Is a US-China detente in the offing? And what are India's options if a new world order emerges?

Before that, in 1985, Soviet leader Mikhail Gorbachev had launched perestroika, a grand restructuring which contributed to the breakup of the Soviet Union in 1991. The end of the 20th century’s Cold War created a geopolitical vacuum: it ended an old argument of ideology in the context of economic development—the ‘democratic dividend’ had led the US well ahead of its Soviet rival.

As I argued earlier in these pages, Russia’s political decline and China’s economic rise in the 90s created a new and unstable global order in which both China and the US occupied the same side of the economic fence. Some resolution between the two was inevitable for a new global order to emerge.

The declining relevance of ideology was noticeable in Trump’s comments after the meeting.

He hinted that countries (read Taiwan) should not declare independence unilaterally. When asked about Washington’s traditional commitment to military support for Taiwan, he said that he was not entirely convinced about it.

Equally significantly, China has refrained from openly opposing US actions during the Iran conflict, limiting itself to generic statements about sovereignty and territorial rights.

Beijing appears to have opted for indirect negotiations with Washington through an old intermediary: Pakistan. The question now is whether we are witnessing the birth of a new global order.

The defining feature of this emerging order is that it rests on mutual economic interests rather than political ideology. That alone explains the remarkable bonhomie between a democratic superpower and a hardline communist regime. Economics, not values, is their binding force.

This is where the Hormuz issue becomes critical. Trump seems to have underestimated the US economy’s dependence on global trade and the political consequences of rising inflation, especially soaring oil prices. His approval ratings have reportedly slipped to nearly 40%.

According to an 11-15 May New York Times/Siena poll, nearly 64% of respondents believed the war with Iran was a mistake, including more than 20% of Republican voters.

Much of this dissatisfaction stemmed from perceptions of economic mismanagement. It is therefore not surprising that Trump has periodically extended America’s ceasefire with Iran even as it seems prepared to dilute its earlier insistence on Tehran surrendering its enriched uranium.

China faces its own economic problems. Its export-led growth of the last four decades is petering out as the US turns protectionist and other developing countries also erect barriers.

Since the 1980s, however, the legitimacy of the communist regime in Beijing has rested heavily on its growth model. But China’s GDP growth has slowed from 8-10% in the early years of this century to about 5% today. Its macroeconomic picture is worrying. Its soaring debt-to-GDP ratio, real-estate market collapse, weak domestic consumption and disappearing export jobs have all undermined the economic compact that sustained the regime in power for four decades. Xi too has reason to worry.

This is why ideological differences between Iran and Israel are likely to take second place to growing US-China economic cooperation. Domestic political compulsions in Washington and Beijing will strengthen their relationship even as the Iran conflict gradually winds down.

As geo-economics increasingly dominates geopolitics, international relations are now set to change profoundly. What then are India’s foreign-policy compulsions as a new world order emerges?

First, our need for economic diversification is greater than ever. The recent flurry of trade agreements reflects this reality.

Second, the real uncertainty is around the European Union. Europe’s political confrontation with Russia persists because of security concerns on its eastern flank. Yet, its economic dependence on China continues. If the US—Europe’s closest ally—is any guide, EU-Russia hostility may eventually soften or recede into the background. As India strengthens ties with several European countries, this contradiction will have to be kept firmly in mind.

Third, there is logic in India’s recent openness to Chinese direct investment. If economics and technology are about to become the principal drivers of international relations, it may be wiser to move closer to the People’s Republic than remain trapped by outdated ideological binaries.

The old Cold War is over. The new world of geo-economics is colder, harder and far less sentimental. Economics now dictates strategy—and China is firmly embedded in the global mainframe.

Welcome to the 21st century.

The author is visiting professor, Shiv Nadar University