February 2012


The Elephant in the Room

By Michael Wesley
An encounter between impatient Australia and non-committal India: John Howard with Indian PM Manmohan Singh in 2004. © Penny Bradfield/Fairfax Syndication
Australia–India Relations

Great expectations attend the Australia–India relationship. The Labor Party’s agreement to sell uranium to India has removed a major impediment to closer relations. Planning is underway for mutual prime ministerial visits. Free trade agreement negotiations are ongoing. Bilateral trade and investment is surging, with Australia now India’s sixth-largest source of imports. The 2009 attacks on Indian students have receded and India continues to be a major source of students and settlers in Australia.

For Australia, investing the relationship with India with real substance is now more compelling than ever. Last year India entered its third decade of post-reform surging growth, which has seen its economy grow by around 8% per year, lifting it into the ten largest economies in the world. Its population is poised to become the world’s largest within a generation.

No other great power’s rise has seen so many well-wishers as India’s. To Beijing’s great irritation, India is spoken of as a coming power in the same terms as China, despite having an economy just over a third the size. The United States has declared its own interest in helping India rise – surely the first time in history that a dominant power has provided another with such a boost to the top table. Washington has negotiated a special civil nuclear agreement with New Delhi, effectively making India a deal outside the global agreement to prevent the spread of nuclear weapons.

Whereas India once cut a lonely figure in international relations – surrounded by hostile neighbours, isolated from regional and global coalitions, prickly and moralistic in its commitment to non-alignment – now it has many suitors. Japan, Korea and Vietnam have worked hard to build strategic relations with India. The Europeans have beaten a path to New Delhi. The Asia–Pacific region has been stretched to accommodate India, now a member of the East Asia Summit and on the cusp of admission to APEC. India is part of the ‘it’ club of emerging economies, a crucial player on global negotiations, a member of the G20.

India’s popularity is only partly about India. As China notches up double-figure growth rates decade after decade, concerns grow about how it will use its power. As the US, which has traditionally held the ring in Asia, staggers under record debt, toxic politics and a public weary of adventures abroad, it is natural for those worried about the rise of China to invest hopes in the rise – and congeniality – of Asia’s other giant.

Australia is one of India’s many suitors, but carries a legacy of difficult relations. As recently as the 1970s, Australia and India rubbed each other up the wrong way on practically every issue on which their interests touched. Bilateral trade had slumped to less than 1% of each country’s total trade.

India’s test of a nuclear weapon in the Rajasthani desert came just after Australia had decided against building its own nuclear weapon and signed on to the nuclear Non-Proliferation Treaty with all the evangelism of a new convert.

When Britain announced its decision to withdraw its forces east of Suez, it seemed only natural for Australia to applaud the American decision to build a base on the small Indian Ocean territory of Diego Garcia. To India, that decision was a direct slap in the face to its proposal to designate the Indian Ocean as a zone of peace.

In New Delhi’s eyes, Australia may have dismantled the White Australia policy, but it still chose to support Britain’s weapons sales to the apartheid regime in South Africa.

To Australia, India’s foreign policy tradition of non-alignment looked increasingly hypocritical as New Delhi drew closer and closer to the Soviet Union in the wake of the 1962 Sino-Indian War and American support for Pakistan. Australia’s self-designation as a middle power, able to mediate global issues impartially among the great powers, seemed no less hypocritical to India, coming as it did from one of the US’s staunchest allies.

At a more basic level, each country symbolised for the other everything it loathed or feared in the world. Australians, a small but rich population in control of an abundant continent, saw India as the incarnation of Asia’s impoverished teeming millions, poised one day to invade Australia’s rich territory. For Indians, Australia epitomised the rich, white minority who controlled the world: a reminder of an imperial order that had been dismantled in law, but not in legacy. The personalities of countries are born of their circumstances and experiences, and those of Australia and India are poles apart.

India lives in a dangerous neighbourhood. It has fought wars with nuclear-armed neighbours China and Pakistan, and is beset by internal instability (much of which is assisted by adjacent countries). Long sections of India’s borders are subjects of some of the longest-running disputes in the world. India’s focus has always been on its immediate neighbourhood, a region in which Australia is strategically irrelevant.

Australia, by contrast, shares land borders with no one. Its one recent territorial dispute, over mining rights in the Timor Sea, could not be less challenging to its sovereignty or security. With almost 80% of its population clustered near its eastern coastline, Australia’s face has always turned towards the Pacific. America’s Pacific fleet has provided for its safety, while a dynamic cycle of Pacific Rim trade and investment has made Australia prosperous. Despite its long-standing ‘Look East’ policy, India struggles to project power into the Pacific or to build significant economic relationships there. When India showed interest in joining APEC in the 1990s, Australia was prominent among the members who kept the door firmly closed. The Indian Ocean, on the other hand, is a region with which Australia has never come to grips.

But despite this troubled history, new dynamics are drawing Australia and India together. As a result of economic growth, India has a thirst for many things that Australia can supply in abundance. Energy is a big part of the story: India needs coal, and Australia is the world’s largest exporter. In time, uranium and gas could be part of the mix also. But there is another, more culturally critical commodity that Australia sells to India. About 40% of Australia’s exports to India are of gold.

