China’s Encirclement Concerns

For almost two decades, Chinese strategists have worried about what they regard as the geopolitical encirclement of China. At various times, they have attributed that encirclement to the United States, then India, and most recently Japan.[1] No doubt last week’s large-scale naval exercise in the western Pacific did little to dispel their concerns. For the first time warships from India, Japan, and the United States jointly conducted anti-air and anti-submarine drills in the Philippine Sea, an area directly adjacent to the Chinese-claimed waters of the East and South China Seas.

China's Encirclement Concerns
China’s Encirclement Concerns

Events over the past month likely added to China’s concerns. Last Friday, Indian Prime Minister Narendra Modi visited Bangkok in part to expand his country’s defense and maritime security cooperation with Thailand. A week earlier, he met with President Barack Obama at the White House, highlighting India’s closer ties with the United States. At a summit in late May, the United States and Japan, along with other Group of Seven countries, openly voiced their concern over China’s maritime actions. Days before the summit, Obama flew to Hanoi where he lifted the long-standing U.S. arms embargo against Vietnam, one of China’s South China Sea antagonists. Then after the summit, Japanese Prime Minister Shinzō Abe welcomed a Vietnamese delegation to discuss how they could enhance their military cooperation.

Certainly Chinese concerns over encirclement are not new. During the Cold War, China worried about the Soviet Union pursuing a similar geopolitical strategy. Even earlier, the Chinese Communist Party faced several all too real “encirclement campaigns” during China’s long civil war. Those experiences could have left an imprint may have left their imprint on China’s strategic thinking ever since.

What is clear is that Asia-Pacific countries have begun to prepare for what could be an era of heightened tensions. Such hedging has recently accelerated, as Chinese behavior in the East China Sea, South China Sea, and on its border with India has grown increasingly muscular. The United States has pursued its “pivot” or “rebalance” toward Asia, which shifted the bulk of American naval might to the Pacific. India and Japan have boosted their diplomatic and economic engagement in Southeast Asia and strengthened their military postures. Other countries have begun to do the same. As Australia’s 2016 defense white paper warned, “competing claims for territory and natural resources [in the region]… could undermine stability.”[2] But does such hedging constitute an encirclement of China?

Imagined Encirclements

In the early 2000s, China agonized over a possible American encirclement on its western border as U.S. forces streamed into Afghanistan and Central Asia. But a decade later, a persistent insurgency had worn down the United States and its allies. U.S. military bases in Kyrgyzstan and Uzbekistan were closed; America’s once-close relationship with Pakistan became acrimonious; and U.S. forces began their long withdrawal. China’s concern never materialized.

Now Beijing fears an even wider encirclement by the countries along the Asia-Pacific periphery, as they hedge against China’s assertive behavior. But most of them are still in the early stages of building up their strength. Although Australia has launched an ambitious military modernization program, its forces remain small. India’s defense bureaucracy continues to frustrate its military’s modernization and expansion plans. While Japan fields highly capable forces, its fragile economy constrains its military’s ability to grow. Even America’s “pivot” toward Asia may not be as weighty as it sounds, as the Obama administration has trimmed the overall size of the U.S. Navy. Hence, one could argue that China’s concern over an encirclement is, at least for the moment, not wholly warranted.

Undermine the Encirclement

Besides, the countries that China fears will encircle it are not yet a cohesive bunch. Officially non-aligned, India remains skittish about is relationship with the United States. And while Australia and Japan have security treaties with the United States, they do not have strong ties with each other. That was evident when Australia, at the last minute, chose to purchase France’s Scorpene-class submarine over Japan’s Sōryū-class submarine for its next-generation submarine fleet. India’s security relationships with Australia and Japan are equally tenuous. China could use bilateral deals to weaken those relationships and hinder a nascent encirclement from coalescing any further.

Breakout of the Encirclement

But even if China’s fear was to manifest itself, Beijing is already developing the means to break out of it. In late 2013, China turned heads across Asia with its “One Belt, One Road” initiative. Among the many infrastructure projects it has financed in Southeast Asia are a special economic zone in Cambodia, hydroelectric dams in Laos, and energy and railway projects in Malaysia. While China’s “yuan diplomacy” has not always been successful, it has had an impact. Cambodia and Laos have become reliable advocates for China within ASEAN. Malaysia largely remains on the sidelines of the South China Sea dispute, despite a rising number of Chinese infringements of its exclusive economic zone. China’s initiative may prove useful even in the Philippines, which has been a thorn in Beijing’s side. The Philippines’ new president, Rodridgo Duterte, has indicated that he would undertake the bilateral dialogue that China has long sought in exchange for Chinese economic development assistance.

Benefit of the Encirclement

Still, Beijing may have reason to play up its fears of encirclement. Despite its remarkable economic achievements, China faces a host of problems. Today, Chinese leaders must manage their country’s difficult transition from investment-led growth to expansion by private consumption, while dealing with its various debt-fueled bubbles. Even under the best conditions, those challenges are bound to be volatile. So some may see fears of encirclement as a way to rally public sentiment and maintain the “social stability” needed to ensure the longevity of communist rule. In any case, whether the “encirclement of China” is imagined or real, effective or not, one can expect the phrase to remain in Beijing’s lexicon for years to come.

NOTES

[1] Zhang Yunbi, “Tokyo urged not to stir tension in the South China Sea,” China Daily, Mar. 10, 2016, http://www.chinadaily.com.cn/world/2016-03/10/content_23806572.htm; “Tokyo’s move to encircle China will lead nowhere,” Global Times, Nov. 23, 2015, www.globaltimes.cn/content/954471.shtml; Hu Qingyun, “US to increase troops stationed in Australia: Deal seen as move to ‘encircle’ China,” Global Times, Aug. 13, 2014, http://www.globaltimes.cn/content/875836.shtml; Li Hongmei, “India’s ‘Look East Policy’ means to encircle China,” People’s Daily Online, Oct. 27, 2010, http://en.people.cn/90002/96417/7179404.html; Dai Xu, “U.S. building ‘Asian NATO’ to encircle China,” China.org.cn, Aug. 11, 2010, http://www.china.org.cn/opinion/2010-08/11/content_20687335.htm; “China feels encircled,” Economist, Jun. 6, 2002.

[2] Australian Department of Defence, 2016 Defence White Paper (Canberra: Commonwealth of Australia, 2016), p. 57.

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China’s “One Belt, One Road” to Where?

During visits to Central and Southeast Asia in 2013, Chinese President Xi Jinping unveiled Beijing’s aspiration to create what it called the Silk Road Economic Belt and the 21st-Century Maritime Silk Road.  Both would entail the construction of new infrastructure to better connect the present-day countries along what was once the ancient Silk Road between China and Europe.  The former would do so over land with roads, railways, and airports; the latter across the ocean with seaports.  China’s two-part aspiration is now commonly referred to as its “One Belt, One Road” initiative.

China One Belt, One Road Initiative

At the time of Xi’s unveiling, China was near the zenith of its economic power.  Not even the 2008 global financial crisis seemed able to derail China’s economic ascent.  Some saw the “One Belt, One Road” initiative as a way for China to extend not only its economic, but also its political reach across Eurasia.  India had begun to worry about what it considered to be China’s “string of pearls,” a series of Chinese-built seaports across the Indian Ocean.  Others viewed the initiative even more broadly as an ambitious effort to reorient global commerce towards China.

