EDITORIAL - MARCH, 6, 2022

THE HINDU (LUCKNOW)-SUNDAY, MARCH 6, 2022

  

Commodity crunch Will sanctions against Russia impact long- term supply of wheat, oil, metals and other goods? PRASHANTH PERUMAL  The story so far: Commodity prices have gone into a tizzy after Russian forces invaded Ukraine last month. The Bloomberg Commodity Index recorded its biggest weekly rally since 1960 last week with gains of 13%. Many fear that a drop in the supply of essential commodities such as oil, metals, and agricultural goods could negatively affect the global economy that is still recovering from the pandemic. The price of Brent crude oil on Thursday almost hit $120 per barrel, the highest in a decade. Why are commodity prices shooting up? -  The military conflict between Russia and Ukraine has led to disruptions in the global commodity supply chain. Commodity traders have been unwilling to purchase oil may be unable to sell them in the global market due to sanctions imposed by Western governments. The United States and European Union have been taking measures to debilitate Russia’s economy by cutting Russian banks off the SWIFT payment massaging system and freezing Russia’s foreign reserves. There are also logistical difficulties in transporting commodities from war zones.  Exports from the region have already been affected and are likely to be further hit going forward, and this risk has been priced in by traders. It should be noted that in 2020 Russia produced about 12% of the world’s oil and about 16% of the world’s natural gas. It also produced nearly half of the world’s palladium (the shiny white metal which is a critical component in catalytic converters- a part of car’s exhaust system that controls emissions, for example). Ukraine, on the other hand, supplies about 12% of global wheat exports and 13% of global corn exports. In fact, the country supplied almost 90% of China’s corn imports in 2019. Disruptions in such significant commodity supplies can affect global commodity prices. At the same time, suppliers in other parts of the world have failed to increase their production to make up for the loss of output in Russia and Ukraine. The Organisation of the Petroleum Exporting Countries (OPEC), for instance, has made no effort to increase its output despite repeated calls by various world leaders to ensure energy security. In fact, the OPEC meet last week was wrapped up in minutes. Is commodity inflation just about the Russia-Ukraine war? -No. Commodity prices have risen significantly since at least 2021 when lockdowns were slowly lifted by governments and economies were allowed to open up. It should be noted that, owing to various frictions in the global economy, it took a while for supply chains disrupted by lockdown to return to normalcy. The supply of goods was limited and this scarcity was reflected in the form higher prices. Some analysts have also blamed policies in several countries to replace fossil fuels with renewable energy as a possible reason behind the increase in commodity prices. The emphasis on renewable energy, they argue, has discouraged investors from investing in the production of traditional fossil fuels. Meanwhile, the pandemic also witnessed major global central banks such as the U.S. Federal Reserve and the European Central Bank injecting massive amounts of fresh money into their economies. This led to an increase in the demand for all goods and services and caused their prices to rise. In short, too much money printed by central banks chasing too few goods has led to a rapid increase in commodity prices. Global commodity prices, as measured by the Bloomberg Commodity Index, have risen by over 60% since the start of 2021. Meanwhile, the price of an essential commodity like oil has risen even more. What lies ahead? -The course of the Russia-Ukraine war, which is unpredictable at the moment, will naturally affect the price of commodities going forward. The hit to commodity supplies could be greater the longer the war lasts and the uglier it gets. It should be noted that cutting off Russia’s economy from the rest of the world can affect not just Russia but also affect businesses and consumers that depend on the Russian economy. Countries like Germany, for instance, rely heavily on energy supplies coming from Russia. This could be why the West is yet to impose sanctions on Russia’s export of crude oil and natural gas. It is not just Russia that will suffer from the war and sanctions but also the rest of the world. Also, as the global economy struggles to grow while prices rise fast, analysts have warned about the risk of stagflation, which is marked by high price inflation and low growth.

