Wednesday, October 19, 2016

If we can't beat them, let's join 'em

At first sight, Prime Minister Narendra Modi’s foreign policy appears awe-inspiring. The sheer energy he has invested in his 46 foreign visits has taken him to destinations that were ignored or played down by his predecessor —Central Asia, Indian Ocean Region, the Persian Gulf, besides the usual staples of the US, western Europe, China and Japan. Their outcome, however, is a matter of opinion.
There has been a sharp rise in FDI into India, but whether it was due to his visits is a question. Foreign visits do have the virtue of concentrating the attention of the various arms of government to Indian interests in a specific country or region. But thereafter what matters is follow-up.

Indian soldiers patrol near the border dividing Kashmir between India and Pakistan, which has witnessed several skirmishes in the recent past. Pic/AFP

Actually, the big problem is in deciding what exactly is the government’s goal — attracting investment and technology, or political support for a seat in the UN Security Council and the Nuclear Suppliers Group, or countering terrorism, or building a coalition to check China and Pakistan. Since the government of India does not put down its goals in writing, you can assume that it is all of the above, with no specific prioritisation.
In one, arguably the most important, area of foreign policy, however, the Modi government has failed. This is with China and Pakistan individually, as well as as a combine. It is no secret that neither of these can be considered friendly and India has serious disputes with them. But since 42 per cent of our land borders are with them, our inabililty to break the Sino-Pak nexus is a significant failing which, in all fairness, cannot be blamed entirely on the Modi government alone.
In the case of Pakistan, the reasons for the estrangement are clear. Indian relations with Islamabad have never been very good and the slow poisoning of the Nawaz Sharif government by the Pakistani military has put paid to any effort by New Delhi to improve relations in the last two years.
As for China, the reasons are more complicated. In some measure, they are a result of a gauche handling of China by Modi and his team. They worked under the impression that quick deals with Beijing were possible and Modi’s personality would be enough to score a breakthrough. However, things haven’t quite worked out and the border talks are frozen. India remains suspicious of China’s One Belt One Road initiative and keeps Chinese investments at an arm’s length, so Beijing sees no payoff in backing India’s membership to the NSG or abandoning Pakistan on the issue of terrorism. In short, in the give and take of international intercourse, Beijing does not see what India has on offer in exchange for the things it wants from China.
In all this, New Delhi is the loser. If it thinks that the US will succumb to its campaign and sanction Islamabad on the issue of terrorism, it is mistaken. The US has been there and done it and found that it does not help. Indeed, as it pulls out from Afghanistan, Washington finds that it needs Islamabad more, not less. Afghanistan is a benighted land which, if left to itself, will descend to chaos. But the US cannot afford to allow that to happen to nuclear-armed Pakistan. In any case, US interests go beyond this negative consideration — Washington has dealt with the generals and understands them well and it realises that even to deal with chaotic Afghanistan, it needs to retain its ties with Islamabad. More germane is the fact that having invested what it has in “human resources” in Pakistan’s army and civil society, the US has important assets which it would not like to abandon, especially when China is stepping up its ties through the China-Pakistan Economic Corridor (CPEC).
It is difficult for Modi government’s supporters to swallow this, but the best option for India is to go back to the beaten track of engagement. This time, engage with both China and Pakistan. Indian policy needs to understand that Pakistan remains a failing state with multiple centres of authority, and engagement with each of them can only be at varying levels of satisfaction. Nothing here should imply that we let our guard down from the point of view of our security.
New Delhi has dithered between Islamabad and Beijing, hoping that some breakthrough in our bilateral ties will help to break that nexus. Instead, what India needs to do is to sally forth to meet that nexus and transform it through its economic power and diplomacy. Notwithstanding what China has on offer in the CPEC, Pakistan’s economic future lies in its ties with India and South Asia.
There are elements in Pakistan — its civilian government, civil society, businessmen and ordinary folk — who realise that good ties with India are a necessary condition for the transformation of their country. What is needed is an imaginative leadership in New Delhi that can link its economic ambitions with a transformational agenda in South Asia, instead of getting trapped in the minefields of the past.
Mid Day September 13, 2016

PM's Pak salvo a political plank

The Modi government’s Pakistan policy remains intriguing. We have seen the flip-flops of 2014 and 2015, ranging from border bombardments to hearty embraces and cold vibes.But the direction it is taking now is baffling. In international meeting after meeting, the prime minister has attacked Pakistan’s support of terrorism and the need to sanction Islamabad.

