Author: Tridivesh Singh Maini

Meanwhile, back in Iran: The demise of JCPOA

Tridivesh Singh Maini Current Events , , ,

The prospects for the revival of the Iran Nuclear Deal 2015/Joint Comprehensive Plan of Action (JCPOA) seem to be dim after International Atomic Energy Agency (IAEA) Director General Rafael Grossi’s announcement during a recent news conference that Iran has started removing 27 surveillance cameras from nuclear sites all over the country. Iran, on the other hand, has emphatically stated that it is cooperating with IAEA.

The board of governors of IAEA, consisting of 35 members, had passed a resolution last week seeking greater transparency with regard to Iran’s nuclear program. The censure accused Tehran of failing to provide correct information with regard to the development of ‘man made material’ at three undeclared sites in the country. While 30 countries voted in favor of the resolution, three countries abstained, and two countries – China and Russia — voted against the resolution.

The US has also once again underscored the point that a return to the Iran nuclear deal will not be possible if Tehran does not cooperate with IAEA. Said US Secretary of State Antony Blinken while referring to Iran’s decision to remove the above-mentioned 27 surveillance cameras :  

The only outcome of such a path will be a deepening nuclear crisis and further economic and political isolation for Iran.

Iranian President Ebrahim Raisi seemed unfazed by the IAEA resolution, and criticism from the West. Said Raisi: 

In the name of God and in the name of the nation, Iran will not withdraw from its stance a single step.

Given its numerous economic challenges, Iran has been looking towards a revival of the nuclear deal, since it could open up new economic vistas. In recent weeks there have been protests against rising inflation, and even Iranian retirees have been joining the fray (the government had announced earlier this month that it would raise pensions by 55%, but retirees say that this is not enough, given the level of inflation). Inflation is estimated at well over 45%, and 2 million Iranians have been left jobless as a result of US sanctions and the Covid pandemic.

Iran has been reiterating that if the 2015 Iran deal is not revived, it has other economic options and would adopt a ‘Look to the East policy’ where it would focus on improving ties with China and Russia.  

After the imposition of US sanctions in 2021, Iran and China had signed a 25-year agreement, referred to as strategic-cooperation agreement, to strengthen both economic and security links between the two countries. China has also been purchasing oil from Iran in spite of sanctions. For the first three months of 2022, Iran’s oil exports were estimated at 8,70,000, and a significant percentage of these were China bound. Iran has also been looking at a 20-year agreement with Russia. In 2021, bilateral trade between Russia and Iran was estimated at over $4 billion, and both countries have been seeking to strengthen ties in other areas like connectivity under the International North–South Transport Corridor (INSTC). 

Tehran, however, can not afford to be solely dependent on China or Russia, and needs to have economic relations with other countries — many which share close ties with the US. A great example of these limitations is China’s decision to reduce its import of oil from Iran after it was able to import the same at much cheaper prices from Russia.  

Even if Iran and the other signatories to the JCPOA are unable to revive the 2015 agreement, Iran may have some limited openings with regard to economic linkages with the outside world. The US could allow Iran to import oil in order to keep global oil prices down. It could provide waivers to certain countries to not just purchase oil, but also have limited economic linkages with Iran. After the withdrawal of the US from the JCPOA in 2018, the Trump administration had provided waivers to eight countries for a period of six months to purchase oil from Iran. Significantly, Iran itself had confessed that it had managed to evade sanctions. While addressing the Doha Forum in December 2018, then-Foreign Minister for Iran, Mohammad Zarif, said that

if there is an art that we have perfected in Iran [that] we can teach to others for a price, it is the art of evading sanctions.

In conclusion, Iran cannot afford to be solely dependent upon a handful of countries for putting its economy back on track. Given the current geopolitical turmoil globally, it is important for the US and other Western countries to be pragmatic and not push Iran to a corner.

Two visions of multilateralism are competing in the Indo-Pacific

Tridivesh Singh Maini Current Events , , , , ,

The Indo Pacific Economic Framework (IPEF), signed by a total of 13 countries on May 23, 2022, in Tokyo, is being dubbed by many as a means of checking China’s economic clout in Asia and sending out a message that the US is keen to bolster economic ties with its allies and partners in the Indo-Pacific.

Many Chinese analysts themselves have referred to the IPEF as an “Economic NATO.” China has also been uncomfortable with the Quadrilateral Security Dialogue (Quad), which consists of the US, Australia, Japan, and India, and has even referred to Quad as an “Asian NATO” – though members of the grouping have categorically denied this assertion.  

The countries which joined the US-led IPEF are: Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam.

IPEF

These countries together account for 40% of global GDP. The four key pillars of the IPEF framework are:

  1. supply-chain resilience;
  2. clean energy, decarbonisation and infrastructure;
  3. taxation and anti-corruption;
  4. and fair and resilient trade.

While launching the plan, US President Joe Biden said: 

We’re here today for one simple purpose: the future of the 21st Century economy is going to be largely written in the Indo-Pacific. Our region.

US Commerce Secretary Gina Raimondo, while commenting on the IPEF, said that it was important because it provided Asian countries an alternative to China’s economic model.

A few points need to be borne in mind. First, many of the countries — Australia, Brunei, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam – which have signed the IPEF are also part of the 15-nation Region Comprehensive Economic Partnership (RCEP) trade agreement of which China is a key driver (Indonesia, the Philippines and Myanmar have not ratified RCEP). RCEP accounts for 30% of the world’s GDP. Trade between China and other member countries has witnessed a significant rise, year on year in Q1 of 2022.

RCEP

Second, many of the countries which are part of the IPEF have repeatedly said that they don’t want to choose between China and the US. Singapore’s Prime Minister Lee Hsien Loong, who was amongst the first to hail the IPEF, has emphatically stated this point on a number of occasions. In an interview to Nikkei Asian Review on May 20, 2022, Mr Lee reiterated this point. In fact, he even pitched for making China a part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). (The precursor to the CPTPP, the TPP, was a brain child of the US).

Here it would be pertinent to point out that China had submitted an application for joining the CPTPP in September 2021. In the interview, Lee stated that countries in Asia needed to have good relations with the US, Japan, and Europe.

Indonesia’s Trade Minister, Muhammad Lutfi, who attended the signing of the IPEF on behalf of the archipelagic country’s president, stated that he did not want to see IPEF used as a tool to contain other countries.

One of the reasons why many countries are skeptical about the IPEF is the fact that it does not have any trade components. A number of ASEAN member states have pointed out that the IPEF makes no mention of tariffs and market access, a major drawback. At the US-ASEAN Summit held earlier this month, Malaysian Foreign Minister Ismail Sabri Yaakob had explicitly referred to this point. Like many other countries, Malaysia has welcomed the IPEF, but in the immediate future sees RCEP as a far greater opportunity.

US President Joe Biden has not deviated significantly from the policies of his predecessor, Donald Trump, with regard to trade and the US is unlikely to return to the CPTPP, at least in the immediate future. Biden and senior officials in his administration have spoken about the need to check China’s growing economic influence, specifically in Asia, and to provide an alternative model. The US, though, along with some of its Indo-Pacific partners, has only recently begun taking some steps in this direction. Leaders of the Quad countries, for example, during their meeting at Tokyo, announced that they would spend $50 billion in infrastructural aid and investment in the Indo Pacific.

Given Biden’s low approval ratings and diminishing political capital, it is unlikely that he is likely to change his approach towards trade significantly. US Trade Representative Katherine Tai said the TPP was “fragile,” and that there was no domestic support for the same. 

