By: Gayathri Pramod, Research Analyst, GSDN

In 2025, the United States sharply escalated trade pressure on India through a series of tariff measures that culminated in tariffs of up to 50 per cent on many Indian goods, followed by a later U.S. announcement of a 100 per cent tariff on imports of branded or patented pharmaceutical products. These measures — justified by Washington as reciprocity and, in the case of the oil-linked tariffs, as punishment for India’s purchases of Russian oil — have immediate economic consequences for Indian exporters and financial markets, medium-term effects on growth and competitiveness, and longer-run political and strategic implications for the U.S.–India partnership. This paper examines the multidimensional impacts across economic, political, strategic, technological, and defence domains, assesses Indian policy responses and corporate adjustments, and discusses plausible future trajectories and associated risks. The U.S. decision to substantially raise tariffs on imports from India began in late August 2025 when President Donald Trump announced an additional 25 per cent tariff on top of existing trade barriers, bringing duties on many Indian exports to as high as 50 per cent. The White House framed this move as reciprocity and, in a separate step, imposed higher levies intended as punishment for India’s continued purchases of discounted Russian oil; U.S. officials tied the punitive element to geopolitics. The tariffs affected a wide array of labour-intensive manufactured goods, where India had a large U.S. market share, including textiles, garments, gems and jewellery, footwear, furniture, and certain chemicals. The levies took effect promptly, after five rounds of bilateral trade talks had failed to produce a comprehensive agreement. The tariff escalation was followed in late September 2025 by a U.S. announcement that, starting October 1, imports of “branded or patented pharmaceuticals” would be subject to a 100 per cent tariff — a move described by Washington as a policy to incentivize onshore manufacturing and reduce the U.S. pharmaceutical industry’s reliance on foreign supply. These measures, by design and by effect, have strained economic ties and tested the resilience of the wider strategic partnership between the two democracies.

Effects on Economy: Trade, Firms & Macroeconomy

The most immediate and measurable channel through which the tariff war impacts India is trade flows and firm profitability. The increase in tariffs to 50 per cent on many product lines represents an acute and sudden rise in the effective tax on Indian goods entering the U.S. market. For firms that export to the United States, the choices are stark: absorb the tariff and accept substantially smaller margins, pass the cost to U.S. buyers and risk losing market share, or attempt to reroute goods to alternative markets. Despite these challenges, Indian exporters have shown resilience and adaptability. For many small and medium-sized enterprises in India’s export ecosystem — particularly in textiles, leather goods, and other labour-intensive sectors — margins are thin, and access to alternatives is limited. Consequently, the ability to absorb tariff costs without layoffs or insolvency is constrained, but not impossible.

Several reputable analyses and market reports documented swift reactions in the weeks after the announcement. Exporters accelerated shipments to beat the tariff deadline where possible, and some segments reported order cancellations or re-pricing pressure as buyers shifted to suppliers not subject to such steep levies. Financial markets priced in the disruption: Indian equity indices experienced sectoral weakness, with particular pressure on pharmaceutical and export-oriented stocks when the pharma tariff news broke. Reuters reported that Indian pharma shares and broader indices slid on news of tariffs, reflecting investor concerns about revenue and profit exposure in the United States, where pharmaceuticals remain a key market for Indian producers. Currency markets also reacted: the rupee saw downside pressure against the dollar and required central bank intervention at times to stabilize volatility. These market moves are early indicators of contagion: tariffs affect expectations, which in turn condition capital flows, corporate financing costs, and investor risk premia.

At the sectoral level, the impact of the tariff war is not uniform. Labour-intensive sectors, such as apparel and footwear, are particularly vulnerable due to their significant exposure to the U.S. market. Gems and jewellery, where India is a global processing hub, also faced substantial tariff increases. The value chain in these sectors, characterised by many small players operating on thin margins, is at risk of rapid job losses and capacity contraction. In contrast, sectors where India competes on value-added, technology, or intellectual property are less directly affected by commodity tariffs but can suffer through second-order channels, including lower external demand, investor caution, and potential reductions in export orders.

Pharmaceuticals require special attention because India is a major global supplier of affordable generic medicines and APIs. The U.S. announcement of a 100 per cent tariff on branded and patented pharmaceuticals is aimed at protecting the domestic pharma industry and compelling foreign multinationals to invest in U.S. production. However, much of India’s exports to the U.S. are generics, which initial reporting suggested might not be directly targeted by the branded/patented tariff — the announcement substantially increased uncertainty and market risk. Policymakers, analysts and industry observers warned that any ambiguity in tariff scope or future expansion to complex generics or biosimilars could broaden the damage to one of India’s most valuable export sectors. The immediate stock market reaction — a sell-off in pharmaceutical equities — reflected both the probability of near-term disruptions to U.S. revenues and the longer-term risk of a policy that could gradually erode categories of India’s export strength.

Macroprudentially, a significant and prolonged hit to exports will depress manufacturing output, slow employment generation in export states, and reduce aggregate demand through income effects on workers and SMEs. Early economic commentary suggested possible modest downgrades to growth trajectories if tariffs persist; some macroeconomists forecast a measurable drag on GDP growth in the range of a few tenths of a percentage point, depending on the duration and scope of the tariffs, as well as the effectiveness of India’s mitigation measures. The potential for growth downgrades if the situation persists underscores the urgency of finding a resolution. The rupee’s weakness, while partly policy-driven, also reflects tighter external financing conditions that could make foreign debt servicing costlier for corporations and the sovereign. A depreciating currency can somewhat cushion exporters by lowering local currency costs, but it increases the burden of dollar-denominated liabilities and can accelerate inflation by making imports more expensive. Policy trade-offs therefore become acute: monetary easing to support growth risks exacerbating currency and inflation concerns, while tight monetary policy to defend the currency can deepen a downturn in the hit export sector.

India’s government response has been to mobilize targeted relief and to accelerate measures intended to diversify markets. Official announcements indicated the government planned and rolled out relief packages for exporters, including financial support, credit facilitation, and temporary subsidy schemes, to reduce immediate distress and prevent mass closures. These relief programs help in the short run but pose fiscal tradeoffs: the government must balance relief against fiscal consolidation priorities and long-term competitiveness measures, such as investing in quality upgrades, logistics, and technology. The effectiveness of assistance depends on speed, targeting accuracy, and whether the support helps firms pivot to alternative markets or product upgrades rather than perpetuate uncompetitive business models. The imposition of tariffs acts as a shock to supply chain location decisions and corporate strategy. Multinational firms, large exporters, and contract manufacturers must reassess their sourcing and routing strategies. Three strategic responses are typically employed: accelerating onshoring or nearshoring to the United States, diversifying markets to reduce U.S. exposure, or reengineering products and value chains to reduce tariff sensitivity.

The U.S. administration’s stated intent — particularly regarding the 100 per cent tariff on pharmaceuticals — is to incentivize onshore production of strategically important goods. For certain large multinationals, the calculus may favour building or expanding U.S. manufacturing capacity, but this option is capital-intensive and time-consuming. For Indian firms that sell primarily into the U.S. market, onshoring is not an immediate option unless they can partner with U.S. firms or relocate some production, and relocation is often constrained by capital, labour availability, and regulatory timelines. Diversification is a more feasible short-to-medium-term strategy: Indian exporters can attempt to reallocate shipments to alternative markets, such as the EU, the Middle East, Africa, and ASEAN countries. Indian authorities have identified dozens of potential alternative markets and have offered trade facilitation to help exporters find new buyers. However, shifting markets is no trivial task. Non-U.S. markets may have different standards, longer certification processes, entrenched competitors (e.g., Bangladesh and Vietnam in the textiles industry), and logistical challenges. Thus, while market diversification is a necessary tactic, it cannot eliminate the economic pain in the near term for goods where the U.S. is the primary or high-margin market. There is also a technological dimension: exporters can attempt to upgrade product value, shift to differentiated branded goods less sensitive to tariff arbitrage, or invest in certifications and manufacturing quality that open access to higher-value segments where price competition is less intense. Indian industrial policy and corporate strategy may therefore accelerate structural upgrading in affected sectors, raising long-term competitiveness but requiring capital, skills and time.

Defence, Strategic & Geopolitical Consequences

The tariff war extends beyond economics into strategy and geopolitics, as U.S.–India ties encompass defence cooperation, intelligence sharing, and a convergence of interests in the Indo-Pacific. The political economy of tariffs can bleed into perceptions of reliability and trust in strategic partnerships. Some strategic analysts argue that using tariffs as coercive leverage against a close security partner undermines long-term geopolitical goals: if economic coercion erodes trust, it may limit the scope for deeper cooperation on defence tech transfers, logistics sharing, or joint operations. Commentators in policy outlets have warned that alienating a rising power through heavy-handed economic measures risks spurring hedging behaviour and alignment with alternative power centres, which could be counterproductive to U.S. security objectives in Asia. These arguments assert that strategic interests are best preserved through stable and predictable economic relations, and that punitive tariffs can undermine this predictability. India faces a strategic squeeze in which Washington’s tariff pressure is partially linked to India’s energy choices, notably purchases of Russian oil. New Delhi’s sourcing decisions are shaped by energy security, price, and geopolitical calculations. While aligning with U.S. preferences might reduce trade friction, it may simultaneously reduce India’s bargaining room on energy and other strategic fronts. Suppose New Delhi perceives U.S. demands as an attempt to dictate its strategic choices. In that case, it may resist, doubling down on diversification that strengthens alternative ties, including with Russia and Middle Eastern suppliers. This dynamic illustrates how trade instruments can be used as geopolitical levers and how such leverage can produce unanticipated strategic realignments.

The tariff conflict could also accelerate India’s outreach to other partners. Indian diplomacy has actively sought alternative markets and investment partners, intensifying engagement with regions such as Africa, Latin America, Southeast Asia and the Gulf. Over the longer term, a sustained tariff dispute might strengthen India’s economic ties with other powers and multilateral groupings that provide alternative routes for trade and investment. While diversification reduces dependence on any single partner, it also reshapes geopolitical configurations in ways that may not be in the short-term interest of the imposing power. Defence and high-technology cooperation between the United States and India had been growing for years prior to the tariff dispute, encompassing arms sales, joint exercises, and technology transfer agreements. The tariff friction introduces a risk that political trust could erode, slowing or complicating future transfers of sensitive defence technologies and dual-use items. India, aware of such vulnerability, may pursue a twin-track approach of diversifying defence procurement and deepening indigenous capabilities. Accelerating indigenous defence production is consistent with India’s “self-reliance” policy but requires time and investment. In the near term, procurement pauses or hesitations by India in U.S. contracts could reduce the volume and tempo of bilateral defence business — a costly political signal on both sides.