But since then the air of invincibility surrounding China’s economy has dissipated.  China’s engines of growth—export manufacturing and infrastructure construction—have sputtered, as the debt that fueled them and the overcapacity that they created have ballooned.  Over the last year and half, Chinese leaders have been forced to repeatedly “fine tune” their economy to keep it growing.  They boosted China’s government spending, devalued its currency, cut its interest rates six times, lowered its bank reserve ratio seven times, and even directly intervened in its stock market.  Still, China’s economy continues to slow.

That slowdown has spurred Chinese leaders to seriously begin to shift their export and infrastructure-led economy to one that is driven by consumers.  How successful that transition will be is uncertain.  But one thing is clear, the “social stability” so prized by the Chinese Communist Party has begun to fray.  Popular unrest is on the rise.  The number of labor protests in China has soared from about 100 in 2010 to almost 2,500 in 2015.[1]

Thus, Beijing has every incentive to keep its giant manufacturing and infrastructure-construction state-owned enterprises (SOE) humming, as its economy makes the transition.  Seen in that light, China’s “One Belt, One Road” initiative looks less like a well-planned strategy and more like a scramble to keep the order books of its SOEs full.  New infrastructure contracts abroad would help do that; and once built that new infrastructure might help Chinese manufacturers export at a lower cost.

One can see China’s push to build more infrastructure projects from Indonesia to Pakistan.  In September, a Chinese-led consortium won approval from Indonesia to build a $5.5-billion high-speed railway in Jakarta.  But the consortium won only after it agreed that the Indonesian government would not have to guarantee the Chinese loans needed to finance the railway’s construction.  While that concession may have secured the approval, it also increased the potential financial losses that the consortium would have to bear if anything goes wrong.  With such large and complex construction projects, it is hard to ensure that will not happen.

Surely, China expected a different outcome after its construction companies built a port at Gwadar for Pakistan in 2007.  Despite a total investment of over $1 billion, the port has remained virtually idle.  Now China is doubling down on the Gwadar project.  It has promised $45.7 billion in fresh financing to build the China-Pakistan Economic Corridor, a series of energy, road, railway, and pipeline projects that will more closely tie Gwadar to China.

Of course, China can still benefit from such infrastructure projects even if they turn out to be unprofitable.  The new road, rail, and pipeline routes through Pakistan will enable China to import strategic resources, like oil, natural gas, and minerals, from the Middle East without being reliant on sea routes through the Indian Ocean.  The projects could also deepen China’s “all-weather” friendship with Pakistan by creating new constituencies within Pakistan that benefit from the economic activity that the trade routes to China could foster.

Other land-based links to China could do the same. The Kunming-to-Bangkok railway is another example.  The portion of it in China is already finished; the portion in Laos broke ground in December; and the final portion in Thailand is slated to begin construction in May 2016.  Given the massive scale of Chinese trade, even if a small portion of it is redirected over the railway, it could reshape the economic interests of a small country like Laos.  Indeed, China may hope to use the railway to pry Laos away from its traditional ally, Vietnam, and gain another friend in ASEAN.  On the other hand, China would not benefit to the same degree from Chinese-built seaports and airports that are not directly connected to it.  While they may boost trade in the host country, the course of that trade could be redirected elsewhere, if trade with China does not evolve as expected.

That is now a real possibility.  If the Chinese economy continues to soften, it means that China will need to import fewer raw materials and export fewer finished goods.  In the second half of 2015 China’s monthly imports fell 10 to 20 percent from a year earlier; and its exports slipped too.  Unless global demand revives or Chinese consumers pick up the slack, Beijing might well expect its “One Belt, One Road” initiative to yield more long-lasting political than economic benefits.

[1] “Number of strikes and worker protests in China hits record high in November,” China Labour Bulletin, Dec. 3, 2015.

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The Almost-Normal Country: Japan and the Use of Force

The enactment of Japan’s new national security bills was a long time in the making.  The bills, already passed by the lower house of the Japanese Diet in July, were approved by its upper house last week.  But ever since Shinzō Abe became Japan’s prime minister in 2012, he had sought legislation that would enable Japan to engage in “collective self-defense,” the ability to aid friendly countries under attack.  While that may seem routine in most countries, it has been anything but in Japan.  Many were unhappy with the legislation’s passage.  Those who opposed it feared that it would lead the country into war; and even some of those who supported it grumbled that it did not go far enough to make Japan a truly “normal” country, one where the use of force is considered as a legitimate tool of international politics.

Japan Collective Self-Defense

Unsurprisingly, China was quick to condemn the legislation’s passage.  China’s Ministry of National Defense declared that Japan’s new security laws ran “counter to the trend of the times that upholds peace, development and cooperation.”  The ministry chastised “Japan’s war mentality, its reinforcement of military alliances and attempts to send more troops abroad.”  Chinese media was less charitable.  Xinhua carried the headlines: “China Voice: Is Japan bound up to battle chariot?” and “News Analysis: Japan’s pacifist ideals stripped as Abe steps closer to resurrecting old war machine.”  One commentator at The People’s Daily blamed the “unyielding spirit of militarism” of Japanese leaders who were “breaking [Japan’s] pacifist promise and getting ready to send its troops to battles again.”[1]

Of course, China rarely passes up an opportunity to remind Japan of its imperial aggression.  Thirty-six years of Japanese economic aid to China—now nearly $1.2 billion per year—has yet to restrain its reflex.  In part, that is because the Chinese Communist Party (CCP) has often used anti-Japanese sentiment to buttress its own political legitimacy.  (Only recently did the CCP even credit its longtime Chinese rival, the Kuomintang on Taiwan, for its contribution—arguably larger than the CCP’s—to resisting Japan in World War II.)

That it took so long for Japan to pass this sort of legislation is a testament to the strength of Japan’s postwar pacifist sentiment.  While militarist elements may still lurk in Japan, most Japanese are decidedly uncomfortable with the use of force in international politics.  That was clear during Japan’s negotiations with Russia over the Northern Territories (or southern Kuril Islands in Russia) in the 1990s.  Though Japan had already begun its long economic stagnation, its military and political might was still near its peak.  In contrast, Russia, following the fall of the Soviet Union, was at its nadir.  Things were so bad in the Russian Far East that it was questionable whether Moscow could provide enough food or heat for its population on Sakhalin Island, let alone defend it.

Yet, Japan did not try to use its military or political capital to pressure Russia into a settlement.  Rather, Japan solely relied on the persuasive power of its economic assistance.  That tactic ultimately came to nothing.  After Russia’s economy recovered, Japan’s window of opportunity to settle the dispute on favorable terms closed.  Today, Russian leaders act without concern over Japanese reaction.  They cavalierly flout Japanese interests.  This year, a series of senior Russian officials visited the four disputed islands, despite repeated protests from Tokyo.  Russian Prime Minister Dmitry even toured one of them in August.  While there, he underlined that the Kuril Islands “are part of Russia… That is how it is and how it will be.”[2]

Japan’s self-imposed limitation on its use of force has also impacted its ability to secure its place in a changing East Asian geopolitical environment.  China’s economic rise has drawn other Asian countries closer to its orbit, while its seemingly relentless military rise has upset the regional balance of power.  Without the ability to form true security partnerships, Japan has risked becoming isolated.  Hence, Abe has eagerly cultivated new political and economic ties across the Asia-Pacific, from Australia and India to the countries of Southeast Asia.  Japan has certainly become more sensitive to changes in Asia’s geopolitical balance.  Last year, after Thailand’s relations with the United States soured, offering China an opening, Tokyo leapt into the breach with pledges of economic engagement with Bangkok.

