- What is Strategic Hedging?
- Components of Strategic Hedging
- India’s Strategic Hedging
- Countering China by Strategic Hedging
- US-Russia Hedging
- Where did India failed to gain Strategic hedging?
India’s embrace for Strategic Hedging
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- Recently, the Indian PM met with French President, US President and Russian President within just 2 weeks in a summit-level meeting.
- Given the instability in international politics, this visits shows a remarkable proficiency in India’s foreign policy.
What is Strategic Hedging?
- Strategic hedging is a form of behaviour used by countries wanting to improve their competitiveness (military and economy) while at the same time avoiding direct confrontation with main competitors.
- In other words, it is form of a second-tier countries behaviour against the leader of dominant country (such as US) in a unipolar system.
- Unipolar system refers to distribution of power in which one country exercises most of the economic and military influence over other countries.
- Strategic hedging helps second tier countries to face specific uncertainty in order to improve its security position in case the relationship with the system leader would deteriorate.
- It tries to find balance between soft balancing (non-military ways to oppose superiority of one country over other) and hard balancing (military forms to oppose superiority of one country over other).
Components of Strategic Hedging
There are three primary factors that create strategic hedging: Economic capacity, Military power, and Central government.
- An increase in relative economic power tends to improve a nation’s international political influence
- Rising powers during the industrial age sought to accumulate wealth to use this wealth in the restructuring of the international system.
- Three economic indicators are used to measure the strategic hedging ability: GDP, foreign exchange reserves, and government debt.
Gross Domestic Product (GDP)
- GDP supports the national economy, helps the provision of foreign aid, and increases the ability to bear additional costs resulting from hedging policies.
Foreign Exchange and Gold Reserves
- Foreign exchange reserve plays a significant role in hedging overall macroeconomic risks. High volume of foreign exchange reserve and gold helps the hedging country to accept domestic and international costs while doing hedging activities.
- Increasing government debt-to-GDP ratio hinders the implementation of hedging policies. Therefore, Government Debt has been used as a negative indicator.
- Military power has a dual and contradictory effect from the standpoint of hedging behaviour.
- While strategic hedging involves upgrading of military capabilities, it seeks to avoid provoking the system leader to increase its military arsenal.
- Importantly, increases in the military expenditure lead to improvement of the competitive military ability of the hedging state.
- The size of military spending, therefore, is a positive indicator of the level of hedging.
Growth of Military Arsenal
- While improving competitive military ability is essential to strategic hedging, the hedging country should avoid an extensive arms buildup that might lead to a dispute.
- Hence, military spending, leading to negative economic growth, is used as a negative critical indicator for measuring strategic hedging capability.
- Rich nations require a strong central government to harness the economic and military power for the purposes of foreign policy, which explains why the United States was a minor power in the late nineteenth century although it was the richest country in the world.
- Democracy allows for a greater number of citizens to participate in government system and in the introduction of laws.
- However, high levels of democracy lead to reducing central authority’s capability to make decisions, and thus to a decline in coordination at the highest levels of government, which is one of the most important conditions for strategic hedging.
India’s Strategic Hedging
- India-France strategic partnership is not new.
- Indian PM visits France president immediately after his election win and was the first foreign leader to meet him.
- Both nations are collaborating in cybersecurity, digital technology, quantum computing, artificial intelligence as well as cooperation in Indo-Pacific.
- France also supported India in the recent abrogation of Article 370.
- US offered to help in the mediation process between India-Pakistan after India abrogated the Article 370.
- However, India did not accept the US proposal for mediation purpose by saying that it is a bilateral matter between India and Pakistan only.
- The strategic partnership with the US cannot be expected to be trouble-free. For instance, Trade is an issue between India and US.
- However, India’s foreign policy have to maintain good relationship with US.
- Indian PM recently participated in the Eastern Economic Forum as chief guest in Vladivostok, Russia and announced $1 billion credit for the development of the Russian Far East.
- This shows that India will not sacrifice its ties with Russia, which is fundamentally in its national interest.
Countering China by Strategic Hedging
- India’s ties with China are the most challenging at this time.
- China’s support to Pakistan, its persistent opposition of India’s great power ambitions, the one-sided trade relations and its lack of concern for India’s core interests all pose a threat to India’s interests.
- Given above scenario, India pursued balancing china strategy. Balancing China refers developing the capacity and linkages to counter China’s political and military efforts against India.
- Balancing China requires building up India’s defence capacity and bringing together a group of countries willing to support each other when they become targets of China.
- However, recent informal summits between India, China and Russia, Indian Prime Minister’s speech at the Shangri La Dialogue in Singapore and his visit to Indonesia shows that India is pursuing Strategic Hedging policy (rather than Balancing china) against china.
