Afghanistan Achieves Pyrrhic Success via Chabahar Port

Afghans celebrated the new access that Iran’s Chabahar port provides the country, but this victory may turn out to be a pyrrhic one. As recent as May 2016, India, Iran, and Afghanistan signed their first-ever trilateral partnership agreement allowing Indian goods to reach Afghanistan and Central Asia via Iran, while also inserting new geopolitically competing players into the region. Over one year later, in October 2017, the first shipment of Indian wheat arrived in Zaranj, Afghanistan, via Chabahar port.

While utilizing Chabahar does fuse common regional and economic interests by allowing an alternate trade route into Afghanistan—and thereby reducing Afghanistan’s dependence on Pakistani ports—relying too heavily on Chabahar raises serious security and economic concerns in Kabul because using Chabahar is bound to further fray Afghanistan’s already tenuous relationship with Pakistan.

Afghanistan’s access to Chabahar will have greater implications for the geopolitical situation and for countries in the region, specifically India, Pakistan, and Iran.

India: Developing New Opportunities

India’s development of the Chabahar port is a calculated move granting New Delhi unimpeded access to Afghanistan and thence to wider Central Asia, while summarily bypassing the subcontinent’s archrival, Pakistan.

Iranian President Hassan Rouhani’s mid-February visit to India indicated a new strategic collaboration between India and Iran punctuated by the countries’ signing of nine additional agreements extending Iran’s 2018-19 bilateral energy infusion to India by some half a million barrels per day (25 MT), an increase of 25% over the 2017-18 estimate of 370,000 barrels per day (18.5 MT). Considering India’s lack of oil and natural gas reserves, opening the gates to Iran’s major ones makes perfect sense, and it is specifically Chabahar that has afforded India the opportunity to import even more natural resources from Iran, which will surely add to the port’s already growing geo-economic cachet.

India made this strategic move to compete with China, its main economic rival in Asia, and also the world’s top importer of Iranian oil commodities. However, India’s reaping of its own political and economic benefits via its agreement with Iran is certain to leave Afghanistan as the odd-country-out, standing more unstably vis-à-vis its potential economic threat to Pakistan, due to Afghanistan’s declining resource dependence.

Pakistan: Complicated Relationships

According to the World Bank, Pakistan’s contribution to Afghan trade has declined from 56.5% in 2008 to 38.9% by 2015, with Iran and India now as the largest importers of Afghan goods. The trilateral agreement on Chabahar port between Iran, India, and Afghanistan has allowed Afghanistan to diversify the ways and means by which it distributes goods to and from its provinces. By design, it completely bypasses Pakistan, which could create a new conflict between Kabul and Islamabad, and more so if Afghanistan continues to disentangle its import/export ties. The resulting deeper tensions would certainly result in further adverse effects on Afghanistan’s still fragile security and economy. The potential for such adverse effects has been amplified by the World Bank’s 2016 public recognition of Pakistan’s hostile Afghan intentions, a recognition that sharply indicates that if push comes to shove over Afghanistan’s further utilization of the Chabahar port, Afghanistan would remain defenseless if faced with a threat from Pakistan.

Iran: A New Power Broker?

Iran’s February anti-government protests again signaled Tehran’s instability to the region and the world. The West’s frequent imposition of sanctions, coupled with international criticism over Iran’s role in Syria and Yemen, reveals that global mistrust of Iran is still widespread. Furthermore, in March, Foreign Minister Javad Zarif said Iran would extend the Chabahar port project to Pakistan and China. The statement may have come as a shock to the region since the sole purpose of the port was to sidestep Islamabad. It is not a concrete partnership and more of a diplomatic declaration to indicate that ties between Tehran and Islamabad are not hurt.

Kabul doesn’t trust Tehran, yet Afghanistan still views Iran as its obligatory, if fickle, diplomatic partner. U.S. intelligence officials have recently revealed that Tehran has gallingly equipped the Taliban with arms, and even deployed Afghan refugees as its foot soldiers in Syria’s bloody civil war. Given these developments notwithstanding the geographic necessity of Iran in the Chabahar agreement, Afghanistan has little say in final trade route decisions; it’s hard not be cynical about the long-term prospects of Afghan international trade. Having such a domineering, frequently disruptive regional power as a neighbor and primary trade partner forces Afghanistan to tacitly accept its severe disadvantage. Another disadvantage is that Afghanistan can’t cut ties with Pakistan because then it would have to rely solely on the already hemmed-in Chabahar route. Were that to occur, Iran would have a leading role in the region not only by establishing Tehran as a major channel of trade entry and exit, but also by potentially giving the Islamic Republic the upper religious and cultural hand in Afghanistan.