Surely, the most immediate beneficiary of Japan’s new security laws is the United States.  For the past half century, the United States has borne the entire security burden of the alliance between the two countries—if Japan is attacked, the United States is obligated to defend Japan; but if the United States is attacked, Japan has no such reciprocal obligation.  Even during the Cold War, that uneven arrangement rankled some Americans.  To make it more equitable, Japan accepted the lion’s share of the financial burden to host American forces in Japan.  But with the end of the Cold War and the withdrawal of a substantial portion of American forces from Japan (to Guam and elsewhere), the relationship was about to tilt again.  Thus, it was hardly surprising that Washington welcomed the legislation’s passage.

But beyond the United States, the legislation also enables Japan to more effectively cooperate with other countries on security matters.  If Japan’s relationships with Australia, India, the Philippines, and recently Vietnam mature into security partnerships, those countries can now count on Japan as a full partner.  In fact, in the days before the upper house vote on the national security bills, Abe met with Vietnam’s communist party secretary to discuss stronger security ties, in light of Vietnam’s dispute with China in the South China Sea.  Abe pledged more patrol boats for Vietnam.  Such promises is partly what worries Japanese opponents of the bills.  Getting Japan entangled in the disputes of other countries could pull it into a conflict, perhaps with China.  On the other hand, the possibility of facing a regional network of security partners might restrain China’s aggressiveness.  After all, China’s own economic prosperity (tenuous as it has become this year) requires peace and stability.

Even with the enactment of its new national security bills, Japan seems unlikely to seek the active use of military force far from home.  After all, Japan’s debt-laden government is in no position to rapidly expand its self-defense forces without hurting its still-weak economy.  Moreover, the conditions under which Japan can use force to support American expeditionary efforts abroad are still narrowly circumscribed.  The new legislation may be a step toward a Japan that is more comfortable with the idea of the use of force.  But the road to an actual use of force remains a long one.  Ironically, China may be the one country that could propel Japan faster down that road.

[1] “China Voice: Is Japan bound up to battle chariot?” Xinhua, Sep. 19, 2015; “News Analysis: Japan’s pacifist ideals stripped as Abe steps closer to resurrecting old war machine,” Xinhua, Sep. 19, 2015; “Japan’s new security bills against trend of the times: defense ministry,” Xinhua, Sep. 19, 2015; Wen Zongduo, “Abe’s win is Japan’s loss,” Chinadaily.com, Sep. 19, 2015.

[2] “Moscow officials ‘have always and will continue to’ visit Russian Kuril Islands – PM,” RT.com, Aug. 23, 2015.

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Modi Flexes His Muscles: India’s Cross-Border Raid into Myanmar

June 16, 2015

Last Tuesday, India launched a punitive raid into Myanmar.  Seventy commandos from the Indian 21 Para (Special Forces) Battalion crossed India’s eastern border to strike two militant bases.  The commandos quickly overran the bases and killed between 20 and 40 militants.  The raid was prompted by the ambush of an Indian army patrol about 110 km south of Imphal five days earlier.  Eighteen Indian soldiers were killed and another 11 were wounded in what was the deadliest attack on Indian security forces in decades.  According to some Indian officials, Myanmar’s government consented to the raid, though Naypyidaw later claimed that the raid occurred on the Indian side of the border.

India Myanmar Raid

Whatever the case, the raid was remarkable.  It reflected Indian Prime Minister Narendra Modi’s willingness to not only use military force, but also take decisive action.  As soon as the ambush on the Indian army patrol occurred, Modi directed National Security Advisor Ajit Doval to coordinate an Indian response.  Within five days, India successfully planned, resourced, and executed the two cross-border missions.  That required not only military, but also diplomatic coordination, if India really discussed the matter with Myanmar.

Modi is surely a different kind of prime minister than India has had in the past.  He demonstrated that when he visited China in May 2015.  He directly communicated to Chinese Premier Li Keqiang “the need for China to reconsider its approach” on issues that hold back their relationship, particularly the territorial disputes between their two countries.  Modi’s predecessors had consistently shied away from such frank discussion, typically sticking “to uninterrupted pledges of friendship and good relations.”[1] While Modi’s visit to China yielded no breakthroughs on the border issue, it was clear that China should take note.

Modi has also embarked on active diplomacy around the world.  Toning down India’s traditional adherence to non-alignment, he has edged close to Australia, Japan, and the United States.  He is clearly interested in having India play a greater role not only in South Asia, but also beyond it.  His ability to act decisively will make that a more likely prospect.

[1] Benjamin Haas, “India’s Modi tells China to ‘reconsider’ approach,” Agence France-Presse, May 15, 2015.

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Strategic Intentions: China’s Military Strategy White Paper

On Tuesday, China published its latest defense white paper.  Unlike its’ eight predecessors, this document was the first time that China publicly unveiled parts of its military strategy.  Even the paper’s title was changed from China’s National Defense to China’s Military Strategy.  Rather than the opaque and retrospective generalities found in earlier versions, the new white paper offered details about China’s strategic intentions and the future development of its military.

One Chinese military official went so far as to state that the greater transparency of the new white paper was a sign of a more confident China.  That said, many of the revelations contained in the document were hardly novel.  It profiled China’s decades-old “active defense” strategy, which maintains that China would always remain strategically defensive–though perhaps not so at the operational or tactical levels.  It also detailed the Chinese military’s primary aim: to prepare itself to fight “local wars under conditions of informationization”—in other words, regional conflicts in which command, control, communications, intelligence, reconnaissance, and surveillance (C4ISR) would play major roles.  That too was already known.[1]

But other revelations in the white paper were more illuminating.  It showed that China intends to focus its force development in four domains: cyberspace (it will boost its cyber warfare capabilities); outer space (it will take steps to defend its interests there, even though it is opposed to the militarization of that domain); nuclear forces (it will build a reliable second-strike capability); and finally the oceans.

Yueyang - China frigate

That last domain is what currently worries China’s neighbors the most, given Chinese assertiveness in the East and South China Seas. Indeed, the white paper highlighted Beijing’s intentions to further expand the Chinese navy and extend the range of its operations—shifting from “offshore waters defense” to “open ocean protection.”  The white paper argued that China’s growing overseas interests have changed the country’s focus from being a continental land power to a maritime power.  That has led China to prioritize its navy in its military modernization plans.  In what once would have been heresy in the Chinese military, the white paper declared that “the traditional mentality that land outweighs sea must be abandoned.”[2]

That means that in the future China would not only defend its coastline from attack, but also its sea lanes of communications through international shipping routes, including those from the Middle East through which over half of China’s oil flows.  That, in turn, means countries like India will have to get used to seeing more of the Chinese navy in the Indian Ocean.  By the same token, Japan and the United States should expect more Chinese naval and air patrols in the Pacific Ocean and maybe one or two more Chinese aircraft carriers.