In conclusion, while the IPEF does have symbolic importance, bear in mind that many signatories themselves have close economic relations with China and would not like to get trapped in competition between the US and China. Unless the US re-examines its approach towards trade, which is highly unlikely, and unless countries which are part of the Indo-Pacific vision are able to strengthen economic cooperation, China is likely to dominate Asia’s economic landscape – even though there is growing skepticism with regard to the same.

Why developing countries need to reduce their economic reliance on China

Tridivesh Singh Maini Current Events , , , , ,

After the resignation of Mahinda Rajapaksa, Ranil Wickremesinghe was sworn in as Sri Lankan Prime Minister on Thursday, May 12, 2022. Wickremesinghe, who is the sole member of the United National Party (UNP), will be holding the position of Sri Lankan PM for the sixth time. While the new Sri Lankan PM is a seasoned administrator, the task of restoring even a modicum of normalcy to the island nation’s economy, which is currently facing its worst economic crisis since its independence in 1948, seems to be a Herculean task. Wickremesinghe has clearly indicated that his first task will be ensuring the supply of electricity, diesel, and petrol to the people.

The grave economic crisis, which has resulted in acute shortage of food and essential commodities, has brought ordinary people on to the roads and demonstrations have resulted in violence and loss of lives. The Sri Lankan President had to declare a state of emergency twice: first last month and then earlier this month (in Sri Lanka, the President and the Prime Minister are two different positions, with the President wielding more power). There had been a growing clamor for the resignation of President Gottabaya Rajapaksa, but Wickremesinghe was sworn in after the exit of Prime Minister Mahinda Rajapaksa (protests have been carrying on even after the swearing in of Wickremesinghe).

During his previous tenure, Wickremesinghe had tried to reduce Sri Lanka’s dependence upon China, and in his current tenure he will be compelled to do the same. He had also been critical of the previous government for not approaching the IMF for assistance (Wickremesinghe has been repeatedly accused of being pro-West and having neoliberal leanings by many of his political opponents).

It would be pertinent to point out that the Prime Minister had also batted for a coordinated regional response, by SAARC, vis-à-vis the covid19 pandemic. The new Sri Lankan PM has also been an ardent advocate of improving ties with India.

While it is true that Sri Lanka finds itself in the current situation due to economic mismanagement and excessive dependence upon the tourism sector (which faced a severe setback as a result of covid 19), it is tough to overlook the level of debts piled vis-à-vis China, and the fact that the island nation was following China’s model of economic growth with a focus on big ticket infrastructure projects.

Another South Asian nation — Pakistan, which witnessed a change last month when Shahbaz Sharif took over as Prime Minister, replacing Imran Khan – also faces daunting economic challenges. Pakistan’s foreign exchange reserves were estimated to be a little over $10 billion on May 6, 2022, and the Pakistani Rupee fell to its all time low versus the US Dollar on Thursday, May 12, 2022. Sharif, ever since taking over as PM, has repeatedly reiterated the importance of Pakistan’s ties with China, and the Foreign Minister, Bilawal Bhutto, in a conversation with his Chinese counterpart, alluded to the same:

[Bhutto] underscored his determination to inject fresh momentum in the bilateral strategic cooperative partnership and add new avenues to practical cooperation

Yet China has categorically said that it will not provide any financial assistance until Pakistan resumes the IMF aid program. Pakistan has been compelled to look at other alternatives, such as Saudi Arabia and the UAE, which have also said that without the revival of the IMF program aid will not be possible. Only recently, Chinese power companies functioning under the umbrella of the China-Pakistan Economic Corridor (CPEC) have threatened to shut down their operations if their dues (to the tune of $1.59 billion) are not cleared. China had also reacted very strongly to the terror attack on Karachi University in which three Chinese teachers lost their lives (this is the second such attack after 2021). China has also indicated to Pakistan that it is not happy with the progress of the China-Pakistan Economic Corridor (CPEC) project. The current government in Pakistan has repeatedly pointed to this fact.

One point which is abundantly clear from the economic crisis in Sri Lanka, as well as Pakistan’s challenges, is that excessive dependence upon China has disastrous consequences in the long run. If one were to look at the case of South Asia, Bangladesh has been astute by not being excessively dependent upon China – it has maintained robust economic relations with India and Japan. Given the changing economic situation it is becoming increasingly important for developing countries, especially in South Asia, to join hands to confront the mounting challenges posed by excessive dependency upon China. The US, Japan, and Western multilateral bodies and financial institutions need to find common ground and provide developing countries with an alternative economic narrative. It is also time for India along with other countries in the South Asian region to find common ground and focus on robust economic cooperation.

Debt Traps from China, Western Stringency, and the Future of South Asian Democracy

Tridivesh Singh Maini Current Events , , , ,

Introduction

If one were to look at two events in South Asia – the economic crisis in Sri Lanka and the downfall of the Imran Khan-led Pakistan Tehreek-E-Insaaf (PTI) government in Pakistan, one of the points which clearly emerges is that both the South Asian nations have moved closer to China, and there are pitfalls to being excessively dependent upon Beijing. Both countries have often been accused of becoming excessively reliant upon China and falling into what has been dubbed as a “debt trap,” which leads not only to rising economic dependency — as a result of piling debts — but also to Beijing dictating political choices. 

External debts of Pakistan and Sri Lanka

The International Monetary Fund (IMF), according to estimates in February 2022, had said that Pakistan owe $18.4 billion (or 1/5th) of its external debt to China, while Sri Lanka’s total debt to China is estimated at $8 billion, its total external debt is $45 billion.

In the case of Pakistan, a lot of attention has been focused on Imran Khan’s independent stance on the Ukraine issue, and a possible external hand in his ouster. Yet the Pakistan Democratic Movement (PDM) coalition, led by PML-N Supremo Shahbaz Sharif — which is now in power – has repeatedly pointed to Khan’s mismanagement of the economy and the growing disillusionment of the public as well as erstwhile allies (one of the final blows to Khan’s hopes of staying in power was when the Muttahida Qaumi Movement Pakistan (MQM) pulled out of the PTI alliance) as some of the key reasons for the ouster of the PTI government. While no political party can afford to say it, Pakistan’s dependence upon China has begun to cause concern, especially amongst sections of the business community who are keen to diversify the country’s economic relations.

The dire economic crisis which has hit Sri Lanka has been attributed to multiple factors; economic mismanagement by the government, dip in remittances as well as a fall in tourism as a result of the Covid-19 pandemic and over reliance on China. 

Interestingly, while earlier Sri Lanka had refused to seek assistance from the IMF, it has been compelled to, as it is left with limited options. A Sri Lankan team headed by newly-appointed Finance Minister Ali Sabry is headed to Washington DC for negotiations with the Americans. In an interview to Bloomberg television, the Sri Lankan Finance Minister said “‘We need immediate emergency funding to get Sri Lanka back on track.”

If one were to look at the instance of Pakistan, while Islamabad has become increasingly dependent upon China in recent years — especially as a result of its deterioration of ties with the US, and the $64 billion China Pakistan Economic Corridor (CPEC) project – it has realized that it can not allow its ties with the West to slide further even though close relations with China are imperative. It is not only Western analysts and US policy makers but even ministers in the previous Imran Khan-led PTI government who had actually raised question marks with regard to the economic sustainability of certain CPEC projects. China had expressed its displeasure to Pakistan over the same.

