Guest Post by Tom Luongo
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With the U.S.’s attempt at regime change in Venezuela going nowhere fast it’s becoming increasingly obvious that major vassals allies aren’t scared of the consequences of defying us.
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India, in particular, has been quite clear in its opposition to Trump’s edicts on who they can and cannot trade with. And with Prime Minister Narendra Modi reeling from a corruption scandal it’s clear he isn’t going to give Trump an inch on important trade issues, especially with Modi in full re-election mode.
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Not only has India defied the U.S. over buying Iranian oil and Russian S-400 missile defense systems but now they continue to flaunt U.S. sanctions on Venezuela upping its purchases from 400,000 barrels per day to more than 600,000.
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The quantity of exports to India has jumped 66 per cent to 620,000 barrels a day and the boost is being driven by refiners like Reliance Industries Ltd and Nayara Energy Ltd, backed by Rosneft, Russia.
Overall though, Venezuela’s crude exports have taken a dip as the US has intensified the sanctions against the Latin American nation’s oil company.
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The response from the U.S. was the nearly inconsequential removing India from the Generalized System of Preferences which created tariff-free trade on a number of products between the U.S. and India.
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Crying over Spilled Oil
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It amounts to $190 million in net benefit to India a year.
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The preferential treatment brought India an annual “actual benefit” of just $190 million, he told reporters.
Of the 3,700 products covered, India used the concession for just 1,784, Wadhawan added.
“The benefit to industry is low, U.S. tariffs are already low,” said another government official, who spoke on condition of anonymity. “GSP is more symbolic of the strategic relationship, not in value terms.”
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It’s a 2% tariff reduction folks. It sounds big because it will hit $5.6 billion in trade but in the end it is less than 1% of the trade deficit between the U.S. and India.
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Trump is also hitting wayward Turkey with the same stick.
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I’m sure Erdogan didn’t even bother to notice.
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Let’s put this in context shall we? Even at a heavy discount to current prices ($55 vs. $65 per bbl), India is paying Venezuela over a billion dollars a month.
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And that’s part of the reason why India raised its purchases of Venezuelan oil, it’s available at a steep discount. Playing this out a little further, a $10 per barrel discount times 600,000 per month is a $72 million net benefit to India offsetting a large chunk of Trump’s temper tantrum.
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Because that’s what this amounts to, a tantrum. John Bolton and Mike Pompeo began a regime change operation that they shouldn’t have to take control of Venezuela’s oil and stick it in the eye of China and Russia who support Maduro financially and politically. Everyone else then has to take sides because in Trump’s mind our allies aren’t supporting us.
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Boo freaking hoo.
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Allies No More
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As has been pointed out numerous times, empires do not have allies, they have vassals. And when the vassals get uppity they need to be slapped down.
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But, what happens when they refuse to sit down? What happens when they continue to defy the imperial edicts of the Orange Obama and his Mustachioed Mafiosi?
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Exactly what we’re seeing now. Did anyone in the White House really think India and Modi would back down over $190 million in tariffs?
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Look, I’m all for removing barriers to trade and for the government to get out of the way of commerce. All government does is pick winners and losers, and this GSP program is a classic example of this.
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But, to think it was going to scare India into cutting its own throat economically is simply the height of hubris and, worse, paranoia.
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India is a massive energy importer. And all the Trump administration has done is antagonize India over issue after issue.: S-400s, Iranian oil, now Venezuela, destabilizing its relationship with Pakistan and China.
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And to make matters worse, Trump’s lack of a coherent foreign policy has alienated India on multiple occasions. Think back to the cancellation of the important 2+2 meeting last year because the North Korea Summit took precedence.
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Do you really think that sat well with the very proud Indians? No it didn’t. This was a meeting postponed for over a year already and once the U.S. canceled it again, it told India all it needed to know about its future relationship with Trump.
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Moreover, why would anyone spend one minute hoping that Trump will treat them with even a modicum of respect when it comes to trade? He already slapped major tariffs on steel (10%) and Aluminum (25%) and threatened the world with worse if they did any trade with Iran.
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The better plan is to expect the worst and prepare accordingly. This is why India was nonplussed when Trump hit back at their refusal to stop buying Venezuelan oil with the only thing he can hurt them with…. essentially nothing.
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The Asian Pivot
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All this is doing is confirming that the emerging powers of Asia — North, Central, South and East — will coalesce over time around a shared platform of intertwined goals.
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Pakistan’s Imran Khan is working hard to defuse the hostilities between it and India. The U.S. foreign policy establishment under John Bolton are freaking out at the idea of detente between India and Pakistan while they are trying to squeeze China and Russia ‘until the pips squeak.’
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Trump knows the U.S.’s unipolar moment is behind us, but he can’t let go of it without a fight. That desire is admirable but he would be better served in the long run to bow off the center of the stage gracefully versus the embarrassing us to the point of vilification.
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Because that’s the next stage of this. Trump has no real leverage over China in trade talks. If he can’t control emerging powers like India or effect regime change in a basket case like Venezuela, what does he really have to threaten China with?