The white paper also listed China’s strategic concerns.  Chief among them was America’s “rebalance” toward Asia, under which the United States has increased its military presence and strengthened its alliances in the region.  The white paper also noted Japan’s push to revise its military and security policies, characterizing them as “sparing no effort to dodge the post-war mechanism.”  China’s “offshore neighbors” warranted mention too for their “provocative actions [to] reinforce their military presence on China’s reefs and islands that they have illegally occupied,” no doubt referring to the Philippines and Vietnam in the Spratly Islands.

While the white paper’s greater transparency may be the product of a more confident China, it is still a country that has not escaped the classic security dilemma.  As the white paper itself observes, China’s neighbors are rearming and helping the United States bolster its security alliances.  So, even as China strives to improve its security, it has prompted its neighbors to seek ways to improve their security situations, thereby reducing the effectiveness of its own efforts.  That is something that China’s military strategy probably did not intend.

[1] “China sticks to ‘active defense’ strategy,” interviewee Senior Captain Zhang Junshe, Vice President of the China Naval Research Institute, China 24, CCTV, Beijing, May 26, 2015,  http://english.cntv.cn/2015/05/27/VIDE1432675208303328.shtml; “White Paper highlights ‘active’ defense strategy,” interviewee Senior Colonel Zhou Bo, China Ministry of National Defense, host Han Bin, China 24, CCTV, Beijing, May 26, 2015, http://english.cntv.cn/2015/05/26/VIDE1432614727198411.shtml.

[2] China’s Military Strategy (Beijing: State Council Information Office of the People’s Republic of China, May 2015); “China’s defense white paper,” interviewee Senior Captain Zhang Junshe, Vice President of the China Naval Research Institute, host Wang Yizhi, Dialogue, CCTV, Beijing, May 26, 2015, http://english.cntv.cn/2015/05/27/VIDE1432668717544907.shtml.

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Decline in Oil Prices, Currency Pairs, and National Power

Last autumn, headlines began to declare national “winners and losers” from the precipitous drop in oil prices over the second half of the year.[1]  They contended that the United States and its friends would benefit from the fall in oil prices; and that its most strident adversaries would not.  While largely true, the headlines did not capture the whole story.

Since international prices for oil are quoted in U.S. dollars, the exchange rate between the U.S. dollar and another country’s currency (a currency pair) also matters when calculating the real impact of a change in oil prices on that country.  Take Russia for example.  Much has been made of the fact that half of Russia’s government budget is based on revenues from oil.  One might suppose, because oil prices have fallen about 50 percent over the last six months, that Russia’s government budget would be pinched by about 25 percent (reflecting the 50 percent fall in oil revenues on half its budget).  Such a contraction would be catastrophic for the Russian government and Russia’s economy, given its high dependence on government spending.  That might lead Western policymakers to believe they can easily wait out Russian President Vladimir Putin’s aggressive designs.

But one must remember that the Russian government does not pay for domestic goods and services in U.S. dollars, but rather in Russian rubles.  Any drop in the value of the Russian ruble against the U.S. dollar allows Russia to reap more rubles for its dollar-based oil revenues.  (Even so, a sudden devaluation in a country’s currency can still wreak havoc on that country’s wider economy, because it fails to let people adjust to the benefits of devaluation, before they feel its negative impacts.)  Given the devaluation in the Russian ruble (which has fallen in tandem with oil prices), the real impact of the fall in oil prices is closer to only 8 percent, rather than 25 percent. While that is still a big challenge for the Russian government’s budget, it is a lower hurdle for Putin to surmount.

Similarly, one might expect that Japan, a key American ally in Asia, to unreservedly benefit from the decline in oil prices.  As a country completely dependent on oil imports, any decline in oil prices should boost its economy.  Given that oil prices have fallen about 50 percent over the last six months and that Japan imported about 1.6 billion barrels of oil in 2014, one may naturally assume that Japan is now saving a vast sum that would act as a fiscal stimulus to its economy, making it a stronger country and one better prepared to cope with a rising China.

That has happened, but not to the degree that the halving of oil prices would suggest.  That is because the value of the Japanese yen against the U.S. dollar has fallen too.  During the second half of 2014, the yen devalued about 15 percent, as a result of the Japanese central bank’s quantitative easing policy.   That shaved one-fifth off the benefit from the decrease in oil prices to 40 percent in yen terms.  Ironically, the lower energy input prices had made it more difficult for the Japanese government to achieve its 2 percent inflation target, which Tokyo believes will help lift the country out of its decades-long deflationary economic stagnation. 

As the cases of Russia and Japan have shown, changes in currency exchange rates can make a real difference on the impact that changes in oil prices have on a national economy, whether they are net oil importers (those shaded in blue in the chart below) or net oil exporters (those shaded in red).

Effect of Exchange Rate Movements on the Decline in Oil Prices in Local Currencies

 

As a region, Asia has benefited from the drop in oil prices.  Almost every country in the region is a net oil importer.  Chief among them is China, whose slightly appreciating yuan against the U.S. dollar, has allowed it to fully benefit from the lower oil prices.  In fact, Beijing has taken advantage of them to less expensively fill its strategic petroleum reserve.[2]  But not far behind have been India and Indonesia.  The currencies of neither country have devalued by more than 6 percent, allowing them to realize almost all of the benefit from the decline in oil prices.  That, in turn, has allowed their central banks to cut their interest rates to spur their economies without having to worry as much about inflation.  Lower oil prices have also enabled Indian Prime Minister Narendra Modi and Indonesian President Joko “Jokowi” Widodo to slash fuel subsidies, which had been draining government coffers in the past, without a public outcry.  That has freed up resources that they can devote to infrastructure and defense, as both national leaders have promised.

However, the fall in oil prices has also pinched some American allies.  One such country is Australia.  Though it is a net importer of oil, Australia has ambitions to become among the world’s leading exporters of liquefied natural gas (LNG).  But LNG prices, which are often linked to those of oil, have followed oil’s prices downward.  That has put into jeopardy Australia’s new round of offshore LNG development.  According to the Australian government, it will likely miss out on about AUS$750 million in petroleum resource rent tax over the next four years—about the cost for one of the new diesel-electric submarines that its navy wants.  The situation would have been even worse had the Australian dollar not devalued by 13 percent against the U.S. dollar.[3]

Finally, some countries, like Venezuela, whose currencies are effectively pegged to the U.S. dollar, have felt the full impact of the decline in oil prices.  Unfortunately for Venezuela, it imports most of its consumer and industrial goods—including food, clothing, machinery, vehicles, etc.—and it holds debts mainly denominated in U.S. dollars.  Thus, any devaluation of the Venezuelan bolívar to temper the impact of lower oil prices would also cause the costs of goods to soar and make its U.S.-dollar debts crushing.  To avoid a financial crisis, Venezuelan President Nicolas Maduro has travelled to China this week.  In the past China has agreed to oil-for-loan agreements, in which China provides immediate financing to Venezuela in exchange for future deliveries of Venezuelan oil.  Already existing deals with China have begun to squeeze out Venezuela’s ability to use its oil to bring Latin American countries into its orbit.  Rather, new deals are more likely to move Venezuela close to China’s orbit.[4]

By the first week of January 2015, the benchmark prices for Brent and West Texas Intermediate crude oil had fallen to $51 and $48 per barrel, respectively.  As long as these conditions persist, oil-exporting countries will suffer and oil-importing ones will benefit.  But to really understand whether these countries are weakening or strengthening to the extent that the decline in oil prices suggest, one would be wise to also consider the trajectories of their national currencies.

