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Shinzo Abe's Ugly Win: Breaking Down Japan's Election

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Japanese Prime Minister Abe Shinzo and his Liberal Democratic Party (LDP) have their election victory. As forecast, they crushed the opposition in Sunday's vote and consolidated their hold on the Diet. It was not a pretty sight, however; this was a problematic win, one that bodes ill for Japan if the results are interpreted as a vote for the status quo.

At first glance, the vote went as anticipated. The LDP and its coalition partner New Komei won 326 seats, increasing their representation in the Diet by one seat from the Parliament that was just dissolved. That well exceeds the 317-seat threshold required for a two-thirds "super-majority" that gives the government control of all committee chairs, a majority in every legislative committee, and allows the Lower House to override Upper House vetoes of legislation.

Dig a little deeper, however and the celebrations should quickly be muted.

While the ruling coalition gained a seat, the LDP lost four seats, dropping from 295 to 291. Ouch.

Turnout was a record postwar low of 53.3 percent, 6 percentage points below the 2012 general election. Ugly.

According to one analysis, the LDP won 75 percent of the seats in single-member districts that account for 295 Lower House seats with just 48 percent of the vote. This highlights a crucial point that analyst Michael Cucek has been hammering since the 2012 general election: the LDP claims a growing number of seats with an ever shrinking number of votes. On Sunday, the LDP won 223 district races—nearly four times the number of seats it won in 2009—with 1.8 million fewer votes than it received in 2009. Ugly. (Proportional representation (PR) votes are another issue, and they are taken up below.)

One of the big winners in the election was the Japan Communist Party, which increased its parliamentary representation from 8 seats to 21. A vote for the communist party in Japan is the ultimate protest vote. Ugly.

Two LDP members forced to resign from the Cabinet because of scandals were re-elected. Kaieda Banri, leader of the opposition Democratic Party of Japan (DPJ), lost his re-election bid, the first time since 1949 that a party head failed to win his seat. Ugly.

Finally, there is the rationale for the election itself.  "Snap" elections are held when a government loses its majority in Parliament and turns to voters to stay in power. This time, however, the government had not lost its majority and there was no risk of doing so. The government's real problem was plummeting popularity ratings, which had fallen from a stratospheric 76 percent in March 2013 to 44 percent when the election was called. In the days before the ballot, NHK reported just 23 percent of respondents were "very interested" in the election and most polls showed "undecided" or "don't know" battling or besting the LDP when voters were asked which party they would back. Ugly.

The prime minister hoped to exploit a disorganized opposition - and succeeded. The DPJ failed to run candidates in 110 of the 295 single-member constituencies. The election was a reminder to voters that they had no alternative to the LDP, which while gratifying to Abe et al, smacks of opportunism. The government's difficulties reflected the failure of its policies - for no reason other than their inability to deal with problems - yet the prime minister called an election to get a mandate to press ahead with more of the same. There is a whiff of contempt in the air.

Abe and his party have a new lease on life. Having called the election less than halfway through the Diet's term, the new Parliament will run until 2018. What will Abe and the LDP do in that time?

Abe has pledged to step up his "Abenomics" program to ensure that its benefits trickle down to the many Japanese who have yet to enjoy them. That will be difficult. He has already suspended the second phase of the consumption tax increase that pushed the economy into recession (two consecutive quarters of economic contraction). A new budget laden with stimulus measures is reportedly already in the works.

It will take more than stimulus to repeat the early success of Abenomics, which was responsible for Abe's early stratospheric approval ratings. The Bank of Japan has already committed to quantitative easing without end to stimulate inflation and it will be difficult (and dangerous) for the yen to devalue further against the dollar.

All that is left is movement on the third arrow, structural reform, and thus far the Abe government's rhetoric outpaces reality. Abe could use his election win to outmaneuver opposition within his own party - the real opposition - to structural reform but it isn't clear whether the prime minister truly believes in the liberalization that is required to unleash Japan's economic potential. In pre-election interviews, he said that he was the leader best positioned to deliver on the Trans-Pacific Partnership (TPP) trade deal, but his actions suggest little enthusiasm for the political consequences of bold steps.

Many worry that Abe will use his new "mandate" to pursue his real interests, the revision of Japan's constitution and the adoption of a higher regional and international security profile. That is possible but gains by the pacifist-minded Komei party - recall it increased seats in the Diet, while the LDP lost four - will give it yet more power within the ruling coalition. If Komei stymied attempts by Abe and like-minded colleagues to promote a more robust national security agenda in the first two years of his term, that resistance will now increase.

And the LDP needs Komei. The party doesn't have a two-thirds majority on its own, and as vote counter Michael Cucek noted, Komei provided over 6.5 million of the 7.8 million vote difference in the LDP's single member district vote and its PR vote, about one-quarter of all votes received by LDP candidates in districts. In addition, Sunday's vote witnessed the evisceration of other parties on the conservative end of the political spectrum. A year ago there was talk of an LDP-led coalition without Komei; no more. And while the DPJ underperformed in the ballot, it still gained 11 seats and with a new leadership (and new ideas) could position itself for a real run in the next election. If the opposition gets its act together, then the LDP cannot afford to disregard Komei's preferences.