On technology, tariffs are only one instrument; export controls, investment screening and non-tariff barriers constitute other levers that can be used to influence high-value, dual-use trade. If strategic mistrust hardens, both sides may deploy non-tariff restrictions more aggressively, creating fragmentation in standards, supply chains, and market access in cutting-edge sectors such as semiconductors, advanced materials, and critical life-science inputs. India’s reaction could be to deepen efforts at domestic capability building and to seek alternative suppliers from friendly partners, thereby increasing global supply-chain fragmentation. Over the long term, this can lead to parallel ecosystems that hinder integration and increase costs.

India’s immediate policy toolkit includes emergency relief for exporters, credit and liquidity support, targeted subsidies, tariff mitigation measures such as drawback schemes, and intensified trade diplomacy to open alternative export markets. These steps have been initiated to varying degrees; Indian officials have announced planned relief packages and diversification efforts in the market. Such measures help buy time and prevent systemic collapse in vulnerable industries. However, they also carry fiscal costs and may simply postpone necessary structural adjustments if not paired with reforms that raise productivity and product complexity in Indian manufacturing. A medium-term strategy should emphasize competitiveness upgrading, including investments in logistics, port efficiency, certifications, worker skills, technology adoption, and product differentiation. Policy measures that incentivize quality, branding, and R&D can help Indian firms move up the value chain and reduce their vulnerability to tariff arbitrage in basic commodities. Internationally, India can expand preferential trade agreements and market access initiatives, negotiate regulatory mutual recognition with blocs, and deepen trade facilitation efforts to accelerate market entry into alternative destinations. In terms of scenarios, a benign path would involve the U.S. tariffs being treated as temporary leverage, leading to a negotiated settlement in exchange for targeted policy moves or trade-opening measures by India, with limited long-term damage. A middle path would involve protracted tariffs, which India largely mitigates through diversification and upgrading, but with measurable near-term growth costs and political strain. A worst-case scenario would be persistent, growing tariffs and scope creep (e.g., the expansion of pharma tariffs to generics or biosimilars), causing structural export contraction, prolonged rupee weakness, and strategic drift between the countries, with knock-on implications for regional geopolitics.

Risk & Uncertainties

The imposition of sweeping tariffs by the United States under the Trump administration injects a profound layer of uncertainty into India’s economic and strategic calculus. At the heart of the issue is not only the immediate economic damage but also the unpredictability of policy trajectories. The Trump presidency has already demonstrated a willingness to use tariffs not merely as tools of economic protection but as instruments of leverage in a broader political and strategic sense. This creates a systemic risk environment where India cannot assume that tariff measures are temporary or limited to specific sectors. Instead, Indian policymakers must now prepare for a shifting baseline in which protectionism is embedded in the United States’ trade posture, with consequences that extend across industries and into the diplomatic sphere. One of the foremost risks stems from the volatility of U.S. policy itself. Unlike structural reforms or treaty commitments, tariffs imposed by executive decision can change with relative ease, subject to domestic political cycles, electoral considerations, and shifting alliances within the U.S. Congress. This means that for Indian businesses, the planning horizon is compromised. Pharmaceutical exporters—India’s flagship industry with nearly $25 billion worth of exports to the U.S. in 2024—must weigh the costs of building alternative market strategies against the possibility that tariffs could be rolled back within a few years. This creates a “policy whiplash” environment, where firms are forced into hedging strategies, reduced capital investments, or price increases that erode competitiveness. The risk profile also encompasses broader financial and macroeconomic vulnerabilities. Indian equity markets, which are heavily exposed to IT and pharmaceutical companies, have already displayed sharp volatility following tariff announcements. The depreciation of the Indian rupee in response to potential capital outflows further compounds uncertainties, as it raises import costs for energy and critical inputs. This introduces inflationary pressures into the domestic economy, forcing the Reserve Bank of India to strike a delicate balance between maintaining growth and containing inflation. Moreover, India’s sovereign credit ratings may come under pressure if global investors perceive a structural erosion in export revenues, particularly when paired with rising fiscal deficits linked to subsidies or support measures for affected industries.

Beyond the purely economic sphere, there is a risk of strategic misalignment. India’s deepening partnership with the U.S., particularly in defence procurement and Indo-Pacific security frameworks, is premised on mutual trust and shared objectives in countering Chinese assertiveness. Tariffs, however, risk injecting friction into this relationship by creating a perception of unilateralism and transnationalism in U.S. policy. India may become increasingly cautious about overcommitting to U.S.-led initiatives, instead seeking to preserve strategic autonomy by balancing its relations with Europe, Russia, and even China, where necessary. The tariff dispute thus has the potential to destabilize the political foundation of the India–U.S. partnership, raising long-term uncertainties about the reliability of the alliance. At the same time, the global dimension magnifies risks. Suppose other countries, especially within the European Union or East Asia, respond to U.S. protectionism by erecting their own trade barriers. In that case, India may find itself squeezed out of multiple markets simultaneously. Alternatively, these economies may seize the opportunity to strengthen their economic ties with the U.S. at India’s expense, further isolating Indian exporters. The cascading effect of protectionism can lead to a “race to the bottom,” where multilateral norms are weakened and global trade fragmentation accelerates.

This is where international institutions, such as the World Trade Organisation (WTO) and the G20, as well as emerging regional frameworks, become critical. In theory, India has recourse to the WTO’s dispute settlement system. Tariffs that violate Most Favoured Nation (MFN) principles or lack proper justification under national security exemptions can be challenged. However, the WTO’s dispute resolution mechanism has been significantly weakened in recent years, particularly due to the U.S. blocking appointments to the Appellate Body, effectively paralyzing the system. Even when disputes proceed, they are notoriously slow; on average, cases can take two to four years to reach a binding ruling. For a dynamic industry like pharmaceuticals, where pricing and patent cycles evolve rapidly, such delays render legal remedies less effective in mitigating immediate harm. Other international forums offer opportunities, but also pose limitations.

The G20, where India holds increasing influence, can serve as a platform to build consensus against protectionism. India’s presidency of the G20 in 2023 highlighted its capacity to shape discussions on resilient supply chains and equitable trade. However, such forums are primarily consultative and lack enforcement mechanisms. Similarly, the BRICS grouping, with its renewed expansion to include countries such as Saudi Arabia and Iran, presents India with an opportunity to forge coalitions advocating for multipolar economic governance. However, BRICS remains fragmented by divergent interests and does not currently possess binding economic mechanisms capable of countering U.S. tariffs. Another dimension of uncertainty is the response of multinational corporations and global investors. Large pharmaceutical and IT firms operating in India may accelerate their diversification strategies by relocating parts of their production or R&D to Southeast Asia, Eastern Europe, or Latin America, thereby hedging against tariff risks. While India remains attractive due to its skilled workforce and cost advantages, the perception of U.S. hostility toward Indian exports could weaken India’s ability to attract new investments. This poses a threat to long-term industrial upgrading, which is crucial for India’s ambition to transition from a service-dominated economy to a manufacturing powerhouse, as outlined in initiatives such as “Make in India” and “Atmanirbhar Bharat.” For India, navigating these risks requires a multi-layered approach. Diplomatic engagement with the U.S. remains paramount, particularly through mechanisms like the India–U.S. Trade Policy Forum, which can serve as a channel for negotiations and temporary relief measures. At the same time, India must strengthen its legal and institutional capacities to pursue WTO challenges more effectively, even if outcomes are uncertain. Diversification of trade partnerships—accelerating free trade agreements with the European Union, the United Kingdom, and the Gulf Cooperation Council—can also provide alternative markets and reduce overdependence on the U.S. Yet, uncertainty remains the defining feature. Tariffs are not isolated economic measures; they are embedded in the larger contestation over global economic governance. International institutions, although imperfect, remain important venues for norm-setting, coalition-building, and signalling. Their ability—or inability—to manage disputes, such as the current tariff war between the U.S. and India, will shape not only the bilateral relationship but also the future of the multilateral trading system. For India, the stakes are unusually high: failure to navigate this turbulent environment could jeopardize its growth trajectory, undermine strategic partnerships, and weaken its aspiration to become a central pillar of the global economy in the twenty-first century.

Conclusion

Trump’s tariff campaign against India in 2025 marks a sharp and consequential juncture in the bilateral relationship. Economically, it imposes immediate stress on exporters, financial markets, and potentially GDP growth, with particular vulnerability in labour-intensive and pharmaceutical sectors. Politically, it forces Indian policymakers to make difficult choices between short-term relief and long-term competitiveness, and the episode risks fueling protectionist sentiment domestically. Strategically, the tariffs constitute a test of the U.S.–India partnership: while defence and security cooperation may persist through shared regional interests, trust and long-term alignment could be weakened, prompting India to diversify partners and accelerate self-reliance in critical sectors. The domestic political implications of the tariff war are manifold. The sectors at risk employ millions of workers in politically pivotal states. Tariff-induced job losses or factory shutdowns could convert economic pain into electoral politics, increasing pressure on the federal government for rapid relief and on state governments for policy interventions. Indian political leaders and commentators have used nationalistic rhetoric to frame the event as an affront to Indian sovereignty and economic dignity, with the prime minister urging citizens to support domestic industry and reduce dependence on foreign products. This rhetorical framing helps build domestic consensus for countermeasures.

However, it also risks entrenching protectionism that could undermine India’s longer-term growth agenda if it translates into durable inward-looking policies. From a governance perspective, the tariff war stresses public finances and priorities. Relief packages and export incentives require fiscal room; if these measures are funded through higher borrowing or diverted from capital spending, the longer-term productivity growth story may be weakened. Conversely, if relief is tightly targeted and coupled to longer-term upgrading (for example, assistance conditional on digitalization or product upgrading), the policy response could mitigate near-term pain and strengthen future competitiveness. The judgment and administrative capacity to design such conditional, efficient programs will be a decisive factor in how much structural damage is avoided. Additionally, the tariff episode catalyzes debates within India about the balance between strategic autonomy and economic interdependence. Many analysts and policy elites fear that conceding strategically (for example, shifting away from certain energy suppliers) purely for tariff relief would set a precedent that undermines India’s policy independence. Thus, political calculus tilts toward resisting coercive external demands, even as policymakers seek pragmatic ways to protect exporters and maintain macroeconomic stability. The outcome will depend on whether the tariff measures are a temporary bargaining tactic or the start of a sustained policy posture; on the clarity and scope of the pharmaceutical tariff; on India’s skill at rapidly redirecting exports and upgrading competitiveness; and on how both governments trade off short-term political incentives against long-term strategic goals.