[1] “Winners and Losers,” Economist, Oct. 25, 2014.

[2] Abheek Bhattacharya, “China’s Petroleum Reserve Builds Shaky Floor for Oil,” Wall Street Journal, Sep. 3, 2014.

[3] Australia is considering a Japanese submarine design for its next-generation submarine fleet.  The most recently launched Japanese Sōryū-class submarine cost $540 million and AUS$750 million converts to $615 million at today’s exchange rate.  John Hofilena, “Japan launches newest submarine Kokuryu amid party atmosphere,” Japan Daily Press, Nov. 04, 2013, Eric Yep, “Falling Oil Spells Boon for Most of Asia’s Economies,” Wall Street Journal, Jan. 4, 2015; Max Mason, “Oil price plunge sends petrol to four-year lows as Australia feels it at the pumps,” Sydney Morning Herald, Dec. 22, 2014; James Paton, “Plunging Oil Threatens to Spoil Australia’s Next Gas Boon,” Bloomberg News, Nov 27, 2014.

[4] Eyanir Chinea and Brian Ellsworth, “Venezuela’s Maduro to visit China, OPEC nations amid cash crunch,” Reuters, Jan. 5, 2015; Nicole Hong and Kejal Vyas, “Oil Shakes Venezuelan Debt to Its Foundations,” Wall Street Journal, Dec. 22, 2014; “Inside U.S. Oil,” Thomson Reuters, Aug. 22, 2014, pp. 7-8.

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Chinese Submarines and Indian ASW in the Indian Ocean

How to deal with Chinese submarines in the Indian Ocean has become a practical question for India.  In December 2013, China let it be known that one of its nuclear attack submarines would sail through the Indian Ocean over the following two months.  It was the first time that China confirmed such a transit.  At the time, many thought it would be a relatively rare occurrence.  But over the last couple of months, two more submarines appear to have made similar transits, after they were spotted making five-day long port calls in Sri Lanka.

On September 19, a Chinese Song-class diesel-electric attack submarine and its attendant Type 925 submarine support ship, the Changxing Dao, docked at the Colombo International Container Terminals for refueling and crew refreshment before the submarine set sail for the international anti-piracy effort in the Gulf of Aden.  Six weeks later, on October 31, there was another port call by a Chinese submarine and the Changxing Dao at the same facility.  Whether that port call was made by the same Song-class submarine which visited earlier or by a Han-class nuclear attack submarine, as some reports have indicated, remains unclear due to a lack of photos associated with its visit to Colombo.

Indian Ocean - China and India

Either way, the two port calls suggested that China might send more submarines (and with greater frequency) into the Indian Ocean in the future.  Naturally, that has heightened Indian concerns about Chinese power in the region.  But even more troubling to India was Sri Lanka’s readiness to welcome those submarines, in spite of Indian reservations.  After the first port call, New Delhi expressed to Colombo its concerns about such submarines visiting Sri Lankan ports.  Colombo dismissed India’s qualms, contending that Chinese submarines were no different than the other 230 foreign warships that visited Sri Lanka this year.  Many Indian observers saw the rebuff as a sign that Sri Lanka had decided to cozy up to China.  A few even argued that Sri Lanka had violated the 1987 peace accord between it and India in which Colombo agreed that its ports would “not be made available for military use by any country in a manner prejudicial to India’s interests.”

As to why the port calls occurred at all, some speculated that they were a response to India’s growing military relationship with Vietnam, a country locked in a dispute with China over the sovereignty of the South China Sea.  India has already become Vietnam’s principal military training partner, providing spare parts for Vietnam’s warships and training Vietnamese sailors in submarine operations.  In fact, India and Vietnam signed an agreement to engage in even closer military cooperation just days before the first port call.

The port calls also lent credence to long-held Indian suspicions of a Chinese scheme to encircle India through the development of military and economic ties with countries across the Indian Ocean.  Indian commentators have often pointed to the proliferation of Chinese infrastructure projects in the region as the manifestation of those ties, and collectively referred to the projects as China’s “string of pearls.”  Notably, the Colombo International Container Terminals facility (where the Chinese submarines docked) was one of those projects.  This year, China put its own name on its infrastructure-building efforts in the region: the “21st Century Maritime Silk Road” initiative.  Two weeks ago Chinese President Xi Jinping declared that China would set up a $40 billion fund to support that initiative as well as contribute billions more to a new Asian infrastructure investment bank.  Both are designed to foster new building projects across South and Southeast Asia.  Both are also likely to further stoke India’s sense of unease over Chinese intentions.

No doubt Chinese submarines in the Indian Ocean would complicate India’s naval situation in the Indian Ocean.  To reduce the danger from Chinese diesel-electric attack submarines, the Indian navy could step up its monitoring of Chinese submarine support ships and the region’s ports, which those submarines need to periodically refuel.  But Chinese nuclear attack submarines would pose a bigger challenge, as they do not need to refuel.  If supplied with timely intelligence, such submarines could put at risk Indian shipping throughout the region.

Already, the Indian navy has begun to prepare for that possibility.  But its planning has labored under a series of naval accidents in recent years, the deadliest of which occurred in August 2013 when an explosion aboard one of its Kilo-class submarines, the Sindhurakshak, killed 18 sailors.  At the same time, the navy continues to experience delays in its procurement of new warships and refit of its existing ones.  Between 2005 and 2010, 113 out of its 152 refit projects were late.  Many of them were combat platforms used for anti-submarine warfare (ASW).  But equally important are those platforms designed to search for and detect an adversary’s submarines.

While India’s land-based ASW helicopters and short-range maritime patrol aircraft (MPA), like its 14 Do 228 aircraft, are valuable to protect its key ports, the Indian navy must use long-range aviation assets to patrol the vast expanses of the Indian Ocean.  Historically, that mission has fallen to the navy’s handful of Soviet-vintage prop-driven aircraft.  Its four Tu-142M MPAs based at Rajali naval air station are responsible for the waters off India’s east coast; and its five Il-38 MPAs based at Hansa naval air station for the waters off its west coast.  But both sets of aircraft are showing their age.  Even setting aside the quality of their ASW sensors and the quantity of sonobuoys and weapons they can carry, the aircraft themselves are relatively slow compared to modern MPAs.  That is an important factor, given the long distances they need to cover in the Indian Ocean.