Mission creep: on NATO expansionism Why did the North Atlantic Treaty Organization accept former Warsaw Pact states into the alliance? NARAYAN LAKSHMAN  The story so far: When Russian President Vladimir Putin launched a military invasion of Ukraine on February 24, the purported reason behind this act of extraordinary territorial aggression was that the eastward expansion of the North Atlantic Treaty Organization (NATO) threatened at some undefined point in the future to allow Ukraine to join the grouping as a treaty ally and thus bring a formidable transatlantic security coalition within striking distance of Russia’s western borders- yet  again. This justification offered by Russia as the reason for undertaking a ground war, including the brutal targeting with ordnance of civilian infrastructure and the expected devastation in terms of human casualty and property damage, has come under increasing scrutiny. In this context, understanding the history of NATO’s challenge to security posture of Russia would help identify the roots of this conflict. It might also provide a clearer picture of what institutional arrangements and assurances the Kremlin could accept as sufficient to pull back its troops and weaponry and engage in dialogue with the administration of Ukrainian President Volodymyr Zelensky. What are the origins of NATO and why does it matter to Russia? -The self-declared mission of NATO when it emerged on April 4, 1949, had three prongs: “deterring Soviet Expansionism, forbidding the revival of nationalist militarism in Europe through a strong North American presence on the continent, and encouraging European political integration.” Clearly the legacy of the Nazi scourge and World War II weighed heavily on the minds of the founding members of NATO. Although NATO claims that it is only “partially true” that its very creation was to counter the threat from the erstwhile Soviet Union, there was a strong emphasis on military cooperation and collective defense in its clauses. For example, Article 5 of the Treaty proclaims that “an armed attack against one or more of them… shall be considered an attack against them all” and that following such an attack, each ally would take “such action as it deems necessary, including the use of armed force” in response. The broader context at the time was that in 1955, a time when the Cold War was gaining momentum, the Soviet Union signed up socialist republics of Central and Eastern Europe to the Warsaw Pact, including Albania (which withdrew in 1968), Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and Romania. The Pact, essentially a political-military alliance, was viewed as a direct strategic counterweight to NARO, and its focus at the time was the fact that while East Germany was still part of the Soviet occupied-territory of Germany, the Federal Republic of Germany had joined NATO by May 1955, and Moscow began to worry about the consequences of a strengthened and reamed West Germany at its border. As a unified, multilateral, political and military alliance, the Warsaw Pact was aimed at tying Eastern European capitals more closely to Moscow, which it effectively did for several decades through the worst hostilities of the Cold War. Indeed, the Pact even gave the Soviet Union the option to contain civil uprisings and dissent across the European satellite states, including in Hungary in 1956, Czechoslovakia in 1968, and Poland in 1980-1981. All that began to unravel by the late 1980s, when the sheer downward pressure of inevitable economic slowdown in most Eastern European Pact allies reduced the potential for military cooperation to make any real difference strategically across the region. Thus, it hardly came as a surprise in September 1990 that East Germany quit the Pact to be reunified with West Germany, and soon Czechoslovakia, Hungary, and Poland withdraw Pact military exercises. The Pact was officially disbanded in early 1991 after the dissolution of the Soviet Union itself. What were the rounds of expansions carried out by NATO? -Even as the Soviet Union was dissolved into Russia and former Soviet republics, NATP, emboldened by circumstances and optimism that the global balance of power was tipping in its favor embarked on a path of expansion. During the term in office of U.S. President Bill Clinton, NATO began, in office of successive rounds of negotiation and expansion, to pull former Warsaw Pact states into its membership. After reunification, while Germany retained membership of NAO, the Czech Republic, Hungary, and Poland joined the alliance in 1999. But it did not end there- in 2004, Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, Slovenia joined the treaty organization. In 2009 Albania and Croatia signed on, in 2017 Montenegro entered the bloc and in 2020 it was North Macedonia’s turn. Why is Russia sensitive to