Abe and the LDP have their election victory. Ironically, it is also proof that an overwhelming win isn't always a mandate and that a vote for an incumbent government can also be a call for change. The trend lines in Japanese politics are not good, and a complacent or arrogant government, one that would rule instead of governing, would make matters worse.

Brad Glosserman is executive director of Pacific Forum CSIS and co-author with Scott Snyder of The Japan-Korea Identity Clash (Columbia University Press, forthcoming, 2015). This piece was originally posted in PACNET: CSIS newsletter here.

Image: Flickr. 

TopicsSecurity RegionsJapan

The U.S. Navy's Littoral Combat Ship: One Big Mistake?

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In one of his last major decisions in office, US Secretary of Defense Chuck Hagel has decided to continue production of the two Littoral Combat Ship (LCS) designs. The US Navy had been directed to examine alternatives to provide the final 20 hulls of the full 52-ship concept. Secretary Hagel had serious concerns over what was being provided with the LCS and sought a more capable and “tougher” small surface combatant. And he had reason for those concerns. While the two high-speed ship designs represent, within limits, some of the latest thinking on hull forms, the LCS has—to this point—possessed only token military capability. The poorly-armed and sensor-deprived LCS sacrifices a great deal for its high speed, including range and, arguably, damage resistance. Both designs displace as much as many conventional-hull frigates (Freedom displaces 3354 tons and Independence 2841 tons) and they aren’t really “smal;” ships in the eyes of any navy other than the US Navy (USN). The modular ideals for sensor and weapon packages have yet to be realised in any significant way, being largely focused so far on embarked fast boats, UAVs and boarding parties.

Still, at a time when the USN has serious concerns over total hull numbers in the fleet and so much has already been invested in the LCS project, it’s no surprise that continuation of the LCS program has been chosen over any of the 18 alternative designs which the USN considered. Whether that would have been the case had the navy been starting with a blank sheet of paper must remain a moot point.

The modified units are likely to carry—in addition to the 57mm gun already in the design and the weapons such as the short-range RAM anti-air and HELLFIRE anti-ship missiles that are part of the existing plans for weapon packages—an over-the-horizon anti-ship missile, an upgraded three-dimensional radar and electronic-warfare equipment, together with a towed-array sonar and torpedo countermeasures. Internal armour will be installed, and there’ll be renewed efforts at signature reduction. The USN is claiming that the ships will cost US$60 to 75 million more than the original, Flight 0, versions of the LCS but it should be emphasized that this almost certainly relates to the hull, propulsion and hotel systems and not to the mission packages. While the USN is quick to emphasise that the original LCS have come in at under US$500 million per unit, that figure doesn’t include the expensive weapons and sensors that represent a significant proportion of the real cost of any modern combatant.

The USN will also consider what in the new package can be retrofitted to the Flight 0 fleet. Although many of those units are likely to have a primary mine-countermeasure role, they represent too large a proportion of the future fleet to be left in their current state. The LCS will no doubt represent an important element in the USN’s forward presence for many decades. As with other troubled ships and systems in the past, there’s little doubt that it’ll be made to work and probably work well. Whether it was what the Americans really needed at the start, however, is another thing.

James Goldrick is a fellow of the RAN’s Sea Power Centre and an adjunct professor at UNSW Canberra, Australian Defence Force Academy. This piece was originally posted in ASPI’s The Strategist here.

Topicsmilitary RegionsUnited States

The Fed’s Dangerous Irrelevance

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Somehow we have come to care a great deal about the precise language the Federal Reserve uses in the statements it releases after every meeting. It may be useful to ask why. The language in question this time is the “considerable time” that the Fed intends to hold interest rates at zero to a quarter point. Any change to these two words will further clarify the exact timing of the Fed’s first interest rate hike, currently expected to occur in the summer or early fall. The exercise amounts to a testing of the waters by the Fed to determine how markets around the world will react to a pivot by the Fed from accommodative to tightening (which has already been happening but may become more explicit).

Any mention of tightening evokes memories of the “taper tantrum.” Emerging market currencies were sent into tailspins in 2012 when then Fed Chair Ben Bernanke stated the Fed would begin tapering. The Fed assumed global central banks were prepared for such action. They were not, and considerable damage was done.

This time much of the emerging market is wounded by the collapse in commodity prices—not just oil, but other staples of China’s flagging infrastructure binge. Worse, this time the U.S. dollar should continue to appreciate—due to the ailing global economy and aggressive easing by other central banks, a phenomenon that much of the emerging world has not seen for a decade or more. The weak dollar world is disappearing.

Since the U.S. will continue to be the “consumer of first resort” in the world, countries with good trade relations, and exporters of consumer goods, should benefit from a stronger dollar. As the dollar appreciates, it makes the U.S. market more attractive to exporters. Because the prices of goods and services have increased in their local currency, foreign companies can cut prices and still generate as much, if not more, revenues. This, however, causes U.S. firms to cut prices, and take job cuts and other measures to maintain profitability. Price cutting puts downward pressure on inflation and the job cuts put pressure on economic growth. These are not enjoyable processes for the U.S. economy, and many on the Fed would be loath to see the U.S. pass through such changes. But the adjustments may be necessary.