Hence, it was significant that the Indian navy began to upgrade its long-range MPA fleet in late 2008.  At that time, Chief of the Naval Staff Admiral Sureesh Mehta explained the need for better “maritime domain awareness and network-centric operations along with a reliable stand-off deterrent” to deal with China’s naval rise.  That approach was reflected in India’s purchase of twelve P-8I MPAs from the United States.  Based on the Boeing 737 jet airliner, the P-8I provides the Indian navy with not only a more capable suite of ASW sensors and weapons, but also greater speed.  The aircraft has a cruising speed over 100 miles per hour faster than India’s current MPA fleet, allowing it to better prosecute any submarines that it detects at longer ranges.[1]

Long-range detection and prosecution are important if the Indian navy is to conduct ASW on an oceanic scale.  Fortunately for India, geography helps to some extent.  The eastern approaches into the Indian Ocean are funneled through narrow straits created by the Indonesian archipelago.  The most significant of these are the Malacca, Sunda, and Lombok Straits.  They offer Chinese submarines the most direct routes from their bases in southern China, particularly a major new one at Yalong Bay, into the Indian Ocean.  Naturally, the Indian navy would want to monitor those straits for the passage of Chinese submarines.

However, the Indian navy must watch its western flank too.  There, Pakistan—China’s “all-weather friend”—has drawn ever closer to Beijing in the wake of America’s scaled back engagement from Afghanistan.  Recently, Pakistani military spokesman Major General Asim Saleem Bajwa went so far as to say that “Pakistan sees China’s enemies as their own.”  Though his comment was directed at China’s Xinjiang militants, it also raised eyebrows in India, which has had a long history of conflict with Pakistan.  Hence, the Indian navy must also have ASW resources ready to counter the possibility that Chinese submarines may use a Pakistani port as a base of operations or that Pakistan’s five French-built Agosta-class diesel-electric attack submarines may even sortie in support of China.

Considering these strategic parameters, we can gauge the number of long-range ASW aviation assets that India would need to conduct oceanic ASW in the Indian Ocean.  We can assess that the Indian navy would have to establish at least two ASW barrier patrols along the eastern and western peripheries of the region (as well as keep a sufficient reserve for escort duty).  Given an operational readiness rate of 75 percent, we can then estimate that India would require a force of 40 to 48 long-range MPAs, likely divided into five or six squadrons of eight aircraft.[2]

The Indian navy could assign three of these MPA squadrons to its Eastern Naval Command, which would likely operate them from not only Rajali, but also Utkrosh naval air station in the Andaman Islands.  From these bases, it could use one squadron to establish an ASW barrier patrol at the western exit of the Malacca Strait and a second squadron to do the same further south, closer to the exits of the Sunda and Lombok Straits.  Finally, it could use a third squadron to support its surface fleet operations.  On the other side of the Indian subcontinent, the navy could assign the other two or three MPA squadrons to its Western and Southern Naval Commands to monitor the western approaches to India’s coast as well as the waters around Sri Lanka for submarine activity.

No one said that oceanic ASW was going to be easy or inexpensive.  But Asia’s changing strategic environment has begun to force India to reassess the kinds of resources that it will need to maintain its naval position in the Indian Ocean.  Given the pace of China’s military modernization, India would do well to mobilize those resources faster.

[1] Gulshan Luthra, “Indian Navy to induct 24 Long Range Maritime Reconnaissance Aircraft,” India Strategic, Dec. 2011; Rahul Bedi, “Indian naval head warns of Chinese military challenge,” Jane’s Defence Weekly, Aug. 12, 2009; Freedom to Use the Seas: India’s Maritime Military Strategy (New Delhi: Integrated Headquarters, Ministry of Defence (Navy), May 2007), p. v.

[2] With a 75 percent readiness rate, each squadron would have six of its eight aircraft operational.  To maintain an effective ASW barrier patrol, two MPAs would constantly need to be on station.  Another two aircraft would be flying to or from the patrol area, and the last pair would be on the ground, preparing for their next patrol.

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Contested Border: China, India, and the Asian Century

Chinese President Xi Jinping’s three-day visit to India last week was supposed to have breathed new life into ties between Asia’s two giants, China and India.  It was the first visit to India by a Chinese president in eight years.  Many hoped it would reboot what was once heralded as the “Asian Century.”  Implicit in that hope was the belief that good relations between the two countries would have to develop to realize the potential of such a century.  On that score, Xi assured his host, Indian Prime Minister Narendra Modi, that China believed its neighbors would be vital to its wellbeing, after all “a warlike state, however big it may be, will eventually perish.”

That assurance was needed, because during Xi’s visit to India, Chinese troops twice crossed into territory that India claims as its own.  One incident began near Chumar about a week before Xi’s arrival.  Chinese forces brought heavy construction equipment and workers into the area with the intention to build a new road there.  Indian troops confronted them and a standoff ensued.  Meanwhile, another incident developed at nearby Demchok, where over a hundred Chinese nomads gathered to protest India’s construction of an irrigation canal that they believed was on Chinese soil.  Thirty Chinese soldiers accompanied the protesters.  Local Indian authorities dispatched 70 border policemen to the scene.  That created a second standoff.  Both then escalated during Xi’s visit.  At their height, about 800 Chinese troops and 1,500 Indian troops were deployed to the areas.  No doubt, the incidents gave Modi something to talk about with Xi during their time together.

China India Asian Century - Border Dispute over Chumar and Demchok

In public, however, Modi and Xi tried to downplay the border incidents.  For Modi, the visit was a chance to attract Chinese investment into Indian infrastructure and manufacturing projects.  For China, it was an opportunity to pry India away from the overtures of Japan and the United States.  A number of agreements were signed.  The two sides agreed to jointly study improving India’s railway system, ease the trade imbalance between them, and cooperate on developing a new economic corridor through South Asia.  China pledged that it would invest $20 billion into India over the next five years, of which $6.8 billion would go into building two new industrial parks in Gujarat and Maharashtra.  In a speech at the end of his visit, Xi contended that “only when the China-India relationship develops, will a real ‘Asian Century’ emerge.”

Nevertheless, many issues still split the two countries.  Their disputed border is only one of them, albeit a particularly thorny one.  In the first nine months of 2014, India recorded 344 Chinese border incursions.  Seventeen rounds of negotiations between the two governments since the 1990s have done little to settle the issue.  But even without the border dispute, there were still other instances of friction between the two countries in just the last week that would have taken some of the shine off of Xi’s visit.

On September 15, India agreed to extend to Vietnam a $100 million export credit for defense equipment that Hanoi has been busily acquiring to counter China.  As if that was not enough, India’s state-owned national energy company, OGNC, signed an agreement with its Vietnamese counterpart, PetroVietnam, to expand their cooperation in oil and gas exploration in the South China Sea, most of which China claims as its maritime territory.  That prompted China’s foreign ministry to warn India against entering into any deals that infringe on China’s territorial claims in those waters.

Similarly, India remains suspicious of Chinese intentions regarding its neighbors in South Asia.  Over the last decade, China has financed and built a string of major port and airport infrastructure projects in places like Gwadar in Pakistan, Hambantota in Sri Lanka, and Kyaukpyu in Myanmar.  Now, China has announced its “Maritime Silk Road” initiative in the region, which echoes its “New Silk Road” effort in Central Asia.  Indeed, prior to arriving in India, Xi was pushing the new initiative in Sri Lanka and the Maldives.  India has naturally grown concerned that China might challenge it as the dominant power in the region.  Last week, the Maldives only fanned those concerns when it gave a highly lucrative contract to manage its international airport to a Chinese company, after taking it away from an Indian one in 2010.

