The aim of this case might be to stop the Adani Group from raising funds in the US markets and prevent its rapid infrastructural expansion especially in ports, and airports.
New Delhi: Through the 1980s, America worried about the rise of Japan, and the “Japanese takeover of the US” as Japanese companies like Mitsubishi and Sony picked up prime American assets. This anxiety gave birth to novels like Michael Crichton’s Rising Sun (1992), a futuristic murder mystery laden with corruption set in Los Angeles in an imaginary age when Japanese companies completely dominate the American landscape having wiped any competition. Ironically, at the same time, the Japanese bubble was beginning to burst, and a long stagnation followed.
For the last three decades, concerns about Chinese infiltration of American and Western systems, and the might of Chinese companies, have grown exponentially, not least due to the Chinese Communist Party’s own machinations including industrial theft. This saga continues as China has now acquired pole position in large scale manufacturing, and comprehensively outpaces the West, including America, in areas like electric vehicles and others.
This concern about economic might and the role of Indian companies was always bound to move to India as the country rose up the GDP ranks—now at number 5—with an avowed aim to be the third-largest economy in the world by the end of the decade.
It is for a court to adjudge the merits of the case against Indian infrastructure and energy major Adani Group and its meteoric founder Gautam Adani, but it is important to understand that this case is much more about geopolitics than merely about alleged corruption.
The Ahmedabad-based around $150 billion Adani Group was virtually unknown three decades ago, and yet it has become one of the most powerful conglomerates with a ports-to-real estate-to-FMCG-and-media portfolio in India. It is, in a sense, spearheading the private contribution to India’s geopolitical infrastructure-building from supplying electricity in Bangladesh to building and managing ports around the world.
While most connected with Prime Minister Narendra Modi whose rise in politics was simultaneous with Gautam Adani’s in business, the Adani Group today has interests in almost every Indian state, and thus, with every political party. It is at the forefront of a clutch of mega companies tasked with delivering India’s economic muscle at home and around the world quite like the chaebols once did for South Korea, or what companies like Mitsubishi, Toyota and Sony did for Japan in the 1980s, or what China’s BYD is doing in disrupting the EV market today—Adani is one of the main faces of rising India’s rising ambitions.
Therefore, the announcement of criminal and civil charges of corruption (bribery) by the US Department of Justice against the Adani Group, and against promoter Gautam Adani himself has made headlines around the world. Some believe an attack on Adani is an attack on the Modi government but actually things are more complicated. The Adani Group is too deeply intertwined with almost every area of the Indian economy, which means it works with almost every political party in the country. It today has too national a footprint for it not represent the interests of one party, or even one political leader.
The truth is India needs economic champions that would further its geopolitical cause and ensure it is able to take on, for instance, China’s Belt and Road Project, and plant Indian flags to counter Chinese ones. India does not have the economic heft of China but it is fast expanding and it has greater goodwill than China in many countries. Investments by business groups like the Adani conglomerate increasingly play at the frontlines of projects which deliver geopolitical benefit to India—whether it be providing infrastructure to smaller countries in the region, or securing supply chain, and energy routes by strategic investments around the world. The cancellation of a $2.6 billion airport-and-energy deal in Kenya as corruption allegations emerged from a courthouse in the US suggests the kind of coordination and depth Adani faces from its detractors, and the scope and span of its work.
There are a few critical things to note about this. The Adani legal scandal has broken out after an earlier so-called expose of the Adani Group financial dealings by an activist short-seller from the US a few months ago failed to hurt the group.
A criminal case suggested against Gautam Adani himself will probably be taken more seriously—the Adani Group has denied all charges—but is unlikely to finally hold up with evidence in any court or lead to any conviction. The aim of this case might be something else—to stop the Adani Group from raising funds in the US markets, something it is particularly adept at doing, and prevent its rapid infrastructural expansion especially in ports, and airports. Following the court case announcement, Adani Green, an energy company with the Adani Group has had to withdraw its $600 million bond offering in the US. This comes in the last days of the Democratic government of Joe Biden and could also be an extension of the troubled relationship some parts of the Biden bureaucracy had increasingly developed with the Modi government.
In real terms, news of the case has shaved off more than $25 billion from the market cap of the Adani Group, and will have an impact on both the personal travel of the promoter, and US fund raising capabilities in the near term. But the real benefit most likely accrues to China, rather than the US, which will gain from any stalling of Adani Group plans to expand infrastructure projects around the world. Adani’s expansion in Africa, and Southeast Asia, in ports, roads, airports, electricity supply and other critical infrastructure will also primarily benefit China, which is grappling with an economic crisis at home and shall welcome any stalling of India’s expansion plans.
It must be asked if this court case was fast-tracked to ensure that this announcement comes before the Donald Trump administration begins its tenure early next year, especially since it is concerned with alleged bribery in India, and not in America. US rules allow such legal intervention where funds have been raised from America, and where there is participation of US companies, but such interventions are not common.
Could the announcement of this court case give a sense of further volatility in the ties between India and the United States which was already facing heat from the Khalistan issue and the alleged Indian intelligence plot to eliminate Khalistan separatist, lawyer and propagandist Gurpatwant Singh Pannun? Could things break down further before Trump comes to power, and are grounds being prepared to ensure that the relationship remains choppy when after Trump takes office?
There are a few unavoidable lessons from the Indian context. Such attacks on major Indian companies which make geopolitical and strategic investments are to be expected and should be planned for in the future. This is not to negate any real issue of bribery and corruption which need to be tackled separately. But rarely do such cases get blown up for purely legal reasons.
There has been speculation if certain factors of the power system in the US de facto does the bidding of the Chinese Communist Party as part of a global ideological commitment, and it is important for India to ask what kind of pressures its economic activities are likely to face from such factions in the future. If the Trump administration is able to bring about some sort of closure to the war in Ukraine and in Gaza and Lebanon, the entire geopolitical focus of the US would once again return to the Indo-Pacific where India is a critical partner. Therefore, near-term greater tussle with China is but inevitable—therefore such negative focus on Indian companies is to be expected and companies and the Indian state need to find ways and means to predict, defend, and counter attacks.
Concerns about the growing activities of Indian companies that go hand-in-hand with India’s rise is something that needs to be mapped and gamed better for greater predictability, and development of best-case solutions when they emerge because they are likely to surface in the coming years with greater frequency.
As a net provider of global assistance, including in terms of economic investments, India will face with resistance, and intrigue, to prevent its rapid expansion and impact. Indian Ocean coastlines, central Asia, and Africa could be the sites on which some of the most fraught contestations happen with China, and other countries. As the West curtails the basket of assistance and investment that it is willing to provide, countries like India must step in where they can, and in this compete with China. Apart from infrastructure, deeper contests are likely in areas like energy—notice the conflict between the Adani Group and the Bangladesh government which is failing to pay for power supplied by India via Adani infrastructure. Adani’s case in the US is the first major case to explode in this manner in this geopolitical scenario of contestation. It is unlikely to be the last.
* Hindol Sengupta is professor of international relations at O. P. Jindal Global University, and co-founder of the foreign affairs platform, Global Order.