The Afghan Gambit: Looking to the Future

History tells us that something deceptively simple and non-political as a trade port can have major security implications both regionally and globally. This is especially true in the Chabahar case, given its natural limitations and the generally fraught state of affairs in Central Asia. The United States remains a strong partner to Afghanistan, both in fighting terrorism and in bolstering Kabul’s overall progress as a governing body, and the Trump administration has (so far) pledged its full support. However, Kabul simply cannot—and should not—rely on a single partner, especially due to its rising tensions with Pakistan. This dynamic makes Afghanistan’s strategic relationships with India and Iran essential, though these relationships are by no means be a perfect one, due to the haranguing influences of Pakistan.

Though Afghanistan is often referred to as the “beating heart” of Central Asia, its distant and isolated geographic position has always left it economically, politically, and militarily vulnerable. There are no easy solutions to the country’s difficult circumstances, but connecting Afghanistan with Chabahar via a calculated geopolitical strategic move with India and Iran could prove a worthwhile gambit, despite its potential for only pyrrhic success.

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What’s in a Name?: Strategy Behind the “Indo-Pacific”

Throughout his tour of Asia in November 2017, U.S. President Donald Trump repeatedly referred to the region through which he travelled not as the “Asia-Pacific,” but rather as the “Indo-Pacific.”  While other American presidents have spoken of the “Indo Pacific” before, they did so infrequently. Trump’s continuous use of the term prompted some to speculate whether it offered a clue to the future of American strategy in the region.

Only a week later, Australia released a new white paper that embedded the term “Indo-Pacific” into its broad foreign policy objectives. The white paper made mention of the “Indo-Pacific” 74 times and the “Asia-Pacific” only four times. In contrast, Australia’s prior foreign-policy white paper, published in 2003, mentioned the “Asia-Pacific” 26 times and the “Indo-Pacific” not at all. Clearly, policymakers have intended the term to hold some deeper meaning.[1]

You Say “Asia-Pacific,” I Say “Indo-Pacific”

What does the term “Indo-Pacific” convey that the term “Asia-Pacific” does not? It conveys a wider view of the region to include the Indian subcontinent and, specifically, India. Why include India? Most likely it is because incorporating a country of India’s size and significance into the traditional conception of the Asia-Pacific region would help to balance the growing economic and military heft of China in it.

That makes sense, given that Australia, Japan, and the United States have already brought India into their Asian security discussions. Back in 2007, Japanese Prime Minister Shinzō Abe first suggested formalizing such a multilateral collaboration through what he called the Quadrilateral Security Dialogue. He hoped to bring together Asia’s four liberal democracies to promote their shared security goals. At the time, the concept fizzled for fear of alienating China. But that apparently is less of a concern today. With the rise of Chinese assertiveness, the four countries have begun to participate in joint military exercises all along Asia’s periphery. Since 2014, India, Japan, and the United States have conducted annual naval exercises from the Bay of Bengal to the Western Pacific. And, since 2015, Japan has joined the biennial Australia-U.S. military exercise called Talisman Saber.

Indo-Pacific Security Relationships

Still, for the moment the Indo-Pacific region’s only formal security alliances are the bilateral ones that link the United States with Australia, Japan, the Philippines, and South Korea in what some have described as a “hub-and-spokes” arrangement. The United States also has long-standing security relationships with Singapore, Taiwan, and until recently, Thailand. All other regional security ties are fairly nascent, including the one between Australia and Japan. Though both countries seem drawn to one another, their bond is not yet strong. Seen in that light, Australia’s recent decision to abandon a Japanese design for its future submarine fleet was probably a missed opportunity to reinforce that bond.