During Xi’s visit, Modi suggested that their two countries should put the past behind them.  Unfortunately, the present looks little better than the past.  The twenty-first century may well be remembered as an Asian one.  But one should not assume that an “Asian Century” will necessarily lead to prosperity and renewal, as Xi implied.  Europe dominated the eighteenth and nineteenth centuries.  Both were known as much for the conflicts and rivalries among European powers as for their economic development.

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Friends in Many Places: Vietnam’s Diplomacy

Last Wednesday, Vietnam feted the 60th anniversary of its victory over French forces at Dien Bien Phu.  But earlier that week, Hanoi lodged a protest against Beijing for allowing a Chinese offshore oil rig to drill in the waters near the Paracel Islands, which are disputed between China and Vietnam.  Hanoi also complained that Chinese ships intentionally rammed two Vietnamese coast guard vessels which were dispatched to the oil rig site on Sunday.  Several Vietnamese sailors suffered minor injuries.[1]  Fortunately, the outcome of the incident was far less severe than Vietnam’s March 1988 naval clash with China in which 70 Vietnamese personnel were killed and three ships lost after Chinese forces fired on them near Johnson South Reef in the Spratly Islands.

That China and Vietnam have had a long history of mistrust, reaching far before the 20th century, is well known.  The fact that both countries eventually became single-party states with a common communist ideology did not make them comrades.  During the Cold War, Vietnam allied itself with the Soviet Union, not China.  And in 1979 China and Vietnam fought a short, but intense war, in which Beijing sought to “teach Vietnam a lesson” for its invasion and occupation of Chinese-backed Cambodia.  But by the end of the conflict, China, after losing over 30,000 troops, learned that Vietnam was no walkover.  What Vietnam learned was the rarity of reliable friends.  Despite a Treaty of Friendship and Cooperation that Hanoi signed with Moscow a year earlier, the Soviet Union did not come to Vietnam’s aid when China invaded.  Unfortunately for Hanoi, after the Cold War ended and the Soviet Union collapsed, it had even fewer friends than before.

South China Sea - Paracel Islands - Spratly Islands - Vietnam

But with growing unease across the Asia-Pacific over China’s rise (and attendant assertiveness), Vietnam has found other countries receptive to friendlier ties.  Unlike the Philippines, which has sought to maximize its long-time relationship with the United States (and a more recent one with Japan), Vietnam has cast a wider net for friends.  Over the last 15 years, it has made fast friends with a number of external powers, including India, Japan, Russia, and the United States.[2]  These have paid off in different ways.

Like Vietnam, India has become wary of China.  New Delhi has wanted to push back against what it sees as China’s efforts to exert influence into South Asia, in countries like Bangladesh, Nepal, Pakistan, and Sri Lanka.  Moreover, India has its own territorial disputes with China over large sections of the Himalayan Mountains.  And so, India has pursued new ties with Southeast Asia through its “Look East” diplomatic strategy, and in doing so found common cause with Vietnam.  So, even as China drilled for oil in waters that Vietnam contests, India’s Oil and Natural Gas Corporation had already agreed to lease exploration blocks from Vietnam in waters that China contests in the southern part of the South China Sea.[3]  India has also extended military support to Vietnam.  Since 2000, the Indian navy has deployed ships into the South China Sea (and on occasion ignored warnings from China’s navy that they were entering Chinese waters).  In 2010, Vietnam signed an agreement that granted the Indian navy access to Vietnamese port facilities.  In turn, India agreed to expand Vietnam’s naval logistics capabilities and, in 2013, offered to help train new Vietnamese submarine crews (since India has long operated the same class of submarine that Vietnam is now acquiring).[4]

Vietnam’s relations with Japan have also grown.  The rift between China and Japan over the disputed Diaoyu (in China) or Senkaku (in Japan) Islands in the East China Sea has made Tokyo as interested as Hanoi in developing new security ties with its neighbors.  In 2011, Japan and Vietnam signed a memorandum of understanding that facilitated the creation of bilateral defense ties, ministerial visits, and exchanges between the two countries’ armed forces.  And when Vietnamese Prime Minister Nguyen Tan Dung visited Tokyo in December 2013, the two sides discussed further collaboration, including providing Japanese-built patrol boats to the Vietnamese coast guard.  (Japan made a similar offer of ten patrol boats to the Philippines in July 2013.)  That was followed up with an accord between Japan and Vietnam to establish an “extensive strategic partnership” during Japanese Prime Minister Shinzō Abe’s visit to Hanoi in March 2014.  The partnership envisions many areas of engagement, most notable among which is Japan’s assistance to enhance Vietnam’s maritime law enforcement capacity.[5]

Of course, Vietnam’s relationship with Russia extends back to the days of the Soviet Union.  But that relationship has been revitalized over the last decade.  Russia is once again doing a brisk business as Vietnam’s principal arms supplier and ranks among Russia’s top five arms export recipients.  In April 2014, Vietnam took delivery of the second of six Kilo-class submarines that it ordered from Russia.  Before that came orders for 32 Su-30MK2 fighters, two batteries of P-800 mobile land-based anti-ship cruise missiles (part of the K-300P Bastion-P coastal defense system), six Svetlyak-class fast-attack craft, and four Gepard-class frigates.  Vietnam also contracted Russia to upgrade its venerable naval base at Cam Ranh Bay, where Russia maintained a naval presence until 2002.  Meanwhile, Vietnam has tried to broaden its relationship with Moscow by allowing Russian state-owned companies, like Rosneft, to acquire stakes in its energy sector.  When Russian President Vladimir Putin visited Vietnam in late 2013, the two sides agreed to several deals that included a joint investment in a major refinery and a contract for a nuclear power plant.  But more interestingly, Hanoi offered Rosneft concessions in two offshore exploration blocks, both of which sit near or within China’s “nine dash line” that demarcates Beijing’s claims in the South China Sea.[6]

Vietnam has even courted the United States, a country against which it fought a bitter conflict in the late 1960s and early 1970s.  When Russia’s lease on Cam Ranh Bay was about to expire in the early 2000s, Vietnam turned to the United States.  Hanoi informally discussed granting the United States access to the naval base, which it had used during the Vietnam Conflict.  At the time the United States demurred, concerned about China’s reaction.  Even so, Vietnam has welcomed U.S. Navy port visits, which have averaged once per year over the last decade.[7]  Nonetheless, the relationship between Washington and Hanoi only really took off after they began holding annual bilateral defense and security talks in 2008.  Vietnam was particularly pleased in 2010 when the United States declared that freedom of navigation in the South China Sea to be in its “national interest.”  That American assertion was reinforced in late 2013 when Secretary of State John Kerry announced that the United States would provide Vietnam with $18 million and five fast patrol boats to improve its coast guard’s ability to properly police its waters.[8]

Whether Vietnam eventually finds these external powers to be fair-weather friends remains to be seen.  Certainly, China has tried to plant the seeds of doubt, warning Vietnam not to be misled by professions of friendship from other countries.  Of course, a country like Russia must weigh its growing strategic relationship with China against its military and economic ties to Vietnam.  Other countries must also consider how far they are willing to go for Vietnam.  Thus far, these sorts of questions have not hindered Hanoi from pursuing a foreign policy that aggressively makes friends around the globe.  Perhaps one day France may be counted among them too.