Take the past week for instance.On September 4, in Hangzhou, addressing fellow BRICS leaders, Modi said that there was need to intensify joint action against terrorism which had become the primary source of instability and biggest threat to the world.Alluding to Pakistan he said, “Clearly someone funds and arms them.”On September 5, Modi intensified the attack saying that “one single nation” in South Asia was spreading terror and that there was need for that nation to be sanctioned.

Why has Modi taken the mantle of the leader of the global crusade against terrorism? (Photo credit: PTI) 

On September 7, addressing the ASEAN summit in Vientiane, Modi declared “one country has only one competitive advantage: exporting terror”. And again reiterated the need to “isolate and sanction” the country which was a threat to everyone.
Two days later on September 9, foreign secretary S Jaishankar followed it up in a speech to a US think tank in New Delhi where he said that the fight against terrorism could not be segmented and that no country could escape responsibility by ascribing terrorist actions to non-state actors.
These are only the most recent broadsides, in the past six months, whether addressing the nation on Independence Day, the diaspora in Kenya or Belgium, or the US Congress, Modi has not hesitated to raise the primacy of terrorism as an issue.It’s not clear whether there is some other strategy behind this relentless assault on Pakistan. Accompanying his attack has been his criticism of the UN for its inability to come up with appropriate responses.
Addressing the G-20 in Istanbul in the wake of the Paris attack in November 2015, Modi had called for an international convention on terrorism, an old idea that New Delhi has pushed to little avail since the 1990s.

What we do know as of now is that the Modi government’s assaults on Pakistan are only verbal.
There are no reports of any Balochistan liberation organisations or Taliban-ambushing Pakistani forces, or any unexplained bomb blasts which could suggest that India was hitting at Pakistan in other ways.
The obvious question is: does the Modi government believe that a verbal bombardment in world capitals will force Islamabad to surrender?
Pakistan has played a cynical game for so long and has done so many bad things ranging from training and arming terrorists to killing innocent people to exporting nuclear weapons technology, that to think that they can be shamed into giving up the use of the terror weapon appears naïve, to say the least.
Had India been reeling with the kind of terrorist attacks the French are witnessing, or the ones that hit Kabul or Baghdad every day, Modi’s zeal could have been understandable. Fortunately, since November 2008, India has been spared a mass-casualty terrorist strike.
Then why has Modi taken the mantle of the leader of the global crusade against terrorism? The only conclusion we can come to is that the goals are domestic. Attacking Pakistan plays well with north Indian voters and keeps the other parties off-balance and unable to focus on the fact that his government’s achievements have been meagre, compared to the extravagant promises that had been made in 2014.

Perhaps, Modi’s economic plan will bear fruit in the future, but Modi cannot afford to allow the political support he got in 2014 to slacken, at least not before the UP elections next year, and hence, the terrorism plank.There is no surprise element here, or across the world; terrorism has proved to be a good plank for politicians.Of course, throughout this period, Modi is being extended help by the hawks in Islamabad, who find it difficult to get off the tiger they mounted in the 1990s.
It is not that the Pakistani deep state is afraid of the Lashkar-e-Taiba and Jaish-e-Mohammad. They probably have them, to use the famous words of General Aziz Khan, by their “tooti” (collar). It is that they cannot contemplate giving up what they consider their most useful instruments of policy.In part, dealing with them does, require them to do what Modi and his men are doing. But instead of verbal barrages, there is need for deft diplomacy to isolate Islamabad.
Here, of all the tasks, the most difficult is to persuade Beijing to join in. And this is where we find that the Modi plan lacks stamina because, as the foreign secretary’s Friday statement on China revealed: the government has the ability to state the problem, but not the wherewithal to do something about it, expect complain.
Mail Today Sep 12, 2016

