Monalisa Tase and Monojit Das
1. U.S. Policy Shifts and Their Implications
Digital Currency Ban
The recent discussions surrounding the potential ban of digital currencies in the United States represent a significant shift in the country’s approach to financial regulation.President Donald Trump’s executive order banning the development of a digital dollar marks a significant shift in U.S. financial policy. This move effectively removes the U.S. from central bank digital currency (CBDC) initiatives, allowing China and Europe to advance their own digital currencies without U.S. competition. For India, this development requires a recalibration of its digital financial strategies, particularly in trade settlements and reserve currency considerations. With China accelerating the internationalization of the digital yuan, India must consider closer cooperation with BRICS nations and other regional players to develop resilient digital payment frameworks.
A ban could also create tension with other nations that are more open to digital currencies, potentially impacting global trade and the U.S.'s competitiveness in the evolving digital economy. CBDC which would allow the government to maintain control over digital transactions, but it may face resistance from those who value privacy and decentralization in financial systems.
"America First" and Indo-Pacific Strategy
The "America First" doctrine, championed byPresident Donald Trump in his presidential campaign, has influenced U.S. foreign policy and continues to shape the country’s approach to international relations, particularly in the Indo-Pacific region.Trump’s renewed focus on military strength and territorial expansion has led to heightened military activities near the Philippines, signalling a more assertive approach toward China in the Indo-Pacific. This presents both challenges and opportunities for India. While increased U.S. military presence may deter Chinese aggression, it also complicates India's strategic autonomy. In the emerging global cooperation dynamics India must balance its partnerships with the U.S. and regional allies while maintaining its independent Indo-Pacific strategy, emphasizing naval modernization and deepening ties with ASEAN and QUAD partners.
2. European Concerns and Strategic Realignments
Security Concerns Over Greenland
European leaders, particularly Danish Prime Minister Mette Frederiksen, have raised concerns about potential U.S. influence over Greenland under the new administration. As Europe reassesses its security architecture, India must evaluate its engagements with the European Union on defence collaboration, especially concerning Arctic governance. With China and Russia increasing their polar activities, India's role in Arctic affairs could see a shift, demanding a proactive diplomatic approach amid growing global competition.
Cultural Diplomacy and Louvre Expansion
French President Emmanuel Macron’s announcement of the Louvre Museum’s expansion underscores the growing importance of cultural diplomacy. While seemingly unrelated to geopolitics, this move aligns with France’s broader strategy of global influence. For India, cultural diplomacy remains an underutilized tool in strengthening strategic partnerships.India’s vast cultural, spiritual and historical assets, can build deeper connections with both traditional allies and emerging global partners.
Investing in soft power initiatives, such as museum collaborations, showcasing diverse heritage, promoting yoga, cultural exchanges and scholarships, cinema and media diplomacy, traditional knowledge and crafts etc. could reinforce India’s global presence beyond traditional diplomatic channels
3. Central Asia’s Connectivity with Pakistan
Kazakhstan and Uzbekistan have embarked on distinct yet complementary paths to enhance their connectivity with Pakistan. Kazakhstan has prioritized projects such as the Trans-Afghan Rail Link, which was expanded in April 2024 to facilitate trade between Kazakhstan and Pakistan via Afghanistan. Additionally, a multimodal export route connecting Kazakhstan, Uzbekistan, Afghanistan, and Pakistan is in a pilot phase, offering a more efficient trade corridor with access to the UAE via Jebel Ali Port. These initiatives reflect a broader regional shift toward connectivity and economic cooperation, challenging traditional trade routes dominated by China and Russia.
Uzbekistan, playing a key role in facilitating these trade corridors, seeks to enhance economic engagement with South Asia. For India, these developments present both opportunities and strategic challenges. While greater regional connectivity could open up alternative trade routes, it also strengthens Pakistan’s economic position. India must counterbalance these trends by deepening its engagement with Central Asian republics, particularly through the Chabahar Port project and the International North-South Transport Corridor (INSTC).
Energy Security and the TAPI Pipeline
Kazakhstan’s state-owned gas company, QazaqGaz, is in discussions to join the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline. This project, which aims to transport natural gas from Turkmenistan to India, has faced delays due to security concerns in Afghanistan. Kazakhstan’s participation could bring additional investment and technical expertise, potentially accelerating its progress. For India, securing energy supply through TAPI remains a priority, but geopolitical risks and Pakistan’s control over transit routes pose significant challenges. Despite these obstacles, the TAPI pipeline could play a key role in strengthening regional cooperation and energy security, provided the involved nations can navigate these challenges and create a more stable and reliable energy framework for the region. Engaging with Kazakhstan on energy diplomacy, while simultaneously expanding alternative energy partnerships, will be crucial for India’s long-term energy security.
4. Trump’s Threat to BRICS and Global Trade Implications
Trump’s latest threat to impose 100% tariffs on BRICS nations if they attempt to replace the U.S. dollar as the global reserve currency has sent shockwaves through global financial markets. The BRICS bloc has been exploring alternatives to the dollar, including the creation of a common currency to facilitate trade among member states. Such aggressive U.S. policies could accelerate de-dollarization trends, prompting India to reassess its financial dependencies.
While India has traditionally maintained a balanced approach, it must now consider stronger financial cooperation within BRICS to mitigate potential economic disruptions. Exploring trade settlements in local currencies, expanding Rupee-Ruble and Rupee-Yuan trade mechanisms, and strengthening the New Development Bank (NDB) will be vital in reducing exposure to unilateral U.S. policies.
5. Growing Neighborhood Challenges:
India’s Concerns Amid Shifting Regional Alliances
As India navigates a rapidly evolving geopolitical landscape, tensions with its immediate neighbour, Bangladesh, are emerging as a current concern. The recent political developments in Dhaka, coupled with rising anti-India sentiment, could complicate bilateral relations, particularly concerning the extradition request for former Prime Minister Sheikh Hasina and broader security concerns.
Against this backdrop, Bangladesh’s Home Advisor, Mohammad Jahangir Alam Chowdhury, has made assertive statements ahead of the 55th Director General-level conference between India’s Border Security Force (BSF) and Border Guard Bangladesh (BGB), scheduled for February 17, 2025, in New Delhi. Chowdhury comment, India will now witness our stance. We will firmly present issues related to Bangladesh’s interests, including cross-border smuggling and incidents involving the killing of our citizens by BSF personnel at the border. We will make it clear to India in strong terms that this will no longer be tolerated.
This shift in Dhaka’s tone, under the Yunus-led government, signals a more confrontational approach towards India. The upcoming conference, traditionally a platform for discussing border security cooperation, may now be overshadowed by escalating political tensions. With China’s growing economic and strategic footprint in Bangladesh and the broader Indo-Pacific, the implications for India’s regional security are significant.
New Delhi will need to navigate these challenges carefully, ensuring that its long-standing strategic interests in Bangladesh are not undermined by shifting political dynamics or external influences. The evolving situation underscores the complexities India faces in its neighbourhood; particularly as global realignments continue to reshape regional power equations.
Conclusion
The evolving geopolitical landscape, shaped by U.S. policy shifts, Central Asian connectivity projects, global trade realignments, and growing neighbourhood concerns demands a proactive response from India. By strengthening its digital financial infrastructure, Indo-Pacific strategy, energy security framework, regional trade partnerships and reviewa suitable framework in the interest of both India and Bangladesh would be desirable. India can navigate these turbulent times while asserting its position as a key global player. Strategic autonomy, coupled with agile diplomacy, will be India’s strongest asset in ensuring long-term stability and economic resilience.