By: Hridbina Chatterjee

India’s foreign policy has gone through a significant change—transitioning more away from “Strategic Equidistance” to “Multi-Vector Engagement.” For decades, New Delhi – in line with the Non-Aligned Movement – adhered to a sort of “passive balancing,” maintaining an objective and cautious distance from all major global power competitions in practice and theory, so as not to disrupt development. However, with a series of recent crises, including the weaponizing of trade through tariffs, energy shocks, ruptures to the global order, and great power competition, it is clear that India’s traditional neutral position is no longer defensible nor a strategic advantage. This transition is an active – and acknowledged – strategy. India no longer aims to evade confrontation; it actively seeks to engage with everyone – the US, Russia, China, and the EU – but under terms that India sets. The “active pivoting” is a pragmatic necessity, where India leverages its growing economic and demographic stature to establish roles in global governance, procure important resources, diversify supply chains and ultimately ensure that any new order advances India’s relevant national interests, positioning it as a central player in the world rather than a marginal balancer.

From Strategic Non-Alignment to Multi-Vector Engagement

Historically, India’s foreign policy was based on Strategic Non-Alignment that originated in a post-Cold War continuation of its original Non-Aligned Movement (NAM) philosophy. This strategy—which can be referred to as “Passive Balancing” or “Strategic Equidistance”—sought to maintain diplomatic neutrality (while avoiding overt alignment with large power blocs) and focus almost entirely on shoring up its developmental space. In a relatively stable, unipolar, or initially multipolar world, this provided India with important strategic autonomy. Today, however, a new era of dramatic instability (the weaponization of trade, energy, and finance) renders an approach based on “passive” equidistance inadequate for the new context. Geopolitical friction points such as the Russia-Ukraine war or increasing US-China tensions are decidedly incompatible with a passive watching-and-waiting approach that has characterized India’s previous foreign policy; these are choices.

The new context requires Multi-Vector Engagement, or “Active Pivoting.” This is an approach that is real-time, based on pragmatic considerations, and involves India engaging with all major and minor power centers—the West, Russia, the Gulf countries, Global South, regional groupings, and so on—all simultaneously but through a hard-headed lens of national interests. The goal is to maximize gains from each of these relationships as well as minimize vulnerabilities. It is not about taking sides, but about having a seat at every table and ensuring India’s voice is integral to any discussion on global governance, trade, or security.

Navigating the Tariff and Trade Turbulence

The global trade landscape has become increasingly protectionist, with tariffs being deployed as a geopolitical tool. India finds itself trying to manage rising pressures from trade partners, while navigating opportunities for economic advantage. Tariff shocks, where select major economies place heightened duties on certain Indian exports, often unrelated to the actual goods but to political decisions around energy sources, is a direct threat to India’s ambitions of growing manufacturing and its associated exports.

India is responding in clear sight of its Multi-Vector Engagement. Rather than giving in to pressures of trade partners, it is expanding its supply chain partners and building supply chain relationships in markets outside of trade partners. The drive for Atmanirbhar Bharat (self-reliant India) is not an isolationist strategy, rather it is a strategic hedge against supply chain weaponization, with the desire to build resilience domestically and to be a reliable alternative to other manufacturing markets. India is also pursuing new free trade agreements (FTAs) with partners, working with new multilateral trade forums, and seeking to reform international trade rules in favour of emerging economies’ effective engagement.

Strategic Autonomy Amidst Energy Shocks

The volatility in global energy markets, particularly in the wake of geopolitical conflicts, poses threat to India, which is a significant energy importer, disrupting its rapid growth trajectory and spurring debilitating inflation. The energetic pivot that India is taking in the energy domain is a great example of pragmatic foreign policy that puts energy security and affordability ahead of ideological fit.

India has leverage, and it’s utilizing it. New Delhi made significant savings that shielded its domestic economy from international price hikes by greatly increasing its import of discounted oil from countries such as Russia after Western powers induced sanctions upon said country. While this was criticized, India stood by its decision to say its duty is to protect its 1.4 billion citizens. At the same time, India is strengthening strategic energy relations with Gulf nations, investing in renewable energy, and encouraging green hydrogen to lower its long-term reliance on fossil fuels. This balanced strategy results in securing immediate energy needs while preparing for a sustainable future, thereby strengthening its strategic autonomy.

Responding to Shifting Alliances and Geopolitical Crises

The contemporary world is characterized by an accelerating shift in global power and the formation of new, fluid alliances. Evidence of India’s active pivoting is most notable in its positioning on emerging alliances and global crises. The approach of the country is to join or participate in a number of sometimes conflicting groupings without committing entirely to one or another one’s side.

On one hand, India is an integral part of the Quad (with the US, Japan, and Australia), which orients itself towards a free and open Indo-Pacific and is an important balancing mechanism against assertiveness in the region and strengthened its bilateral defence and technology relationships with Western countries. At the same time, India is also at the forefront of initiatives such as BRICS and the Shanghai Cooperation Organisation (SCO), which include the participation of China and Russia, among others. This dual engagement, often referenced as “Multi-Alignment,” enables India to influence dialogues both within the Western-led order and the emerging non-Western axis. In convening and taking leadership roles in major forums, such as the G20, India has successfully conceived its position as the “Voice of the Global South,” advocating for debt relief, climate finance, and proportionate representation in global governance institutions, and this active engagement in global normative processes is indeed the ultimate evidence of its efforts growing from passive balancing status to actively altering situations and outcomes.

The Decisive Shift from Balancing to Shaping

India’s choice to abandon Strategic Equidistance for Multi-Vector Engagement is an imperative born of necessity, marking its ultimate transition from a rule-taker to a rule-shaper. There is no longer a viable “wait and watch” regime; the time for passive neutrality is over. The intermix of economic pressures (tariffs, supply chain disruptions), security dilemmas (border issues, regional instability), and existential concerns (climate change, energy security) calls for a forward-looking, nimble, and interest-based foreign policy.

Multi-Vector Engagement requires relentless diplomacy in an adverse climate, compartmentalization of competing bilateral relationships (e.g., strong ties to the US, while also continuing the modality of defense and energy trades with Russia), and explicitness in advocating its national interests on the global stage. India desires to use its demographic dividend, economic growth, civilizational/soft power appeal, and developing defense capabilities to not only secure its future but to promote a genuinely multipolar, rules-based, and equitable order in the world to best position itself as a global pivot to a proliferated bipolar state, rather than a side-player in a new global order.

By: Prachi Kushwah, Research Analyst, GSDN

The European Union (EU) is today in a very critical crossroad with the People’s Republic of China. In the past forty years, China has been seen to evolve as isolated developing economy to a global superpower that has tremendous political, economic and technological influence across the world. The EU that has been keen on portraying itself as a champion of democratic ideals, multilateralism, and free trade has on the other hand increased its involvement to China and has become increasingly cautious about the possible dangers of depending heavily on Beijing. This has become a complicated political game that raises the questions of whether the EU is becoming a victim of a so-called Chinese grip. This paper tries to delve into this question by looking at how the EU-China relations have changed with time, the economic and trade relationship, the Chinese contribution to technology and infrastructure in Europe, the political and diplomatic impact, the security risk, and the last thought on how the EU can gain the independence further. Through these dimensions we will be able to see that the answer is not binary but rather it emphasizes the fine balancing act that Europe needs to ensure to strike between opportunity and vulnerability.

Historical Background of EU-China Relations

On May 6, 1975, the formal diplomatic relations between the European Economic Community, the forerunner of the modern-day European Union and the Peoples Republic of China were officially established. Back in 1990, China was still just coming out of the chaos of the Cultural Revolution and the EU was still in the midst of its institution-building and common market. Initial interaction was meagre with the early interaction largely being trade and cultural interactions. The changes that were implemented by Deng Xiaoping in December 1978 however exposed the Chinese economy to the world resulting in increased interconnection with Europe. The EU had developed into a major partner to China by 1990s when they realized the increasing influence that Beijing had on the world markets. In 2003, the EU and China also took their relationship to a new level of Comprehensive Strategic Partnership, which was meant to extend beyond trade to other fields of cooperation like science, education and the environment.

But together with cooperation tensions started to appear. The European parliament also questioned the human right practices, freedom of expression and the lack of democracy in China. These problems usually conflicted with the normative identity of EU. Economic interdependence increased at a high rate in spite of these political differences. EU-China trade in goods had up to 2020 reached US$ 709 billion with China emerging as the second largest trading partner of the EU after the United States. This two-sidedness: between values in conflict and between economies in interdependency has represented the movement of EU-China relations.

Economic Interdependence Trade

Trade and investment are the foundation of EU-China relations. The fact that the volume of trade between the two parties is so enormous shows how they are mutually dependent. This saw trade between the EU and China in goods and services to reach more than US$ 2 billion a day by 2024. EU imports huge volumes of consumer goods, electronics, textiles, and intermediate products with China and exports machinery, vehicles, pharmaceuticals, and luxury goods. Another significant market that has been gained by Europeans is their wine, dairy, and pork in China.

However, China has always had the balance of trade. The asymmetry of the relationship is witnessed in 2023 where the EU trade deficit with China is in excess of US$ 400 billion. European businesses tend to complain of unreasonable competition by the Chinese companies which enjoy state subsidies, inexpensive labour and less rigorous environmental regulations. The steel, solar and textile markets in Europe have all had a hard time competing with the Chinese imports.

The 2020-2021 COVID-19 pandemic demonstrated the dangers of overdependence on China-based supply chains even further. The inadequacy of medical machinery, drug raw materials and electronic parts made EU policymakers face the weaknesses of globalization. Although the European leaders accept that doing business with China leads to economic development, it is increasingly being realized that it is time to diversify and limit strategic reliance.

Digital Influence and Technology

Technology is one of the most disputable fields of EU-China relations. China has grown swiftly to become a leader in artificial intelligence (AI), semiconductors and telecommunications. The arrival of the Chinese companies like Huawei and ZTE into the European market created hope of quicker, inexpensive technological infrastructural support, in particular in executing the fifth-generation (5G) networks. This was however soon followed by security authorities in the various countries such as Germany, France and Netherlands to raise alarm about the possibility of espionage, threat to data security and overreliance on Chinese companies in building of essential infrastructure.