Meanwhile, India, which leaned towards the Soviet Union for much of the Cold War, has a relatively new security relationship with the United States. It was not until President George W. Bush orchestrated a civil nuclear deal with India, which implicitly recognized its nuclear weapons status in 2005, did that relationship really start. And even then, it did not grow quickly. Many Indians, including former National Security Council military advisor Prakash Menon and the former foreign secretary Shyam Saran, had reservations. In 2012, they, along with some notable Indian security experts, penned a strategy paper entitled Nonalignment 2.0 that downplayed the importance of stronger ties with the United States.[2]

Since then, however, China’s growing pressure on India’s borders and influence among India’s neighbors have made Indian leaders less concerned about India’s distance from the United States and more interested in finding common cause. As a reflection of that, India—once an exclusive Russian arms importer—has begun to acquire American military equipment and to consider Japanese ones, too. Australia specifically cited its interest in “much closer” ties with India in its recent foreign policy white paper.[3]

Indo-Pacific Encirclement of China?

For years, Chinese strategists have chafed at what they regarded as the geopolitical encirclement of China. But the number of such commentaries seems to have fallen over the last year or so. Perhaps that is because China has strengthened its relationship with Russia and made diplomatic headway in Southeast Asia. Or perhaps that is simply because China feels more powerful than it was. Ironically, China would have more reason to feel encircled today, if the other major Indo-Pacific powers choose to revive something akin to the Quadrilateral Security Dialogue.

What’s in the name “Indo-Pacific?” The answer, in this case, might be a strategy for balancing Chinese power in the region.


[1] Australia Department of Foreign Affairs and Trade, The Commonwealth of Australia’s 2017 Foreign Policy White Paper, Nov. 2017; and Australia Department of Foreign Affairs and Trade, Australia’s Foreign and Trade Policy White Paper, 2003.

[2] Sunil Khilnani, Rajiv Kumar, Pratap Bhanu Mehta, Prakash Menon, Nandan Nilekani, Srinath Raghavan, Shyam Saran, and Siddharth Varadarajan, Nonalignment 2.0: A Foreign and Strategic Policy for India in the Twenty First Century (New Delhi: Centre for Policy Research, 2012).

[3] Australia Department of Foreign Affairs and Trade, The Commonwealth of Australia’s 2017 Foreign Policy White Paper, Nov. 2017, p. 42.

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Conflict Escalation: China and India’s Territorial Dispute in the Himalayas

During the summer of 2017, an unusually volatile territorial spat between China and India erupted in the Himalayan Mountains. For over two months, hundreds of Chinese and Indian troops were locked in an escalating standoff on the Doklam Plateau, a region disputed by China and Bhutan near the Indian border. (See map.)

The fact that there was a standoff came as little surprise to most observers of China and India’s long-running territorial dispute. Other standoffs have periodically occurred along the two countries’ 4,057-km mostly disputed border—called the Line of Actual Control (LAC)—from the rocky peaks of Aksai Chin in the west to forested mountains of Arunachal Pradesh in the east. But this latest case was different in three respects: the parties involved, the strategic location, and the length and level of escalation.

Parties Involved

In the past, whenever such incidents took place, they occurred on parts of the LAC that China and India shared. This one did not; it transpired on land claimed by a third country, Bhutan. The incident began in June 2017 when Chinese troops and bulldozers moved onto the Doklam Plateau to build an all-weather road. With no ability to stop them, Bhutan appealed to India for assistance. Obligingly, New Delhi dispatched a military detachment to confront the Chinese, prompting the standoff.

Of course, China saw things differently. It accused India of sending troops into its territory and obstructing its road construction. China also intimated that India had exercised its historic influence over Bhutan’s foreign affairs to manufacture the Bhutanese request for help. But while one can debate the propriety of India’s intervention, what prompted China to attempt to build a road on land that it disputes with Bhutan in the first place remains unclear. Some speculated that Beijing may have been trying to gain a bargaining chip with which it could pry Bhutan away from India’s influence. If true, that would have been a long shot, given Bhutan’s economic dependence on India.

Strategic Location

While standoffs have developed in sensitive areas before, the most recent one occurred near a particularly strategic location for India. The Doklam Plateau sits near a part of India where its territory is squeezed between Bhutan, China, and Nepal to the north and Bangladesh to the south. That location, known as the Siliguri Corridor, is strategic because it connects India’s northeastern states with the rest of the country. The Indian military has long worried about a possible Chinese thrust through Sikkim that could sever the corridor and cut India in two.

