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Great Depression or Great War: Is This China's 1929 Moment (Or Worse)?

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China’s economy may be facing its 1929 moment. Or this may be only the painful burst of a big bubble. Will it become a cascading catastrophe or just a crashing correction?

Pay your money and place your bets. And hold your breath. No jests about a Communist Party flummoxed by the workings of a central motif of capitalism, please.

The obvious point for Australia is that Greece is concerning but China is the main event. For Oz, Chinese investors panicking at plunging values trump Greeks shaken by the shriveling of their economy.

In the 20th century, recession in Europe and America meant something similar would happen in Australia. In the 21st century, Australia’s economy has decoupled from the U.S. economy. America gets pneumonia but Australia doesn’t sneeze. Plugged into Asia, Australia sailed past the U.S. dotcom bust and the Great Recession. Australia is coupled to Asia. And at the head of the train is China.

As the IMF noted, Australia’s decoupling from America’s economy, made explicit at both ends of the previous decade, means the U.S. negative effect on Oz is “no longer statistically significant.”

A huge shift of historic dimensions. Ho hum, say the nation of pragmatists who live in Oz. Old news. Got the Asian Century memo, thanks, understood the point. The calm rests on the reality that so far the decoupling from the American economy and the firm coupling to Asia has delivered copious good news.

China’s market mayhem highlights another great decoupling—the parting of the ways of Engage & Hedge. This is the grand strategy that the U.S. and Australia have employed towards China since the end of the Cold War. Engage economically. Hedge militarily.

Engage & Hedge were never really closely aligned or tightly joined. Now, though, they exist in different universes. Engage & Hedge can no longer be seen as the twin legs of a coherent strategy.

Two concepts supposed to run at least in parallel aren’t even in parallel universes. They have become policy poles with opposed existences. That’s why the U.S. effort to create a Trans-Pacific Partnership excluding China is much more about the Hard-Power-Hedging universe than the Win-Win-Engage-and-Trade universe.

Tony Abbot got the terms of the decoupling into one vivid phrase when he said that Australia’s policies towards China are driven by two emotions: “fear and greed.” The fear demands strategic hedging and the greed fuels economic engagement. These are opposed, not linked emotions. Off in their different universes, fear and greed no longer feed into a united policy recipe.

Fear of the hedging universe is going to keep growing whether China booms or busts. A rich China has shown it can be aggressive and assertive, A China that suddenly confronts the danger of being poorer than the trend line promised might be worse.

A Communist Party that can’t deliver ever-enriching growth has to play instead to the emotions of pride and nationalism (and belligerent fear of the perfidious foreign powers that seek to block China’s rise). The world’s second biggest economy is plenty big enough to matter, no matter what happens next. So whether China goes up or down, the demands of hedging just increase. Not much linkage there between Engage & Hedge.

Kevin Rudd captures the truth of the decoupling of Engage & Hedge in his Harvard report describing “the emergence of an asymmetric world in which the fulcrums of economic and military power are no longer co-located, but, in fact, are beginning to diverge significantly.”

The Ruddster is a sensitive and difficult subject in Oz. It’s going to take a long time for Australia—much less the Labor Party—to get over The Kevin. So approach the Rudd study via a recommendation from a fine former Foreign Minister, Gareth Evans, who nominates Rudd as the smartest guy in the room:

“Rudd’s recommendations are undoubtedly ambitious. But, given his credentials—he is a formidable Chinese linguist and creative policy thinker, with long and close personal relationships with key figures in both the U.S. and China—his argument must be taken seriously. Indeed, though Rudd’s tenure as Australia’s prime minister was anything but smooth, his sheer force of intellect is unmatched by that of any public figure with whom I have interacted over the last 30 years. (Not that this will much help his evident willingness to be drafted as the next UN Secretary-General: in that role the major powers have always preferred bland secretaries to creative generals.)”

Rudd advocates a new framework of “constructive realism” between the U.S. and China. The choice he describes is stark. Either China and America create a common understanding of mutual benefit and achievement—including a common strategic narrative—or they will drift toward conflict.

The Engage policy must become so dominant and so central that it changes the color of the sky in the Hedge universe. A big, big ask. Kevin is always ambitious.

Kevin being Kevin, he asks and then answers seven core questions on the rise of China. And publishing a couple of months before the crashing sounds out of Shanghai, Rudd offers his answer about whether we are seeing catastrophe or mere painful correction.

“Sorry,” he writes, “but on balance the Chinese economic model is probably sustainable.” That confident prediction about China’s next decade is about to get an extreme pressure test.

This piece first appeared in ASPI’s Strategist here

Image: Creative Commons. 

TopicsSecurity RegionsAsia

Indonesia Is Building New Military Base in South China Sea

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Indonesia is developing a plan to build a new military base in the South China Sea, according to local media reports.

On Friday, the Jakarta Post reported that Indonesian officials are preparing a plan to build a new military base somewhere in the South China Sea, which has seen an uptick in tensions over competing sovereignty claims. The report said Indonesia’s Defense Ministry and the The National Development Planning Board (Bappenas) held a meeting on Friday to discuss the potential locations for such a base.

“Our meeting today is aimed at synchronizing our ambition to guard the national interest and protect the sovereignty of our territory,” Bappenas chief Andrinof Chaniago was quoted as saying in the report.

“The findings from the team will be conveyed to President Jokowi [Joko Widodo], who will make his decision. We hope that in the near future, the plan will be realized,” he added.

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Among the places being considered, according to Andrinof, are areas in Sambas, West Kalimantan; Natuna Islands, Riau Islands and Tarakan, North Kalimantan.

Indonesia’s Defense Minister, Ryamizard Ryacudu, who previously served as Army Chief of Staff, expressed his support for the proposed military base.

“I previously worked in West Kalimantan and I believe that building a military base in that territory is a very good decision. We have natural resources that we need to guard,” he said, according to the report.