One of the reasons cited for Imran Khan’s differences with the Pakistan army have been his anti-West stance – the former PM accused the US of plotting his downfall and for following an independent foreign policy, pointing to a memo which said that “…if the no-confidence motion passes, Pakistan will be forgiven, if not, there will be consequences.” The US has repeatedly dismissed these charges levelled by Imran Khan.

Khan’s successor, Shahbaz Sharif, has given clear indicators that he will focus on relations with China and Saudi Arabia. He has also hinted at mending ties with the West. US Secretary of State Antony Blinken, in a congratulatory message to the Pakistan PM, said:

The United States congratulates newly elected Pakistani Prime Minister Shahbaz Sharif and we look forward to continuing our long-standing cooperation.

Pakistan is dependent upon the US and EU, since they are important export markets. During his address at the Islamabad Security Dialogue, Pakistan Army Chief Qamar Javed Bajwa, while commenting on Pakistan-US ties, had said: “we share a long and excellent strategic relationship with the US which remains our largest export market.”

Pakistan’s grey list status at Financial Action Task Force (FATF) will also be in review in June 2022. Islamabad would need to mend ties with Western countries if it wants its grey list status to be removed. Pakistan is also likely to resume negotiations with the IMF for the 7th review of the $6 billion loan agreement which was signed with the IMF in 2019. For smooth negotiations with the IMF, a working relationship with Washington DC is essential.

In conclusion, while it is true that Western institutions impose stringent conditions on developing countries and they are compelled to look for different options, excessive dependence upon China has its own pitfalls. It is time for South Asia to look inwards and focus on strengthening regional cooperation and realise that no external player can come up with sustainable solutions for dealing with the region’s economic challenges.

Why Pakistan can not afford further deterioration of ties with the West

Tridivesh Singh Maini Current Events , , , , , , ,

Introduction

While in recent days a lot of attention has been focused upon the political events in Pakistan (the vote of no confidence on April 3, 2022, will decide Pakistan PM Imran Khan’s fate), what was interesting to see was an address by the Pakistan Army Chief, General Qamar Javed Bajwa, at a two-day Islamabad Security Dialogue on April 2, 2022.

Imran Khan has accused the US for plotting his downfall, pointing to a ‘threat letter’ and citing his independent foreign policy (especially support for Russia) as the main reason for the same. During his address to the nation on Thursday, March 31, 2022, Khan said that the US was keen to dislodge him (though later on he said that mentioning the US specifically was a slip of tongue), and also said that the opposition was working against the national interest at the behest of certain forces abroad.

While Pakistan had summoned a US envoy to lodge a complaint against interference by Washington in its domestic affairs, the US State Department has vehemently denied this accusation. 

It would be pertinent to point out that while Khan’s anti-West tirade has drawn criticism from the opposition parties, the military, too, has not been particularly happy with his remarks. Significantly, Khan’s Pakistan Tehreek E Insaaf led coalition had lost the support of the Muttahida Qaumi Movement-Pakistan (MQM-P) on March 30, 2022, and was left with the support of 164 legislators in the national assembly, while the magic number is 172.

Last month, Khan had lashed out at Islamabad-based Western envoys (including those of EU member countries) after 22 of them had written to the Pakistan Prime Minister seeking Pakistan’s support on the Ukraine issue (Pakistan had abstained from voting in favor of a UNGA resolution criticizing the Russian invasion of Ukraine). Khan had said that Pakistan is nobody’s slave.

During his address at the Islamabad Security Dialogue — which was held a day before the vote of confidence in Pakistan — Bajwa said:

We share a long history of excellent and strategic relationship with the US, which remains our largest export market. We seek to continue our ties with both countries [China and the US].

While it is true that ties between the US and Pakistan have deteriorated significantly (US President Joe Biden has not called Imran Khan after taking over), it would be pertinent to point out that there are lobbies in both Washington and Islamabad which are in favour of mending ties and at least having a working relationship. Both the US and Pakistan worked closely on the issue of Afghanistan, and given Islamabad’s economic challenges it needs to have a working relationship with the US (especially with regard to assistance from international organisations like the IMF) and the European Union (EU), and cannot look only to Beijing. In recent months, senior officials within the PTI government have repeatedly batted for improving Pakistan-US economic ties.

Interestingly with regard to the Ukraine crisis, Bajwa criticised Russia’s invasion, while batting for immediate cessation of hostilities. Said Bajwa:

despite legitimate security concerns of Russia, its aggression against a smaller country cannot be condoned.

Bajwa’s address and the criticism of Imran Khan’s anti-West/US pitch by opposition parties in Pakistan clearly points to the fact that, while in recent years due to the changing world order and the geopolitical architecture of South Asia, Islamabad may have moved closer to China and to an extent Russia, there is a realisation that Pakistan cannot further damage its relations with the West, and needs to strike a genuine balance between China/Russia and the West.

Oil Prices and the Ukrainian War

Tridivesh Singh Maini Current Events , , , , , , ,

On March 8, 2022 US President Joe Biden imposed a ban on imports of Russian oil, gas, and energy . Said the US President: “This is a step we’re taking to inflict further pain on Putin.” Biden also said that Americans may have to deal with the economic repercussions of this tough decision for sometime. Gas prices in the US had touched well over $4/gallon, which was higher than the previous record set in 2008, before the announcement. 


Over the past few days, the US has been looking for alternatives to Russian oil. Last week, a delegation of US officials visited Venezuela, and apart from the release of detained US citizens in Venezuela, the removal of sanctions was also discussed (as a goodwill gesture, two prisoners were released on Tuesday, March 8, 2022). The US delegation also met with President Nicolas Maduro.

In the Middle East, the US and other countries are looking to Saudi Arabia, the UAE, and Iran for making up for the shortfall caused by the sanctions on Russia. Iran, which currently pumps over 2 million barrels per day (bpd), could raise this number significantly to 3.8 million. This would reduce global oil prices and the pressure on countries dependent on oil imports. During his address, last month, to the Gas Exporting Countries Forum (GECF) held at Doha (Qatar), Iranian President Raisi had said that Iran was willing to fulfil the energy needs of countries, including European nations.

The Biden Administration’s decision to look at alternatives for oil supplies has drawn stinging criticism. A Republican policy maker, while commenting on this decision, said:

The decision to explore alternative sources of oil and gas has fit would be outrageous to even consider buying oil from Iran or Venezuela. It’s preposterous that the Biden administration is even considering reviving the Iran Nuclear Deal.

It would be important to point out that while Iran may be an important option for the US and other countries, this would only be possible if the Iran Nuclear deal 2015 is revived, and sanctions are removed. Russia has created a major hurdle by asking for a written guarantee from the US that sanctions imposed by it will not apply to Russia’s economic linkages with Iran. The US has dismissed Russian demands and said that the sanctions imposed are not linked to the Iran deal. Apart from this, there are sections of US policy makers vehemently opposed to the deal. 

If one were to look at the case of the UAE and Saudi Arabia, both countries have refused to take the calls of President Biden – the two Gulf countries have turned down US demands to pump more oil. Both countries also took time to vote for the UNGA resolution against Russia’s invasion of Ukraine (in recent years there economic and defense ties with Russia have improved). It is important to understand that ties between Washington and both the Gulf nations have soured for a number of reasons.