China’s rapid infrastructure development and military modernization over the last two decades have only heightened those concerns. Indian strategists fear that China could use its new all-weather roads, high-speed railways, and airfields to quickly mass its military might on the border. Chinese military doctrine and exercises suggest that China is preparing to do just that. During its Stride 2009 exercise, the Chinese military mobilized and transported four divisions across China in record time. Meanwhile, the Chinese military has been steadily acquiring new combat platforms suited for mountain warfare, from helicopters to light tanks able to operate at high altitudes. It also recently completed a major reorganization of its command structure to boost its joint war-fighting capability.

On the other side of the Himalayas, India has struggled to keep up with China. Already five years behind schedule, India has competed only 27 out of 73 roads that it had wanted built to improve its access to the LAC.[1] To compensate for that weakness, the Indian military has stationed sizable forces near the LAC so that it can quickly respond to any crisis there. But as the gap between Chinese and Indian military capabilities continues to widen, India has felt more pressure to strengthen its border defenses. In 2013, it began to raise a new two-division formation, the 17th Mountain Strike Corps, to be better prepared to repel a serious Chinese incursion. The Indian army is now outfitting the corps with some of its newest arms, including U.S.-designed M777 howitzers.

Length and Level of Escalation

Historically, when a standoff on the LAC has arisen, it is settled in a few weeks through a diplomatic resolution whereby both sides agree to a mutual and simultaneous withdrawal. Most observers expected that to happen in this latest case. Instead, whether by coincidence or design, China conducted a series of live-fire drills in nearby Tibet after the standoff began. Then, when India’s national security advisor travelled to Beijing in July, China rebuffed him. Rather than negotiating a resolution, China issued a lengthy position paper accusing India of wrongdoing and insisted on a unilateral Indian withdrawal.

In August, India upped the ante. It increased the combat readiness of its 50,000 troops along the eastern portion of the LAC, advancing the timetable for its annual exercise in the region and deploying its forces to their wartime positions. China’s state-owned Global Times warned that “China is more than capable of defeating India in potential military conflict” and had already mused that “perhaps it is time that [India] be taught a second lesson,” a reference to the 1962 Sino-Indian War.

The Next Standoff

Fortunately, cooler heads prevailed by late August, and the two countries reached a settlement. India withdrew its troops, and China removed its road-construction equipment from the disputed region. Eventually, what drove the easing of tensions may have been Beijing’s desire for stability ahead of a Chinese-hosted BRICs summit (to which Indian Prime Minister Narendra Modi was invited) in September and China’s Communist Party Congress in October.

In any case, how Beijing handled the standoff on the Doklam Plateau seems to have marked an incremental shift in Chinese behavior. It demonstrated that China has become more willing to directly challenge the strategic interests of a large neighboring power and is less concerned over conflict escalation than it once was. If there is a lesson for India to learn from all that, it is to be better prepared for the next border standoff.


[1] Rahul Bedi, “Deadline for construction of India–China border roads extended to 2022,” Jane’s Defence Weekly, Aug. 3, 2017.

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Selling Out the Rohingyas

In the past several weeks, much attention has been devoted to the abject plight of the minority, predominantly Muslim, Rohingya community in Burma’s (Myanmar’s) Rakhine state. They have long been mistreated in the country and are denied citizenship rights despite a claim to have inhabited the Rakhine region since the sixteenth century; their situation has recently taken a particularly adverse turn. On August 25, it is reported that an emergent Rohingya guerrilla group had launched an attack on some Myanmarese army units. The military retaliated with considerable force and massacred substantial numbers of villagers at Tula Toli near the Bangladeshi border. In its wake, thousands of the hapless villagers trekked to nearby Bangladesh swelling an already turgid refugee population.

The harshness with which the Burmese military has responded to the guerrilla attack has generated understandable condemnation in the global community. Some groups have even organized to try to strip the Burmese leader, Aung San Suu Kyi, of her Nobel Prize. A fellow Nobel Laureate, Bishop Desmond Tutu of South Africa, has sharply criticized her deafening silence about the situation of the Rohingyas. Another Nobel Laureate, Malala Yousufzai, has also criticized her silence.