NATO expansion? -In 2008, in the week leading up to NATO’s Bucharest Conference, “NATO Allies welcomed Ukraine’s and Georgia’s Euro-Atlantic aspirations for membership and agreed that these countries will become members of NATO.” They went on to announce a period of intensive engagement with both countries at a high political level to address the questions still outstanding regarding their Membership Action Plan applications. This set off alarm bells in Kremlin, because even the very concept of Ukraine, a nation considered to hold strong historic ties first to the Soviet Union and then Russia, was anathema. This development prompted Mr. Putin to warn erstwhile U.S. Undersecretary for political affairs William Burns that “no Russian leader could stand idly by in the face of steps toward NATO membership for Ukraine. That would be a hostile act toward Russia.” This was only among the more recent of a long list of actions by NATO leaders that Russia considers a political betrayal. However, it is not necessarily the case that Russia is right to believe that-and to understand this, it is important to grapple with the history of NATO expansion and its consequences. Did NATO violate a promise to avoid expansion? -An oft-quoted line in this line of enquiry is the comment by U.S. Secretary of State James A. Baker to Soviet leader Mikhail Gorbachev in February 1990, that “there would be no extension of NATO’s jurisdiction for forces of NATO one inch to the east.” While Moscow seized upon his comment to fuel its ostensible outrage at NATO expansion into the Baltic states region, it is a fact that in early 1990, the locus of the diplomacy for the Two Plus Four- including East and West Germany plus the United States, France, the Soviet Union, and the United Kingdom- agreement was whether a unified Germany would be part of NATO. Indeed, Mr. Baker’s aim in making that comment was to reassure Moscow that NATO command structures and troops would not be transferred to the territory of the former German Democratic Republic. Yet it was a difficult time in Russia politics, domestically, because in the aftermath of the Soviet Union’s dissolution, there was a failure to institutionalize democratic practices, a stable market economy, and a robust law and order system. Facing all manner of chaos at home, erstwhile Russian President Boris Yeltsin Began to interpret- many argue deliberately falsely- the Two Plus Four Treaty as a ban on NATO expansion east of Germany. He wrote to Mr. Clinton in September 1993, that Russia ruled out “the option of expanding NATO territory eastward.” Through the 2000s, Mr. Putin carried on in this vein, speaking with increasing alarm and anger at NATO’s steady expansion into Eastern Europe, and saying in Munich in 2007 that “it is obvious that NATO expansion does not have any relation with the modernization of the alliance itself or with ensuring security in Europe. On the contrary, it represents a serious provocation that reduces the level of mutual trust.” In 2008, following NATO announcement of its intent to admit Georgia and Ukraine into its alliance, Russia invaded Georgia and took control of several of its territorial regions; and in 2014, with Ukraine drifting closer towards an economic alliance with the European Union; Russia marched into Ukraine and seized Crimea.   Why do Indians go abroad for medical studies? What prompts students to pick countries like Russia, Ukraine and China? Will setting up more private colleges help? RAMYA KANNAN  The story so far: The war in Ukraine has turned the spotlight on something that has been the trend for about three decades now. When students from India studying in Ukraine cried out for help, it became clear that there were a large number of them trapped in a war zone. According to estimates from Ukraine, reported in the media, around 18,000 Indian students are in Ukraine. It may be safe to assume they are pursuing medicine, at least anecdotally, going by interviews with students who have returned. Hundreds of students are still stuck in several regions of Ukraine, while for those who have returned, an uncertain future threatens, unless the Government finds a solution soon. Which countries do Indian students prefer? -For about three decades now, Indian students have been heading out to Russia, China, Ukraine, Kyrgyzstan, Kazakhstan, and the Philippines to pursue a medical degree. The medium of education for these student is English, a language they are comfortable with, and the amount spent on living and the medical degree are far more affordable than paying for an MBBS seat in private medical colleges in the country. The desire to study medicine still holds a lot of value in the Indian community. While it retains the prestige of an honorable profession, there is a great deal of aspirational zeal in taking up medicine. The lack of