Reasons for deterioration in Saudi-US ties 

If one were to look at the instance of Saudi Arabia, Washington’s ties with Riyadh have gone down hill due to a number of issues including two big ones: Washington’s withdrawal of support to the Saudi Arabian war offensive in Yemen, and strained ties between Biden and Crown Prince Muhammad Bin Salman (MBS). Biden, unlike Trump, has refused to deal with MBS and has been speaking to MBS’ father (King Salman) instead. One of the major bones of contention has been the release of an unclassified report in 2021, which clearly points to the role of MBS in the brutal murder of Saudi journalist Jamal Khashoggi (Trump had refused to release this report). Visa restrictions were imposed on 76 Saudi citizens involved in harassing journalists and activists by the Biden Administration, but no such measures were announced against MBS.

During his presidential campaign, Biden had been stinging in his criticism of Saudi Arabia’s human rights record and vowed to treat Saudi Arabia as a “pariah,” and the decision of the Biden Administration not to sanction MBS directly drew strong criticism from certain quarters within the Democrats. Saudi Arabia’s growing proximity towards China has also been a bone of contention in US-Saudi relations. In December 2021, US intelligence agencies suspected that China was assisting Saudi Arabia with the development of its ballistic missiles program. In a recent magazine interview, MBS said that he did not care if the US President had misunderstandings with regard to the former. 

Riyadh moving closer to Beijing?

Earlier this year, in January 2022, during a meeting between Chinese Defense Minister Wei Fenghe and Saudi Deputy Defense Minister Khalid Bin Salman, there was a focus on strengthening defense ties. Saudi Aramco and China’s North Industries Group (Norinco) have recently decided to take forward an agreement for the development of a crude oil refinery and petrochemical complex in Panjin, China. What is significant is that Norinco is also a defense contractor, and was amongst the eight Chinese companies that joined the recently held World Defense Show exhibition in Riyadh. Significantly, Saudi Advanced Communications and Electronics Systems Company (ACES) signed a strategic agreement with China Electronics Technology Group Corporation (CETC), one of the world’s largest defence companies, to manufacture drone payload systems in Saudi Arabia. 

Abu Dhabi-Washington relations 

The UAE’s ties with the US have also witnessed a downturn. One reason is the UAE’s blossoming relationship with China. US has been uncomfortable with Huawei being part of UAE’s 5G program and had suspected that China was developing a military facility inside the Khalifa Port close to Abu Dhabi. The UAE subsequently cancelled a $23 billion deal to buy F35 jets from the US. 

The UAE has also been unhappy with the US decision not to designate Yemen’s Houthis as terrorists. A missile and drone attack by the rebel group, in January 2022, resulted in the death of 3 people and injured 6. While commenting on the current state of the UAE-US relationship, UAE’s envoy to the US, Yousef al-Otaiba, said:

Today, we’re going through a stress test, but I’m confident that we will get out of it and we will get to a better place.

In conclusion, while the US is looking for ways of minimising the problems caused by the ban on Russian oil and gas, it is absolutely imperative for the US to convince the Saudis and the UAE to start pumping more oil, and for the revival of the Iran nuclear deal at the earliest.

The US-France-Germany triangle and the Ukraine crisis

Tridivesh Singh Maini Current Events , , , , , ,

Introduction

After French President Emmanuel Macron’s visits to Ukraine and Russia, German Chancellor Olaf Scholz embarked on visits to Ukraine and Russia as well. Scholz had visited the US last week and discussed the Ukraine issue with Biden.

The timing of Scholz’s visits to Ukraine and Russia were important, given that the Biden administration has said that Russia could attack Ukraine at any point in time (significantly, only last week, Putin had assured Macron that Russia had no plans of escalating conflict, and would not like to escalate tensions). In a media interaction on Monday, Pentagon Spokesperson John Kirby had said:

This is a military that, that continues to grow stronger, continues to grow more ready. They’re exercising, so we believe that he has a lot of capabilities and options available to him should he want to use military force.

The US has pulled out its diplomatic staff from Ukraine, while EU and NATO member states, including Germany, have urged their citizens to leave Ukraine. 

Economic repercussions

The US and other members of the G7 have issued a stern warning to Russia, saying that it would face strong economic repercussions if Moscow invades Ukraine. During his conversation with Vladimir Putin, on February 12, 2022, Biden had conveyed that any aggression by Russia would result in strong measures, and G7 Finance Ministers also reiterated the same in a statement on Monday, February 14, 2022.

It would be important to point out that apprehensions with regard to a Russian invasion of Ukraine have also impacted global markets and oil prices. European indexes, including the UK’s FTSE 100, Germany’s Dax, and France’s CAC 40, dropped significantly on Monday, February 14, 2022, along with US and Indian markets. Apart from this, crude prices went up to a seven-year high, crossing $95 a barrel.

Differences between the US and France and Germany

One of the reasons cited for Russia’s aggressive stance is US support for Ukraine’s membership in NATO. France and Germany have, however, differed with the US on this issue. In 2019, then Ukrainian President Petro Poroshenko signed a constitutional amendment which made a commitment towards making Ukraine a member of both the EU and NATO.

During his visit to Ukraine, Chancellor Scholz said that membership is not such an important issue, and that it was “strange that Russia makes this the subject of major political problems.”

The Ukrainian President, Volodymyr Zelenskiy, also said that for Ukraine, “NATO membership is not the absolute goal.”

It would be pertinent to point out that Ukraine’s Ambassador, Vadym Prystaiko, in a media interview, had made remarks indicating that Ukraine may consider giving up its stand of joining NATO, in order to avoid war, but later denied the same.

Before embarking upon his visits to Ukraine and Russia, Scholz had warned that Germany would be compelled to impose sanctions, and that the Nord Stream 2 Project, which runs from Western Siberia to Germany, would be shelved (Russia accounts for 40% of Germany’s energy supplies). During Scholz’s US visit, Biden had also said that if tensions rise then the $11 billion project owned by Gazprom would not go ahead. Said Biden:

The notion that Nord Stream 2 is going to go forward with an invasion by the Russians — that’s not going to happen.

The role of both France and Germany has been important; while on the one hand they have kept the channels of communication with Putin open, and conveyed the reservations of the US and its allies, on the other their stand vis-à-vis Ukraine membership in NATO is different. 

Biden’s focus on working with allies has been beneficial, but at the same time the reality is that there are differences between the approach of the EU and the US vis-à-vis the Ukraine issue. EU countries, especially Germany, can not overlook their economic interests and the logic of geography. It is not just France and Germany, but many other allies which would be concerned over escalation of conflict and the likely economic consequences – specifically the rise in oil prices.

The Russian-American-Chinese Triangle: A Changing Global Landscape

Tridivesh Singh Maini Current Events , , , , , ,

Introduction

Chinese President Xi Jinping and Russian President Vladimir Putin met on February 4, 2022 (this was the 38th meeting between both of them after 2013). Putin and Xi met hours before the opening ceremony of the Beijing Winter Olympics. Putin was in China to attend the Olympics and his presence was important in symbolism given that a number of countries – including the US, the UK, Australia, and India announced a diplomatic boycott of the games.

Both sides forcefully pitched for further enhancing their bilateral relationship and referred to the need for a ‘no limits partnership.’ Putin and Xi are also supposed to have agreed on the need for finding common ground in areas like artificial intelligence, technology, and climate change. A statement issued by the Kremlin after the meeting between Xi and Putin said that Beijing was opposed to the US aim of expansion of NATO in Eastern Europe (both Xi and Putin argued that NATO was promoting a ‘cold war’ ideology). During the meeting, Putin also made it clear that Russia endorsed China’s stand on Taiwan and opposed Taiwanese independence in any form. The Russian President was critical of the US for creating blocs in the Indo Pacific. Both sides expressed concern with regard to the Australia-UK-US (AUKUS) security partnership.

