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23 August 2024 at 4:29:04 pm

Chaos Diplomacy

Donald Trump has always understood one thing better than most modern politicians that markets respond to perception. In the grinding drama over Iran, the American president appears to have weaponised uncertainty itself. One day he hints at a diplomatic breakthrough with Tehran and signals the reopening of the Strait of Hormuz which causes investors to breathe a sigh of relief. However, hours later, he reverses course by declaring there is “no rush” for a deal and that restrictions will remain...

Chaos Diplomacy

Donald Trump has always understood one thing better than most modern politicians that markets respond to perception. In the grinding drama over Iran, the American president appears to have weaponised uncertainty itself. One day he hints at a diplomatic breakthrough with Tehran and signals the reopening of the Strait of Hormuz which causes investors to breathe a sigh of relief. However, hours later, he reverses course by declaring there is “no rush” for a deal and that restrictions will remain until Iran bends fully to American conditions. The markets wobble again Trump’s defenders may argue that unpredictability is a negotiating tactic. Henry Kissinger once cultivated strategic ambiguity during the Cold War. Richard Nixon perfected the so-called ‘madman theory’ to keep adversaries guessing. Yet Trump’s oscillations differ in both scale and intent. In recent weeks, analysts and ethics experts in the United States have raised uncomfortable questions about whether political messaging is increasingly shaping market volatility in ways that benefit insiders, speculators and politically connected traders. When geopolitical brinkmanship begins to resemble a financial instrument, public trust in democratic institutions erodes. Nearly a fifth of the world’s oil passes through Hormuz. A closure or blockade affects fuel prices in Mumbai as much as manufacturing costs in Shanghai or inflation in Berlin. Trump’s repeated shifts between escalation and reconciliation have had grave implications for India, which imports more than 80 percent of its crude oil requirements. Any prolonged instability in Hormuz translates directly into higher import bills, inflationary pressures and stress on the rupee while ratcheting prices of essentials. India has spent years carefully balancing its ties between Iran, the Gulf monarchies and the United States. Tehran remains important for connectivity projects such as Chabahar Port and for India’s access to Central Asia. But allies and adversaries alike are forced into a perpetual state of recalibration because American policy itself appears unstable. Trump’s Iran manoeuvring reflects a dangerous transformation in global politics, which is the merger of geopolitics with spectacle capitalism. International crises are increasingly consumed like market-moving entertainment. This may generate short-term leverage for him or even produce tactical victories at the negotiating table. Iran, under immense economic strain, reportedly agreeing in principle to surrender its highly enriched uranium stockpile is no small development. Yet diplomacy built on volatility carries long-term costs and lead to the weakening of institutions. Markets become addicted to chaos and chaos, once normalised, rarely remains controllable. The world’s largest economy cannot afford to conduct foreign policy like a reality television script, with cliffhangers designed to manipulate sentiment every news cycle. Great powers are supposed to provide stability, not amplify uncertainty for strategic theatrics. Trump may believe that time is on America’s side. But for an anxious global economy already strained by wars, inflation and fragmentation, time spent trapped in manufactured uncertainty is becoming increasingly expensive.

Katchatheevu and the Ghosts of Forgotten Treaties

Ahead of his Sri Lanka visit, Prime Minister Modi finds his stance on Katchatheevu echoed by an unlikely ‘ally’ - Tamil Nadu’s Chief Minister M.K. Stalin.

As Narendra Modi steps onto Sri Lankan soil, the spectre of Katchatheevu looms large in this state visit. For beneath the surface of diplomatic niceties, an old ghost has stirred. Katchatheevu, a tiny islet in the Palk Strait that India ceded to Sri Lanka in 1974, has once again entered the bloodstream of Indian politics.


Last year, prior to the Lok Sabha polls, Modi, whilst campaigning in Tamil Nadu, had spoken about the need to revisit this historical error, dubbing it a blunder of the Congress era. Now, ahead of his visit to Sri Lanka, Tamil Nadu’s Chief Minister, M.K. Stalin - leader of the DravidaMunnetraKazhagam (DMK) and a fierce critic of Modi - has passed a resolution in the Tamil Nadu Assembly urging the Union government to retrieve Katchatheevu. In doing so, Stalin is unwittingly toeing Modi’s line.