Inflation expectations—what people expect inflation to be in the future—are a significant factor in the determination of interest rates. Low inflation, and especially falling inflation expectations, combined with low growth means investors demand less return for their risk free investment. For example: at present the U.S. economy is expected to perform well next year with growth of around 2.5 to 3 percent, and inflation is expected to be below the Fed’s 2 percent target. Therefore, investors are willing to accept the 10-year U.S. Treasury yield of only about 2 percent. With oil at $55 per barrel and a stronger dollar, inflation may be difficult to find regardless of the relative strength of the U.S. economy.

The non-commodity dependent emerging world should benefit from a stronger dollar and resilient U.S. consumer market in the medium term. But it will not all last. The U.S. should be able to do well without the rest of the world for a while. After all, there is not much in the way of a manufacturing economy remaining in the U.S., and what does remain cannot be easily disintermediated by foreign competitors on the basis of price. There will be some manufacturing side-effects, but services—the main employer of the U.S. economy—should be resilient for a while.

It is commodity producing countries who will suffer from the appreciating dollar. Commodities have already sold off, but the carnage could become even worse. All else equal, as the dollar appreciates, commodities become more expensive in non-dollar terms—destroying demand. This places emerging market economies with commodity exposure in a particularly vulnerable position to a prolonged depreciation of their currency. Currency depreciation risks sparking inflation with imported goods becoming expensive quickly. They are trapped—commodity prices are falling but inflation is risked with a falling currency. It is a difficult scenario to escape without higher interest rates and the potential for a painful recession.

The Fed is in a tough position. Its main policy mechanism of raising short term interest rates has little effect on interest rates further out the yield curve—especially with inflation expectations falling. But the Fed cannot be too aggressive with the falling or low inflation environment, and the short end can only rise so much before the curve would be “flat.” In other words, the Fed is limited (to a degree) by forces—namely central banks who are loosening policy and falling oil—out of its control. These are acting in concert to push the dollar higher and inflation expectations lower.

The Fed, after three rounds of QE and a promise not to raise interest rates too early, is now losing control of inflation expectations—to the downside. Taking away some language in the FOMC statement at the last meeting of 2014 or raising interest rates in 2015 should not have a tremendous impact on the U.S. economy directly. Mortgages and other major borrowing costs are tied to the 10 and 30 year rates, which should remain low due the downward pressure on inflation expectations. In fact, the Fed may move the front end up, while still purchasing bonds to maintain its balance sheet. This would constitute a self-flattening of the yield curve by the Fed, and would do little besides initiating the lift-off of a tightening cycle.

Instead of causing a significant rise in interest rates, the move will likely have its primary impact through the currency market. This is the mechanism that will affect the emerging world, and potentially comes back to haunt the U.S. The U.S. would be affected as the strong dollar drives commodity prices lower for longer and weakens U.S. inflation expectations and potentially hurts the competitiveness of exports. It may also hurt trading partners whose currencies are vulnerable. The Fed knows there will be some consequences to raising interest rates, and is likely to do so anyway. The plan, to see how the rest of the world reacts, may backfire on the U.S.

Sometimes, it is worth leaping into the unknown—such as QE. With a dollar poised to breakout and inflation expectations slipping from the Fed’s control, this is an experiment with delayed consequences. The dollar may prove to be the mechanism that will come back to haunt the Fed. And it may not take a considerable time for it to happen.

Image: Wikimedia/Dmadeo/C.C. BY-SA 3.0.

TopicsEconomicsMonetary Policy RegionsUnited States

Back in Bahrain? Britain Never Left Persian Gulf

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It was announced earlier this month that Britain would establish its first permanent military base in the Middle East since the 1970s.  Located at the port of Mina Salman in Bahrain, the naval installation will be a boon to the Royal Navy’s efforts to police the strategically (and commercially) important sea lanes of the Persian Gulf.  While a meaningful development, however, the base’s implications should not be overstated.

On its face, news of a British return to the Middle East could raise some eyebrows.  In 1968, the Labour government of Harold Wilson announced its intention to withdraw “East of Aden” (in fact, British troops had ignominiously been forced to pull out of Aden itself in 1967 following a local uprising), an overdue response to Britain’s waning global influence and the country’s dire financial footing.  Concomitant with this strategic withdrawal, Britain came to rely much more on cooperation with Commonwealth nations—as well as, of course, the United States—to ensure the security of the Indian Ocean from the Persian Gulf to the Malacca Strait.  With London now set to recreate a permanent presence in the region, does this mean a resurgence of British influence and assertiveness in the region?

In fact, Britain has never been fully absent from regional affairs, least of all in military terms. The Sovereign Base Areas of Akrotiri and Dhekelia, for example, are enclaves on the island of Cyprus that have remained under British military control since 1960—vital staging posts for air, sea and land forces that maintain a keen eye on security developments in the Levant, around the Suez Canal, and even as far afield as the Persian Gulf.

At sea, the Royal Navy—still one of the largest and most powerful in the world—has always maintained an active presence in the region: in the 1980s and 1990s, the so-called Armilla Patrol was dispatched by London to ensure the maritime security of the Persian Gulf and Arabian Sea—a commitment that was only bolstered during the wars in Afghanistan and Iraq.  Britain has also played a leading role in combating piracy off the Horn of Africa.  Such efforts blend a national self-interest in keeping seaborne trade flowing with a more internationalist commitment to assisting in the protection of the global commons.