Forget the Economics, it Was Geopolitics that Dominated the G20 Summit

Ostensibly, the Hangzhou G20 summit was about taking stock of the economic situation in a world where global recovery since the 2008 crisis remains sluggish. Better coordination of monetary, fiscal and structural policies is difficult to accomplish when states become increasingly nervous and protectionist.
But to go by the tenor of our newspapers, it would seem that the global summit was a Sino-Indian match, with India repeatedly scoring points on the issue of terrorism. The tone and tenor of Prime Minister Narendra Modi’s remarks, as conveyed by official spokesmen, appeared designed to shame China into chastising Pakistan on the issue.
Modi pointedly initiated his talks with Chinese President Xi Jinping by condemning the recent terrorist attack on the Chinese embassy in Bishkek in theKyrgyz Republic. Later speaking to BRICS leaders, Modi said, “Terrorists in South Asia or anywhere for that matter, do not own banks or weapon factories. Clearly, someone funds them”. Alluding to Pakistan, he called on the BRICS countries to coordinate the anti-terror war, and isolate those who support and sponsor terror. In a subsequent intervention, he was more explicit, saying that “one nation is responsible for spreading terrorism in South Asia.”

Beijing would not have been amused, leave alone embarrassed. A country that has in the past backed Pol Pot and even today supports a range of unsavoury characters around the world is unlikely to be shamed into doing anything. The only language that Beijing knows is that of realpolitik and self-interest.In terms of arriving at solutions to the world’s economic illnesses, the G20 came up with little. In the realm of geopolitics, however, the meeting took place in circumstances that are anything but sluggish. The recent decision of a UNCLOS arbitration tribunal on the South China Sea came in the backdrop of increased friction between the two principal global actors – the US and China. On the other hand we have an uncommonly active Russian outreach to Syria, Turkey, Japan, the ASEAN and, of course, the US.
For this reason, the meeting held on the sidelines of the summit between US President Barack Obama and Xi was watched with considerable interest. However, we must take with a pinch of salt the narrative about the Chinese snubbing Obama by refusing to emplace a rolling staircase on his aircraft, compelling him to use a smaller built-in feature in Air Force One.
The Americans issued a dry “fact sheet” on the outcome of the talks, noting their commitment “to work together to constructively manage differences and…. expand and deepen cooperation” in a range of areas.
The Chinese report via Xinhua was more nuanced. It did not list the 22 heads that the US fact sheet had, covering everything from climate change, counterterrorism and subnational cooperation on municipal governance. But what it did was to emphasise the Chinese desire to be seen as having a unique relationship with the US based on “the principles of non-conflict, non-confrontation, mutual respect and win-win cooperation”. Xi has long mooted the idea of a “new type of major country relations” between the US and China based on these three principles and he indicated that this had led to concrete achievements – including fighting cyber crimes, coping with the Ebola epidemic and facilitating the Iran nuclear deal.
Besides, he noted, that the two countries have worked together in combating climate change, advancing negotiations in a bilateral investment treaty and establishing “a mutual trust mechanism between the two militaries”.
Xinhua noted that Xi told Obama that China opposed THAAD deployments in South Korea and foreign interference in the name of human rights. Further, he called on the US to take a “constructive” stand in the South China Sea, curb “Taiwan independence” activity in all its manifestations and not to support “Tibet independence”. Xi made sure to list what China considers its expanded core interests.
In a speech to the US-China Business Council in 2012, Xi, then China’s vice president, emphasised the importance of strategic trust, saying that it would lead to better and broader cooperation. Even while calling on the need to strengthen dialogue to build mutual trust and understanding, there was need to respect each other’s core interests and major concerns. Xi spelt out what these were – Taiwan, Tibet and China’s development path. However, Beijing has never quite asked, and the Americans have never spelled out, what their core interests are.