The joint statement made two interesting points; first, that the China-Russia relationship is ‘superior to political and military alliances of the cold war era’ and second, that both Moscow and Beijing were firmly committed to multilateralism. 

US-Russia-China triangle 

The steady deterioration between the US and both Russia and China have resulted in Moscow-Beijing relations further strengthening in recent years.

A number of US strategic analysts have argued that Washington needs to work with Moscow and find common ground on certain global issues, and to ensure that Moscow is not compelled to move closer to Beijing. 

There has been high level engagement between both sides in recent months, and they have found some common ground on the Iran nuclear issue/JCPOA (Joint Comprehensive Plan of Action). After his meeting with Russian Foreign Minister Sergey Lavrov in Geneva last month, US Secretary of State Antony Blinken had said that Iran nuclear deal was an example of how Washington and Moscow could work together. The threat of a Russian invasion of Ukraine have ensured that ties between US and Russia remain strained in spite of high level interactions between both sides.

Russia-China ties and the impact of US sanctions

A day before the meeting between Xi and Putin, Russian Foreign Minister Sergey Lavrov and his Chinese counterpart had met and are supposed to have discussed a number of issues, including Ukraine and Afghanistan. In response to the meeting, officials in the Biden administration had stated that a close economic relationship with China would not be enough for Russia to face the impact of US sanctions. Ned Price, Spokesperson of the US State Department, also warned Chinese companies in case attempts were made to circumvent US sanctions:

We have an array of tools that we can deploy If we see foreign companies, including those in China, doing their best to backfill U.S. export control actions, to evade them, to get around them.

Russia-China economic relations 

There has been a growing thrust in both Moscow and Beijing on strengthening economic relations. After the meeting between Xi and Putin a number of trade and energy related deals were signed. Russia’s Rosneft also signed a 10-year deal with China’s state-owned CNPC to continue supplying 200,000 b/d of crude to China via Kazakhstan (shipments will flow from Kazakhstan’s Atasu-Alashankou pipeline to refineries in northwest China).

Will China support Ukraine at the cost of economic ties with the EU?

While it is true that in the current global world order, Russia-China relations are likely to further strengthen, there is also a belief that China may extend support to Russia on the Ukraine issue – only to a certain point — because Beijing shares close economic links with Europe and the US. While trade between China and the EU and US account for a significant percentage of China’s total trade, trade with Russia accounts for only 2% of China’s total trade. At a time when China’s growth rate is slowing down considerably due to a number of reasons – such as some of Xi Jinping’s economic policies seeking to prevent ‘disorderly expansion of capital,’ a serious real estate crisis, and a drop in consumer spending – China would not like its economic links with the EU to be adversely affected. Apart from this, as mentioned earlier, the US has warned China that it will be affected by the economic and security challenges arising out of any further Russian aggression vis-à-vis Ukraine.

In conclusion, while there is no doubt that Russia-China bilateral ties, which are already robust, are likely to expand in a number of areas. And in a changing global world order there is likely to be growing convergence on important geopolitical issues.  It is important, however, to bear in mind that interests are not always identical and China’s economic interests – especially its economic links with the EU – are important in this context. 

China’s new footprint in the Middle East starts with Iran

Tridivesh Singh Maini Current Events , ,

Introduction

Iranian Foreign Minister Hossein Amir Abdollahian met with Chinese Foreign Minister Wang Yi on Friday, January 14, 2022, in the city of Wuxi, in China’s Jiangsu province. Both of them discussed a gamut of issues pertaining to the Iran-China relationship, as well as the security situation in the Middle East.

A summary of the meeting, published by the Chinese Foreign Ministry, underscored the point that the Foreign Ministers of Iran and China agreed on the need for strengthening bilateral cooperation in a number of areas under the umbrella of a 25-year agreement known as “Comprehensive Cooperation between the Islamic Republic of Iran and the People’s Republic of China.” This agreement had been signed between both countries in March 2021 during the Presidency of Hassan Rouhani, but the Iranian Foreign Minister of the new Raisi government announced the launch of the agreement on January 14, 2022.

During the meeting there was a realization of the fact that cooperation between both countries needed to be enhanced not only in areas like energy and infrastructure (the focus of the 25-year “comprehensive cooperation agreement” was on infrastructure and energy), but also in other spheres like education, people-to-people contacts, medicine, and agriculture. Iran also praised the Belt and Road Initiative (BRI) and said that it firmly supported the One China policy.

China-US and the Iran nuclear deal

The timing of this visit is interesting, as Iran is in talks with other signatories to the JCPOA/Iran nuclear deal 2015 (which includes China) for the revival of the 2015 agreement. While Iran has asked for removal of economic sanctions which were imposed by the US after it withdrew from the JCPOA in 2018, the US has said that time is running out, and it is important for Iran to return to full compliance to the 2015 agreement. US Secretary of State Antony Blinken said in an interview: “Iran is getting closer and closer to the point where they could produce on very, very short order enough fissile material for a nuclear weapon.” The US Secretary of State also indicated that if the negotiations were not successful the US would explore other options along with other allies.

During the course of the January 14 meeting Wang Yi is supposed to have told his Iranian counterpart that while China supported negotiations for the revival of the Iran nuclear deal 2015, the onus for revival was on the US since it had withdrawn in 2018.

The visit of the Iranian Foreign Minister to China was also significant because Foreign Ministers of four Gulf Cooperation Council (GCC) countries – Saudi Arabia, Kuwait, Oman, and Bahrain — and the Secretary General of the GCC (Nayef Falah Mubarak Al-Hajraf) were in China from January 10-14, 2022, with the aim of expanding bilateral ties – especially with regard to energy cooperation and trade. According to many analysts, the visit of GCC officials to China was driven not just by economic factors, but also the growing proximity between Iran and Beijing.

In conclusion, China is important for Iran from an economic perspective. Iran has repeatedly stated that if the United States does not remove the economic sanctions it has imposed, it will focus on strengthening economic links with China (significantly, China has been purchasing oil from Iran over the past three years in spite of the sanctions imposed by the US). The Raisi administration has repeatedly referred to an ‘Asia-centric’ policy which prioritises ties with China.

Beijing is seeking to enhance its clout in the Middle East as US ties with certain members of the GCC, especially the UAE and Saudi Arabia, have witnessed a clear downward spiral in recent months (the US has been uncomfortable with the use of China’s 5G technology by the UAE and the growing security linkages between Beijing and Saudi Arabia). One of the major economic reasons for the GCC gravitating towards China is Washington’s thrust on reducing its dependence upon GCC for fulfilling its oil needs. Beijing can utilize its good ties with Iran and the GCC and play a role in improving links between both.

The geopolitical landscape of the Middle East is likely to become more complex, and while there is not an iota of doubt that American influence in the Middle East is likely to remain intact, China is fast catching up.

China, Covid, and economic slowdowns

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China’s economy faces a number of challenges — three in particular:

  1. the spread of the covid19 pandemic
  2. the country’s ambitious zero-covid approach (which has resulted in severe lockdowns)
  3. and a grave real estate crisis arising out of the crackdown on the property market

The slow down of China’s economy was acknowledged by Chinese Premier Li Keqiang. In a meeting he is reported to have said: “It is necessary … to further cut taxes and [administrative] fees to ensure a stable economic start in the first quarter and stabilize the macro economy.”