Indonesia isn’t an official participant in the South China Sea disputes, however, in the past China's nine-dash line maps of sovereignty have included Indonesia’s Natuna Islands. This has been met by sharp rebukes from Indonesian officials.

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“China has claimed Natuna waters as their territorial waters. This arbitrary claim is related to the dispute over Spratly and Paracel Islands between China and the Philippines. This dispute will have a large impact on the security of Natuna waters,” assistant deputy to the chief security minister for defense strategic doctrine, Commodore Fahru Zaini said, in March of last year during a trip to the Natuna area.

He added: “What China has done is related to the territorial zone of the Unitary Republic of Indonesia. Therefore, we have come to Natuna to see the concrete strategy of the main component of our defense, namely the National Defense Forces (TNI).”

Around the same time, Indonesia’s Military Chief General Moeldoko took to the Wall Street Journal to blast China’s claims. “Indonesia is dismayed… that China has included parts of the Natuna Islands within the nine-dash line, thus apparently claiming a segment of Indonesia's Riau Islands province as its territory,” Moeldoko wrote.

(Recommended: China's New Trump Card in the South China Sea)

He went on to write: “The Indonesian military has decided to strengthen its forces on Natuna. We will need also to prepare fighter planes to meet any eventuality stemming from heightened tensions on one of the world's key waterways.”

More recently, in February of this year, General Moeldoko referred to the South China Sea as a potential flashpoint. “In the future, we expect that the South China Sea will be a flash point. So a task force, such as the Kogabwilhan, will be very important,” Moeldoko said in an interview.

Indonesia’s popular president, Joko “Jokowi” Widodo, has also waded into the dispute from time to time. For example, just before a trip to Japan and China in March of this year, Jokowi said “The ‘nine-dashed line’ that China says marks its maritime border has no basis in any international law.”

Outside observers have regularly pegged Indonesia as a potential leader of the Association of Southeast Asian Nations (ASEAN), and the organization’s secretariat is indeed located in the country. Thus, Indonesia’s position on the South China Sea dispute carries particular weight.

However, Indonesia has tried to take a balanced approach on the issue, and Jokowi reaffirmed in March that Indonesia seeks to remain an "honest broker" in the dispute.

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

Image: Wikimedia/KAI

TopicsSecurity RegionsAsia

Russia May Build India New Super Advanced Submarine

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India and Russia are in the final stages of talks for Delhi to lease another nuclear attack submarine from Moscow.

According to India’s Economic Times, Indian Prime Minister Narendra Modi and President Vladimir Putin will discuss the deal on the sidelines of the BRICS Leadership Summit currently being held in Ufa, Russia.

“Several sources related to the project that ET spoke with confirmed that talks on leasing a new submarine under the 'Chakra 3' project are in advanced stages and that the issue will be discussed during Prime Minister Modi's visit to Russia this week,” the report said.

There has been previous signs that India intends to lease a second Russian-built nuclear attack submarine (SSK). And, during a trip to India last year, Vladimir Putin indicated that Russia would be interested in such a deal.

However, the new Economic Times report said that in contrast to previous Indo-Russian submarine deals, under the “Chakra 3” project, Russia will build India a customized submarine. The report speculates that the boat may be one of Russia’s new Yasen-class submarines, or else a derivative with a similar design.    

"The final shape is yet to be decided, but it is now almost certain that a 'greenfield' submarine will be built," ET quotes an unnamed source close to the program as saying.

A Yasen-like submarine would be a significant boost to India’s depleted undersea fleet. As Kyle Mizokami has observed on The National Interest: “The Yasen class is one of the most advanced submarines in the world. The class reportedly has a crew of only ninety, implying a high level of automation. A 200MW nuclear reactor is thought to power the submarine to a maximum speed of 35 to 40 knots, with a ‘quiet operating speed’ of 20 knots.”

Regarding weaponry, Mizokami pointed out that: “The Yasen class has eight vertical launch tubes, four 650mm torpedo tubes and four standard-diameter 533mm torpedo tubes. Besides standard guided torpedoes, Yasen will almost certainly be armed with the Shkval supercavitating torpedo, capable of traveling at 200 knots to ranges from 7 to 13 kilometers.”

India is currently in the process of trying to revamp its submarine fleet, which has been battered by a number of mishaps in recent years. For starters, India is trying to build nuclear-powered ballistic missile (SSBNs) to serve as the sea-based leg of its strategic deterrence.

In addition, earlier this year India greenlit a project to build six-indigenously produced nuclear attack submarines, which would likely be manufactured with significant foreign assistance from abroad. In fact, as The National Interest previously reported, Russia and India have been in discussions over starting a joint-venture involving the nuclear attack submarines. Those talks are still in the very preliminary stages.

Still, India has a long history of relying on Russian submarines to power its undersea fleet. In the 1960s and 1970s, for example, the Soviet Union sold India eight Foxtrot-class submarines, which India operated as Vela-class submarines. India also currently operates a number of Kilo-class submarines, which are designated as Sindhughosh-class submarines by the Indian Navy.

Furthermore, India has experiencing leasing Russian-built nuclear attack submarines. In the 1980s, India briefly leased a SSK from the Soviet Union under Chakra 1. Delhi took on a ten-year lease for a second Russian-built SSK in 2012. Unlike the deal currently in discussion, both of those earlier submarines were refurbished Soviet and Russian boats.

In related news, Russia is reportedly interested in making India a global hub for the upgrade, maintenance and repair of Russian-built conventional submarines. Evgeny V. Shustikov, Deputy Director General of Russia’s state-owned Zvyozdochka Shipyards, tells the Economic Times that: "We are in the process of negotiating with an Indian shipyard and if these negotiations are successful, it could become our partner for future tasks of modernising Kilo class submarines. Not just for India but for third nations as well.”