The US and China have cooperated in a range of areas since then – piracy off Somalia, climate change, international terrorism, Iran, North Korea, Afghanistan, cyber issues and pandemics like Ebola.
But, the economic crisis of 2008 brought in a new trajectory in the US-China relationship, which changed the US’s somewhat benign view of China and led to what the US subsequently called its “pivot” to Asia. The problem is that Washington did not quite spell out what the pivot, later rechristened a ‘rebalance’, was all about. The US stood by as China sharply stepped up pressure on Japan over the Senkaku Islands, beginning 2008. Later, the Chinese began to consolidate their position in the South China Sea by building what were clearly military facilities.
The US response in 2012 through its so-called Freedom of Navigation Patrols was too mild to make any difference. Now, the region is confronted with a Chinese naval consolidation, along with the fact that America’s putative response, the Trans Pacific Partnership, is not likely to be going anywhere.
This is where India comes in as a new American partner, one whose “Act East” policy is aimed at providing heft to the coalition confronting China’s assertiveness.
In recent months, India has taken one step back and two steps forward here. It has dropped the specific reference to the South China Sea in its official statements relating to its desire to protect freedom of navigation and the right of overflight. On the other hand, it has perceptibly enhanced its relationship with Vietnam to a “comprehensive strategic partnership” and signed a new defence agreement with the US.
Ironically, the Indian readout of Modi’s one-on-one meeting with Xi suggests that our complaints with China have a familiar ring. If the Chinese expressed their desire for the US to take heed of their core interests, Modi told Xi that “to ensure durable bilateral ties, and steady development, it is of paramount importance that we respect each other’s aspirations, concerns and strategic interests.”
It doesn’t take a genius to realise that what he meant was that China should heed India’s core interests – its desire to become a member of the Nuclear Suppliers Group, its concerns over the China-Pakistan Economic Corridor, and China’s attitude towards Masood Azhar’s proscription by the UN.
In response, Xi somewhat enigmatically stressed his willingness to work with India to “maintain their hard-won sound relations and further advance cooperation,” and to handle differences in a constructive manner. As in a mirror image of China and the US, the reportage from India does not tell us whether there was any discussion on Indian attitudes towards China’s core interests and concerns.
A much clearer signal of evolving geopolitics came from the meet between Russian President Vladimir Putin and Xi. According to Xinhua, the two “called for firm support in each other’s efforts to safeguard sovereignty, security and development interests.” So, in essence they would respect each other’s core interests, as well as their respective political systems. Further, they would align their strategies by “dovetailing the Belt and Road Initiative with the Eurasian Economic Union.” Clearly, the Sino-Russian entente seems to be evolving into a larger grouping, including, perhaps, Turkey, aimed at cutting the US down to size. Finally, Putin backed China’s stand against US interference in the South China Sea dispute.
With the G20 out of the way and the US getting deeper into election  mode, there are some who expect China to turn up the heat in East Asia. In August, there was a sharp escalation in the number of Chinese coast guard and fishing vessels in the Senkaku-Diayou islands area. Having very publicly declared their intention of not stopping construction in the South China Sea, we may see the long-expected movement by Beijing to build new features in Scarborough Shoal. The Obama administration has not been particularly strong in its push-back and it remains to be seen what a new US president will do.
The Wire September 5, 2016