During a meeting in December 2021, Chinese leadership flagged ‘stability’ as its key aim for 2022. This was in stark contrast to targets for 2021, which was focused on ‘the disorderly expansion of capital’ driven by President Xi Jinping’s objective of reducing inequalities in Chinese society.

China’s zero-covid strategy is impacting its economic links with the rest of the world as international air travel is restricted, and even the stringent lockdowns applied in the country are likely to take their toll on global supply chains. A lockdown in Xian, for instance, has already prompted Samsung Electronics and Micron Technology, two of the world’s largest memory chip makers, to red flag the possibility of their chip manufacturing bases in the area being hit.

As a result of its zero-covid strategy, and its aim of controlling the spread of the pandemic in Xian, and also before the Beijing winter Olympics next month, China has further tightened regulations for the import of products from neighbouring countries in Southeast Asia. Trucks with agricultural products from Vietnam and Myanmar have been stranded for weeks (some for well over a month), and as a result products have been rotting (especially fruits like mangoes and jackfruit) and exporters in both countries have had to face losses (exports of non-agricultural products, such as rubber and minerals, from Laos to China, have also suffered). Apart from stringent checks, exporters of commodities are supposed to carry Chinese trucks across the border – the unloading of goods and transfer is a time consuming process and this leads to further delays.

It is not just mainland China but also the important financial hub of Hong Kong that has been following a zero-covid policy, which has impacted its economy – especially the tourist sector. The fact that Hong Kong will be opening to China before it opens to the rest of the world has also not sent out a positive message to international businesses.

China faces the onerous responsibility of not just keeping covid19 under check, but also preventing a further slow down in its economy. Economic challenges and the zero-covid approach will lead not only to domestic problems, but also impact its economic linkages with the rest of the world, especially neighbouring countries in Southeast Asia (China is an important market for agricultural products of Vietnam and Myanmar). The slow down in China’s economy and the remarks by Li Keqiang with regard to the same also highlight the limitations of Xi Jinping’s economic vision and the fact that there is a growing concern with regard to the country’s possible economic challenges over the next few months.

China’s new footprint in the post-American Middle East

Tridivesh Singh Maini Current Events , , , , , , ,

Days after the UAE’s decision to cancel the agreement regarding purchase of F35 jets from the US, a CNN report (December 23, 2021) stated that assessments of senior US officials suggested that transfers of sensitive ballistic missiles had taken place between China and Saudi Arabia.

UAE’s reasons for cancelling the agreement for purchase of F35s

One of the reasons for the UAE to cancel the deal with the US was that it did not want to be caught in any sort of ‘cold war’ between both the US and China. Anwar Gargash, Diplomatic Adviser to the UAE’s leadership, said, while speaking at a think tank in Washington DC earlier this month:

I think we, as a small state, will be affected negatively by this, but will not have the ability in any way to affect this competition even positively really.

While the US has been uncomfortable with the UAE’s use of Chinese 5G technology, with Washington warning the Emirates that the latter’s use of technology will impact security ties between both countries, the findings of US surveillance that China was trying to build a military installation in Khalifa port, close to Abu Dhabi, led to serious differences. Although construction work on the site in Khalifa port was cancelled (though both the UAE and China insisted that the facility was purely commercial in nature), and both the Emirates and the Americans have publicly stated that their relationship is still strong, there is no doubt that recent events have cast a shadow on the bilateral relationship.

If one were to look at the case of Saudi Arabia developing ballistic missiles, it is important for a number of reasons. First, it shows the increasing security imprint of China on the Middle East, specifically two Gulf Cooperation Council (GCC) countries: Saudi Arabia and the United Arab Emirates (UAE). Both are considered to be close to the US, and the fact is that ties with China could emerge as a bone of contention in relations between Washington and Abu Dhabi and Riyadh.

A senior Chinese official did not deny cooperation in the sphere of ballistic technology between Saudi Arabia and China, stating that both countries are comprehensive strategic partners. Said the official:

Such cooperation does not violate any international law and does not involve the proliferation of weapons of mass destruction.

Interestingly, China also shares robust economic ties with Iran and has been pitching for revival of the 2015 Joint Comprehensive Plan of Action JCPOA/Iran nuclear deal, while the UAE and Saudi Arabia, like the US, Israel, and other countries, have expressed worries with regard to Iran’s nuclear ambitions. China and Iran have also signed a 25-year cooperation agreement, referred to as “strategic cooperation pact,” in March 2021, which sought to bolster economic and security linkages between both countries. Iran has also hinted that if the JCPOA does not revive it would go ahead and trade with China and other countries.

Second, the development of ballistic missiles by Saudi Arabia will have a significant impact on the Middle East, and make it tougher for the US and other countries to prevent Iran from developing a ballistic program.

US ties with Saudi Arabia

While information pertaining to Chinese assistance for Saudi development of ballistic missiles was available to the US even earlier, the Trump administration did not put much pressure on the Saudis over this issue. The Biden Administration’s ties with Riyadh have been strained (as a result Saudi Arabia has been attempting to reorient its foreign policy significantly), though in recent months the US has been working on remolding ties. One of the reasons why Washington did not impose sanctions on Saudi Crown Prince Mohammed Bin Salman (MBS) even though declassified reports of CIA pointed to the fact that MBS was clearly involved in the Jamal Khashoggi murder (a number of Saudi officials were put on a no travel list, while financial sanctions were imposed on some officials), was that the US did not want to allow ties with Saudi Arabia to further deteriorate.

GCC countries like Saudi Arabia and the UAE, which have shared strong economic and strategic ties with the US, have been altering their foreign policy within the Middle East (one important example of this has been attempts by both countries to improve ties with Iran) as well as outside of it. One of the propelling factors for the reorientation in foreign policy of Riyadh and Abu Dhabi is the belief that the US will be less involved in the region in the future. In the past the China factor has never been a major issue in US ties with Saudi Arabia and the Emirates, but greater security and technological cooperation between the GCC states and Beijing could prove to be a thorny issue. Apart from its increasing economic clout, the biggest advantage that China possesses in the Middle East is that, apart from strong ties with Gulf countries, it also has good relations with Iran.

The Aussie-UK Free Trade Agreement

Tridivesh Singh Maini Current Events , , , , , , , ,

Introduction

Australia and the UK signed a Free Trade Agreement (FTA) on December 17, 2021 (an in principle agreement had been announced in June 2021). This FTA will drastically reduce tariffs on a number of Australian exports to the UK and reduce duties on a number of British commodities to Australia. Significantly, it will also make it easier for both Australian and British workers to work in each other’s countries under the working holiday scheme (WHS).

According to estimates of the British government, the FTA could increase trade between the United Kingdom and Australia by approximately $19 billion “in the long run” while the UK’s GDP may increase by about $4.2 billion by 2035.

There are some important provisions which could benefit workers from both countries. Firstly, in an important step, both countries have increased the working holiday visa’s eligible age to 35. What is especially significant is that there is no pre-requisite for applicants under this category to be employed in any “specific work.” Second, Australia will permit up to 1,000 workers to come from the UK in the first year of a new “skills exchange” trial.

Symbolic importance of the FTA

In a post-pandemic world, society is becoming even more insular and borders are becoming more stringent, so encouraging professionals and workers is important. In June 2021, UK Prime Minister Boris Johnson had said:

We’re opening up to each other and this is the prelude to a general campaign of opening up around the world.

The UK’s Secretary of State for International Trade, Anne Marie Trevelyan, described the deal as “a landmark moment in the historic and vital relationship between our two Commonwealth nations.”