In particular, the Royal Navy has taken on a specialized role of maintaining the maritime security of the Persian Gulf by furnishing its allies with a dedicated fleet of four mine-hunters, the purpose of which is to patrol the Persian Gulf and to be on hand should any regional power—Iran being the usual suspect mentioned—attempt to disrupt maritime traffic. Minehunting is now a fairly longstanding contribution of the UK to regional security, one that is said to be highly valued by Britain’s allies, regional actors, and fellow trading nations alike.

In many ways, then, Britain never left the Middle East.  The difference is that London’s role in the region—much curtailed from its imperial peak, obviously—is now conducted in conversation with partners.  This includes partners like Bahrain.  While Bahrain’s human rights and political liberalization scorecards might leave a lot to be desired, the Gulf nation’s Western-oriented regime has been a fairly reliable strategic ally of the West’s security designs for the Middle East.  Bahrain already plays host to the U.S. Fifth Fleet; is a member of the Gulf Cooperation Council (a tacit balancer against Iranian influence in the Persian Gulf); and, more recently, has taken part in military action against ISIS.

Bahrain’s monarchy has much to gain from security cooperation with outside powers.  Traditionally hostile to Iranian ambitions for hegemony in the Gulf, Bahrain accepts Western patronage (and hosts Western military personnel) partly as a way to contain Tehran’s influence—not least of all over Bahrain’s own Shia majority.  As such, if the new British and the existing U.S. base on Bahrain are evidence of any sort of “return to empire,” then it can only be regarded as what Geir Lundestad once referred to as an “empire by invitation”—a gambit used by the governing Al-Khalifa regime to buttress its external and internal security footing.

Thus, while certainly a headline-grabber, Britain’s return to Bahrain should not be overestimated. The base at Mina Salman will lower transaction costs for the British naval detachment in the Persian Gulf but it will not radically alter Britain’s already sizable role in the region. Nor will it fundamentally alter the broader geopolitics of the Middle East.  Instead, the base should be considered the latest in a long line of moves designed to check Iranian influence—both now and in the future—and maintain maritime security in this most vital of theaters.

Image: Royal Navy/ Dave Jenkins/ Open Government Licence

TopicsSecuritymilitary RegionsMiddle East

The Real "Chinese Dream": Control of the South China Sea?

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While bureaucratic competition among numerous maritime actors is likely a factor that is contributing to tension and uncertainty in the South China Sea, as Linda Jakobson argues in her report China's Unpredictable Maritime Security Actors, it is probably not the biggest source of instability. Rather, China's determination to advance its sovereignty claims and expand its control over the South China Sea is the primary challenge.

Xi Jinping has clearly signaled that “protection of maritime rights and interests” and “resolutely safeguarding territorial sovereignty” are high priorities, which should be pursued even as China seeks to preserve stability and maintain good relations with its neighbors. At the recently concluded Central Foreign Affairs Work Conference, Xi additionally emphasized that China should not “relinquish our legitimate rights and interests or sacrifice' China's 'core interests.'”

As Jakobson relates, uncoordinated actions by local entities have occasionally created policy confusion, for example by releasing competing maps of the nation's South China Sea claims. However, China's most assertive and destabilizing actions have appeared to be well coordinated, including the placement of the HYSY-981 oil rig in waters disputed with Vietnam earlier this year and extensive land reclamation projects that are underway in the South China Sea.

In the case of the dredging activities that are rapidly transforming tiny reefs into artificial islands, Jakobson states that these are “likely to be a tool of legal warfare, intended to solidify China's claims to maritime rights based on so-called land features, rather than an attempt to militarize the South China Sea as some have claimed.” It is likely, however, that China is pursuing both objectives simultaneously.

Beijing is not satisfied with the status quo in the South China Sea and it is amassing capabilities to gradually change the situation to its advantage. It is carefully avoiding the use of force and thereby hopes to keep the US at bay. Some experts describe China's strategy as “tailored coercion.” Others have used the term “salami-slicing.” Whatever terminology you prefer, the evidence is mounting that Xi Jinping does have a grand strategy. Strengthening China's control over the South China Sea is part of his “China Dream” of rejuvenation of the Chinese nation.

This piece was first posted on The Interpreter, which is published by the Lowy Institute for International Policy.

Image: Wikicommons. 

TopicsSouth China Sea RegionsChina

India’s ‘Annihilator of Enemies’ Submarine Begins Sea Trials

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India’s first indigenous ballistic missile nuclear submarine (SSBN) began its maiden sea trials today, a senior Indian defense official announced.

On Monday, Indian Defense Minister Manohar Parrikar announced that INS Arihant--which roughly translates to “annihilator of enemies”-- pulled out of Visakhapatnam Harbor this morning to begin its long awaited first sea trials. The Hindu described in the scene in unusually poetic language, writing, “INS Arihant, with a helicopter flying over it, emerged from the breakwaters into the Bay of Bengal even as low hanging mist made it difficult to view the submarine. The submarine glided in [the] Bay partially submerged as part of its sea trials. INS Arihant majestically sailed north in the Bay along the coast, partially submerged. After about an hour later it disappeared into the mist.”

In some ways, the event was decades in the making. India first began discussing the potential of nuclear powered submarines back in the 1960s, and officially launched its Advanced Technology Vessel (ATV) submarine program in 1984. It wasn’t until 2009 when the ATV program finally bore fruit with the launch of INS Arihant.