The discussion escalated in December 2020 when the European Commission released a toolbox of actions towards safe 5G implementation, stating that it is necessary to not be dependent on a single supplier. Other member states of the EU, such as Sweden and Denmark, have subsequently limited or prohibited Huawei equipment on their networks. In the meantime, European companies like Nokia and Ericsson are trying to offer alternatives, but they are hard pressed by the competition that is well subsidised by the Chinese competitors.

The technological industry is also an indication of a wider geopolitical conflict between China and the United States. EU has always been lying in the middle trying to safeguard their economic interests and at the same time maintain their strategic autonomy.

Belt and Road Initiative (BRI) in Europe

The Belt and Road Initiative (BRI) a giant infrastructure investment endeavour by the Asian continent, Africa and Europe was launched in September 2013. One of the areas where BRI projects have been very active is Europe. In March 2019, Italy was the first G7 to sign a memorandum of understanding with China on the BRI. China has invested in railways, ports and energy in other European states e.g. Greece, Hungary and Serbia.

A good example is the Port of Piraeus, Greece. China Ocean Shipping Company (COSCO) later on in August 2016 took the majority stake in the port turning it into a key Chinese export hub to Europe. Although this investment improved the infrastructure of these regions and generated employment opportunities, critics believe that it made China strategic in terms of European trade routes.

The advocates of BRI initiatives stress that the Chinese capital will bridge infrastructural gaps caused by insufficient EU funds. Critics, though, are concerned with so-called debt traps and political considerations. The case of Hungary is one example when it is alleged that Brussels lacked transparency in pursuing Chinese-funded projects in the country. The BRI is therefore an opportunity of development as well as the potential geopolitical leverage weapon.

Diplomatic and Political Influence

In addition to economics China has also increased its political presence in Europe. In April 2012, a so-called 17+1 framework was introduced that united China with 17 Central and Eastern European countries, most of which are member states of the EU. This format also caused concern in Brussels, because this format appeared to circumvent EU institutions and separate member states. Other nations, including Lithuania, later pulled out claiming transparency and excessive reliance on Beijing.

Another form of influence by China is by exerting diplomatic pressure. As an illustration, the EU attempted to make some bold words criticizing human rights violations in Xinjiang or political oppression in Hong Kong, but some of the EU members watered down their words because of economic relationships with China. This has weakened the capacity of EU to provide a common voice in international issues touching on human rights.

Meanwhile, Chinese embassies in Europe are now more aggressive, resorting to social media and social diplomacy to push Beijing messages. This approach, often so-called wolf warrior diplomacy has occasionally caused estrangement among European citizens and decision makers.

Risks and Security Concerns

The increasing Chinese influence in Europe is not only a threat to the economy. The European intelligence services have also sounded alerts several times with regard to cyber-espionages, which have been associated with Chinese players. Claims of intellectual property theft and intimidation of transfer of technology also contribute to mistrust.

The context has also been changed by geopolitical developments. When Russia invaded Ukraine on February 24, 2022, it revealed the risks of using authoritarian regimes as sources of important resources. The uncertain attitude of China to the war, its cooperation with Russia, and a lack of readiness to denounce the aggression have increased the anxiety of the European secret positioning.

Another issue is energy dependency. With the introduction of renewable energy in Europe, the Chinese leadership in the production of solar panels and rare earths is a threat of future helplessness. The dilemma of the EU is that it should not repeat what it did with Russia in the energy sector, and this time with China in technology and green industries.

European Reactions and Strategic Independence

With all these challenges, the EU has started to re-adjust its position with regard to China. The European Commission in March 2019 termed China as a partner, competitor, and systemic rival. This triple framing is what is signifying that the EU is conscious of the intricacy of the relationship. Ever since, Brussels has endeavoured to reinforce trade defence tools, and review foreign investments, as well as protect critical technologies.

There is also the Global Gateway initiative by the EU which was launched in December 2021 with a view of mobilizing US$ 340 billion in infrastructure projects around the world as an opposition to the Belt and Road Initiative by China. The partnerships with the United States, Japan, and India are also being extended to encourage diversification of the supply chains.

The concept of strategic autonomy has taken over the leadership of the EU policy. Although this does not imply breaking ties with China, it ensures that there should be a balance. European leaders are more insistent on the fact that cooperation should not be at the expense of security, democracy, and sovereignty.

Conclusion

Is the European Union in Chinese grip or not is the question that does not lend itself to either yes or no answer. The EU is highly tied to China both on the economic front and this can never be cut off without colossal expenses. However, the EU does not ignore the dangers of relying on China too much in terms of trade, technology, and infrastructure. The argument brings out the peculiarity of opportunity versus resilience in Europe.

The EU still needs to invest in its own technological and industrial resources, establish better contacts with other similar democracies and solidify its internal cohesion in the next few years. Such steps are the only ones that can help the EU not to be too reliant on Beijing and enjoy the benefits of engagement, at the same time. Thus, the so-called Chinese grip is not unavoidable- it is a matter of European strategic decisions in terms of protecting its sovereignty and principles.

By: Simran Sodhi, Guest Author, GSDN

Even as Nepal seems to calm down and stabilize, the recent upheaval in the Himalayan Kingdom has left India worried. The Gen Z protests in Nepal were reminiscent of the youth protests in Dhaka last year, and what followed in Dhaka left India anxious about its Eastern Front. It would then be a fair assessment to make at this time that India is today surrounded by a neighbourhood that doesn’t appear very friendly towards it. Instability in Nepal, a rather unfriendly govt in Dhaka, antagonistic ties with Pakistan, and other countries like Sri Lanka and the Maldives which vacillate between being friends and not-friends, India needs an urgent and serious re-think about its much touted ‘Neighbourhood First Policy’(NFP).

The NFP was first formulated in 2008 but it received a great push after 2014 under the leadership of Prime Minister Narendra Modi. His govt emphasized giving priority to India’s neighbours and building ties with them based on regional connectivity, trade and culture. India also stepped up its defence and security co-operation in the South Asian region but the political instability in many of the South Asian nations poses a perennial challenge. Also, the growing presence of China in the region and its tendency to offer loans to many of the South Asian nations for infrastructure building, etc is another challenge for India. There is also a perception in many of India’s smaller neighbours that India harbours a ‘Big Brother’ attitude towards them and that has also strained India’s ties with many in its immediate neighbourhood.

A quick look at the developments post 2020 makes it abundantly clear that the region is in a state of political instability. In 2023, the Maldives elected a new government which had campaigned on an anti-India platform. Though of late there seems to have been a change of heart in the Maldives and relations seem to be getting better. But there can be no denying the fact that the Maldives does seem to harbour an anti-India sentiment that was on full display in their elections in 2023. 

For India, the hardest blow came in 2024 with the ouster of Bangladesh’s Sheikh Hasina, and with Muhammad Younus becoming Bangladesh’s Chief Advisor. Delhi-Dhaka ties saw a golden period under Hasina who sided with India on many major issues and for India, the Eastern Front was a place of calm and friendship. Younus, on the other hand, has been quite vocal in his critique of India, and in late Sept this year while in New York to attend the United Nations General Assembly (UNGA), he publicly hit out at India. He stated that India did not like the student protests that took place in his country last year, and that by providing Hasina a safe haven in India, India is further spoiling its ties with Bangladesh. He even went on to blame India for SAARC becoming non-functional.

Nepal has a similar story for India, in many respects. The Gen Z protests have seen the established politicians get a boot and the country is now gearing up for elections in 2026. India has wisely been careful to not get too involved in the internal politics of Nepal because the pushback from the Himalayan Kingdom carries the same rhetoric, that of India playing ‘Big Brother”.

With neighbours like Pakistan, India’s ties today are almost a cipher. With the Taliban in Afghanistan, India has started an outreach but there is nothing very substantial there as of today. Bhutan and Mauritius (extended neighbourhood) are today the two spots in India’s neighbourhood where India is maintaining excellent ties. But even in Bhutan, the Chinese are working overtime to increase their foot print.

In short, India today needs to go back to the boardroom and do a serious re-think of its ties with its neighbours. The present scenario is grim and also poses a serious challenge to India’s security as is evident with the coming together of Pakistan-China and Bangladesh. India also needs to either breath new life into SAARC or look at other regional groupings which can help South Asia integrate into a closer unit. SAARC held its last meeting in 2014. India has maintained that since Pakistan continues to sponsor cross-border terrorism into India, it cannot be in attendance in SAARC. That has helped finish off SAARC as a regional grouping, more or less. India then turned its attention to BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) grouping that excludes Pakistan for regional cooperation. But BIMSTEC really hasn’t shown the kind of positive trajectory one expected from it.

With time not on its side, as the recent events in Dhaka and Nepal show, India needs to swiftly re-think its Neighbourhood First Policy. India also needs to invest more in bilateral relationships with its smaller South Asian neighbours; and either revive SAARC or put in place a new regional grouping for South Asia that will bind all together. If India doesn’t act fast, it might prove to be too late with China breathing down the region’s neck.

By: Lt Col JS Sodhi (Retd), Editor, GSDN

South Asia with 25% of the world’s population with 2.04 billion and comprising India, Bangladesh, Bhutan, Maldives, Nepal, Pakistan, Sri Lanka and Afghanistan with per capita GDP of just US$ 2691.6 in 2024, is amongst the poorer regions of the world, though faring better than the African sub-regions. Western & Central Africa had per capita GDP of US$ 1284.20 last year. Per capita GDP of the ASEAN nations were US$ 5814 in 2024 and Central Asian nations had per capita GDP of US$ 5900 the same year.

Viswathika Gayathri’s famous quote “Poverty is the root cause of all evil” pretty much holds true as it explains why Western & Central Africa and South Asia periodically see unrest and uncertainty. These regions are perpetually mired in turbulence and turmoil with poverty being the root cause. For poverty gives rise to communalism, unrest and uncertainty.

In 2024, 75.6% of the population residing in South Asia lived below the poverty line on less than US$ 6.85 a day whilst 10.5% of the South Asian populations was mired in extreme poverty who lived on less than US$ 3 per day. Last year, the Western & Central African regions saw 35.7% of the population in extreme poverty. In 2024, Though the ASEAN nations had 10.8% of the population below the poverty line but no one lived below the extreme poverty line.

But amongst these regions in general and South Asia in specific, stands out India which despite not being a rich or developed nation has seen resilience and resoluteness in her pursuit for progress and prosperity. From mortgaging gold in 1991, today India is the world’s fourth largest economy.

India, a land of Unity in Diversity with a bouquet of 89 major and minor religions and 122 major languages and 1599 other languages that are spoken across the length and breadth of the country, has always seen peaceful transition of power and no national uprisings that have turned violent.