Bangladesh and India’s Response

The focus on the global community’s response to these most tragic developments in Myanmar is entirely warranted and appropriate. Lost in much of the reportage on these events, however, are the reactions of two key regional countries, Bangladesh and India. Bangladesh, which has grudgingly sheltered Rohingya refugees for years, has allowed more of them to enter the country, albeit with much reluctance. The conditions that prevail in the Bangladeshi refugee camps can only be described as being downright squalid. Yet, such dire conditions do not deter the wretched Rohingyas from fleeing the depredations of the Myanmar army. Of course, Bangladesh has little or no incentive and has limited resources to improve the existing state of the camps. Making them more livable is likely to make them a magnet for further refugee inflows. Furthermore, despite much economic progress over the past few decades, it remains a desperately poor country and can ill-afford to provide succor to increasing numbers of refugees even if they happen to be fellow Muslims. Even if substantial inflows of international assistance were available to Bangladesh, it is most unlikely that its regime would alleviate the milieu of these camps for fear that the refugees would seek more permanent residence in the country.

Bangladesh’s response to the emergent refugee crisis, while less than laudable, is at least somewhat understandable. What then has been India’s reaction to the unfolding crisis? The country has a long and storied tradition of not merely accepting refugees, but actually providing them solace. For example, in the wake of the Khampa rebellion in Tibet in 1959, it provided comfort to thousands of Tibetans. It has also sheltered the Dalai Lama, the spiritual and temporal leader of the global Tibetan community, for decades since his flight to India. More recently, in 1971, it opened its borders to nearly ten million Bengalis who fled East Pakistan following a military crackdown during the crisis that led to the creation of Bangladesh. Why then has the Bharatiya Janata Party (BJP) regime adopted a mostly uncaring stance? The reasons stem from the imperatives of both regional and domestic politics.

In his visit to Myanmar last week Prime Minister Narendra Modi, at least in the public domain, scrupulously avoided bringing up the issue of the Rohingyas. Worse still, he concurred with Suu Kyi that Myanmar was confronted with and needed to address a “terrorist problem.” According to reliable Indian newspaper sources, he was able, however, to persuade her that it was necessary to provide substantial economic assistance to the strife-torn region. Whether or not such aid ever materializes and reaches the unfortunate population remains an open question.

What explains Modi’s reticence to criticize the country’s role in precipitating this humanitarian crisis? In considerable part, it stems from a careful calculation of India’s perceived national security interests. Given that the country has long faced and continues to confront a range of insurgencies in its northeastern region abutting Myanmar, it needs to elicit Suu Kyi’s cooperation to prevent them from using bases and sanctuaries in her country.

Additionally, it can also be traced to India’s interest in limiting the influence of the People’s Republic of China (PRC). In earlier decades, Myanmar’s fledgling democracy movement was battling a vicious military dictatorship, and India had been at the forefront of supporting it. However, after watching the PRC make steady inroads into Myanmar in the early 1990s, India started to move away from its unstinted support for democratic reforms. Modi’s muted reaction to the ongoing crisis amounts to a logical culmination of that strategy.

Beyond regional concerns, what are the domestic determinants of this policy? The BJP regime, as is well known, has little or no regard for India’s vast Muslim minority. In fact, elements within the party are known for their active hostility toward India’s Muslim citizenry. Consequently, it should come as little surprise that the regime has no particular regard for the Rohingyas who have sought refuge within India. With complete disregard for customary international law, which calls on states not to deport refugees to countries where they face a reasonable prospect of persecution, Kiren Rijiju, the junior minister for Home Affairs, has threatened to deport the Rohingyas to Myanmar. Without adducing any evidence, he has argued that the refugees pose a potential terrorist threat and thereby should be deported. It is uncertain that the stinging rebukes that he has received from both Indian civil society as well as human rights groups will lead to a suspension of this stated policy.

At a juncture when multiple global crises command the attention of national leaders, there is a strong likelihood that the stance of the two most important regional actors— Bangladesh and India—to this humanitarian crisis will be mostly overlooked. Under those circumstances, the predicament of the Rohingyas will simply be written off as yet another footnote to the many humanitarian tragedies of the new century.


Sumit Ganguly is a Senior Fellow at the Foreign Policy Research Institute in Philadelphia and holds the Rabindranath Tagore Chair in Indian Cultures and Civilizations at Indiana University, Bloomington.

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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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