Gold plays a vital role at all levels of Indian society. For centuries it has been the commodity that Indians have used to store and display wealth. In India it is less volatile in value than cash. Indian gold jewellery has a higher gold content than western jewellery and is worn across India’s ethnic divisions and social hierarchies. In a society prone to sudden instability, great comfort is taken from personal wealth kept so close to the body. Gold played a vital role in the crisis that sparked India’s liberalising reforms after 1991. India’s level of debt and sustained attacks on the value of the rupee had forced the government to apply to the IMF for a loan. Part of the collateral for the loan was 67 tonnes of gold bullion airlifted to London and Switzerland – an act of abject humiliation for India.

India’s economic growth after the reforms has created new wealth faster than at any time since Independence. With continuing concern about the currency and the banking sector, Indians have been determined to convert and store that wealth in gold. Australia’s role in supplying a commodity so essential to social stability has meant that New Delhi has been silent about India’s huge trade deficit with Australia.

The new forces of convergence go beyond just trade. India’s and Australia’s strategic imaginations have started to correspond for the first time. China is now the largest trading partner of both countries, but both are wary of its growing power. India has a legacy of conflict and ongoing border disputes with its northern neighbour. It is also intensely irritated that China continues to aid Pakistan, including by providing crucial assistance in acquiring nuclear weapons. Australians are growing more and more wary of China, particularly as its military modernisation begins to challenge both free navigation and the dominance of the American navy in the western Pacific Ocean.

India’s strategic thinkers have started to argue that, surrounded by instability to its north and west, India needs to build stronger diplomatic, military and commercial linkages with the countries to its south-east. Australia has realised anew the strategic importance of the Indian Ocean, as a body of water and commercial thoroughfare, and an increasingly integrated part of an Indo-Pacific strategic realm that will play a central role in the coming decades.

But neither country will conform easily to the expectations and preferences of the other. In many ways, engaging with a rising India presents Australia a much more complex task than engaging with a rising China. For all the opacity of its strategic culture, China’s interests are not hard to work out; nor are its actions particularly hard to interpret. A powerful India may be more benign than China or it may not, but it will be much harder to read or anticipate.

And Australia will always be neither fish nor fowl for India. The only western country in India’s strategic orbit, it will be moralising or pragmatic by unpredictable turns. Its substantial riches will not blunt its pursuit of even more wealth, a factor that could play a much greater role in its security decisions than it would in the calculations of countries that live in more dangerous neighbourhoods. Australia’s attachment to the mechanics of multilateralism may sometimes blind it to the possibilities of practical though imperfect solutions.

Australia, like many countries in Asia, hopes that a strong, democratic India will play a significant role in the emerging power balance in the region. But India will almost certainly disappoint such expectations. Its economic heft will outstrip its strategic clout for the foreseeable future. India’s focus will remain firmly on its immediate and enduringly troubled neighbourhood. Within that domain it will become an increasingly potent actor, able to offer or withhold access to its booming economy to surrounding countries, and capable of countering China’s efforts to complicate the balance on the subcontinent. India has a sense of status that is not matched by its capacity to shape events beyond south Asia; its influence will be rhetorical and potential rather than actual.

Australians have high expectations of the fact that India is a democratic great power, which they anticipate will mean a natural affinity for global institutions, free trade and other democratic countries. But there is little evidence that democratic idealism plays a significant role in India’s foreign policy. It has been no less willing than China to deal with authoritarian regimes, nor has it shown any inclination to subordinate its own interests in order to uphold the sanctity of global institutions or free trade.

India and Australia may share an apprehension about how a powerful China will use its heft, but both would be unwise to derive any strategic reassurance from this. It is hard to see any scenario in which India would choose to become involved in a confrontation that pits China against the US and its allies in the Pacific; it is equally hard to think of a scenario in which Australia would choose to become involved in a Sino-Indian confrontation in Asia.

At the heart of the ongoing mutual confusion will be the basic strategic orientation of each country. Australia has been serially monogamous in its choice of security partners; in the words of senior envoy Ric Smith, it approaches its alliance with the US with all of the reverence and commitment of a marriage. Canberra’s response to the growing fluidity of its strategic environment has been to draw even closer to its great and powerful spouse. India, on the other hand, will continue to be strategically promiscuous. Since the end of the Cold War, New Delhi has renovated its doctrine of non-alignment into a disinclination to enter into any binding groupings or commitments. It will choose its partner according to the dance. On some issues, its interests will see it do a deal with China; on others with the US. India’s sense of itself will mean that it will not fear taking stances that leave it isolated or unpopular.

This will make India a difficult player to factor into strategic calculations in the region. It will always opt for an attitude of non-committal flexibility. So the hopes of those in Washington and Canberra that India will sign on to a great democratic coalition to stabilise the region will almost certainly be in vain.

Australia is used to its alliance with the US increasing its importance to others in the region, but India regards the alliance as something that reduces Australia’s usefulness. When Canberra extends the hand of security engagement, it will struggle to convince New Delhi that it is attempting to draw India into an American-directed regional design. For its part, Canberra needs to be careful that whatever relationship is struck between New Delhi and Washington does not consign Australia to a marginal role.

The challenge of building a closer Indo-Australian relationship will lie in the encounter between an impatient Australia and a non-committal India. Australians like to think up initiatives and execute them in short order, while Indians confound and frustrate impatience, typically making decisions at the last minute. Ultimately, then, transcending their troubled history and ill-matched personalities is more than a diplomatic challenge for Australia and India. It will be a test of character and commitment – and ultimately of understanding and adaptability – on both sides.

Michael Wesley

Michael Wesley is Professor of International Affairs and director of the Coral Bell School of Asia Pacific Affairs at the Australian National University. His most recent book is Restless Continent: Wealth, power and Asia’s new geopolitics.

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