Since then, Indian officials have repeatedly promised the vessel would soon begin sea trials, only to be followed by further unexplained delays. In January 2012, for instance, the Times of India cited numerous “top defense ministry sources” in reporting that the sea trials would begin the following month. The same report suggested the Indian Navy could actually commission the vessel as soon as six months after sea trials began.

In July of the following year, Indian media outlets again began reporting that Airhant would begin sea trials shortly. “The nuclear reactor that will power the submarine can be formally declared ‘critical’ anytime now, while the nuclear-tipped missiles to be launched from underwater are in place,” an “informed insider” told reporters. These reports suggested that the Navy was only waiting for the annual monsoon rains to end.

Then, in February of this year, Indian officials again suggested that sea trials would begin within one to two months. At the time, Avinash Chander, chief of India's Defense Research Development Organization (DRDO), which spearheaded the submarine program, confidently predicted that Arihant would be commissioned by the navy sometime next year.

In any case, once it is commissioned, the vessel should provide a significant boost to India’s strategic deterrent. INS Arihant is 6,000-ton ballistic missile submarine powered by an 83 megawatts pressurized light-water reactor. It is modeled off of the Russian Akula-1 class submarines, and its nuclear reactor was built with “significant” Russian assistance, according to local media reports. Its hundred person crew was also trained by Russian specialists.

Although India has operated Russian-made nuclear submarines, these are reportedly not equipped with nuclear-armed missiles due to international treaties prohibiting this. By contrast, Arihant is the lead ship in a class of SSBNs of the same name that will give Delhi a nuclear triad. Delhi is hoping to build 3-4 Arihant-class submarines.

Each submarine will be equipped to carry up to 12 K-15 submarine-launched ballistic missiles (SLBM), which have a range of 700-750 km. Ultimately, India hopes to equip them with 4 K-4 SLBM, which have ranges of up to 3,500 km. It just began testing K-4 SLBMs this year, however, so it’s unclear when those would become available.

The Times of India reported on Monday that the current sea trials will take at least 18 months, although some Indian officials have suggested much shorter times. We’d hedge our bets on both.

Zachary Keck is managing editor of The National Interest. You can find him on Twitter @ZacharyKeck.

Image: Wikimedia/Government of India

TopicsmilitarySecurity RegionsSouth Asia

Iranian Drones May Soon Fly Over Mexican Skies?

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Iranian drones may soon be flying over Mexican airspace.

At least that’s according to Alaeddin Boroujerdi, the influential chairman of the Foreign Policy and National Security Committee in Iran’s parliament, who recently led a delegation of Iranian lawmakers on a 4-day trip to Mexico. The trip, which reportedly was the first of its kind since the 1979 Islamic Revolution, came at the invitation of Gabriela Cuevas Barrón, head of the Foreign Relations Committee in the Mexican Senate, who herself visited Iran on a couple of occasions this year.

The most concrete result of the trip was the signing of a memorandum of understanding promoting stronger economic, cultural and political ties between Iran and Mexico. The two sides also reportedly agreed to expand their cooperation in the oil sector.

Upon returning, however, Boroujerdi also said that Mexican officials had expressed interest in purchasing drones from Iran to use in its war against drug cartels.

“During my recent visit to Mexico they announced that [they] want Iranian drones,” Boroujerdi was quoted as saying by Fars News Agency, a media outlet close to the Revolutionary Guards, according to BBC Monitoring and Trend News Agency, an Azerbaijani-based private news outlet that regularly reports on Farsi-language Iranian news reports.

The English-language Iranian news reports on the visit did not mention drones. A review of some Spanish-language news found some articles referring to drones, but these too cited the Fars News Agency article as their source.  

Without confirmation from Mexico, it’s important to view Boroujerdi’s claim skeptically, especially given that the parliamentarian also said that the “two sides stressed that the Americans have played the biggest role in the creation of Takfiri groups [Sunni extremist terrorist groups like ISIL].”

Still, the claim that some Mexican official-- particularly a potential member of the Senate-- expressed interest in Iranian drones, isn’t as outlandish as it might seem at first. Mexico has long struggled to root out the powerful drug cartels in the country, and drones have become an increasingly integral part of its counternarcotics strategy. In fact, according to some sources, “the Mexican market for drones jumped seven times from 2013 to 2014.”

Mexico’s interest in using drones to fight the drug cartels long predates 2013, however. Long before then Mexico secretly agreed to allow the U.S. to operate unarmed surveillance drones over Mexican airspace to collect intelligence on the cartels, as long as the intelligence was then passed on to Mexican officials. This agreement eventually became public setting off some outrage in Mexico where there are persistent concerns about U.S. violations of its sovereignty.

Although this practice continues, Mexico has also sought to build up its own UAV capabilities in recent years. In 2009, for instance, the Mexican Air Force secretly purchased Israeli-made Hermes 450 surveillance drones to use to spot narcotic smugglers in hard to reach parts of Mexico. Hermes, which are a popular UAV among Latin American countries, have a maximum altitude of 18,000 feet and can loiter for up to 20 hours. Mexican police also operate Israeli-made Skystar 300 surveillance aerostats and small Orbiter UAVs.

Besides Israeli-made drones, there is a nascent indigenous UAV market in Mexico. The Mexican Navy was the first institution in the country to premier a UAV, but others-- including companies like Hydra Technologies and SOS Global-- have done so in more recent years. Still, the capabilities of Mexico’s indigenous drones remain limited.

