China

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.

A short reflection on the unintended political consequences of the right of due process

Federico Sosa Valle Current Events, Law , , , , , ,

Some days ago, The Economist published an article about the spread of the morality councils in the villages of China, whose members meet to praise the ones who they regard as well-behaved and humiliate the others who don’t. The publication used its characteristic sense of irony by pointing out that, finally, the highest ranks of the villagers found a way to exercise their “right to speak”.

Nevertheless, the said irony might lead us to a different kind of reflection on the political right to speak and the rights of due process, such as public hearings, an impartial tribunal, and an opportunity to be heard. Public hearings and impartiality are interrelated since it would be much harder for a tribunal to deliver an arbitrary adjudication if it is overseen by the society. But the public watch of the trials and the right to be heard are even more interrelated. Through these devices, the whole civil society wields the power to take notice of both the claims of the prosecution and of the ones of the prosecuted individuals, and, thus, form its judgment about the impartiality of the tribunal.

Moreover, public hearings endow the prosecuted individuals with the opportunity to exert their political right to speak without any restraint. In a political context of heavy or increasing authoritarianism, any procedures -even the one of a morality council- could resound with the voice of the contrarian. Thus, the right of due process could have -although unintended- political consequences.

Daron Acemoglu and James A. Robinson relate a poor justice system with the causes of why nations fail, exemplified by government exerting their interference over the judiciary power. Thus, extractive political institutions encroach upon the economic institutions, turning them extractive as well. Nevertheless, defending the procedural rights of the due process could work as a way to contribute to restore both inclusive political and economic institutions.

Of course, a tight authoritarian regime, such as China’s, is aware of the political consequences of free speech, even in the realm of a judiciary process. However, this insight could be profited by the countries where democracies are feeble but still exist. Promoting oral and public judiciary procedures, even for the most insignificant matters, and the right of the prosecuted individual to be heard is not just an issue of lawyers, but acquire a political dimension. The rights of due process endow the civil society with powerful tools to get familiar with main strands of the Rule of Law and the dissidents with the opportunity to exercise their own right to speak.

The immunities of the due process have a long history of discovery and extension to all human beings, beginning with the Magna Carta Libertarum of 1215, that is not fulfilled to this day. It should be something to be pondered that they are historically previous to Modern democracy. Surely, they are a logical condition as well.

Nightcap

Brandon Christensen Links , , ,
  1. The International Dimension of the US Constitution (pdf) Tom Cutterham, JAS
  2. How China avoided Soviet-style collapse Adam Tooze, Noema
  3. Really good essay on sovereignty (pdf) David Strang, SSSC
  4. Foreign Relations between Indigenous Polities 1800-1920 (pdf) Brian DeLay, CHAW

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.

The case for Taiwan’s statehood

Brandon Christensen Liberty, Politics , , , , , , , ,

When Russia invaded Ukraine a few short weeks ago, some people began to worry that China might try to do the same thing with Taiwan. I didn’t worry about this myself, as China is mostly a paper tiger, but also because the US has close military ties with Taiwan. Taiwan has close economic relationships with several wealthy democratic states in East Asia, too. Contrast this geopolitical context with Ukraine, and the parallels, while tempting, do not add up.

The whole debate and worry over Taiwan got me thinking again about federation as a libertarian foreign policy. Why shouldn’t Taiwan just join the United States? Here are the most common objections to such a federation:

Geography. This is probably one of the strongest cases against Taiwan joining the US, since it’s so far away from not only the mainland but Hawaii, too. Aaaand it’s just off the coast of China, which would likely cause friction with the regional power were Beijing to suddenly find itself neighboring a transoceanic republic.

(Source)

This is all much ado about nothing. A plane ride from Dallas to Taipei is 14 hours if you take out the layovers. Somebody living in Kaohsiung could send me an email after reading this essay and I could access it within minutes. Geography still matters, but its not an insurmountable barrier to a freer, more open world via the federative principles of the United States constitution.

Culture. A big complaint I see about adding “states” to the American republic is “culture.” Fellow Notewriter Edwin does this all the time, and it can make sense, on the surface, in some cases, but not in Taiwan’s, and not in the Indo-Pacific more generally.

Look at Taiwan’s 2020 presidential election results:

(Source)

Look familiar? There’s only two colors. It’s a contest between a left-wing and right-wing, and both wings are committed to, and bound by, liberty and democracy. There are no “ethnic” parties, no “religious” parties, and no radical parties, mostly because Taiwan has the same electoral system as the US does: a “first-past-the post” one. So the cultural angle is even weaker than first imagined. Taiwan started out as a nationalist holdout against the Communist Party, but today nationalism doesn’t carry a whole lot of weight. Adding Taiwan to the republic would be like adding another California or Hawaii, albeit with more conservative votes. It’s plausible that adding Taiwan would give Democrats two more reliable seats in the senate, but this is merely cause to invite a polity that would reliably vote Republican to also join the United States.

Self-determination / cultural autonomy. There’s an argument in some circles that joining the US would be akin to losing self-determination and even cultural autonomy. I don’t see how any of this could be true. Even today, people in American states retain a “state-centric” identity when it comes to thinking about their place in the US. That Taiwanese would be able to add “American” to a plethora of other identities already at their disposal could only be a good thing.