Be it the Taliban 2.0 seizing power by force in August 2021 or the dramatic Sri Lankan government change in July 2022 or the violent protests that shook Pakistan in May 2023 or the mayhem that seized Bangladesh in August 2024 or the massive student protests in Nepal in September 2025, India has never seen such chaos and mayhem and will never see in future too.

Three issues that have played a pivotal role in India standing strong as South Asia remains engulfed in chaos and confusion, are India’s well-written constitution, India’s independent judiciary and India’s apolitical and secular armed forces.

A good constitution is quintessential for a just and democratic society which sets the fundamental rules for governance, protects citizens’ rights, establishes a system of checks and balances to prevent abuse of power and fosters social cohesion.

The Indian Constitution adopted on November 26, 1949 and enacted on January 26, 1950 established India as a sovereign, socialist, secular, democratic republic with a federal parliamentary structure and parliamentary system of government. It outlines the framework for the government’s powers, duties, procedures as well as the fundamental rights and duties of citizens.

Certain features of the Indian Constitution are so integral to its functioning and existence that they can never be changed. This is also known as the Basic Structure Doctrine. This has ensured that the basic framework and foundation of the Indian Constitution can never be changed.

Pakistan since its creation in 1947 has seen three constitutions in 1956, 1962 and 1973. Nepal has seen seven constitutions in the last 77 years – 1948, 1951, 1959, 1962, 1990, 2007 and 2015.

Since gaining independence in 1948, Sri Lanka has seen three constitutions in 1948, 1972 and 1978. Afghanistan has seen eight constitutions in the last 102 years – 1923, 1931, 1964, 1987, 1990, 2004 and no formal constitution since 2021 as the Taliban government follows the Sharia law.

Clearly, the Indian Constitution has been so well-written that it has withstood the test of time. Whenever, any situation has risen which could shake the foundations of India, the Constitution has in-built features that have kept India united and strong.

The next issue that has kept India strong and united is India’s independent judiciary. The judiciary in India is composed of the Supreme Court at the top of the pyramidical justice system, followed by the state High Courts and then various subordinate courts, forming a hierarchal structure to administer justice and interpret law. The Indian judiciary functions as an independent guardian of the Indian Constitution and people’s fundamental rights.

The Indian judiciary has ensured that justice is dispensed within the framework of the Indian Constitution and various laws in force. However, a point of concern that needs mentioning is how some individuals tarnish and taint the Indian judiciary when judgements aren’t given as per their expectations. But when judgements are given as per their expectations then these very individuals praise the Indian judiciary. A classic case of never being graceful and gracious when things don’t turn out as per one’s desires.

These very people who criticize and condemn the Indian judiciary by often stating that there are over 51 million cases pending in the Indian courts, will never highlight that the number of Judges in India is only 21 per million as compared to 150 per million in the USA and 100 per million in the United Kingdom. They also never bring out that India has only 158 police personnel per million population as compared to 271 police personnel in the USA and 2400 police personnel in the United Kingdom per million population. The United Nation’s recommended strength of police personnel for every million population is 222.

In the Indian High Court, the average pendency for a court case is 3-5 years, whereas for the United Kingdom High Court it is 3-4 months and for the US High Court is just 2-4 months.

Needless to say, that swift justice in a very less time frame is directly proportional to the number of judges and police personnel.

The Indian judiciary has always upheld the Indian Constitution and the various laws and has never succumbed to fear or favour. The miniscule aberrations have been dealt very severely by the Collegium system that is existing in the Indian Supreme Court and the Indian High Courts.

The third pivot that has been instrumental in India’s rise compared to the other South Asian nations, is the Indian Armed Forces comprising the Indian Army, Indian Navy and Indian Air Force which are apolitical and secular.

The Indian Armed Forces unlike most militaries in the South Asian nations, have kept itself apolitical and secular. Be it a man-made tragedy or a natural disaster, the Indians have supreme confidence in the Indian Armed Forces and in every task assigned to the Indian Armed Forces by the political leadership of the time, the Indian Armed Forces has come out with flying colours.

The Indian Armed Forces have never seized power as most South Asian nations have this troubled history. This has ensured that India has always had political leadership at the helm of affairs and the path for peace and prosperity has been followed. For, the political leadership is best suited to govern the nation than its military.

Pakistan has been under military rule thrice from 1958-1971, 1977-1988 and 1999-2008. It is well known that the Pakistan Army even when not in political power, governs the nation from the shadows.

Bangladesh since its independence has seen 29 military coups and has seen military rule during the periods 1975-1981 and 1982-1990.

India has neither seen any period of military rule nor any attempted military coup. The Indian Armed Forces have only focussed on the defence of India from external aggressions and internal disorders.

Those who call for Indian Armed Forces to get political or mock its secular credentials, should look at the state Pakistan and Bangladesh are in today because of their militaries being political and communal.

As South Asia is deeply mired in uncertainties and is slipping, India stands strong with her well-written constitution, independent judiciary and apolitical & secular armed forces being the three major pivots.

There is no nation in South Asia, except India, which in the last eight decades has seen a democracy with the same constitution down the years, independent judiciary that has performed without and fear or favour and no military coups or military rule.

The well-written constitution, independent judiciary and apolitical & secular armed forces are India’s main pivots. Any attempt to tinker with these three pivots or even one of them, will prove detrimental for India.

By: Trishnakhi Parashar, Research Analyst, GSDN

Resting at the heart of Eurasia, Central Asia has long been more than just a geographic expression— it is a strategic location, deeply rooted in history and instrumental in the rise of great powers. In 1991, as a consequence of the collapse of the Soviet Union, the five Central Asian Republics (CAR): Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan emerged as independent and sovereign nations. The region is phenomenally rich in culture and natural beauty, economically vibrating corridor between Asian and European nations and remains undeniably crucial in global geopolitics.

Whenever, the topic of discussion is Central Asia, two theories are bound to emerge. First is, Sir Halford Mackinder’s “Heartland Theory”. He was a British geographer who argued that Eurasia was the core of world power and Central Asia its “geographical pivot” or “Heartland”. According to him, whoever controlled this Heartland, could dominate the “World Island” and shape global politics. Years later, Nicholas Spykman, a political scientist shifted the focus to the role of maritime/sea-power in his “Rimland Theory”. To him, “Who controls the Rimland rules Eurasia; who rules Eurasia controls the destinies of the world”— basically focused on coastal Eurasia and Central Asia remained crucial region as a connector between Heartland and Rimland.

In terms of location, Central Asia usually covers a vast area extending from the Chinese border in the east to the Caspian Sea in the west, and from Russia in the north to Iran and Afghanistan in the south. The five states together cover a large landmass. Since the era of the historic Silk Road, Central Asia continues to be a land of great significance for traders and invaders throughout history. The region functioned as a vital channel for transportation of fabrics, such as cotton, wool, linen and particularly silk from China to the West and vice versa. Cities like Samarkand and Bukhara, became prominent centres for trading textiles. Central Asia and neighbouring region’s traders also imported a wide variety of spices along with tea, carpets and rugs. Central Asia region was also a gateway in circulating papermaking and printing technology that invented in China, that revolutionized the way knowledge was recorded and spread. Along the way, the region also emerged as a prime source of transition in multiple domains of knowledge combined with religious sciences and architecture. Beyond transportation of goods, the legacy of Silk Road remains significant, in terms of cultural development, knowledge exchange and most importantly connecting civilizations. Thus, Central Asia’s role as a vibrant bridge between diverse cultures is still undoubtedly relevant in contemporary times.

In the present context, Central Asia is still considered as a strategically productive region, and thereby acquiring privileged status in contemporary geopolitics. Potential source of energy resources like oil, natural gas, coal, minerals along with its growing role in transcontinental trade corridors substantially contribute to its significance. Particularly rare earth materials demand is increasing in Western industries. Almost 18 out of the 30 rare earth materials that is vital for the EU economy are produced only in Kazakhstan, including titanium, niobium beryllium, and tantalum. In fact, Kazakhstan is also the largest producer of uranium in the world, 43% of global production in 2022. After the collapse of USSR, in terms of petroleum and natural gas production, four Central Asian countries – Kazakhstan, Turkmenistan, and Uzbekistan were quickly considered a good alternate to Russia. Kazakhstan, Turkmenistan, and Uzbekistan have considerable energy resources and production. To put that in perspective, Kazakhstan’s oil reserves amounted to 30 billion barrels as of January 1, 2025. Turkmenistan proved natural gas reserves valued at approx. 71.5 billion barrels, makes it the fifth-highest in the world. In the meantime, Turkmenistan is the world’s 11th-highest natural gas producer, and Uzbekistan was the 17th-highest natural gas producer in 2023.

The Central Asian nations are also evolving in green energy with major focus in solar, wind, and hydrogen. There are also discussions going on regarding water diplomacy. Transboundary climate change, water and environmental challenges in Central Asia, rises the need of cooperation. Leaders from Central Asia had raised concerns over the Aral Sea crisis and climate change at global forums, accentuating the sustainable use of water and other natural resources, as well as risk reduction of water-related challenges. Western collaboration with Central Asian nations, whether public or privet, in developing sustainable energy production not just uplifts their regional initiatives against climate change but also ensures energy security in the global level. So, even from the perspective of green energy and sustainable development Central Asian states are very important.

The regional dynamics, however have been reshaped by recent developments, such as the Russia-Ukraine conflict and China’s growing economic domination etc. China’s Belt and Road Initiative (BRI) is a comprehensive strategy that includes Central Asia to boost regional cooperation by promoting infrastructure and economic integration. China’s heavy investments in Central Asian states have acted as a catalyst, propelling significant growth, economic development and strengthening regional connectivity. One such strategic   development is the newly launched China-Kyrgyzstan-Uzbekistan railway line, likely the route of economic breakthrough for the Central Asian region. Such initiatives have led to increased transport efficiency, reduced costs, and increased bilateral trade among states. Due to its location, the region became a geostrategic backbone of the BRI, while also reshaping China’s influence across the region. Such crucial changes have caught the attention of other powers.

Recognizing the strategic need of connectivity, these states are actively working on developing their regional connectivity and infrastructure. Central Asia, in this regard seeks to maintain closer economic and diplomatic ties among neighbouring countries and beyond the region. Trans-Caspian International Transport Route (TITR) is an integral multimodal transport route joining China and Southeast Asia to Europe via Central Asia, the Caspian Sea, the Caucasus, and Turkey through a network of railways, highways, and maritime routes. Central Asian corridor is arguably the most potential hub for trade and investment— attracting sustainable growth and prosperity for the entire region. Improved connectivity accentuates other region’s presence, to influence and firm stance across the Central Asia.