The report went on to say that: “Officials from the state-run Zvyozdochka shipyard told ET that a memorandum of understanding could be signed within a month as it is in final talks with an Indian partner for the project. Russian engineers have already visited the Indian yard and advised it on changes to be made as well as investments needed to execute the project.”

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

Image: Admiralty Shipyards

TopicsSecurity RegionsEurasia

Why Is Iran's Foreign Minister So Angry?

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Nuclear negotiations that once contested questions of access and verification now seem to be turning into a contest of measurement—and those aren’t uranium stockpiles they’re measuring. Yesterday, Russian and Iranian media outlets reported a string of bombastic outbursts from their nations’ top diplomats in disputes over the removal of the United Nations Security Council’s arms embargo on Iran. The Russians and Iranians want the arms embargoes lifted; the U.S. and others want some restrictions to remain. After European Union foreign policy head Federica Mogherini suggested the talks could end over Iran’s intransigence, say the reports, Iranian foreign minister Mohammad Javad Zarif shouted back, “Never threaten an Iranian!” “Or a Russian,” Russian foreign minister Sergey Lavrov is said to have added. Zarif and U.S. secretary of state John Kerry are also reported to have been shouting at each other so loudly one night that other delegations in the hotel could hear; on another occasion, when Western negotiators raised the issue of Iran’s destabilizing role around the Middle East, Zarif “erupted” that “If we are talking about regional security, I should take every one of you to international courts for supporting Saddam” in the Iran-Iraq War.

It’s no surprise that the nuclear talks would see some of the negotiators losing their tempers—after all, the issues at stake reach into the core of the parties’ visions of their own security and dignity—and this isn’t the first time Zarif has been accused of indelicacy. Yet it’s only now that we’re hearing just what Zarif is shouting about. All leaks from the talks should be treated as deliberate efforts to cultivate an image, since the negotiators are typically tight-lipped. These revelations are particularly suspect, given that they come via interested parties’ state media and that they make little sense in the negotiation room and lots of sense as efforts to rally nationalism. An Iranian lawsuit against key Western states over a war three decades ago would only deepen Tehran’s isolation—precisely the opposite of what Zarif and his president, Hassan Rouhani, are trying to achieve by negotiating. And Zarif and Lavrov’s appeals to proud national “character” probably weren’t going to move an elite bureaucrat of a politically correct, postnational outfit like the European Union. Yet raising the Western role in supporting Iraq is red meat for Iranians across the political spectrum, as that inhuman and deadly war remains an open wound. And tough talk about standing up to threats? That’s a universal political language, and it seems to have hit its mark in Iran. These leaks were about public positioning, not diplomatic gain.

And what’s the positioning mean? That’s hard to say, but it may have been multipurpose. A successful deal will include controversial concessions, so it’s useful for the negotiators to make a show of how patriotic they are and how hard they’re pushing the other side. And if the talks break down, the negotiators will be accused of being soft for having engaged with the United States in the first place. Highly visible shows of patriotism and machismo can mitigate that damage. And Zarif is a moderate, technocratic figure with no real war record or natural political base in Iran. If the negotiations succeed, he and Rouhani will be rock stars for many Iranians; Zarif’s remarks might help him capture a little more of the spotlight. He’s denied ambitions for higher office. Even if he was telling the truth, adoring crowds have a way of changing men’s minds.

Political scientist Robert D. Putnam once wrote that diplomacy is a two-level game—negotiators aren’t just negotiating with other countries, but with their own domestic system. At the level of international diplomacy, Zarif’s conduct looks unprofessional and intemperate—hard to explain from a man who’s been doing diplomacy for decades and who’s rarely photographed without a smile on his face. As domestic politics, though, it’s much more understandable. While the international level of the talks has been dominated by arcane technical questions, the domestic level is simple and volatile, with symbols and emotions mattering far more than, say, questions about whether Iran can turn uranium hexaflouride into uranium dioxide by this or that day. This apparent Russo-Iranian bid to make moves on the international level that get results at the domestic level suggests that something big may be upon us—whatever it is.

John Allen Gay, an associate managing editor at The National Interest, is coauthor of War with Iran: Political, Military, and Economic Consequences (Rowman and Littlefield, 2013). He tweets at @JohnAllenGay.

Image: Mueller/MSC. CC BY 3.0.

TopicsNuclear ProliferationDiplomacy RegionsIran

China’s New Cybersecurity Law: What You Need to Know

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The National People’s Congress posted the draft of a new cybersecurity law (in Chinese) on Monday. The purpose of the law, according the NPC, is to maintain “cyberspace sovereignty.” The law is open for comments until August, and the important questions will be in how it is modified, interpreted, and implemented. But here are some of the key points:

-Government will establish national security standards for technical systems and networks.

-Real name registration to be enforced more strictly, especially with messaging apps where enforcement has been lax.

-Internet operators must provide “support and assistance” to the government for dealing with criminal investigations and national security. Nicholas Bequelin, East Asia Director at Amnesty International, tells Reuters that Article 50 gives authorities the legal power to cut Internet access in to maintain order as Beijing did in Xinjiang in 2009.

-“Timely warning and notification” system for cybersecurity incidents.

-Greater investment in cybersecurity (including subsidies for cybersecurity companies, internet operators, etc.) and cybersecurity education.

-The Cyberspace Administration of China (CAC) will review cybersecurity practices of key telecommunication operators, conduct regular emergency drills, and provide help in implementing the law. Employees must undergo background checks, and the CAC will review procurement.

-User data for the key operators must be stored in China (if there’s a business imperative to store data overseas, they can apply for exceptions).

-Collection and use of user data must “comply with the principles of legality, justice, and necessity” and operators must secure users’ agreement to have their data used. Data collected must be related to the service the Internet operator is providing. Collected user data must have adequate protections and data breaches must be responded to in a timely manner.