Vietnam Will Never Be for India What Pakistan is to China

Narendra Modi’s visit to Vietnam is the first bilateral by an Indian Prime Minister since Atal Bihari Vajpayee in 2001. In today’s hyper-nationalist times, Modi’s visit assumes a larger-than-life form with some Modi ‘bhakts’ virtually seeing the feisty South-East Asian nation as an instrument of Indian geostrategy in the same way that Beijing uses Islamabad against New Delhi.  This connection is underscored by the fact that Modi chose to visit Hanoi on his way to the G-20 summit in Guangzhou, where he is expected to meet Chinese leader Xi Jinping.
The “Pakistan”  thesis doesn’t hold water for the simple reason that no other country in the world can be so self-destructive as Pakistan is in its rivalry with India. Vietnam, on the other hand, is a very smart country which has a ruthless understanding of self interest; after all, confronted with a rising China, it has not hesitated to befriend the United States, the country that was reponsible for the deaths of an estimated 1.5 million Vietnamese in the 1960s and 1970s.

Given where it is located, Vietnam almost certainly is looking to leverage its friendship with India to offset the rising power of its northern neighbour. But it is under no illusion that it can “take on” China; India is too weak to make up the power differential and its new friend, the United States, is too unreliable.
Following his meeting with Premier Ngyuen Xuan Phuc on Saturday, Modi announced a new $500 million line of credit for defence products and a target of $15 billion for two-way trade (currently it is around $9 billion). The two sides also signed agreements in areas like health, cyber security, ship building and naval information sharing. Indian investments are of the order of $1 billion in the area of food processing, fertilisers, sugar, auto components, information technology and agro-chemicals. Indian companies like ONGC Videsh have been active in Vietnam’s oil exploration efforts since the late 1980s despite some offshore areas being contested by China.
Vietnam carefully manages its ties with China. For the past 12 years, China has been Vietnam’s top trade partner with estimated trade anywhere between $66-96 billion per annum. Vietnam is part of China’s production value chain for making electronic goods and sub-assemblies.
The Indo-Vietnamese strategic relationship – now upgraded, in nomenclature at least, to a ‘strategic comprehensive partnership’ –  is important, but its importance should not be over-stated. In terms of substance, it is actually fairly modest, beginning with the MoU on defence cooperation that was signed by the defence ministers of the two countries in November 2009. India offers 50 slots to Vietnamese defence personnel under the India Technical and Economic Cooperation (ITEC) programme. India had offered a $100 million line of credit to Vietnam to purchase four offshore patrol vessels that are currently being built in Indian yards. The two countries also have some unspecified cooperation in electronic intelligence in relation to Chinese naval activity in the seas of Vietnam. India has helped Vietnam train personnel who are operating its Kilo class submarines, and New Delhi has offered to upgrade and maintain Russian-origin equipment with the Vietnamese forces such as tanks, fighter aircraft, helicopter and ships.
So far, there is no reference to the Brahmos missile, though it is well known that India has been keen to sell the missile to Vietnam. Hanoi itself is likely to be cautious on such a deal which could be viewed as destabilising. The recent emplacement of a missile battery off the Chinese border in Arunachal was sharply criticised by China.
Hawks in India virtually equate Brahmos with a ‘Brahmastra’, the mythical war-winning weapon of the Mahabhrata. The fact of the matter is that it is a type of missile in service with many navies, though India and Russia may have developed a land-attack and air-to0ground version of it. An important aspect of any sale would be the Russian view, since they have a veto on its marketing. While Russia continues to sell weapons and systems to Vietnam, it will certainly be guided by China on any sale of the Brahmos to Hanoi. In any case, with its DF-21Cs and HQ-9 SAMs, China has more than enough to deal with Vietnam.

The Sino-Vietnamese relationship
Vietnamese Prime Minister Ngyuen Xuan Phuc will visit China later this month, following up on the defence minister, Ngo Xuan Lich’s visit this week. Hanoi is aware that its partners like India, Japan and even the US are not a match for the power that Beijing, especially with its new friend Russia, can bring to bear on it. The Vietnamese may have given the Chinese a bloody nose in 1979, but Beijing’s adventure against Vietnam achieved all its military and political objectives. So it wants to maintain an even keel in its ties with Beijing.
Vietnam has settled its land border dispute with China, as well as that relating to the seas opposite Hainan island. What remains toxic, however, is the issue of South China Sea where Hanoi claims all of the Paracels, occupied by China, as well as the Spratlys, where the Vietnamese control 25 of the “rocks”, as compared to just seven by China.
Vietnam will not get too close to the US in order to anger China and neither will it get so close to Beijing as to discomfit Uncle Sam. US President Barack Obama’s visit to Vietnam and the decision to lift the American arms embargo is a significant development, but for now, little will happen till a new president is in office in Washington. But one thing is more or less certain — the Trans-Pacific Partnership is probably dead. Vietnam’s membership of the new trade agreement could have had major consequences. In any case, the US tends to be difficult in transferring cutting-edge technology to anyone and there is no indication that it will give Vietnam anything that will remotely upset the Chinese.
Vietnam’s key to dealing with China lies in the close party-to-party ties that the ruling establishments of the two countries enjoy. This relationship is quite deep, involving party organisations, institutions and personnel. Under General Secretary Ngyuen Phu Trong, the Vietnamese follow a policy that accepts the centrality of good relations with “socialist China”.
Yet, there is a well-spring of anti-Chinese feeling among the Vietnamese public, in part because of history, and in part arising from recent events like China’s forcible occupation of the Paracel islands.
More recently, the two countries have had issues with oil exploration, with China insisting that many blocs Vietnam has put on the international market are part of its territory, while in turn, China has offered areas which fall in Vietnam’s EEZ.
The big question is whether Hanoi will take up the South China Sea issue through the UNCLOS arbitration system following the successful example of the Philippines. The likely answer at this juncture is no. While Vietnam insists that peaceful settlement must be based on “equality” and respect for international law, China will be brazen and seek to strike a bilateral deal with Vietnam, after it has done so with the Philippines. At the end of the day, Vietnam will do what it considers best for its national interest. Indian policy makers would do well to understand that.
The Wire September 3, 2016