[1] “Sea incident not clash: China Vice-Minister,” China Daily Asia, May 8, 2014, http://www.chinadailyasia.com/news/2014-05/08/content_15134173.html; “Chinese vessels deliberately ram Vietnam’s ships in Vietnamese waters: officials,” Tuoi Tre News, May 7, 2014, http://tuoitrenews.vn/society/19513/chinese-vessels-deliberately-rammed-into-vietnamese-boats.

[2] Vietnam also developed closer security ties with Australia, Germany, Italy, and Sweden.  In 2010, Vietnam signed a Memorandum of Understanding on Defence Cooperation with Australia and further strengthened its ties in 2013 with a new joint training program.  In the same year, it contracted with Sweden’s Unmanned Systems Group for unmanned aerial vehicles.  Julian Kerr and James Hardy, “Australia, Vietnam signal closer defence ties,” Jane’s Defence Weekly, Mar. 21, 2013.

[3] That same region was a zone of contention in the early 1990s when China and Vietnam leased exploration blocks abutting one another to Crestone and Mobil Oil, respectively, both American energy companies.  Philip Bowring, “China Is Getting Help in a Grab at the Sea,” New York Times, May 6, 1994.

[4] Rahul Bedi, “Indian Navy to train Vietnamese submarine crews,” Jane’s Defence Weekly, Dec. 2, 2013; Hao Zhou, “China warns India against oil exploitation,” Global Times, Dec. 5, 2012, http://www.globaltimes.cn/content/748314.shtml; Desikan Thirunarayanpuram, “USA, China frown at Navy’s S China Sea exercise,” The Statesman News Service, May 8, 2000.

[5] “Vietnam-Japan ties lifted to extensive strategic partnership,” Tuoi Tre News, Mar. 19, 2014, http://tuoitrenews.vn/politics/18447/vietnamjapan-ties-lifted-to-extensive-strategic-partnership; Jon Grevatt, “Japan, Vietnam pave way for further defence collaboration,” Jane’s Defence Weekly, Mar. 19, 2014; “Japan extends patrol ship carrot to Vietnam, plus ¥96 billion loan,” Japan Times, Dec. 15, 2013, http://www.japantimes.co.jp/news/2013/12/15/national/japan-extends-patrol-ship-carrot-to-vietnam-plus-%C2%A596-billion-loan/#.U2vRp7Stzj4.

[6] Alexei Anishchuk and Ho Binh Minh, “Russia’s Gazprom, Rosneft sign Vietnam energy deals on Putin visit,” Reuters, Nov. 12, 2013 ; “Russia to Deliver 12 Su-30 Fighter Jets to Vietnam – Source,” RIA Novosti, Aug. 21, 2013; Nguyen Pham Muoi, “Vietnamese Defense Minister in Russia to Boost Military Ties,” Wall Street Journal, Aug. 10, 2013; “Russia Will Help Vietnam Build a Submarine Fleet, Shoygu Says,” RIA Novosti, Mar. 8, 2013.

[7] The most recent U.S. Navy port visit occurred in April 2013 when the guided-missile destroyer USS Chung-Hoon and salvage ship USNS Salvor docked at Da Nang.

[8] “Kerry announces new US maritime security aid to Vietnam amid China tensions, pushes reforms,” Associated Press, Dec. 16, 2013; Malcolm Moore and Praveen Swami, “Vietnam offers navy base to foil China,” The Telegraph, Nov. 8, 2010; John Pomfret, “Clinton wades into South China Sea territorial dispute,” Washington Post, Jul. 23, 2010, http://voices.washingtonpost.com/checkpoint-washington/2010/07/clinton_wades_into_south_china.html ; Nayan Chanda, “Cam Ranh Bay manoeuvres,” Far Eastern Economic Review, Dec. 28, 2000-Jan. 4, 2001, pp. 21-23.

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How Populist Politicians are Isolating Pakistan

In late November, while Imran Khan, an athlete turned populist politician, was lambasting the United States and inciting his party workers to stop NATO supplies on the streets of Pakistan, there was an Iranian door opening on the other side of the world that could also mean the closing of Pakistan’s door as a strategic geo-political partner to the United States.

Confused Pakistani political elites will likely respond. So what? We don’t need the United States. All of this could be true, if Pakistan wasn’t so financially dependent on the aid, trade and military support from the United States, and other NATO countries. Governance, economic and social structures have been paralyzed or dismantled in Pakistan over the last five years, with still no sign of resurrection even though a new Government is in place. Pakistan is by no means self-sufficient, nor it is rich with any natural resource that other nations would go against the global grain to acquire.

Pakistan’s politicians need to stop and ask themselves, given its current precarious state of affairs, what exactly does Pakistan have to offer when its neighbors are leveraging the diplomatic game better and smarter than it is? The socio-economic gains that Pakistan’s neighbors are making come at the cost of potential economic opportunities. If Pakistan was internally stable and its political elite had the attitude to build global alliances, their neighbors’ successes would only add to their own with the opening of trade routes, strengthening of cooperative relationships and broadening of investment opportunities.

US-Iranian relations are thawing, NATO troops are pulling out of Afghanistan and China and India’s economic growth and regional dominance are here to stay. The region is rapidly transforming as leaders of Pakistan’s neighbors are steering their respective nations away from conflict and towards sustainable peace and prosperity. In contrast, Pakistani politicians, in particular Imran Khan, instead of navigating the nation towards capitalizing on changing times are pushing Pakistan towards global isolation and lost opportunities, in their futile quest to fuel populist anti-American sentiments and find enduring affection in the hearts of militants and extremists. What a disservice Imran Khan is doing to the people and the future of Pakistan.

I think, after the strengthening of US-India strategic ties, it is the thawing of US-Iran relations where Pakistan will feel the greatest hit. The United States could further shift the realization of its interests in the region by expanding its partnership with the Shia-dominated Iran to provide a land link to Afghanistan, thus further lowering its tolerance for the growing dominance of Sunni extremists and terrorists in Pakistan. The drone attacks against which Imran Khan is zealously protesting will not only continue, but will expand as long as militancy is harbored within Pakistan’s borders. He forgets that drone strikes are a response to terrorists acting with impunity in the region, not the other way around; he also forgets that drone strikes are an alternate solution in the absence of resolve by Pakistani politicians to wholeheartedly act against extremist and terrorists; let’s not forget militancy is the actual problem in Pakistan. 

With the weekend protests and the NATO supply blockage, Imran Khan has further damaged Pakistan’s global image, fueled lawlessness by inciting people who could commit acts of violence, caused Pakistan to violate international agreements with NATO, threatened to disrupt much needed jobs of all those Pakistanis associated directly and indirectly with transporting NATO supplies and lastly cemented the idea that the Taliban sympathetic Prime Minister of Pakistan, Mr. Nawaz Sharif just cannot and will not act against anyone or anything that is causing real harm to Pakistan.

With “saviors” such as these, Pakistan is in no need of any other enemies; both internal and external.

Raza Bokhari is the International Spokesperson for General Pervez Musharraf, the Former President of Pakistan. He is a Trustee of the Foreign Policy Research Institute, Vice Chairman of the World Affairs Council of Philadelphia and Past President of Pakistani American Public Affairs Committee. The opinions expressed here are his own.

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