Bordering on the opium capital of the world, and strategically located to drug consuming markets, Iran-- like Mexico-- has also long struggled with narcotics smuggling.

Unlike Mexico, however, Iran has a fairly robust indigenous drone program. In fact, the Center for the Study of the Drone at Bard College has noted, “Iran has one of the oldest drone development programs in the world.” Iran’s interest and deployment of UAVs actually dates back to its war with Iraq during the 1980s, but it has become much more pronounced more recently. In April 2013 alone, it rolled out four new drones: the Azem-2, Mohajer B, Hazem 3 and Sarir H110. The next month it unveiled the Hamaseh High Altitude Long Endurance drone. The Shahed 129 UAV Iran first unveiled in 2012 is a larger version of the Hermes 450 (It is widely believed that Iran has stolen UAV technology from Israeli firms on numerous occasions) with an alleged range of 2,000 km and an endurance of 24 hours.

Nor is Iran bashful about sharing its UAVs with other countries. There have been reports that Iran has sold or helped develop drones for numerous other countries and groups, including Hezbollah, Hamas, Syria and Sudan, among others. Of particular note with regards to Mexico, Iran helped Venezuela develop a UAV.

Thus, it’s certainly plausible that some Mexican lawmaker or policymaker expressed interest in purchasing an Iranian UAV. And, Iran would undoubtedly sell Mexico UAVs were the latter interested as this would allow Tehran to relish in the fact that its drones were flying along the Mexican border. That being said, don’t expect Iranian drones to be flying over Mexico anytime soon, at least if Washington has anything to say about it.

Zachary Keck is managing editor of The National Interest. You can follow him on Twitter: @ZacharyKeck.

TopicsSecuritymilitaryDiplomacy RegionsAmericasMiddle East

How Iranian Oil Became Irrelevant

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The recent OPEC decision not to slash production is a major setback to Iran’s fiscal health. Beset by sanctions, Iran’s most important source of revenue is under attack not by Israeli or American war planners but by market forces. The price of Brent crude, the benchmark, has sunk by 40 percent since June. North American production and Saudi Arabian insistence to maintain current levels of supply has led to a surplus of 1.5 to 2 million barrels a day. While the steep drop in oil prices is a blow to all exporters, the Arab countries of the Persian Gulf have sufficient cash reserves to weather the storm. Iran does not.

Years of war, sanctions, lack of proper investment as well as mismanagement and corruption within the Iranian oil industry—particularly under the stewardship of former President Ahmadinejad—have had the profound and long lasting effect of putting Iran behind other major crude producers.  This is in sharp contrast to where Iran stood in the 1970s when the world looked at her oil exports with envy. At the time the late Shah was dubbed the “Emperor of Oil” by Time magazine as Iran held as much sway within OPEC as the Saudis do today. Iran was the second largest exporter in the cartel and the fourth largest producer in the world. At its peak, before the revolution, Iran was producing 6 million barrels a day.

Iran’s fall as a global player in energy markets has been steep and fast. Today, Iran is the 8th largest net exporter of crude in the world, and it has fallen behind many OPEC countries like Iraq, the UAE and Kuwait. To be sure, those countries have structural advantages that Iran doesn’t. Most significant, a smaller population base that consumes less of the oil they produce. Estimates vary, but of the 3.5 million barrels of oil a day that Iran produces, nearly half is refined and used domestically.

Also hurting Iran are sanctions that have forced traditional European buyers, such as Germany and Italy, to halt all Iranian crude purchases. This was not done all at once but rather over a period of six months whereby the European Union (assisted by United States using its threat of extraterritorial sanctions) managed to get long standing customers of Iran’s crude to purchase less and less oil every month. This strategy allowed other OPEC producers, particularly Saudi Arabia- to make up for the shortfall of Iranian crude that was no longer being purchased.

What made this strategy particularly effective was that it was not sudden, but rather phased in over time.  As a result, crude importers didn’t feel a price shock. With Gulf Arab states producing at or near capacity and new production coming from North American shale oil, downward pressure on crude prices persisted. Consumers never felt the pain of Iran’s crude being replaced.

Iran’s crude exports were marginalized. The math is simple: What’s 1.5 million barrels of crude per day, in a world that’s currently over-supplied by 2 million barrels per day?

Some argue Iran should have withdrawn its crude from the market all at once, so as to shock the global market and cause a rise in crude prices. That argument falls flat for a country whose primary source of income is oil exports. It was telling that the Iranian oil minister Bijan Namdar Zanganeh, a respected industry veteran, came to the OPEC meeting in Vienna determined to see a production cut, but left stating the Iranian position was “closer” to that of Saudi Arabia. Iran’s leverage to sway other OPEC members to its position was limited, with the collective might of its GCC neighbors (which account for more than half of OPEC’s daily production) unified under the Saudi position.

In the future, Iran could again play a significant role in international oil markets as it holds the fourth largest known crude reserves in the world. However, it can only return to relevance if it is able to fully realize its export potential and ramp up production. This can only happen with a deal on its nuclear dossier that lifts restrictions on its energy sector and allows for foreign investment and the inflow of technology that it lacks. It will also need to make its fiscal regime more attractive for Western companies (the world leader in oil field extraction and services) to justify their return to the Iranian market.

