremists. However, it depends upon Beijing to restrain its close allies Iran and Pakistan to dissociate from this state-sponsored violence. It, however, goes to the credit of Chinese President Xi Jinping that he helped two estranged neighbours, Saudi Arabia and Iran to restore their diplomatic ties. It is believed that Iran's top diplomatic representatives would be together with their counterparts in Saudi Arabia in future negotiations.

 

It goes to the credit of  Modi that during the past 25 years, including his innings in Gujarat as its chief minister, he has diligently been working for closer economic cooperation with India's northern neighbour, China.

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