The foreign business community will be reading the law closely, trying to determine how the cybersecurity standards and procurement provisions will be implemented. The past few months will not give them great comfort, as Beijing has adopted a national security law and other provisions to make technology used in China “secure and controllable.”

Just weeks after the Strategic and Economic Dialogue ended, and months before President Xi Jinping’s visit to the United States, cybersecurity and information technology are becoming an even greater source of tension in the bilateral relationship.

This piece first appeared in CFR’s blog Net Politics here

TopicsCyber Security RegionsAsia

Explained: Why America's Strategy Against ISIS Is Doomed to Fail

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In the Islamic State (ISIS), we face a determined enemy melding terrorism and guerrilla warfare with an expansionist, state-building agenda and a mastery of online propaganda. And no country has yet mustered the political will or strategic understanding to defeat the group. In strikingly similar speeches on both sides of the Atlantic on July 6, U.S. President Barack Obama and British Prime Minister David Cameron each admitted that no complete strategy is yet in place, and acknowledged this will be a protracted “generational” struggle with many setbacks.

Over the past year, since its capture of Mosul drew a belated response from the United States, Australia and others, ISIS has adapted to western counterterror efforts, repeatedly beaten Iraqi and Syrian regular troops and Iranian-backed militias, established provinces in Libya, Algeria, Tunisia, Egypt, the Caucasus, Yemen, Afghanistan, Pakistan and Saudi Arabia, and inspired attacks in western states and several North African and Middle Eastern countries.

Pentagon and White House spin to the contrary, ISIS terrorism shows no sign of diminishing after a year of Western intervention. On June 26, an ISIS gunman massacred 38 people in Tunisia. The same day, ISIS bombers struck in Kuwait (killing 27) and Syria (killing 20). Five days later ISIS launched coordinated assaults on 21 Egyptian military posts in the Sinai Desert. Along with its ability to generate unprecedented numbers of foreign recruits—12 times as many as at the height of the Iraq War in 2006–08—Islamic State’s ability to inspire attacks like these illustrates its mastery of social media and electronic propaganda, and the effectiveness of its “leaderless resistance” model of individual and small-team guerrilla-style terrorism.

But ISIS is far more than a terrorist group. Behind the front line of its offensives in Iraq and Syria, it has forged a governmental structure that administers 6 million people (a larger population than Singapore, Lebanon, Norway or New Zealand) and controls a territory covering one third of Iraq and roughly the same proportion of Syria. Its economy includes oil exports, sale of utilities like electricity and water, extortion of businesses and wealthy individuals, kidnapping, and the sale of antiquities. Along with its increasingly regular taxation system, this gives ISIS an annual revenue of more than US$600 million —small for a state, but (with the sole exception of the Colombian FARC’s drug revenues in the late 1990s) unprecedented for a terrorist group.

As I argued in a recent Quarterly Essay, ISIS—at its core—is a state-building enterprise. It seeks to create a real-world, territorial state in the Middle East, and then expand it by relatively conventional military conquest. It’s driven by a strongly sectarian, anti-Shi’a ideology, and influenced by the Ba’athist roots of its senior Iraqi leaders. As a string of battlefield victories shows—along with its demonstrated adaptability and resilience to bounce back after defeats—ISIS fields the most effective force currently fighting in the region. ISIS overseas provinces, and its ‘Internationale’—ISIS-inspired individuals and cells undertaking subversion, propaganda and terrorism on its behalf—support the state-building efforts of the core ISIS structure.

There are good reasons to avoid calling ISIS a state: to deny it legitimacy, and enable prosecution of those who travel to join it. But treating it as a state for targeting purposes—destroying its governmental structures, its economy, its military, and its ability to control territory and population—should be at the heart of western strategy. Instead, the approach so far has relied on limited airstrikes (11 strike sorties per day, on average, across Iraq and Syria, since last August) against tactical targets, arming and training the Iraqi military (and a few Syrian rebels) under extraordinarily restrictive rules of engagement, and occasional Special Forces raids. This strategy is failing.

On May 18, ISIS captured Ramadi—capital of Iraq’s largest, most heavily Sunni province, Anbar—routing western-trained Iraqi troops including the vaunted Golden Division. Only four coalition airstrikes were launched the day Ramadi fell, making no impression on an ISIS force including dozens of armored vehicles, mortars and artillery, spearheaded by seven suicide trucks followed by a swarm of combat teams on foot and in vehicles. Within days ISIS had consolidated its control of Ramadi, captured the city of Palmyra in Syria, and seized a critical border crossing.

Beside these battlefield defeats, half-hearted western engagement has created space for Iranian-backed militias (the ‘Popular Mobilization’) who have engaged in sectarian cleansing in Sunni towns, and (with Assad in Syria, and Hezbollah in Syria and Lebanon) represent the combat element of an Iranian proxy war to expand Teheran’s influence across the region. US air strikes helped the militias to seize Tikrit in March, and to achieve some progress against ISIS around the strategically critical Bayji oil refinery earlier this month.

But they also weaken the Iraqi government’s credibility, undermine the inclusive agenda of Iraqi Prime Minister Haider al-Abadi, strengthen Nuri al-Maliki (the Shi’a-supremacist former Prime Minister closely associated with the militias) and encourage Kurds in the north and Shi’a in the southern region around Basra to break with Baghdad altogether. The rise of Popular Mobilization militias as the leading element of Iraq’s campaign to recapture Ramadi (and, perhaps, an eventual offensive against Mosul) also means few Sunnis will support the offensive. Under these circumstances, battlefield victories by Iranian-backed Shi’a militia weaken the Iraqi government even more than defeats: not for nothing, the International Crisis Group has argued that the current approach is ‘defeating the Iraqi state, one victory at a time.’