The geopolitical significance of the FTA

From the UK’s point of view the FTA is important because the UK has been seeking to become more pro-active in the Indo-Pacific. Australia has been one of the most vocal proponents of the Free and Open Indo Pacific, and is also one of the members of the Quad (the other three members are the US, Japan, and India). From an economic standpoint the FTA is agreeable because the UK is seeking to get on board the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) (members of this group have a combined GDP of $13.5 trillion), and this deal will only bolster its chances. The UK has already signed trade agreements with two members of the CPTPP — Japan and Vietnam – in 2020. Interestingly the TPP (Trans Pacific Partnership), the precursor to the CPTPP, was conceived by former US President Barack Obama, but the US withdrew from the agreement during the Trump Administration (pulling the US out of the TPP was one of the first decisions taken by Donald Trump after he took over as President). The trade agreement had also been opposed by a number of Democrat leaders including Hillary Clinton and Bernie Sanders.

For Australia, this agreement is especially significant because ever since the souring of relations with China, the bilateral economic relationship has been adversely impacted. China has imposed tariffs on a number of commodities, such as wine and barley, and also restricted imports of Australian beef, coal, and grapes. Under the Australia-UK FTA, tariffs on Australian wines will be terminated immediately, and the FTA will give a boost to the sales of not just wine but a number of other commodities boycotted by China. The FTA with the UK may not be able to compensate for the economic ramifications of strained ties with China, but it could pave the way for Australia exploring similar arrangements with a number of other countries.

In conclusion, the agreement between Australia and the UK is an important development and a clear reiteration of the point that the UK has an important role to play as a stakeholder in the vision of the “Free and Open Indo Pacific.” Second, the Indo Pacific needs to have a strong economic component and FTAs between countries are important in this context. Third, countries like Australia willing to bear the economic ramifications of a deterioration in ties with China need to look at alternative markets for their commodities. Finally, while there are certain areas where only the US can provide global leadership, US allies need to chart their own course, as is evident not only from FTAs signed between many of them, but also by the success of the CPTPP without the US being on board.

The Quad of West Asia: New Developments, Old Problems

Tridivesh Singh Maini Current Events , , , , ,

Introduction

The signing of the Abraham Accords in September 2020, through which Bahrain and the UAE normalised ties with Israel, was a significant development which analysts believed had the potential of altering the geopolitical dynamics of the Middle East. In December 2020, Morocco also signed an agreement for normalising relations with Israel, while in January 2021, Sudan followed suit. The 2020 accords, which many believed was more about symbolism than substance, drew criticism for ignoring the Israeli-Palestinian conflict (the events of May 2021 clearly reiterate this point) and overlooking other complexities of the region.

Hailed by the Biden Administration

The Abraham accords, which have been dubbed as one of the significant achievements of the erstwhile Trump Administration, were welcomed by Biden (who was then not President) and have been hailed by him and by senior officials within his administration repeatedly. Commenting on the Abraham Accords at the one-year anniversary, US Secretary of State Anthony Blinken said: “Today, a year after the Accords and normalization agreements were signed, the benefits continue to grow.”

Israel opened a consulate in the UAE in June 2021, while the UAE opened a consulate in Tel Aviv in July 2021.

Abraham accords and UAE-Israel ties

The accords have also given a boost to economic ties between both the Emirates and Israel (Israeli Foreign Minister Yair Lapid said that bilateral trade between both countries had surpassed $600 million in June 2021, less than a year after signing of the Abraham Accords). In the past year alone there has been a significant jump in Israeli tourists visiting the UAE (Israel, on its part, is also trying to woo tourists from the UAE). In October 2021, the Foreign Ministers of the US, the UAE, Israel, and India met and discussed potential areas of cooperation – specifically trade, infrastructure, technology, and maritime cooperation. This grouping has even been dubbed as a new ‘Quad’ in West Asia. US State Department spokesperson Ned Price, while commenting on the thrust of the meeting, said that the four countries:

discussed expanding economic and political cooperation in the Middle East and Asia, including through trade, combating climate change, energy cooperation, and increasing maritime security.

UAE’s outreach to Iran and its impact on UAE-Israel ties

While improving ties with Israel, the UAE has also been reaching out to Iran (economic ties between both countries remained robust even in the midst of tensions). Iranian Foreign Minister Hossein Amir-Abdollahian said, in a telephonic conversation last month with UAE Foreign Minister Sheikh Abdullah bin Zayed bin Sultan Al Nahyan, that Tehran attached great importance to its ties with the UAE and that it was important to give a boost to bilateral economic linkages.

National Security Advisor of the UAE, Sheikh Tahnoon bin Zayed Al Nahyan, led a high profile Emirati delegation to Iran on December 6, 2021 and met with his counterpart, Admiral Ali Shamkhan (the Iranian National Security Adviser), as well as Iranian president Ebrahim Raisi, and discussed bilateral and regional issues. This visit came days after the Vienna talks pertaining to the revival of the JCPOA (Joint Comprehensive Plan of Action)/Iran nuclear deal had broken down on December 3, 2021 (both the US and several EU countries had blamed Iran for its rigid approach). Dr Anwar Mohammed Gargash, diplomatic adviser to the UAE’s president, said that Sheikh Tahnoon bin Zayed Al Nahyan’s visit to Iran:

comes as a continuation of the UAE’s efforts to strengthen bridges of communication and cooperation in the region which would serve the national interest.

While the UAE is a key player in the Middle East and could play an important role in talks pertaining to the Iran Nuclear deal, both Israel and the US would be watching the attempts by the UAE to reach out to Iran. Many analysts argue that the Emirates could show lesser interest in getting other Gulf countries to normalize relations with Israel (Saudi Arabia, arguably the most influential country in the Arab Gulf, has also stated that it could not normalize ties with Israel without a sustainable resolution to the Palestinian-Israeli conflict).

UAE-China-US trilateral

Another important point to bear in mind is that there have been differences between the US and the UAE after the former alleged that China was building a military installation inside the Khalifa port, not far from the capital city of the Emirates, Abu Dhabi (this construction was halted after discussions between senior US officials and their UAE counterparts).

The UAE shares close strategic ties with the US (the latter has 3,500 of its troops based at Al Dhafra air base, which is 30 kilometres from Abu Dhabi), but the sale of fifty F35 stealth fighter planes (worth $23 billion) has been delayed for a number of reasons: Abu Dhabi’s use of Huawei 5 technology, the presence of China at strategically important points, and the offer of military technology by Beijing to the UAE. The agreement for the sale of F35s to the UAE had been signed during the Trump Administration.

The UAE has the ability to reinvent itself and this has stood it in good stead in the economic sphere; it will now need to recalibrate its foreign policy and keep it in sync with the geopolitical developments in the Middle East (the geopolitical landscape of the region has changed significantly ever since the signing of the Abraham accords). Its biggest regional challenge will be to maintain cordial ties with Israel and Iran, and at a global level ensuring that its strategic ties with the US do not get impacted by its cordial ties with China. In the midst of all the challenges and complexities, the UAE could leverage its ties with Iran to reduce tensions between the West and Tehran.

Afghanistan deserves attention, but don’t lose sight of Iran

Tridivesh Singh Maini Current Events , , , ,

Introduction

While global attention is understandably focused on the turmoil in Afghanistan, another major challenge for US President Joe Biden is likely to be the restoration of the Iran Nuclear Deal/JCPOA (Joint Comprehensive Program of Action). While to begin with the negotiations between Iran and other signatories (the US was part of these indirect talks) to the 2015 JCPOA offered a ray of hope, since June there has been no progress.

