After being hit with US tariffs that climbed to 50 per cent over its purchases of Russian oil, India has now struck a deal with the world’s largest economy to cut those duties to 18 per cent, sending the rupee and local markets sharply higher.
All the more remarkably, India has done so after indicating it would only halt new purchases of oil from Russia – a move that still stops far short of eliminating those imports or breaking ties with Moscow altogether.
It is a reminder that the new “middle powers” are defined by their ability to stay open to all sides while keeping their own interests first, a kind of economic selfishness that is actually becoming an asset.
Speaking in Davos recently, Canada’s Prime Minister Mark Carney argued that middle powers, including Canada, must work together because, as he put it, “if you are not at the table, you are on the menu”. He also warned the world is in a “rupture, not a transition, a break that I see many middle powers now turning to their advantage”.
Those that are attracting capital and production offer a predictable neutrality. That logic is already showing up in the numbers: Vietnam drew $38.4 billion in foreign direct investment last year, up 9 per cent, the strongest in five years. And India’s economy reached about $4.2 trillion last year, overtaking Japan to become the world’s fourth largest.
For investors, the appeal of these nations is simple: putting money into the US, China or Europe comes with political risks that are pretty much impossible to fully hedge. Middle powers, by contrast, can offer a way to grow returns with less exposure to that political crossfire.
Indeed, some of these economies – the ones pulling ahead – often carry less geopolitical baggage because they maintain working ties with several major powers. And they do so consistently.
The early winners are the countries that make this neutrality predictable, not improvised. The front-runners are Vietnam, Kenya, the UAE and India – countries that keep broad ties across major powers while offering the kind of stability and economic momentum that attracts investment.
Adding to the appeal is the fact many of these countries now face lower default risk than in the past: India recently earned its first sovereign credit upgrade in nearly 20 years. Many of these countries also offer solid prospects for growth at a time when institutions such as the IMD see the global outlook as steady rather than spectacular.
This shift is not just financial; it is operational. Companies are rebuilding their supply chains around reliability rather than the lowest cost, and are steering production towards countries where it is easier to do business across several markets.
One recent study by Economist Impact and DP World found that about 90 per cent of companies planned to rework their supply chains last year to diversify and localise – a shift that rewards the middle powers.
That advantage only grows as geopolitical tension continues to rise. Many companies now treat spats – especially between the US and China, the world’s largest economic powers – as a risk they cannot ignore.
Instead of relying on one big market, like China, they now spread production across several countries. That shift makes some middle powers more appealing: they sit outside the main contest and let companies get on with business.
India, now the world’s fastest-growing major economy, has not only been buying cheap Russian oil, but also courting US tech and defence investment, all the while keeping its economic ties with China open and even improving, after years of border tension.
Investors’ risk is manageable, and the upside is compelling.
Middle powers are also making the most of a world where the old trade rules no longer hold. As trade becomes weaponised and the World Trade Organisation struggles to uphold its core principles, countries are turning to bilateral deals instead. That shift gives middle powers more room to strike deals on their own terms and to back the industries they want to grow.
Indonesia is one example: the resource-rich middle power recently wrapped up a trade deal with the EU that promises zero tariffs on most of its exports, especially palm oil and nickel.
On top of that, last month’s EU-India trade deal is one sign of a world in which even major powers must negotiate their own terms – a major shift away from the WTO system towards the bilateralism that middle powers have long relied on to grow their economies.
And for the countries hoping to join that expansive group, the first rule for becoming a reliable hub for investment and production is to focus.
The economies that broke through – South Korea with its focus on cars and electronics, and Taiwan with semiconductors – built global clout by backing clearly defined industrial strengths. Others, such as Thailand, tried to spread themselves across several sectors and took far longer to climb the ladder.
The same logic applies now: the middle powers that will rise are those that pick a sector they can lead, and build around it. Those that do not focus risk spreading themselves too thin and staying stuck in the middle, instead of joining the ranks of middle powers that are pulling ahead.