With international exploration and production hit hard by bearish prices and excess production, Iran must play for time until markets stabilize and recover. In the interim, it must do everything it can to break out of its international isolation so its energy sector can recover and become relevant again.

Amir Handjani is an Energy Expert and Managing Director of Pt Capital an Arctic Resource Asset Manager. He may be followed at @ahandjani.

Image: Wikimedia/CC by SA-3.0

TopicsEnergyOil RegionsMiddle East

The Reason for North Korea's Big Diplomatic Blitz: China?

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Over the past few months North Korea has undertaken a large diplomatic effort. It has reached out to traditional opponents like the United States, Japan and South Korea. Contemporaneously, it has pursued a warmer relationship with Russia. But one nation has been missing from that charm offensive: China.

The border between China and North Korea is the focus of a significant amount of investment activity. But when one looks more closely at that investment, a pattern begins to emerge: Chinese spending along the border isn’t replicated within North Korea.

Emblematic of that spending—and perhaps also of the wider relationship—is the new bridge over the Yalu River at Dandong. The bridge itself is no small feat of engineering as it spans nearly 1.5 kilometres. Complementing the bridge, is a new high-speed-rail link to Dandong, from Shenyang, intended to feed into the new Yalu River crossing point. On the North Korean side of the bridge, there’s nothing but dirt.

The port in Rason in northeastern North Korea has also been developed as part of a trilateral effort on the part of North Korea, Russia and China. The port, for its size, is remarkably empty. A seaside hotel, which dwarfs the surrounding infrastructure, sits vacant at the end of a dirt road.

The size of the investment is obvious but the results are not so easy to identify. For all of its spending, Beijing has not been able to convert the effort into stronger diplomatic relations. The North, for its part, is clearly baulking at the possibility of being so heavily dependent upon China. As a result it’s reaching out in an apparent effort to diversify the sources of its relationships.

Pyongyang has reached out to South Korea and Russia. In October, a senior North Korean delegation made an unannounced visit to Incheon for the closing ceremony of the 17th Asian Games. And after receiving a high-level mission from Pyongyang, Putin seems receptive to developing the relationship further—he’s written off significant debt from the Soviet era and pledged another billion in infrastructure investment.

Russia already has a presence on the ground in North Korea’s Special Economic Zones (SEZ) but it’s dwarfed by China’s. During my visit to the Rason Trade Show in August 2013, there were a dozen Chinese companies operating stalls for every Russian or South Korean one. Still, it would seem logical for Pyongyang to seek an expansion of that investment if its intent is to reduce its dependence on Beijing.

North Korea has also reached out to Japan. Relations between the two states face inherent difficulties due to the large part history plays on both sides. For the Japanese, the issue relates to the North’s nuclear program and its abduction of Japanese citizens. On the other hand, Japan plays a large role in the historical narrative of Pyongyang’s propaganda. Pyongyang has signalled a willingness to compromise on the issue of abductions and it seems possible that could be the basis for developing a more stable relationship between the two.

Finally, although the position of the United States towards North Korea has not markedly altered, Pyongyang has signalled that it’s open to improving their relations. A major stumbling block to any future relations was the imprisonment of two US citizens. Prior to their release, the North Koreans signaled to the Americans that they would be interested in welcoming a cabinet-level official to their country to facilitate the prisoners’ release.

A wary US sent James Clapper—a cabinet-level official, but not a member of cabinet or a diplomat—to Pyongyang to retrieve the two citizens. Interestingly, the North Koreans were puzzled when, upon Clapper’s arrival the US was not prepared to resume more high-level talks.

Taken together, this recent bout of activity paints a picture of a North Korea clearly operating from a different diplomatic playbook to the confrontational one it had been using for the previous two years. It doesn’t follow, however, that the North Korean leadership has altered its underlying strategic aims. All of those negotiations have essentially pursued a similar objective—that of diversifying relations and reducing the North’s diplomatic reliance on China.

Those actions are neither unique to the region nor unprecedented for Pyongyang. During the Cold War North Korea relied upon the support of the Soviet Union and since that time it has played a successful game wherein it seeks the support of outside powers to leverage its position for a maximum advantage and independence. To that end it has—at various times—embraced the South (during the days of the ‘Sunshine Policy’), China, Japan and the US.

For the Kim dynasty, exploiting the North’s weak position for maximum gain has long been a hallmark of their foreign policy. As such, although the means of pursuing survival have altered, for the time being, Pyongyang has not shifted internally. The rise of China may prove to be an insurmountable obstacle but the Kim dynasty is deploying its traditional means of resisting interference in order to maximise its own freedom of action.

Robert Potter is currently assisting with research at the Kennedy School. Previously he was a visiting scholar at Columbia and a student at Cornell. He took part in a research  program in North Korea and China in 2013. This piece was first posted on ASPI’s the Strategist here.

Image: Creative Commons/Flickr. 

TopicsSecurity RegionsNorth Korea

India and Israel's Secret Love Affair

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The Indo-Israeli defense relationship is once again in focus following Benjamin Netanyahu's "sky is the limit" comment after meeting Narendra Modi in New York back in September—and especially after the signing of the long-delayed $144 million deal on Barak I missiles in October. Another milestone was crossed in November when New Delhi and Tel Aviv successfully tested the Barak 8 anti-missile system—a joint project developing an aerial defense system for naval vessels. Moreover, since Modi took power this summer, New Delhi has purchased a whopping $662 million worth of Israeli arms.