Beyond the immediate threat, the humanitarian impact—the largest number of displaced persons and refugees ever recorded—is unconscionable, and the risk of a wider regional war is sharply elevated. Sunni states in the Arabian Gulf, with regional powers like Turkey, Egypt, Saudi Arabia and Israel, see expanding Iranian influence as an even more serious threat than ISIS, and are determined to stop it. The failure to mount an effective international intervention against ISIS, along with the appearance of an accommodation with Teheran on its nuclear program, risks turning a long-standing regional cold war into a hot conflict.

Thus, the current approach—in which the United States and its allies, including Australia, seem to be trying to fight the Islamic State without actually fighting—is not only doomed to failure but also likely to have dire knock-on effects. More than a year into the campaign, recognizing this failure is the critical first step in crafting a workable strategy going forward.

This piece first appeared in ASPI’s The Strategist here

Image: Flickr/U.S. Air Force. 

TopicsSecurity RegionsMiddle East

China's Stock Market Crash Scapegoat: “Hostile Foreign Forces”

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It was bound to happen. As China’s stock market continued its wild ride, dropping 30 percent by early July from a seven-year high only a month prior, rumors started swirling that Goldman Sachs, Morgan Stanley, and George Soros, among other vague forces of international capital, were to blame for the stock market plunge. No matter that foreign investors have only limited access to mainland Chinese stock exchanges, the current Chinese leadership has become addicted to the foreigner blame game. The phrase “hostile foreign forces” has become a catch-all for Chinese officials, scholars, and media commentators who cannot acknowledge the reality of China’s current political and economic situation.

In the past few years, virtually no area of Chinese policy has remained untouched by the influence of “hostile foreign forces.” China’s education minister Yuan Guiren argues that “young teachers and students are key targets of infiltration by enemy forces” and condemned Western concepts such as the rule of law, civil society, and human rights. The Chinese Academy of Social Sciences (CASS) accused “hostile Western forces” of exaggerating the number of people who died during the Great Leap Forward in order to undermine the legitimacy of the party. CASS also worked with China’s National Defense University and the General Staff department of the People’s Liberation Army to produce a film that claims U.S.-China military-to-military exchanges offer Americans a chance for infiltration and attacks the longstanding Fulbright program as an element of “America’s cultural invasion.” Western reports of police violence in Xinjiang were attributed to hostile foreign forces in August 2014. The vice chairman of the All-China Federation of Trade Unions, Li Yufu, blamed hostile foreign forces for attempting to undermine the solidarity of the Chinese workers. Early in China’s clean air movement, as well, some officials argued that the activists were being used by hostile foreign forces. And, of course, hostile foreign forces were a major contributor to the protests in Hong Kong. Even President Xi Jinping has warned against outside forces intruding on Chinese religions, although virtually all major religions in China today came to the country from outside its borders, and two of the largest, Buddhism and Catholicism, are led by religious figures who reside outside China.

This flurry of anti-Western rhetoric has also been accompanied by a number of legislative efforts designed to limit Western influence. A broad-reaching new National Security Law is tasked to “safeguard national security, defend the people’s democratic dictatorship and the socialist system with Chinese characteristics” as well as to realize “the great rejuvenation of the nation.” China’s national security commission is also drafting legislation to severely regulate foreign-based nonprofits for fear that Western governments will use these organizations to undermine the Communist Party. A cybersecurity law presented earlier this year, since put on hold, would have required the banking industry to use equipment deemed “secure and controllable” by Beijing, essentially closing the door for foreign information technology firms. Meanwhile, a separate proposed anti-terrorism law would require technology firms to provide encryption keys and install backdoors to allow law enforcement to access information.

While the Chinese leadership may see such rhetoric and policies as a cheap and easy way of deflecting attention from their inability to address the challenges before them, this strategy trades short-term gain for long-term pain. As the political atmosphere turns sour, China will become a less attractive destination for many foreigners. Overall, twice as many foreigners left China than arrived in 2014, and while the United States still supplies more expats to China than any other country, 22 percent fewer Americans moved to China in 2014 than in 2013. Beijing also risks losing credibility with the most educated segments of Chinese society. Even as less informed Chinese may buy into the anti-Western narrative, each time the “hostile foreign forces” argument is introduced, Chinese netizens fight back. Chinese labor union activists, for example, have argued that their discontent derives not from the infiltration of foreign forces but from the failure of the All-China Federation of Trade Unions to protect their interests. And certainly the constant drumbeat of anti-Western sentiment emanating from senior Chinese officials does little to support their claim that they want a trust-based “new relationship among major powers.” The China Dream may eventually come to represent a unique and compelling combination of Chinese traditional values, Marxism, and Xi Jinping Thought; but in the meantime, Chinese leaders shouldn’t take the easy, but ultimately self-defeating and poisonous, path of using anti-Western values to fill the void.

This piece appeared courtesy of CFR’s Asia Unbound blog and Forbes. 

Image: Flickr. 

Topicseconomy RegionsAsia

"On Greece, it is clear that Merkel has failed the test of statesmanship."

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In Greece, with one in four unemployed, the people have voted (once again) for an end to self-defeating austerity imposed from abroad. In Brussels and in Berlin, officials and ministers declare their loyalty to a 'European' vision of monetary and fiscal rectitude that might have borrowed its name from Foucault ('discipline and punish') or Dostoyevsky ('crime and punishment'). Across the whole southern half of the continent—from the Pillars of Hercules to the outer approaches to the Hellespont—unemployment has robbed a generation of a future.

Only a decade ago, Europe was mostly remarkable as a place where history had stopped. Nothing symbolized this more than the euro. Today, the single currency is the emblem of a crisis not just in Europe's stagnant economy but in the whole idea of European political unification.

How did we get here?

Greece's sins—and there are many—have been endlessly detailed. Cooked books. Corruption. Waste. In Denmark, where I live, the story stops here: profligate Greeks.