Russia, China and Eurasian integration

In the last three years, Russia under Vladmir Putin has surprised us by actions in Crimea and Ukraine, and then,  more recently, in Syria. All three have been wildly welcomed in Russia  and, in their own way, successful, and have brought observers to wonder whether Russia is now once agan a geopolitical player, if not the globe, then in Eurasia. Adding to this has been the growing proximity between Russia and China.  Ever since Russia’s estrangement with the West over Ukraine, ties between the two countries have developed in three areas—energy, finance and infrastructure—and now they are reviving in defence

Putin’s first two Presidential terms were from 2000-2008 and seen as political stabilisation and economic growth. The third from 2012 has not quite brought either. Putin began with a three-point plan—prosperity, the rule of law and westward integration. But all three are now in doubt.
The rise in oil prices after 2000 gave Russia a windfall of $1.1 trillion, but today the prices are down three quarters from their peak. According to The Economist average salaries which were $ 850 per month in 2014, were just $ 450 in 2015.
Corruption, western sanctions and low oil price for oil and gas have affected the Russian economy. It has cut Russia off from western capital markets and FDI fell a massive 92 per cent in 2015.  In 2015, its GDP shrank by 4 per cent.
Many people have praised the management of the Central Bank of Russia  which has allowed the rouble to drop in value and channeled dollars to its energy companies and banks to repay debt. Now, with the price stabilising, the CBR reserves are again growing. The rouble’s fall has stoked inflation which in turn has led to real wages falling 10 per cent since 2014 (but they are still triple of what they were when Putin took office in 2000).

 We should not forget the protests of 2011-2012. Following the elections when a majority voted against United Russia party, the Kremlin manipulated the results leading to widespread protests. Putin’s power appeared fragile.

Critics say that it was after the 2011-2012 protests, claiming that the ruling United Russia party had manipulated the results, that Putin began to stage dramatic foreign policy ventures such as the annexation of Crimea to show the public that Russia was still great. In great measure this was based on a massive $ 720 billion programme of arms modernisation that the oil windfall had provided.

Russian support for Putin is based on the same principles as the support for the CPC in China—you deliver economic growth and we will back you and not ask too many questions. However, today with the Opposition cowed down, Putin does not need to coerce the voters, they are apathetic and Putin’s support in Russia remains very high.

The return of a great power

Putin has garnered a great deal of support because of his actions in Crimea, Ukraine and Syria. For Russia and many Russians, the dream of being a great power is a powerful one. Dealings with China, the American willingness to collaborate with Russia on Syria seem to signal that Russia is an equal and once again rival of the US. Putin seems to want to take Russia back to the world where the Soviet Union, US and UK decide the fate of the world and many Russians, too yearn for that past.
Americans may have their exceptionalism, but so do the Russians.

Putin’s action in intervening in Syria in September 2015 were not aimed at merely shoring up an ally or to resolve a huge humanitarian crisis. It was to signal to the US and EU that it was a global power.
The Russian actions have been carefully caliberated. They are not in the American mode to do nation building. Their moves have been surgical and strategic. The bulk of the fighting in Syria has been done by Assad forces and in Ukraine by pro-Russian elements.
Having secured a nominal ceasefire in February, the Russians declared victory and announced a withdrawal from Syria.  In the process, he showed the US to be ineffective and dithering and sidelined Turkey. 

Aggrieved nationalism plays well in China, so does it in Russia. The Kremlin portray the annexation of Crimea and bombing of Syria as defensive actions against the US which in their view had staged a coup in Ukraine. Putin’s latest avatar is as the leader  of a resurgent nation by which he is able to paper over the fact that his country is going through one of the worst economic crises in recent Russian history.

Yet the Syrian action has got Russia and US working together. After the February accord, the two sides have coordinated action and currently seeking to work out a new agreement to make more durable arrangements for a ceasefire as well as to cooperate to defeat the IS.