To further increase engagement with foreign nations, these states created the C5+1 platforms, that connects the five Central Asian states with partners such as Japan, followed by the US, the EU, Russia, and China and so on. In 2024, the US also launched the B5+1 forum, in order to boost economic integration.

Over the past few years, the region has witnessed several internal and external changes, that have contributed to its evolution into its current form. It was once part of Soviet Socialist Republics governed by the Communist Party of the Union of Soviet Socialist Republics (USSR). Initially, these newly independent nations were deeply dependent on Russia for institutional and economic stability. Simultaneously, their leaders reinvented their roles and authority for strengthening their power over their land. The region carries a profound historical and cultural imprint left by the Mongols and Turks and with the spread of Islam, it became a vibrant catalyst, driving the rise of prominent centres of knowledge during the medieval times. This legacy not only shaped the identity of Central Asian nations but also position the region as a pivotal point for transformation and exchange.

These days, Central Asia has gained attention and importance across the world in light of the Ukraine war. The major cause for such a growing interest is the notion that estimated fading influence of Russia on Central Asia. Such estimation currently intensified a kind of inevitable competition among a number of Russia’s competitors to deepen ties with the Central Asian nations. Several states like–the United States, Turkey, Germany, France, India etc. have started to intensify their engagements with the CAR region in various means to expand their influence.

Amidst the changing political dynamics, these states navigate through a series of complex decisions in order to protect their sovereignty and secure economic gains by carefully managing their relations with major powers. They also need to address internal issues as well. Central Asian states occasionally witnessed large-scale border related, security and anti-governmental protests. However, these states are relatively stable and coordinated.

Central Asia still does not have a regional organisation. Across the world, regions have established notably strong organisations like the Association of Southeast Asian Nations (ASEAN) in the Southeast Asia, the North American Free Trade Agreement (NAFTA) in North America or the African Union (AU) in Africa. But in Central Asia, there are only regional institutions, established with specific goals/objectives prompting greater prosperity but, limited in scope and often dominated by the neighbouring great powers.

Another issue in the region is water sharing and border disputes. Rapidly melting glaciers, overexploitation of Amu Darya and Syr Darya rivers, water sources cross national boundaries and, dam construction etc contribute to disputes. Competition over water rights has led to clashes, prominently in the Fergana Valley and other transboundary areas. Parallelly, with poorly demarcated borders turned irrigation disputes into broader border conflicts. People in Uzbekistan and Kazakhstan, living near the water bodies have been forced to leave as a result of environmental degradation and related socio-economic issues. Similarly, armed clashes also have erupted between Kyrgyzstan and Tajikistan around a major cross-border water supply facility.

From the security and stability perspective, Central Asian Republics occupy a pivotal position in the wider Eurasian region. Their proximity to Afghanistan exposes them to a number of serious cross-border challenges such as terrorism, violent extremism, and drugs trafficking, particularly Afghan heroin flowing continually through Central Asia into Russia and Europe with authorities seized less than 3 percent.

As matters stand, Central Asia continues to grapple with terrorism. Numerous cases of terrorist acts committed by Central Asians outside of the region, for instance- Karachi airport in Pakistan in 2014, Istanbul in 2017, and the Moscow concert hall attack on March 2024. It appears that Central Asians have been involved in extremist activities at the global level, but such incidents within the region itself remain rare.

Surely, Central Asia is actively combating extremism, and other geopolitical vulnerabilities, but many unavoidable internal issues, governance, social grievances, and reliance on external powers limit the effectiveness of these measures.

However, the five states have become more unified and active on the international platforms. They, in fact, openly discuss and comment on world events. Kazakhstan, Uzbekistan, Kyrgyzstan, and Tajikistan have all publicly supported a two-state solution to the Israeli-Palestinian conflict. Similarly, they also supported peaceful resolution of on-going Israel-Iran crisis, to maintain regional stability. With so many crisis-like situations going on in the world and having experienced major shifts in its own political environment, the region is currently less tense and much more cooperative in political, diplomatic and economic spheres, than in the years immediately following its formation.

In the past couple of years, the geopolitical situation in the Central Asia region has been rapidly developing in the course of many events. Most Central Asian states seek to pursue a so-called diversified foreign policy, focusing on multilateral approach, remaining open to function with different actors. However, unlocking the region’s full potential requires very strategic collaboration among states, regional institutions and external partners. The evolvement of Central Asian states from a well-known crossroads to being a modern-day geopolitical hotspot, highlights their ever-growing importance in world order.

In conclusion, the world to a great extent, is turning towards a multipolar order. Engaging with each other is not only important but a necessity. And within this evolving world order, Central Asian states have assumed a vital position and their importance/influence on global affairs is continuously growing almost by default. The region’s strategic position and their existing resources play a decisive role in influencing outcomes. Natural resources have become a strong asset for the growth of the Central Asia. Since 1990s, the United States has sought to divert the oil and gas flows away from Russia. However, the greater part of their produced oil and gas is now going towards China, making it a vital ally of the Central Asian states. In this context, Russia’s involvement in Ukraine conflict, provided China with a window to seize more economic opportunities and influence over the region. Observing these shifts in the geopolitical scenery have led numerous actors to re-adjust their approaches in Central Asia. Central Asian states are also becoming more and more careful on guiding through the complexities of the region and work accordingly.

By: Kashif Anwar

The Pahalgam terror attack and Operation Sindoor which highlighted the nature of India-Pakistan relationship and India’s military capabilities was followed by a period of uncertainty and unease in the Indo-US relationship. Despite enjoying a healthy Indo-US relationship and meeting between India’s PM Narendra Modi and the US President in February 2025, recently the Indo-US relationship continued to face litmus tests. The developments post Operation Sindoor like growing relationship between the US and Pakistan, increasing US involvement in South Asian geopolitics and US tariff threat to allies, partners and friends worldwide have made India worried. Such developments and geoeconomic challenges from the US reflect heightened concerns regarding the Indo-US comprehensive global strategic partnership; a status-quo achieved in the last few years. India despite being a strategic partner of the US and vital player in the US Indo-Pacific policies, the US imposed an additional 25% tariff on India which came into practice on August 27, 2025, bringing it up to 50% – 25% implemented on August 7, 2025 and additional 25% came into effect on August 27, 2025 – which put India along with Brazil to be fined the highest tariff in the world.

 

Considering China being an adversary to the US who was spared from additional tariff by giving China a 90-days mutually agreed tariff truce till November 10, 2025, India finds itself on the hammer side. Further, Pakistan regaining the status of “phenomenal counter-terror partner” for the US, such developments not only impacted the ongoing negotiation to achieve a new Indo-US trade deal and achievement of Modi-Trump’s February 2025 meeting, it also impacted the Indo-US relationship and created new strategic challenges for India. Amidst all this India shifts to further recalibrate its bilateral relationship with Russia and China and position within BRICS grouping. As the current situation offers India some opportunities, on the other hand, the implementation of heavier tariffs on India impacts its position from a comprehensive global strategic partner for the US to a coercive economic actor that could affect the India-US ties.

 

Trump’s Ceasefire Narrative and India’s Rejection

As US President Trump claimed, since he assumed office, he has stopped six conflicts worldwide, and such claims from him are seen as spreading misinformation and taking credit. On 12 May 2025, he claimed that “a couple of calls” from his end also stopped the India-Pakistan fighting and sees it as the first war he stopped as the US President. Although India immediately rejected such assertions and claims, on the issue, External Affairs Minister S. Jaishankar clarified that during the four-day conflict, all the conversations with the US were “routine diplomatic exchanges, not negotiations”. Further, there was no US or third-party involvement, and the ceasefire – after intense, strategic and calculated air warfare – was reached through “direct military channels” between India and Pakistan.

 

In this regard, India’s rejection of US involvement to secure a ceasefire between India and Pakistan is based on three main premises. Firstly, India’s acceptance of the US involvement in the ceasefire process would have legitimised third-party mediation on Kashmir, which could have violated India’s long-standing red line. Secondly, Trump’s narrative, which equated a democracy responding to cross-border terrorism with a state accused of sponsoring it, was seen as a means that would allow the US to take credit for the ceasefire. Thus, acceptance of US involvement would have also blamed India for the situation, as such a claim could have blurred the distinction between the victim and aggressor on the world stage. Lastly, domestic politics further amplified the sensitivity and opposition parties who accused the government of “diplomatic surrender”; therefore, the Indian government’s acceptance of the US offer or mediation was politically costly.

 

US Tariff Coercion and the Collapse of Trade Assurances

Following such claims and India’s rejection, the relationship between the US and India remains focused on the purchase of the F-35 versus the Su-57 fighter jet, growing geoeconomic challenges and threats due to the US tariff threat. As the US set 1^st August as the deadline for many nations, including India, to sign a trade deal or face steep tariffs after the deadline, it pushed both countries to hold a series of negotiations, which are still in process, to achieve a trade deal. However, on 6 August 2025, President Trump imposed an additional 25 per cent tariff on Indian exports, which raised import duties on affected Indian items to 50 per cent. It also placed India next to Brazil, with both nations being imposed the highest tariff among all the US trading partners. As the US continues to face challenges from China, the new tariff was imposed on India which will impact the India-US relations and strategic partnership which was achieved in recent years. The US Presidential executive order explicitly mentioned India’s continued import of Russian oil worth US$52 billion in 2024 as justification for the decision to impose additional tariffs on India. On the other hand, it omitted comparable Chinese purchases of US$62.6 billion from Russia, which met 20% of China’s energy demand in the same year.

 

As a result of such tariff imposition, the economic implications are severe for India, and the development is viewed as a serious concern. As India currently enjoys a trade surplus with the US; the new tariffs will have an inimical impact on India’s key export industries, economic growth, and broader trade relationship with the US. Considering India’s merchandise exports to the US in 2024 were US$87 billion, and sectors such as textiles, footwear and gems and jewellery now confront a 30-35% competitiveness gap relative to Bangladesh, Vietnam and Japan. The Federation of Indian Export Organisations warns that as a result of additional tariffs on India, 55% of US-bound shipments will be disrupted, impacting around US$48.2 billion worth of India’s merchandise exports.