But Greece has not imposed a depression on itself. If Athens' economic position in 2010 was parlous, by 2012 it was catastrophic. What brought this about was not Greece's failure to stick to the medicine meted out to it, but the medicine itself. We now know that even the IMF questioned the remedies ceaselessly recommended.

But Germany, above all, insisted. In the middle of a global recession unprecedented in severity since the 1930s, there would be drastic cuts to pensions and welfare spending; an admittedly bloated public sector would lose thousands of jobs; the rights and conditions of those still in work would be dramatically eroded; national assets would be sold off at fire-sale prices. What's more, Berlin would do nothing to stimulate demand at home or elsewhere in the Eurozone to compensate for its collapse in the Aegean. On the contrary, Germany, with a trade surplus greater than China's, would make a budget surplus a requirement under federal law.

What explains Germany's behavior? The first part of the answer can be found in the personality of its chancellor.

At the end of last year, Angela Merkel was the Western world's favorite politician. Responding to the global interest, a long and revealing biographical essay in the New Yorker notes “scientific detachment” (Merkel is by training a quantum physicist), “caution under dictatorship” (she grew up in East Germany) and “reticence” as her defining personal qualities. A senior German official described her as “about the best analyst of any given situation that I could imagine...She looks at various vectors, extrapolates, and says, "This is where I think it's going."”

But in regard to Greece, that only raises the question: did she? Is this really where she thought it would end? Is this, in fact, what she wanted?

Certainly, Greece needed reform. But Merkel is on record as saying that she never considered Greece fit to join the euro. The punishment for Athens' profligate dishonesty should be so tough that, in her words, “nobody else will want this.”

Usually praised for her foresight, Merkel has led Greece and Europe to the brink by failing to see what should have been obvious from her much-vaunted reading of German history: that cutting public spending in the middle of a global recession to satisfy the demands of foreign creditors would create the depression-like conditions that have ever been a boon for political extremists; and that, if such measures were forced upon Greece by a foreign government, the principles of democratic politics on which the EU is built would be flagrantly undermined.

But what matters to Merkel is not Europe but Germany. She can (and does) take Europe for granted. As Merkel's predecessor Helmut Kohl is quoted as saying in the New Yorker, she is interested in power, and Germany is its base.

The New Yorker notes that, as a former East German, Merkel has a real commitment to the overriding importance of personal freedom and national self-determination (note her many statements, for example, on Ukraine). But she is nonetheless ‘a learned democrat' and a learned Atlanticist. And growing up a world away from the 1950s and 1960s 'fathers of Europe' (de Gasperi, Monnet, Schuman and Spaak), she's no less a learned European. Far less than her predecessors Kohl or Gerhard Schröder, thinking like a European doesn't come at all naturally to her. And the crisis has shown it.

In Germany, her policies are wildly popular.

The country's most popular politician for over a decade (if she has recently lost that position to her Finance Minister Wolfgang Schäuble, it's because he's seen as even more a monetary and fiscal disciplinarian than she is), Merkel is known to her people as Mutti ('Mum'). She's perfectly in tune with Germans' perception  of debt as a sign of moral failing, the legacy of a Lutheran mentality compounded by the still traumatic memory of 1930s Weimar hyperinflation and the red carpet it laid for the Nazis.

Among others, Thomas Picketty has pointed out that, in 1955, saddled with the costs of two world wars, West Germany was itself the recipient of the kind of debt relief that Germans would deny Greece today. Its late enemies, including Britain, France and Greece, wrote off half the national debt. “Fortunately.” Picketty observes, “we were more intelligent (then).”

But Greece's (and Europe's) tragedy is that Germany's instincts are stronger than its memories. And there's nothing in Merkel's personality or experience to lead her to jog those memories. Germany's tragedy (and Germany will suffer too from this debacle) is that Germans' own interests could only be defended by acting in contradiction to their supposed national values and perceived (but not, it bears repeating, their complete actual) history.

This is not unusual. In 1957, Henry Kissinger observed that:

“The whole domestic effort of a people exhibits an effort to transform force into obligation by means of a consensus on the nature of justice. (…) But the international experience of a people is a challenge to the universality of its notion of justice, for the stability of an international order depends on self-limitation, on the reconciliation of different versions of legitimacy.”

That is, foreign policy is challenging because it can often demand a course of action that would be rejected as wrong or unjust in a domestic setting—even adherence to a quite different set of values from those that form the basis of domestic peace.

“Not for nothing,” Kissinger continued, “do so many nations exhibit a powerful if subconscious, rebellion against foreign policy, which leaves the travail of the soul inherent in arriving at decisions unrewarded, against this double standard which considers what is defined as "justice" domestically, merely an object for negotiation internationally.”

If Germany's mistakes with regard to Greece have a single cause, it is that the country has misidentified a foreign-policy problem as one of domestic policy, and erred in its remedies accordingly. For the resolution of the Greek debt crisis demanded the domestically indefensible: debt forgiveness or its mutualization through the issue of common 'euro bonds'; looser Eurozone interest rates and looser German fiscal policy; and the initiation of a serious movement towards a more complete fiscal and political union.

Faced with the challenge, the German governing class balked. It resorted to all it knew about itself, ignoring what it could learn from the study of the world around it, even as far as declining to consider Germany's own place within in it. When Kissinger writes that “a statesman will tend to have great difficulty legitimizing his policy domestically, because of the incommensurability between a nation's domestic and its international experience,” it's noteworthy that, especially on Greece and the euro, Merkel has not encountered any such difficulty.

On Greece, it is clear that Merkel has failed the test of statesmanship.