So is the Indo-Israeli strategic relationship likely to be fundamentally different now that Modi is in power?

Although Indo-Israeli ties are undoubtedly on the upswing, history suggests that Modi is not likely to have a fundamental impact on the substance of the bilateral relationship.

During the early part of the Cold War, Indian Prime Minister Jawaharlal Nehru briefly considered inviting Israel to the 1955 Bandung Conference, but eventually decided against doing so in order to appease Arab and Middle Eastern states. While this carved out India’s Cold War foreign policy of opposing Israel and siding with Palestine, New Delhi’s military ties with Tel Aviv, however modest, began by the 1960s. Not only did Israel provide military assistance to India in its wars in 1962, 1965 and 1971, but Tel Aviv was also one of the first countries to recognize Bangladesh following India’s victory in its 1971 war against Pakistan. When the traditionally pro-Israel and Hindu, right-wing, Jan Sangh-led government was briefly in power from 1977 to 1979, Israeli foreign minister Moshe Dayan paid a secret visit to New Delhi in August 1977 to further expand bilateral ties.

While Prime Minister Indira Gandhi mostly maintained her father’s pro-Palestine position, her son and successor Rajiv Gandhi met his Israeli counterpart in September 1985 during the UN General Assembly’s annual meeting, which was the first such open meeting between the prime ministers of the two states. Indian concerns over the fast-advancing Pakistani nuclear program are believed to have facilitated these improved ties. However, it was not until 1992—after the end of the Cold War and India’s 1991 economic liberalization—that New Delhi formally established diplomatic relations with Israel. Nevertheless, it is important to note that even without formal diplomatic relations, Indo-Israeli military ties existed during the Cold War. These ties have certainly increased in volume since the 1990s.

However, a constant theme in the history of Indo-Israeli relations has been that their public visibility has been conditioned on which party holds powers in New Delhi. Specifically, each time a Hindu nationalist coalition led by the Bharatiya Janata Party (BJP) is in power in New Delhi, the visibility of the bilateral ties increases, but not the substance. On the other hand, the Congress Party has tended to downplay India’s ties to the Jewish state whenever it holds power.

In this sense, the Modi government’s proximity to Israel harkens back to the previous BJP-led National Democratic Alliance. In 2000, for instance, BJP leader L.K. Advani was the first senior Indian minister to visit Israel since the 1992 establishment of diplomatic ties between the two countries. An Indo-Israeli joint working group on terrorism was formed that year, and in 2003, then national security advisor Brajesh Mishra delivered a speech at the American Jewish Committee underlining the potential for cooperation among India, Israel and the United States in fighting Islamist extremism.

Once the Congress Party–led United Progressive Alliance government came to power in 2004, however, Indo-Israeli ties mostly disappeared from the headlines. This was by design; in 2010, the Indian Ministry of External Affairs refused to allow Congress Party MP Mani Shankar Aiyar to ask questions about the Indo-Israeli defense relationship in parliament on the grounds that it pertained to a “state secret.” At other points during the UPA’s tenure, Israel and India openly clashed. This was the case, for instance, when Indian president Pratibha Patil called on Israel to withdraw from Golan Heights as a primary condition for peace. Despite this public bickering, Indo-Israeli strategic ties remained rock solid. In fact, in the wake of the Mumbai attacks, India’s defense purchases from Israel increased so much that Tel Aviv briefly replaced Russia as New Delhi’s largest defense supplier in 2009.

In other words, the key difference between the secular Congress Party-led coalition and the one led by the Hindu nationalist BJP lies in their public-relations management of the bilateral relationship. The former publicly downplays strategic ties between India and Israel, while the latter loudly champions its defense and strategic cooperation with Tel Aviv. Beyond these semantics, however, the Congress Party and the BJP maintain largely similar ties with the Jewish state.

Not surprisingly, then, as Narendra Modi prepared to take office, think tanks in Washington and New Delhi predicted that Indo-Israeli relations would once again become more visible. After all, the Modi government’s anti-Islam, anti-Pakistan, anti-terrorism and pro-business positions are compatible with its public enunciation of deeper defense, strategic and economic ties with Tel Aviv. Furthermore, given his historic win and the weak and fractured nature of the opposition, Narendra Modi is nearly able to single-handedly coordinate the future direction of India’s foreign policy. This allows him and his government to magnify Indo-Israeli relations in public.

Which isn’t to say that Indo-Israeli ties aren’t currently expanding, as they are and are likely to continue to do so for the foreseeable future. New Delhi is currently Israel’s largest arms customer, and talks are underway for the conclusion of a free-trade agreement that would increase bilateral trade many times over.

In addition, Israel has hailed India as a strategic partner in Asia, while China as merely a trading partner. With Modi entrenched in power, and strategic interests aligned, we are poised to see India and Israel expand on their already-strong relationship.

Jayita Sarkar is a Stanton Nuclear Security Postdoctoral Fellow at the Belfer Center for Science and International Affairs of Harvard University’s John F. Kennedy School of Government.

Image: Office of India's Prime Minister

TopicsDiplomacy RegionsSouth AsiaMiddle East

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