Sino-Russian entente

 The western embargo of Russia post Crimea and Ukraine has led to Russia turning eastwards towards China. A measure of this is the sharp increase in Russian oil supplies to China. In 2013 the two sides signed the massive  $270 billion  deal  to supply oil over the next 25 years and the following year, another $85 billion pre-paid deal to supply 200,000 bpd of oil. Russia is aiming to supply 1 million barrels per day to China (currently it is around 300,000).
Rosenft and CNPC have also formed a joint venture for exploration and production  in Siberia. This was topped by a $ 400 billion deal to supply gas from western Siberia to China over 30 years.  Once the deliveries began probably in 2018, China would supplant Germany as the primary destination of Russian gas. Of course when the deals were struck, oil prices were above $100 a barrel and now they are $30-40 and the Chinese economy has also slowed down significantly, there are question marks about the pricing of the gas as well. This will reduce both the oil and gas flows, but this  cannot remove the strategic nature of the relationship emerging.

Another area in which the Russians have turned to China because of the western embargo is in the area of finance. According to the Bank of Russia, Chinese foreign direct investment into Russia increased by a factor of five from 2009 to 2014.

Political relations between the two countries are today excellent. The Sino-Soviet border agreement of 1991 removed the one major irritant that could have stalled the process. The 2001 China-Russia Treaty of Friendship needs to be looked at  carefully considering Jiang Zemin signed it with Putin.

It talked about peaceful relations, economic cooperation etc. and Article 16 spoke of  cooperation in   “ economy and trade, military know-how, science and technology, energy resources, transport, nuclear energy, finance, aerospace and aviation, information technology and other areas of common interest.”

But article 9 of the treaty can also ben seen as an implicit defence pact its language is remarkably similar to the one that was their in Article 9 of the Indo-Soviet treaty of 1971. It notes,  “When a situation arises in which one of the contracting parties deems that peace is being threatened and undermined or its security interests are involved or when it is confronted with the threat of aggression, the contracting parties shall immediately hold contacts and consultations in order to eliminate such threats.”

It is not as if the two countries have common security concerns. Russia’s main aim is to create a security buffer between its heartland and NATO in the West, while China’ main focus is on pushing the US back beyond the first island chain in the Pacific.

Arms sales from Russia to China declined after 2006 because of Moscow’s annoyance at Beijing’s copying of Russian designs. But the Russian problems with the West has compelled them to resume sales. So  today, Russia remains the largest external provider of Chinese military equipment. Of course, Beijing has developed a indigenous, high tech defence industry with the abiity to reverse engineer even sophisticated military hardware. But it still needs some  cutting edge stuff like the S-400 Triumf missile defence system of which it will be the first customer. There are also reports of China acquiring 24 Su-35 fighters and there is a lot of work on joint projects on dual use technologies, for example a tie up between Karpesky Labs and the state-owned China Cyber Security company for defence against cyber attacks. In the past two years the ties are going beyond technology transfer.
 In May this year the Russians and Chinese participated in a joint computer exercise  in Moscow on ways to jointly counter a ballistic missile attack. Given the need to exchange information in a sensitive area, it speaks of the enhanced trust between the two.
The essential focus of their new cooperation is in ways to counter the US and its allies. China used to copy Russia, now Russians are sourcing components from China. Russia plans to  buy Chinese diesel engines which they had originally planned to get from Germany for their coastal patrol vessels. In April they discussed exchanging electronic components used in spacecraft construction with Russian liquid fuel rocket engine technology.
Another area of learning seems to be in hybrid warfare, both China and Russia are using a mix of civilian and paramilitary to push back against the West in Ukraine and in South China Sea.

Central Asia

The rise of China and the relative decline of Russia has implications for the Russian near-abroad in Central Asia. This is China’s area of vulnerability, bordering as they do its restive province of Xinjiang. Whereas for Russia these are legacy areas from the days of the Soviet Union.  For China this is also an area of opportunity through which it seeks to enhance its Eurasian vision.

In September 2013, Xi Jinping announced the One Belt One Road (OBOR) plan at a speech in Astana. Over the years, China has signed major oil and gas deals and developed pipelines that have had a significant shift in the economic relations of Central Asian countries in relation to China.
Trade between the region and China has grown from $ 1 billion in 2000 to $ 50 billion in 2013 and then coming down to about $43 billion. Chinese companies own 25 per cent of Kazakh oil production and account for 50 per cent of Turkmenistan’s gas exports. China’s Eximbank is the largest single creditor to Tajikistan and Kyrgyzstan holding 49 and 36 per cent of their government debt.
The 2008-2009 economic crisis marks the point when Chinese trade with Central Asian countries exceeded that of their trade with Russia for the first time. Today, Russian trade with the region is of the order of $27 billion.