It is quaint now to recall British Prime Minister Margaret Thatcher and French President François Mitterand's opposition to German reunification in 1990. Even then, the idea of German tanks in London or Paris was absurd. But what if what their fears were justified not by World War III but by the rise to a position of leadership of a power unready for the burden of its responsibilities? (Their consternation at Bonn's precipitate 1991 recognition of Slovenian and Croatian independence was a sign of things to come.)

For the duration of the Cold War, such a foreign policy as Germany had ('Ostpolitik') was in fact domestic policy: the reunification of East Germany to the West. Germany was reunited in 1990. That it has struggled ever since to define its post-reunification goals in Europe and the world is a truism. Yet even more than West Germany during the Cold War, East Germany, whose leadership took directives religiously from Moscow, was a country without a foreign policy. So where, in the East before 1989 or in the West thereafter, would Merkel have learnt the principles of sound foreign policy? Where, more to the point, would Germans?

From the start, Merkel has been committed to making sure that Germany's domestic experience of the euro crisis was to all intents and purposes the only relevant experience of the crisis at a European level. This was a successful strategy for ensuring her domestic popularity, and the German population hasn't challenged it (nor has Germany's strange kind of democracy helped stimulate debate; the Government is as a grand coalition of the country's two largest parties; there's effectively no Opposition). But it was disastrous when it came to ensuring Germany's long-term interests. Already Berlin is having trouble where in the recent past it has always succeeded: lining up the leaders of the Eurozone's other big states (France, Italy and Spain) behind its positions.

Make no mistake. The Greek referendum was a defeat of German leadership in Europe.

True, whatever happens from here, the economic pain will fall on Greece and its people. But the big loser from last weekend's far-from-pointless referendum will be Germany. Whether a new deal is reached which still contains the element of 'punishment' the German Government considers so important to impose, or Greece defaults and leaves the euro, Germany will have shredded its claim to leadership in Europe. For that leadership will have been shown to rest not on consent or voluntary submission to a strong Germany claiming to act in the interests of all, but on force and the threat of economic Armageddon.

Kissinger saw power (the perception of what is possible in relations between states) and legitimacy (the perception of what is just) as the two inseparable elements of a stable international order. In a classic miscalculation of its own interests, Germany has traded legitimacy for power. There's no going back now.

This piece first appeared in the Lowy Interpreter here

Image: Creative Commons 3.0. 

TopicsEconomics RegionsEurope

Watch Out, India: Pakistan Is Ready to Use Nuclear Weapons

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Pakistan is ready to use nuclear weapons against India, a senior Pakistani official confirmed on Monday.

Appearing on the Pakistani television channel “Geo,” Pakistan’s Defense Minister Khawaja Asif said that Islamabad is willing to use nuclear weapons to ensure its survival.

“We should pray that such an option never arises, but if we need to use them (nuclear weapons) for our survival we will,” Asif said, according to Geo’s website. His remark was widely reported by Indian media outlets.

Asif went on to accuse India of supporting anti-Pakistani terrorist groups in a proxy war against Islamabad. “Fuelling terrorism directly or indirectly is India’s proxy war in Pakistan,” Asif said. He singled out Tehreek-e-Taliban Pakistan (TTP), the Pakistani Taliban, and Baloch separatists as two of the groups that India is allegedly supporting.

Asif’s statement about Pakistan’s willingness to use nuclear weapons is in line with Islamabad's long-standing nuclear doctrine. In contrast to India and China, which both maintain no first use nuclear doctrines, Pakistan has always maintained that it could resort to nuclear weapons to blunt a conventional attack from India.

Nor is Asif the first high-level Pakistani official to threaten to use nuclear weapons. Former President Pervez Musharraf issued a similar threat (albeit, after he left office), when he stated: “We do not want to use nuclear capability but if our existence comes under threat, who do we have these nuclear weapons for?”

More tellingly, in an interview back in 2002, Lt. Gen. Khalid Kidwai, the first head of the Strategic Plans Division (SPD), which is responsible for Pakistan’s nuclear arsenal, outlined four scenarios where Pakistan would consider using nuclear weapons against India:

  1. If India conquers a large part of Pakistan;
  2. If India destroys large parts of Pakistan’s army or air force;

  3. If India tries to strangle Pakistan economically;

  4. If India tries to destabilizing Pakistan politically, including by creating large scale internal subversion.

Notably, in his interview this week, Asif seems to suggest that India is doing the fourth scenario by supporting terrorist groups inside Pakistan.

(Recommended: 5 Indian Weapons of War Pakistan Should Fear)

Pakistan has backed up its rhetoric by creating an operational nuclear force capable of making good on its threats. For example, when Indian officials began discussing a Cold Start doctrine—in which Indian forces would make quick and limited incursions into Pakistan in response to Islamabad-supported terrorist attacks in India—Pakistan began developing tactical nuclear weapons to thwart such attacks.

In 2011, Pakistan first tested its Hatf-9 (Nasr) missile, which it referred to as a “Short Range Surface to Surface Multi Tube Ballistic Missile.” The statement announcing the test elaborated: “NASR, with a range of 60 km, carries nuclear warheads of appropriate yield with high accuracy, shoot and scoot attributes. This quick response system addresses the need to deter evolving threats.”

(Recommended: 5 Pakistani Weapons of War India Should Fear)

It went on to add that “the test was a very important milestone in consolidating Pakistan’s strategic deterrence capability at all levels of the threat spectrum.”

It has continued to test the Nasr missile in the years since, including using firing it in four missile salvos using a “state-of-the-art multi-tube launcher.”

(Recommended: Russian Nuclear Weapons 101)

Earlier this year, Marine Corps Lt. Gen. Vincent R. Stewart, the director of the U.S. Defense Intelligence Agency, confirmed that Pakistan is continuing to build up a tactical nuclear weapons force. In testimony before the Senate Armed Services Committee in February, Stewart said: “We anticipate that Pakistan will continue [its] development of new delivery systems, including cruise missiles and close-range ‘battlefield’ nuclear weapons to augment its existing ballistic missiles.”