- In other words, India is trying to find a strategic alliance with china while also building security and political links with a number of other powers in the region against China.
- Also, India is trying to reassure China that India has no interest in balancing or containing China.
How did China use Hedging?
- For any country, effective hedging would mean calculated combination of soft and hard power.
- For instance, China has used hard and soft power over the last decade against the US and India. As a result, US and India are seeing the great power emergence of china.
- Despite enhanced emphasis on border talks between India-China since 2014, 2014 itself saw more than 300 transgressions by Chinese army. Besides, the Chinese Army transgressed into Indian territory 426 times in 2017, up from 273 times in 2016.
- This strategy of disconnecting military decisions from diplomatic talks between India and china has proven to be a potent hedging strategy which China has used against India.
- Moreover, China has used Asia as its strategic naval ground to hedge against a host of countries ranging from the US in the Asia-Pacific and India in the Indian Ocean Region (IOR).
- China’s Belt and Road Initiative (BRI) has created china’s influence across Asia, Eurasia and Europe. Such influence by China is nothing but hedging, as china intends to have hostile intentions under its BRI in the form of economic aid.
India’s effort against Chinese Hedging
- India’s attempt to create external influence in Seychelles (Assumption islands) and Oman (Duqm port) through use of strategic ports and bases
- Membership in the Quad
- India’s cooperation with Japan to counter China’s advances in the Indo-Pacific and the South China Sea
- US-India Joint Strategic Vision for the Asia-Pacific and the Indian Ocean signed in 2015.
Why India’s hedging strategy against china won’t work?
- India’s hedging against china wont’ work as China is in any case unlikely to trust India. For instance, at the Shangri la dialogue, Prime Minster of India said that India is seeing Indo-Pacific as natural regional and not as a strategy.
- This statement, in the light of India’s continued balancing efforts against china, won’t be accepted by china.
- India’s shift towards hedging will reduce the confidence of India’s potential partners, especially in the Indo-Pacific region.
- Any perception of India’s unreliability as a partner would make it difficult to build the Asian balance that India claims to want. For India’s potential partners, India’s efforts to reach out to China will be seen as a signal of its lack of faith in building a balance against China.
- The consequence of this hedging strategy will be that India will neither reduce the threat it faces from China nor have the partners it needs to counter this threat.
- India’s position as one of the world’s largest importers of arms bestows it with unique positional advantage to hedge against Russia and the US.
- Russia and US both have competed to replace each other in the last few years as the largest exporter of arms to India.
- While Russia was India’s top defence supplier in 2017, the US has attained the special category status, namely, ‘Major Defense Partner’ of India.
- Moreover, between the US and Russia in recent times, India has also shows interest to hold more power in Asia.
- India’s exceptional position between Russia and the US has allowed for simultaneous parity in relations with both the countries.
- However, India’s improved relationships with US has pushed Russia towards China and Pakistan.
Where did India failed to gain Strategic hedging?
Deficit in aid providing aid to neighbouring countries
- Pakistan has witnessed a slew of Chinese investments, deep Chinese inroads through the China-Pakistan Economic Corridor (CPEC) and a planned naval base at Gwadar in Pakistan.
- Sri Lanka has leased its strategic Hambantota port to China for a period of 99 years allowing Chinese naval inroads in South Asian waters; Nepal is using the China against India at will; and Maldives snubbed India in the recent constitutional crisis in that country to the advantage of China.
- These developments have substantially curtailed India’s negotiating power in its neighborhood.
- Much of the loss in India’s hedging power in its neighborhood has to do with the deficit in aid providing capacity to needy countries and lack of a ruthless political actions.
Excluding Australia from Quad Grouping
- India lost an important opportunity at creating hedging capacities in the Indo-Pacific when it reportedly opposed Australia’s request to be a part of the Quad, to gain support of the China.
- A far better option for India would have been to remain neutral on Australia’s inclusion.
- Hence, it can be said that it is a big threat to India’s options of strategic hedging in the future if it tries to gain favour of a dominating country by sacrificing ties with other countries.
- Hedging in international politics, by definition involves creating external common leverages with other stakeholders, with the advantages tilting in favour of the hedging nation.
- Under current circumstances, when most of the other countries are hedging against India, there is a need for India to adopt similar countermeasures.
- For instance, Russia’s altered ties with Pakistan and China, China’s friendly ties with Pakistan (China-Pakistan Economic Corridor) Nepal’s double gain game between India and China, Sri Lanka’s prioritizing of China over India (leasing its strategic Hambantota port), and, Maldives’ snub of India favouring China, could all be as much accorded to China’s higher capabilities than India.
- For India to sustain hedging as a sustainable foreign policy strategy, it would have to be multidirectional, as opposed to being focused on one country which poses the most immediate threat.