equal opportunities exacerbated by the caste factor in the India context, has a great deal of impact on the prestige still associated with being a doctor, says G.R. Ravindranath, of the Doctors, Association for Social Equality. “For years, certain communities were denied the opportunities, and finally they do have a chance at achieving significant educational status. People still think it is good to have a ‘Dr.’ attached to their name, even if they do not specialize. In many rural areas, people still look at doctors as god’s incarnate.” Doesn’t India have enough colleges? -There are certainly far more MBBS aspirants than there are MBBS seat in India. In NEET 2021, as per a National Testing Agency press release, 16.1 lakh students registered for the exam, 15.4 lakh students appeared for the test, and 8.7 lakh students qualified. Barati Pravin Pawar, Union Minister of State for Health, told the Lok Sabha in December 2021, that as per data from the National Medical Commission (NMC), in 2021-22, there were 596 medical colleges in the country with a total of 88,120 MBBS seats. While the skew is in favour of Government colleges, it is not greatly so, with the number of private medical institutions nearly neck-to –neck with the state-run ones. That means over 50% of the total seats are available at affordable fees in Government colleges. Add the 50% seats in the private sector that the NMC has mandated must charge only the government college fees. Assuming each one of these seats is also available at this reduced fee structure that could be another 20,000 odd seats. In effect, roughly 65,000 seats are available within the affordable fee segment. Additionally, these colleges are also not distributed evenly across the country, with States such as Maharashtra, Karnataka, Tamil Nadu and Kerala having many more colleges. What about costs? -The cost factor on both sides of an MBBS degree is significant. The costs of and MBBS degree in a Government college tot up to a few lakh of rupees for the full courses, but in a private medical college, it can go up to 1 crore rupees for the five-year course. In case it is a management seat, capitation fees can inflate the cost by several lacks again. Whereas, an MBBS course at any foreign medical university in the east and eastern Europe costs far less. Students from Tamil Nadu who returned from Ukraine said on an average they had to spend close to 30 lakh-40 lakh, rupees inclusive of lodging and boarding. A majority of the students had written NEET at least twice, and only decided to move after they could not get an MBBS seat. On return, the requirement is to clear the Foreign Medical Graduates Examination, a licensure examination held for students who have studied medicine abroad, and for most countries, also a house urgency stint. Dr. Ravindranath explains that in India the disparities in income of doctors, and others, like nurses and allied health professionals, is also a key factor in making an MBBS degree alluring. People are willing to leave their home to study far away in much colder places and with completely alien cultures and food habits. They ability to practice as a doctor, in Government and private sectors simultaneously, and the scope of earning a life-long income are also powerful incentives, in addition to the social status it confers. Is the solution more private medical colleges? -While Prime Minister Modi emphasized that more private medical colleges must be set up in the country to aid more people to take up MBBS, medical education experts have called for pause on the aspect. If the aim is to make medicine more accessible to students of the country, the path ahead is not in the private sector, but in the public sector, with the Central and State governments’ involvement, they point out. From 2003, the Centre’s Pradhan Mantri Swasthya Suraksha Yojana has been working to augment facilities for quality medical education in the country. “Starting private medical colleges by reducing the strict standards set for establishing institutes may not actually be the solution to this problem, if we think this is a concern,” says Dr. Ravndranath. Going oversea to study does have advantages, it could broaden students’ mind and thinking, expose them to a whole range of experiences, and their approach to issues and crises is likely to be far better. However, creating more medical colleges will be beneficial for the country, if access and availability can be ensured. This will not be possible by resorting to private enterprise only. He adds that State and Central governments can start more medical colleges, as recommended by NITI Aayog, by utilizing district headquarters hospitals, and expanding the infrastructure. This way, students from the lower and middle social-economic rung, who are otherwise not able to access medical seats, will also benefit.