 

It is estimated that a protracted tariff regime could shave 0.5 percentage points off India’s FY 2025-26 GDP growth and also pull India’s GDP below 6%. From a political and geopolitical perspective, this move has significantly impacted the Modi-Trump understanding, which was reached on 13 February 2025, aiming to achieve an “early harvest” trade package and to raise bilateral trade to US$500 billion by 2030. An additional 25% tariff on India will take effect on 27 August, casting a shadow over the next round of negotiations between India and the US, happening on 25 August with new hope arising recently. Such a delay in imposition and proximity to the next negotiation date highlight and are seen as a US strategic move to create a negotiating window and pressurise India, which could also impact the India-US defence relationship in the coming times.

 

US-Pakistan Rapprochement and South Asian Realignments

As a result of Operation Sindoor and the US imposing heavier tariffs on India, the geopolitics of South Asia underwent a dramatic transformation, with the US and Pakistan working to deepen their bilateral relationship. Following the operation, the US Department of State described Pakistan as a “phenomenal partner” in counter-terrorism, and subsequently, Pakistan’s Army Chief, General Asim Munir, was invited to attend the US Army’s 250th anniversary parade on 14 June 2025. Such an invitation and development have not only symbolically reversed years of limited senior-level contact between the nations. Pakistan PM Shehbaz Sharif, who acknowledged Trump’s “pivotal and paramount role” in achieving a ceasefire between Pakistan and India, was welcomed by President Trump and allowed Pakistan to secure favourable economic treatment from the US.

           

For India, who sees such gestures as a confirmation that US strategic interests in Pakistan – supply routes to Afghanistan and leverage over the Taliban – remain intact, which will have direct implications for India’s South Asia policy. In this regard, reports in the Indian press allege that US agencies’ cultivation of the Bangladeshi student movement has resulted in Sheikh Hasina’s resignation on 5 August 2024; however, conclusive evidence remains absent. Further, the developments taking place in Bangladesh under the interim government of Mohammad Yunus, the improvement in relations between Pakistan and Bangladesh, Pakistan and the US, and Bangladesh and the US has made India cautious.

 

India’s Pivot to Russia, China and the BRICS Pathway

At a time when geopolitics in South Asia and bilateral relations between India and the US are changing, India’s recent strategic pivot toward Russia, China and BRICS reflects a calculated response to evolving geopolitical pressures and opportunities for diplomatic diversification. In this regard, Prime Minister Modi’s scheduled visit to China for the SCO Summit on August 31 and September 1, clearly marked a significant improvement in India-China relations. Further, Chinese Foreign Minister Wang Yi’s visit to India on August 18, 2025 and met NSA Ajit Doval and PM Modi and also extended an invitation to PM Modi to attend SCO summit in Tianjin. As result of such meeting which witnessed development to resolve tension along the Line of Actual Control and begin groundwork to delimit to adopt non-offensive military posture along the border and work toward achieving permanent demarcation by resolving long-standing border dispute. Such development and progress are seen in the right direction which will allow India and China to further reduce tension along the Line of Actual Control and potentially resume trade and achieve pre-Galwan bilateral relations.

 

In recent times, as India and the Indian Air Force are engaged in a drive to address the declining number of squadrons which will be reduced to 29 from 31 after the retirement of Mig-21 Bison by the end of this year. As India aimed to have sanctioned 42 squadrons to face any future two-front war in near future it once again put light on the current state of Tejas jet, Kaveri engine, AMCA programme and relation with other nations to acquire advanced fighter jets. In this regard, as first half of the 2025 was filled with F-35 versus Su-57 debate, and considering India’s reliable defence partnership with Russia and renewed Indo-Russian relation post Trump’s 50% on India, Su-57 will be back on the table during Russian President Vladimir Putin visit to India in December, 2025. With Russia offering a potential defence deal to India which is compelling, India is still weighing the scale which includes planning to acquire more Rafael and how to ensure defence cooperation and relations with Russia continue without raising alarm in the West.

 

Lastly, as the role and position of India within BRICS and QUAD frameworks have been solidified in recent years. In the case of BRICS, on the issue of de-dollarisation and securing its bilateral trade and national interest India has started to embrace alternative financial mechanisms like saw the use of Rupees to conduct trade with Russia and around 30 countries including BRICS members showing interest in using Rupees as a form of payment in 2025. Further, since 2022, the Reserve Bank of India has been signing direct settlement agreements allowing transactions in rupees without dollar conversion by using Special Rupee Vostro Accounts (SRVAs) mechanism which have been further streamlined recently. However, whether India has accepted or approved the de-dollorisation, statements from the Indian government recently stressed it isn’t a part of India’s financial agenda, rather sees it as a way which allows India to diversify payment and trade relations with its partners and also reduces India’s risk amid rising US tariff threat.

 

Such strategic initiatives clearly represent India’s pragmatic hedging approach to leverage partnerships with both authoritarian and democratic powers to maximise economic benefits and strategic autonomy and also maintain flexibility in an increasingly growing multipolar world order. With the latest US tariff being active, it could impact India’s surplus trade with the US – US$ 45.7 billion in 2024 as per the US Census Bureau and stand 10^th and next to Canada with US$ 63.3 billion – pushing the Indian government to cover up the losses and mitigate the impact India is working to boost domestic demands, provide sectoral support and is engaged in strategic diplomatic engagement. Such an approach and financial mechanism will enable New Delhi to diversify dependencies without completely abandoning existing Western relationships and provide India a wonderful opportunity to revive the RIC – Russia India and China – trilateral forum which will strengthen India’s balancing act.

 

Implications for the Quad, De-dollarisation and India’s Strategic Options

Considering, the Indo-US relationship is going through a rough phase recent statement from Peter Navarro, Senior Counselor for Trade and Manufacturing to US President Donald Trump made a startlink remark on the Russia-Ukraine conflict that if India stops buying Russian oil, it can get 25% off tomorrow and sees it as a ‘Modi’s War’. In the wake of such a situation the RBI has stated it is ready to step in to support the economy and engage with the industry, and on the other hand, if a situation arises and becomes a necessity a senior government official from the Indian government state India may relax certain FDI restrictions on Chinese investment to further improve bilateral relationship.

 

In such a situation, the issue of QUAD, de-dollarisation and India’s strategic options come into the picture. The implementation of 50% tariff on Indian export to the US has further caused more difference to achieve a new Indo-US trade deal which has put 70% of India’s export to the US with textiles, gems and electrical machinery majorly affected. India, who sees the tariff as unfair, unjustified and unreasonable as it caused the worst phase in Indo-US relationship in the last two decades. With tariffs holding various geo-economic challenges and India continue to engage with the US, statement from Vikram Misri, India’s Foreign Secretary that India continues to attach a high value to the QUAD provided a respite that the 2025 QUAD Leaders’ summit which will be held in India later this year remain unharmed or impacted.

On the other hand, as India’s engagement with Russia and China have increased in the last few weeks with India strengthening its engagement with the BRICS+ members will evolve further in the coming times. Steps taken by India like SRVA and Structured Financial Messaging System (SFMS) developed by the RBI is seen as an alternative to SWIFT to conduct international transactions. As India sees such measures as a way to ease rules to promote use of Rupees-based trade with BRICS members with the Ministry of External Affairs affirming such steps shouldn’t be seen as India’s formal confirmation to adopt the de-dollarisation.

 

Such an approach adopted by India recently not only highlights that the Indian government wanted to have a balanced bilateral relationship with QUAD and BRICS members with India’s current strategy being driven by national interest and hedging approach to have multipolar engagement. For India, embracing alternative payment mechanisms through BRICS represents a calculated response apart from its relation with the US and BRICS members to have leverage. Further, regarding China, Russia and the US, India is advocating for systemic economic sovereignty driven by deeper and more sustainable countermeasures to secure India’s interest at domestic and global level and to achieve maximum strategic flexibility.

 

Conclusion

Former UK Prime Minister Lord Palmerston in his famous 1848 speech to the House of Commons when he stated “there are no permanent friends or enemies only permanent interests” which later became the foundation of political theory of realpolitik which still stand valid till today. Such a statement fits perfectly in the case of India considering how Indo-US relationships have evolved and strengthened multi-fold in the last two decades. The imposition of 50% tariff on India export to the US and improvement of US-Pakistan relationship on the other should be seen as a watershed moment in the Indo-US relationship, and India should see it as an opportunity to diversify its export with like-minded countries and also increase the acceptance and relevance of Rupee and SFMS in bilateral trade and globally respectively.

 

The current tariff which will impact trade with the US and if extended could impact India’s approach, role and outlook towards QUAD and therefore rather India should see it also as an opportunity to further strengthen bilateral relations with individual members of the group especially with Japan. Although tariff has given India an opportunity to further secure its interest to further strengthen BRICS and should see it as a vital opportunity to revive the RIC forum giving India leverage. Considering the rich history of Indo-Russian relations and meeting between PM Modi and President Putin on the sideline of 2025 SCO summit, India should see the development and President Putin visit to India later this year as an advantage. Such development will allow India to further enhance its presence in the BRICS and in the Global South geopolitics and keep its interest secured and protected while keeping a check on China. Considering the history of China who opens its door on its own terms and if the Indo-US economic relationship is back on track for India such diversification and such steps should continue as it will only secure and enhance India’s annual total export and thwart any such development in the near future. Such steps, measures and developments will allow India to navigate the complexities of a fragmented international system and assert its role as a key player in shaping the global order.

By: Rudraksh Saklani, Research Analyst, GSDN

In this era, which is not of war, but of geo-economics rather, the latent nature and unmet potential of the South American continent have begun to witness realignment within the broader rules-based global order. As the intra-nation as well as inter-nation power dynamics shift, in order to not repeat the mistakes of the past, it is only fair to not underestimate the impact and capability of the nations that make up this continent. It is equally imperative to let go of and overcome the stereotypes that engulf the image South America holds in the eyes of rest of the world, often restricted to its football prowess, Iberian colonial past, oil reserves, infamous drug cartels and a unifying hero in the form and resilient spirit of Simón Bolívar.

Introductory Perspective

South America, often mistaken to be on the periphery, is actually central to the global discourse and logistical realities pertaining to food, energy, and climate security. Amidst rising great power competition between the United States of America (USA) and China. South America most definitely matters geopolitically because of its multi-layered dynamism as a continent.

The countries of South America are the likes of Brazil, Argentina, Chile, Colombia, Bolivia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay, Venezuela and French Guiana (which is an overseas territory of France, not a sovereign state per se). The population of South America, is officially estimated to be between 438–453 million during 2025, as per United Nations (UN) Data.

As Alberto Methol Ferré has famously proposed “a continentalist outlook of South America as a geopolitical unit, within a Latin American national dimension”, it indicates the desired cohesion, integration and shared identity.