Katchatheevu’s history, much like the larger Indo-Lankan relationship, has been shaped by colonial borders and the ghosts of forgotten treaties. The island, a rocky outcrop between Tamil Nadu and Sri Lanka’s Jaffna Peninsula, was once the domain of warring kingdoms, claimed at various points by the Jaffna kings, the Pandyas of Tamil Nadu, and later, the Portuguese, Dutch, and British. By the early 20th century, the British, who ruled both India and Ceylon, found little need to resolve the island’s ambiguous sovereignty—until, of course, the empire dissolved and two new nations emerged.


In the 1920s and 1930s, British administrators in Ceylon (now Sri Lanka) argued that Katchatheevu fell under Ceylonese control, citing old revenue records. Indian officials in the Madras Presidency disagreed but saw little urgency in pressing the issue. The ambiguity persisted until the 1970s, when the governments of Indira Gandhi and Sirimavo Bandaranaike sought to settle lingering territorial disputes as part of a broader effort to cement post-colonial ties.


In 1974, after years of deliberation, the Indira-Sirimavo Accord was signed. India formally ceded any claim over Katchatheevu, recognizing Sri Lanka’s sovereignty over the island. The deal was supposedly meant to resolve maritime disputes amicably, but in hindsight, it appears to have been one of the gravest strategic miscalculations of independent India.


At the time, the decision stirred outrage in Tamil Nadu, where fishermen had traditionally used Katchatheevu as a resting point. Tamil Nadu’s then Chief Minister, M. Karunanidhi, railed against the deal, calling it a betrayal of Tamil interests. But the Congress dismissed Tamil Nadu’s opposition as regional dissent. The island had been used for centuries by Tamil Nadu’s fishermen, but Delhi’s bureaucratic calculus deemed it expendable.


In 1976, Indira Gandhi’s government compounded the mistake by signing a supplementary agreement that stripped Indian fishermen of their rights in Katchatheevu’s waters. Successive Sri Lankan governments then treated the area as their exclusive domain, routinely arresting Tamil Nadu’s fishermen who ventured too close.


Over the decades, Tamil Nadu’s leaders from Karunanidhi to Jayalalithaa have demanded that Delhi reclaim Katchatheevu. But it was Modi, during his 2014 and 2019 election campaigns, who gave the issue national prominence. He accused Congress of gifting away Indian territory without parliamentary approval and vowed to correct the historical wrong.


Now, ahead of the 2025 Tamil Nadu Assembly elections, Stalin is reviving the issue out of political necessity. With the BJP making inroads in Tamil Nadu, the DMK cannot afford to be seen as weaker on Tamil rights than Modi himself.


By raising Katchatheevu just before Modi’s visit, Stalin is reinforcing an issue that Modi himself had championed. More importantly, he is signalling that the DMK is not willing to cede the Tamil nationalist vote to the BJP.


For Modi, this is an unexpected advantage. If even a DMK-led Tamil Nadu government believes that Katchatheevu must be retrieved, then Modi’s long-standing position is validated. Stalin’s move strengthens India’s bargaining hand. If New Delhi decides to reopen the discussion with Colombo, it can do so with the claim that there is cross-party consensus on the issue.


For decades, the BJP has struggled to gain political traction in Tamil Nadu. The state’s Dravidian political culture has resisted the party’s Hindutva narrative, and it has remained an electoral outlier. But in the past few years, the BJP has been making steady inroads, leveraging issues like Katchatheevu to gain support among Tamil Nadu’s disaffected fishing communities. If the DMK is forced to echo Modi’s stance, it only reinforces the BJP’s argument that Congress-era blunders continue to haunt Tamil Nadu.


Beyond the political gains, the Katchatheevu issue is also an opportunity for Modi to assert India’s regional influence. Sri Lanka, still recovering from its economic crisis, is heavily dependent on Indian assistance. By bringing up Katchatheevu in some form, Modi can remind Sri Lanka that India is not a passive observer in regional politics.


Sri Lanka, predictably, will resist any discussion of sovereignty. President Anura Kumara Dissanayake cannot afford to be seen conceding territory. However, Modi’s visit presents a moment for diplomatic pressure, if not for outright territorial negotiations, then for significant concessions on fishing rights.


If Modi can push for stronger protections for Tamil fishermen, or even force Sri Lanka to acknowledge the illegitimacy of the 1976 agreement, he will have achieved something no Indian leader has managed in 50 years.

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