China. Would China fight a war against the US over Taiwan statehood? Maybe, but given Russia’s poor showing in Ukraine, the war would end quickly, at least from a Taiwanese statehood perspective. The CCP’s military has no fighting experience, unproven tech, unproven hardware, and…no fighting experience. The worst that would happen, I think, is that the CCP threatens war, maybe sends some warships to the strait, maybe fires some rockets over the island and flies some fighter jets over the island, but that’s about it. The CCP just doesn’t have the muster to fight a war against the United States over Taiwan.

These four objections are so common that I can’t help but be exasperated by their banality, especially given the rich tradition of republican security theory and federalist thought over the past three or four thousand years. There are two reasons for Americans, and especially libertarians, to support Taiwan’s federation with the US:

The free riding problem. The first thing that all libertarians complain about when it comes to “foreign policy” is the free riding problem. This is a problem in political economy where agents will enjoy the benefits of a policy at the expense of other agents who are required to bear the costs. Libertarians aren’t wrong to complain about the free riding problem. It’s a big problem. Think of a Russian attack on NATO ally Lithuania.

Taiwan has a fairly hard guarantee of US military support were the Communist Party of China to attack it. This, the argument goes, allows Taiwan to be a bit more reckless than it otherwise would be when dealing with Beijing. Therefore, according to non-interventionists, the US should simply stop guaranteeing Taiwan’s military security and just trade with the people of the island instead. It would be an awful scenario to face were Taiwan to goad China into attacking it and thus draw the US into a war with China.

Federating would end the free riding problem once and for all. Taiwan’s citizens would be American citizens. They would benefit, and pay the costs, associated with such citizenship.

Sovereignty. Taiwan is not a sovereign nation-state, as China has blocked all of the island’s attempts to become so, and it never will be so long as nation-state status depends upon recognition by large states such as Russia and China (as well as the US). This actually makes it easier for Taiwan to join the republic. The American senate is a tool of international diplomacy that was utilized to bind independent states together in a federal union by trading their sovereignty for seats in a powerful upper house of Congress. Taiwan wouldn’t have to go through the arduous process of debating whether or not its sovereignty is worth the price of admission into a North American federal order, because its status as a Westphalian sovereign nation-state is non-existent.

By incorporating Taiwan into its federal order, the US could revamp the liberal world order, and it could do so by adhering to the principles which made it a beacon for liberty in the first place.

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.

Some Monday Links

Michalis Trepas Links , , , , , , ,

Ulysses at 100: why Joyce was so obsessed with the perfect blue cover (The Conversation)

“Context is that which is scarce” (Marginal Revolution)

I had sensed this in training modules, but couldn’t quite put my finger on it. A good instructor, apart from presentation skills, should also provide just the right amount (sic) of context.

America’s Long War on Cancer: What Was It Good For? (Bloomberg)

Some tidbits of context for things Vishnu wrote about here.

The Price of Nails since 1695: A Window into Economic Change (Journal of Economic Perspectives)

Yes, Let’s Call ‘Beijing’ Peking (National Review)

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

Tridivesh Singh Maini Current Events , , , ,

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.

“Blood is Thicker Than Water: Elite Kinship Networks and State Building in Imperial China”

Brandon Christensen History, Links , , , ,

A long tradition in social sciences scholarship has established that kinship-based institutions undermine state building. I argue that kinship networks, when geographically dispersed, cross-cut local cleavages and align the incentives of self-interested elites in favor of building a strong state, which generates scale economies in providing protection and justice throughout a large territory. I evaluate this argument by examining elite preferences related to a state-building reform in 11th century China. I map politicians’ kinship networks using their tomb epitaphs and collect data on their political allegiances from archival materials. Statistical analysis demonstrates that a politician’s support for state building increases with the geographic size of his kinship network, controlling for a number of individual, family, and regional characteristics. My findings highlight the importance of elite social structure in facilitating state development and help understand state building in China – a useful, yet understudied, counterpoint to the Euro-centric literature.

Read the whole thing (pdf).

“Federations, coalitions, and risk diversification”

Brandon Christensen Links , ,

[…] while we recognize that issues of participation in a coalition involve complex factors, there has been little discussion in the literature from a risk-sharing perspective. It is well-known in financial economics that the pooling of resources and the spreading of risk allows investors to realize a rate of return that approaches the expected rate. We take this to be a natural motive for federation formation among a group of regions. Indeed, the existence of an ancient state in China (the example given in the next section) supports our intuition. It appears that floods, droughts and the ability of a centralized authority to diversify risk paved the way for the unification of China as early as 2000 years ago. Thus, our approach is not empirically irrelevant.

Click the “pdf” tab on the right-hand side, not the “buy PDF” tab.

Some Monday Links

Michalis Trepas Links , , , , , ,

It’s Not in Your Head: The World Really Is Getting Worse (The Walrus)

How China Avoided Soviet-Style Collapse (Noēma)

The Role of “We” Versus the Role of “I” (Econlib)

Party-crashing was a serious business in medieval Arabic tales (Psyche)