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

Image: Wikimedia/One half 3544​

TopicsSecurity RegionsAsia

China's Big South China Sea Gamble

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Several Southeast Asian countries have expressed concern over Beijing’s belligerent behavior and aggressive posturing in the South China Sea. A litany of complaints of harassment of innocent fishermen by Chinese Coast Guard vessels has been reported by Vietnam and the Philippines, who are visibly angry with China. These incidents have led to stand-offs between maritime security forces, shadowing and buzzing by aircraft, including obstruction of exploration ships and rigs. Issues such as freedom of navigation and the possibility of China announcing an ADIZ over the South China Sea have also unnerved regional countries. If these trends continue, these could potentially result in deterioration of relations between China and the Southeast Asian countries and Beijing may soon lose friends.

In light of these developments, the ongoing standoff between Malaysia and China over the presence of a Chinese coast guard ship Haijing (CCG-1123) anchored in Malaysia’s Economic Zone (EEZ) merits attention. Following the sighting of the Chinese coast guard ship off Luconia Shoals (Beting Patinggi Ali in Malay) nearly 90 nautical miles north of Sarawak, the Malaysian government ordered the navy and the Malaysian Maritime Enforcement Agency (MMEA) to deploy ships and aircraft and monitor the activities of the Chinese ship. The Malaysian Navy chief Abdul Aziz Jaafar expressed concern over the intrusion by the Chinese ship and announced that his forces were continuously monitoring and shadowing the Chinese vessel. Further, since September 2014, intrusion by Chinese vessels in Malaysian waters had increased and “We protest every time. We see them every day.” Jaafar was also disappointed that there was no response from the Chinese ship when it was contacted by radio with warnings to leave Malaysian waters using international distress and calling frequencies. Malaysian National Security Minister Shahidan Kassim stated that Luconia Shoals fall in the Malaysian EEZ and warned that Prime Minister Najib Razak would raise the issue directly with Chinese President Xi Jinping.

There is a history of Chinese Coast Guard ships intruding into the waters of other claimants in the South China Sea. The Philippines has accused China of harassing its fishermen by firing water cannons at them and, in a recent case, ramming into boats. In 2014, in a television interview, Philippines President Benigno Aquino stated that two Chinese hydrographic survey ships were sighted in the Recto Bank, about 80 nautical miles off Palawan, within the Philippines claimed EEZ.  Aquino also made known that Chinese Coast Guard ships were often spotted patrolling around Second Thomas Shoal. Also, in May 2014, two Chinese survey vessels were sighted in Galoc, an oil field in western Palawan. Earlier this year, the Philippines government lodged strong protest with China over an incident involving a Chinese Coast Guard ship which rammed three Philippine fishing boats in the disputed Scarborough Shoal area.

Vietnam has also been at the receiving end of disruptive Chinese activities in the South China Sea. The Chinese Coast Guard conducted aggressive maneuvers including ramming and a 2014 video of Chinese ships firing water cannons at a Vietnamese vessel was made public. Interestingly, water cannons were also used against a Vietnamese law enforcement vessels and a Chinese aircraft flew over Vietnamese police patrol boats in a bid to threaten them.

At another level, Chinese fishermen engage in illegal fishing and Greenpeace reported that Chinese boats were seen as far as west coast of Africa illegally fishing in big numbers. In May 2015, the Indonesian government ordered the sinking of 41 boats including a 300-ton Chinese fishing vessel Gui Xei Yu that was caught illegally fishing in its waters in 2009. Apparently, Chinese fishermen were not deterred by the above incident and soon after that Chinese fishing vessels were spotted poaching in Makassar Strait and Tomini Bay. The Indonesian Traditional Fishermen Association (KNTI) observed that Chinese registered fishing boats, identified by the nine-digit Maritime Mobile Service Identity codes, are often seen in Indonesian waters.

As far as Malaysia is concerned, the presence of Chinese Coast Guard vessels may potentially encourage it to respond aggressively by posturing and deploying military assets, which may in turn bring the two maritime forces close enough to cause a naval incident. Malaysia has preferred ‘quiet diplomacy’ to prevent any escalation in its relationship with China. In 2013, it was reported that Chinese naval and maritime surveillance forces had made incursions in waters off East Malaysia, which were not publicized at the time. Further, Malaysia has worked to prevent the sort of anti-China nationalist sentiments were seen in Hanoi in 2014.

Beijing’s reclamation and construction activities on the islands/reefs in the South China Sea also have not gone unnoticed in Malaysia. Kuala Lumpur, however, has chosen to remain quiet given that it too has undertaken reclamation on some of the features under its control from where it has attempted to project civilian or maritime presence into surrounding waters.

It is fair to say that if China does not order its ship to leave Malaysian waters, it may result in a diplomatic standoff with adverse repercussions. This may in turn result in a soured relationship and fading of the ‘charm offensive’ that has been very cleverly employed by China through a number of economic engagements with the Southeast Asian countries. The Asian Infrastructure Investment Bank (AIIB), a Chinese initiative to finance infrastructure construction in the continent, may run into serious jeopardy if China does not stop its provocative behavior in the South China Sea. Likewise, Southeast Asian countries may shy away from the Chinese 21st century Maritime Silk Road (MSR) which could be a major setback for the Chinese leadership,  which sees Southeast Asia as a springboard to launch the initiative.

In essence, the current standoff in the Luconia Shoals creates the potential that Beijing may lose a much-needed friend. Malaysia is currently holding the Chairmanship of the ASEAN, and its position on these issues may in turn have influence Vietnam and the Philippines’ stance towards Chinese behavior.

This piece first appeared as part of the Asia Maritime Transparency Initiative's (AMTI) website here

Image: Creative Commons. 

TopicsSecurity RegionsAsia