Historical Underpinnings

It certainly is strange and fascinating in equal measure, that most countries of South America (except Suriname), despite exercising sovereignty and achieving independence since the 19th century still get overlooked. A continent so rich in natural resources, so crucial to the global oil supply chains and still struggling to break free from the shackles of rampant corruption, rising crime rates, declining economies, environmental degradation and a serious drug problem? The questions are varied and their reasons are significantly embedded in the whirlwind of geopolitical undercurrents.

To reconstruct the past, it is imperative to revisit and recall it first. South America’s colonial past, especially the Spanish-Portuguese legacy reverberates centuries later in its economic traditions and popular culture, spheres that manifest into geopolitical ramifications. The history of economic dependency through an extractive model, later followed by becoming a reluctant battleground in the struggle for ideological supremacy between the US and the erstwhile Soviet Union in the second half of 20th century have been markers of the journey that the region has had.

While the Spanish and Portuguese empires turned South America into an exporter of raw commodities — silver from Potosí (Bolivia), gold from Brazil, sugar and coffee from plantations — this hampered the region’s self sufficiency, autonomy and agency. With that kind of a historical backdrop, the continent’s economy continues to be entrenched with inequality and dependency on external markets.  This pattern explains why South America has always been a supplier of strategic resources (then silver, gold, sugar; now oil, lithium, soy).

The Cold War showed that control of South America mattered for ideological balance and global security. Today’s great power rivalry (U.S. and China, with Russia re-emerging) is a direct echo of these tensions. Many South American states although resisted full alignment with either superpower. Non-Aligned Movement (NAM) had strong Latin American participation (e.g., Argentina, Peru, Brazil to some extent). Countries pursued regional initiatives to reduce dependence (like early precursors to Mercosur “Mercado Común del Sur”.

These non-aligned tendencies established a tradition of strategic autonomy, which continues till date.

Political Ethos & Chaos

The political fiber of the continent, despite varying country-wise, also has a thread that has held them all together, that thread being of chaos and instability. With the onset of the Pink Tide 1.0 in the 2000s, left-leaning leaders gaining ground (like Chávez, Lula, Morales) and the subsequent right-wing resurgence in the 2010s, which has now gone back to left (Lula’s comeback, Boric in Chile, Petro in Colombia) shows the diversity of public opinion, overpowering the waves of real politik that the world has tried time and again to associate South America with.

This frequent democratic fragility, almost across the board, including the coups like that of Bolivia in 2019, impeachment crises (like those in Brazil, Peru), have had repercussions on the policy swings that have hindered long-term strategies to either unite, or integrate into the changing tech-savvy world order.

Colombia’s cocaine trade menace, organized crime spilling into politics, the Venezuelan crisis forcing millions of refugees to look for shelter and opportunities elsewhere, bankruptcy, hyper-inflation has destabilized the path to mainstreaming of modernity, innovation and collaboration.

Whether it’s Argentina’s Falkland Islands unresolved issue with the United Kingdom (UK), or the Venezuela-Guyana territorial conflict regarding the Essequibo region, the equations are subject to change and scrutiny within South America as well as outside, making it a geopolitically charged entity.

Natural resources-Exploited yet under-utilized

The continent has a lot to offer – like soybeans, lithium, copper, and oil. Venezuela holds the world’s largest oil reserves, but on the flip side, the recent instance of aggressive posturing by the U.S. near its coast (some have gone on to the extent of terming it as an instance of doorstep warfare) and the not so friendly rapport that President Lula from Brazil or President Nicolas Maduro from Venezuela share with President Trump cast aspersions on the viability and feasibility of maximizing the potential of these resources.

Brazil and Argentina are now big players in exporting soybeans, especially because of the trade issues between the US and China, which has made China look for more soybean suppliers in Latin America. This makes South America a stakeholder in the global food supply chain. Also, Argentina’s new policies under President Javier Milei and other countries in the region making it easier for businesses have boosted investors’ hope and confidence. Plus, the continent is key for clean energy, with Chile, Bolivia and Argentina (the Lithium Triangle with 60% of global reserves) providing lithium used in batteries, putting South America on the map in green technology. Regarding renewable energy potential, the wind energy landscape in Patagonia and the hydropower caliber of Brazil are treasure troves of geo-economic transformation waiting to be unlocked and unleashed.

Expanding relationship with China and its alarming aspects

China has solidified its position as South America’s leading trading partner by heavily investing in energy, infrastructure of railways and ports, and military sectors through the Belt and Road Initiative, of which various South American countries are signatories. In 2025, China hosted regional leaders and announced a US$ 9 billion investment credit line, reinforcing its economic influence. Chinese companies have filled the gap left by declining Western investment, building goodwill through aid, investment, and cultural diplomacy. Beijing’s increasing military cooperation, particularly with Venezuela, has raised concerns in Washington regarding the strategic implications for hemispheric security. Another area of suspicion is the Chinese technological and military footprint (courtesy Huawei’s operations under the scanner, satellite stations in Argentina etc).

The shifting alliances on the Taiwan issue—most recently highlighted by Honduras switching recognition to China in 2023—illustrates Beijing’s growing diplomatic influence. More importantly, Beijing’s history of charging exorbitantly high rates of interest when lending and wolf warrior diplomacy coupled with expansionist tendencies repeatedly put on display, the risk of debt dependency is as real as one can safely speculate.

Strategic partnership with India

Meanwhile, the diplomatic engagement with India and the geopolitical vitality that it has in New Delhi’s outlook has been on an upward trajectory. South America, collectively, now has the defining choice to make – to continue to work with India as a strategic partner in mobilizing the Global South and be the voice of reason in multilateral forums.

The transition from non-alignment to all-alignment, as long as there is issue-based cooperation and the strategic autonomy stays intact, has been India’s policy so far in these unprecedented times of sanctions. With South America on-board, and the diversity, credibility and newness that it brings, the sky is the limit to realize mutually beneficial outcomes. Therefore, South America clearly has a role to play bridging the divide and communication gap that exists and persists in the world, in the form of camps and alliances.

Security and regional equations

An economic bloc like the Mercosur, but with issues of uneven integration has had some history. UNASUR (Union of South American Nations) meanwhile stands rather weakened and UN CELAC (the Community of Latin American and Caribbean States) signals a revitalizing attempt at ensuring Latin American unity. With the newfound activity within BRICS (Brazil-Russia-India-China-South Africa), of which Brazil is a permanent member and from which Argentina withdrew is another instance of different countries making different choices, often at the expense of contrast. While this does signify autonomy, but as a whole, it is also how fragmented the region really is.

South America’s ambitions to influence global standards on development, climate change, and conflict resolution are highlighted by Brazil’s 2025 BRICS chairmanship and the region’s heightened participation in international fora like the G20 (Group of 20).

Its role as a resource-rich periphery still defines its geopolitical importance, after being historically turned it into a strategic arena where resources, ideology, and autonomy collide. These same factors corroborate why the region is even more geopolitically vital today.

Geographical and environmental domain-Climate politics

The geo-strategic location of South America, if we were to look at it from the lens of Rimland theory or Mackinder’s theory, is a myriad of gateways to oceanic spaces and land borders. The presence of the “lungs of the Earth” Amazon rainforest in the context of biodiversity preservation and conservation and also transnational security, the proximity to the Panama Canal with respect to movement in world trade, the direct access to both the Atlantic and Pacific oceans as trade routes, the Andes mountains as resource hub and the Atacama desert as a natural barrier – are all to be factored in while ascertaining the sheer impact it has on the global ESG (Environmental, Social, Governance) goals.

The politics surrounding climate change has also assumed a more pronounced geopolitical character with deforestation, illegal unchecked mining, wildfires and overall climate negotiations taking the centre stage in what we now know as climate justice amidst fulfillment of common but differentiated responsibilities. This very climate security ties South America to global future.

The US conundrum

With the Monroe Doctrine (1823) declaring Latin America as the US “backyard”, thereby shutting out European colonial ambitions, South America has always been fundamental to U.S. hemispheric stability and security doctrine. Throughout the 20th century, Washington is often found to be somewhat considered by many, as party to interventions, coups, and economic pressure to secure its dominance. The classic case of Chile (1973) when the U.S. supported Pinochet against socialist Salvador Allende serves as a famous example.

One famous school of thought amongst geopolitical commentators suggests that this is partly because of their geographical proximity to a superpower that at times overshadowed/overpowered them, unintentionally and otherwise. Albeit the U.S. influence off late has been viewed as declining with rise of China, Russia, and regional assertions, but it still holds well in the spheres of military, migration, anti-narcotics operations. Today, the U.S. faces the historical baggage and legacy of these policies and rightly so, as many South Americans remain persistently uncomfortable with, or skeptical of American influence and power.

Economic sustainability

South America has historically been the supplier of raw materials in global supply chains. However, as the circumstances and economic priorities have changed over the years, the situation is a lot more optimistic brimming with recovery and expected reforms, of which increased geopolitical relevance is a natural consequence.

Brazil, apart from being a full-time G-20 member, is the continent’s largest economy, followed by Argentina and Colombia. While South America’s total nominal Gross Domestic Product (GDP) in 2025 is projected at around US $4.3 trillion. The International Monetary Fund (IMF) and UN Economic Commission for Latin America and the Caribbean (UN ECLAC) estimate a real GDP growth rate for South America of 2.7% in 2025, driven by recoveries in Argentina and Ecuador and steady expansion in Brazil, Colombia, and Paraguay.

As South America has largely and consciously chosen to stay neutral as tensions rise between the United States, China, and the European Union. This nuanced approach enables South America to position itself as an important hub for foreign direct as well as institutional investments. For example, the recent completion of trade talks between the EU and Mercosur (bloc with Argentina, Brazil, Paraguay, Uruguay) in December 2024 shows how South America is working to build partnerships with different groups. Over 64% of local business leaders see the current split in global trade as a chance to grow.

Way forward

South America’s geopolitical importance ought to be rooted in realism, with special emphasis on its strategic location, resource-richness and climate change-related food security to be utilized as a leverage while carrying out its balancing act between various world powers.

As South America is no longer a passive participant or a dormant observer, but a key arena in the 21st-century multi-polar order, but it still faces multiplicity of challenges like political instability, economic inequality, corruption, water shortage, weak logistical base, and regional ideological fragmentation. By cracking new trade agreements and treaties, welcoming foreign investment, and carefully handling relationships with major world powers, the continent as a whole is coming up as a key player.