His name is Narendra Modi. And as the 14th Prime Minister of India, he may be the most popular world leader today. Last evening, President Biden feted Mr. Modi to a State Diner, as the United States spared no expense in rolling out the Red Carpet. Earlier in the week, Modi was the chief speaker for the Yoga celebration at the United Nations. Last week, he was the Honored Guest and Keynote Speaker at Russia’s St. Petersburg Economic Forum. And, of course, he is esteemed as a primary supplier of refined petroleum products for Western Europe.
How he became so heralded is a fascinating story that tells much about the current direction of this global economy. It all began, as so much of our contemporary history, with the conflict in Ukraine. A conflict that divided the World into the pro-Ukrainian countries of the “North,” principally those countries in Western Europe who are members of NATO and the United States. While on the other side of the conflict, and the World, are the nations of the “South,” those countries representing the BRICS nations, Brazil, Russia, India, China, and South Africa.
NATO had two principal strategies to oppose the conflict: first, to supply an unlimited amount of military equipment to Ukraine, and second to provide economic sanctions against Russia. Chief among these was to cut off sales of Russian oil to the West. Combine this with the destruction of the Nordstream Pipeline that provided Russian Gas to Europe, and you have a pretty impenetrable block for any Russian oil going from Russia to Europe.
It took Russia only a short time to realize that they would have to make up for those lost sales to Europe and, incidentally, to the United States, which had also cut off all Russian oil sales. So, like any good salesman, Russia went to its best customers and offered a discount for all Russian oil they’d purchase. Both India and China were anxious to buy more Russian oil, and they quickly made up for any deficit from the Western Countries. India increased its imports of Russian oil by better than 40% in the first year of the War, and then last year increased that by another 20% above that. India is importing nearly 2 million barrels of Russian oil daily. That’s a record.
But here’s the rub: not all that oil is for Indian consumption. Nearly half of that oil is refined in India and sold in the open market. And who buys most of that Indian refined oil? You guessed it: Europe. So India has become a most significant supplier of refined petroleum products to Europe. Petroleum Products, which are at their core, Russian oil.
What a small world.
The Finish Think Tank, the Center for Research on Energy and Clean Air, has named this process the “Laundromat.” It’s the process where Russian Urals Crude is first sold to India, providing Russia with much-needed Rubles, then refined by India and sold again to Europe — creating cash flow all along the chain.
Ironically, Bulgaria utilized the same Laundromat process to sell Diesel to Ukraine. Again, Bulgaria buys Russian crude oil, refines it into Diesel, among other products, and then sells the Diesel to Ukraine. So, as incredible as it may sound, many of those Ukrainian tanks are currently operating on Bulgaria-refined Russian oil.
The World continues to get smaller.
So you can see why Prime Minister Modi is popular in Russia. Last week, at their premier Global Conference: The St. Petersburg Economic Forum, Modi was the honored guest and keynote Speaker, as well as the guest of President Putin at dinner. After all, India is now one of Russia’s best oil customers, a customer worth billions in petroleum sales for Russia.
Last night the United States began to play catch-up. Modi had been invited to a full State Visit, complete with a State Diner, yesterday. The Biden Administration is increasingly aware that India is slipping into the Southern Half of the Globe. A founding member of BRICS, the relationship between India, Russia, and China is becoming closer. Recently we’ve seen a growing military alliance between Russia and China. And although India has remained assiduously neutral, it’s unclear which side India would choose if a worldwide conflict emerged between Russia and NATO.
Whether America can pull India away from its increasing alliance with Russia and China will fall to the diplomatic efforts of President Biden. Like it or not, much of this country’s future relationship with India will rest in the personal interaction between Biden and Modi during this State Visit. Indications in the Indian Press are that their government is thrilled to have its leader visit the US. Whether that translates into something more substantive is an open question.
But one thing is sure, the Indian relationship with Russia is solid, representing billions of dollars in trade. While the United States finds itself virtually empty-handed. Like the house guest who brings a half-empty bottle of wine for their host, India agreed to a token purchase of two small military equipment contracts from the Americans. While the American press may portray this as a “big deal,” the reality is that Modi is just being polite.