Iran’s nuclear program, and its foreign policy in the Middle East (especially its support to proxies), have emerged as the contentious issues between Iran and other signatories to the 2015 JCPOA.

In an important statement, Iran’s supreme leader Ayatollah Ali Khamenei recently said that:

America’s current administration is no different from the previous one, because what it demands from Iran on the nuclear issue is different in words, but the same thing that Trump demanded

After facing flak for his handling of Afghanistan, Biden would not like to send out a message that his approach towards Iran is similar to his predecessor.

Here it would be pertinent to point out that senior officials in the Biden administration have hinted at their impatience with the lack of progress. The US President, after his meeting with Israeli PM Naftali Benett, said:

We’re putting diplomacy first and see where that takes us. But if diplomacy fails, we’re ready to turn to other options

The Israeli PM (whose stance on Iran is identical to that of his predecessor) is supposed to have praised Biden’s clarity with regard to curbing Iran’s nuclear program.

The attack on Mercer Street in July 2021 was criticised not just by Israel, but also the UK and US. The US Secretary of State had alluded to retaliatory action.

Raisi’s election

The election of hardliner Ebrahim Raisi, in June 2021, was, according to analysts and commentators, likely to be a major stumbling block to the revival of the JCPOA. Ever since taking over, though, the Iranian President has moderated his stance considerably, and has spoken to French President Immanuel Macron, and also held an in-person meeting with Japanese Foreign Minister Toshimitsu Motegi, who visited Iran. During both meetings, Raisi put forward Iran’s views on the JCPOA saying that Tehran could not accept some of the conditionalities which other signatories to the deal are trying to impose. The Iranian President, during his conversation with Macron, criticised the US for imposing more sanctions.

CIA Chief William Burns, one of the architects of the 2015 JCPOA, also visited Israel, and is supposed to have discussed the Iran Nuclear deal with senior Israeli officials.

Challenges for Iran’s economy

It would be pertinent to point out that Iran’s currency, the Rial, has taken a significant beating in recent weeks as a result of the domestic uncertainty as well as the turmoil in Afghanistan. Even before Raisi had taken over as President, the country was afflicted with numerous economic challenges, including rising inflation (this was estimated at well over 30%). The covid19 situation as well as US sanctions had been held responsible for the economic crisis.

There were protests as a result of water shortages and power shortages as well. While there are high expectations from Raisi, there is a realization in Iran that unless the US removes sanctions Iran’s economy is unlikely to witness a recovery.

In conclusion, it is important for the Biden administration to give priority to negotiations related to the Iran deal, and to refrain from adopting a path similar to that of the Trump administration. Raisi’s hardline credentials, as well as his proximity to Khamenei, put him in a better position as far as negotiations pertaining to the Iran Nuclear deal are concerned. Time is running out, and Washington DC will need to give some elbow room to the new president. The US should also realize that reduction of tensions with Iran could be handy since Tehran has links with the Taliban.

While the outreach by France and Japan to Iran is encouraging, Washington DC itself needs to adopt a flexible approach vis-à-vis the JCPOA and should not lose patience. It is also important for Washington to not allow Israel to influence its Iran policy.

Biden’s newest foreign policy challenge: Iranian and Israeli hardliners

Tridivesh Singh Maini Current Events , , , , , ,

Introduction

After the triumph of Ebrahim Raisi in the June 2021 Iranian Presidential election, the US and other countries, especially the E3 (the UK, Germany, and France), which are party to the JCPOA/Iran Nuclear deal would have paid close attention to his statements, which had a clear anti-West slant. Raisi has made it unequivocally clear that while he is not opposed to the deal per se, he will not accept any diktats from the West with regard to Iran’s nuclear program or its foreign policy in the Middle East.

In addition to Raisi’s more stridently anti-US stance, at least in public, what is likely to make negotiations between Iran and the US tougher is the recent attack on an oil tanker, off Oman, operated by Zodiac Maritime, a London based company owned by an Israeli shipping magnate, Eyal Ofer. Israeli Foreign Minister Yair Lapid did not take long blame Iran for the attack, referring to this as an example of ‘Iranian terrorism’ (current Israeli PM Naftali Bennett’s policy vis-à-vis Iran is no different from that of his predecessor Benjamin Netanyahu). After Raisi’s win in June, Israel had reiterated its opposition to negotiating with Iran, and the Israeli PM termed the election of hardliner Raisi as a ‘wake up call’ for the rest of the world. Two crew members — a Romanian and a Briton, were killed in the attack.

While the Vienna negotiations between Iran and other signatories to JCPOA (the US is participating indirectly) have made significant progress, Raisi could ask for them to start afresh, in which case the US has said that it may be compelled to take strong economic measures, such as imposing sanctions on companies facilitating China’s oil imports from Iran (ever since the Biden administration has taken over there has been a jump in China’s oil purchases from Iran).

It would be pertinent to point out that pressure from pro-Israel lobbies in the US, as well as apprehensions of Israelis themselves with regard to the JCPOA, were cited as one of the reasons for the Trump administration’s maximum pressure policy vis-à-vis Iran, as well as the Biden administration’s inability to clinch an agreement with the Hassan Rouhani administration. While at one stage the Biden administration seemed to be willing to get on board the JCPOA unconditionally, it is not just domestic pressures, but also the fervent opposition of Israel to the JCPOA which has acted as a major impediment. While GCC countries Saudi Arabia and UAE were fervently opposed to the JCPOA and also influenced the Trump administration’s aggressive Iran policy, in recent months they have been working towards improving ties with Iran, and have softened their stance.

Washington should refrain from taking any harsh economic steps

At a time when the Iranian economy is in doldrums (the currency has depreciated and inflation has risen as a result of the imposition of sanctions and of Covid-19), Washington would not want to take any steps which result in further exacerbating the anti-US feeling in Iran. While commenting on the attack on the Israeli managed tanker, US Secretary of State Anthony Blinken said:

We are working with our partners to consider our next steps and consulting with governments inside the region and beyond on an appropriate response, which will be forthcoming

There is no doubt that the maximum pressure policy of the Trump administration of imposing harsh sanctions on Iran did not really benefit the US, and Joe Biden during the presidential campaign had been critical of the same. Reduction of tensions with Iran is also important given the current situation in Afghanistan, and Tehran’s importance given its clout vis-à-vis the Taliban.

US allies and their role

US allies themselves are looking forward to the revival of the JCPOA, so that they can revive economic relations with Iran. This includes the E3 (Germany, the UK, and France) and India. As mentioned earlier, GCC countries like Saudi Arabia and UAE, which in recent years have had strained ties with Iran, are seeking to re-work their relations with Tehran as a result of the changing geopolitical environment in the Middle East.

The role of US allies who have a good relationship with both Israel and Iran is important in calming down tempers, and ensuring that negotiations for revival of JCPOA are not stalled.

Conclusion

It is important for Biden to draw lessons from Trump’s aggressive Iran policy. Biden should not allow Israel or any other country to dictate its policy vis-à-vis Iran, as this will not only have an impact on bilateral relations but have broader geopolitical ramifications. Any harsh economic measures vis-à-vis Iran will push Tehran closer to China, while a pragmatic policy vis-à-vis Tehran may open the space for back channel negotiations.

Raisi on his part needs to be flexible and realize that the most significant challenge for Tehran is the current state of its economy. Removal of US sanctions will benefit the Iranian economy in numerous ways but for this he will need to be pragmatic and not play to any gallery.