Over the years, Chinese infrastructure construction has negated Russia’s advantage as being the best connected to the Central Asian region. Among the projects are:

The Central Asia-China (Turkmenistan-China) 3,666 km long gas pipeline runs from Turkmenistan to China via Uzbekistan and Kazakhstan and was commissioned in 2009. Today this comprises of three pipelines and the fifth pipeline Line D which will go through all five central Asian repubics is under construction.

The 2228 km Kazakhstan-China oil pipeline runs from Atyarau in the Caspian sea to Alashankou in Xinjiang . In future, this will be the main means to tap the huge Kashagan oil field.  

Central Asia is also the region through which Beijing’s ambitious goal of developing overland communications links with Europe under the OBOR. Trains are already running to destinations in Hamburg, Madrid and Teheran. The number of containers travelling by train between China and Europe via Kazakhstan has increased 18 times between 2011 and 2014, and   doubled in 2015  according to KTZ, the Kazakh state railway company.

The route is attractive to electronics companies such as HP — which has helped to pioneer it — for whom the shorter transit time compared to shipping by sea is worth paying for. The journey from China to Europe takes 14-16 days, compared with a month or more by sea, although the cost of shipping one container is some $9,000 compared with $3,000 by sea.

Russia has its own Eurasian Economic Union plan, but as of now it appears that China is leading the game. Beijing has been careful not to over-step, it has agreed to coordinate OBOR investments between the AIIB and the World Bank and ADB. In May 2015 bowing to the inevitable, the Russians sign an agreement with China to coordinate the projects.

As for China, it is only beginning its grand One Belt One Road design which could see much greater investments in transportation infrastructure in the Central Asian republics and their closer economic and political integration with China which, in turn, is merely a prelude to a closer Eurasian integration under Beijing’s auspices in the coming half century.

Sunday, October 09, 2016

India can't be at sea over China

A visit to Japan is fruitful in many ways, it is a beautiful country, with all kinds of wonders to behold. But from the point of view of international relations, it is one of the best places to understand China. Geography has made these two countries proximate to each other, but the lessons of history have been mixed since the Sino-Japanese war of 1894.
Their contemporary relations are rife with tension, with bitter grievances stated and unstated. Currently they are focused on a couple of uninhabited islands in the East China Sea called the Senkaku Islands by Japan and Diayou by China.

The disputed islands known as Senkaku in Japan and Diaoyu in China. A look at the map will tell you why the Senkakus are deemed important by China. Pic/AFP
The disputed islands known as Senkaku in Japan and Diaoyu in China. A look at the map will tell you why the Senkakus are deemed important by China. Pic/AFP

Till 2008, Chinese intrusions into the Senkaku (Diayou) islands were rare, though Beijing had expressed their claim for the islands in the 1990s.
However, from 2010 onwards their intrusions became a routine event with 10-15 vessels entering the territorial sea every month. In early August this year, the Japanese detected an unusually large number of ships coming in, comprising of coast guard and fishing vessels. Most of these fishing vessels are manned by paramilitary personnel. Japanese analysis of the coast guard ships indicate that some of them are converted naval vessels and some even equipped with higher calibre guns.
A look at the map will tell you why the Senkakus are deemed important by China. They lie close to Taiwan and a couple of other Japanese islands which are astride China’s sea lanes to the Pacific Ocean. The Chinese view the ‘first island chain’ running from Japan to the Philippines, with Taiwan in between, as a psychological barrier to their aspiration to be a Pacific Ocean power like the US.
Japanese economists are almost uniform in their assessment that China’s economy has steadily worsened since the beginning of 2014. They think that China’s resource consumption economic model is now at a turning point. An index prepared by the Centre for International Public Policy Studies (CIPPS) based on data from some 60 Japanese companies operating in China suggests that there is substantial financial distress in production and sales. There have been significant capital flows out of China, which began with the stock market fiasco in June 2015 and there is a serious issue of new investment coming in now.
Most specialists are agreed that there is considerable problem in getting accurate information in China. There are no good indices to depend on so, it is difficult to make accurate prognoses of the economic goals of the Chinese leadership.
Looking at the internal dynamics of China, a majority of Japanese scholars believe that there remain serious internal differences and Xi Jinping’s position is not as strong as it is often made out. As one Japanse scholar put it, “Xi is much stronger than Hu and Jiang, but he lacks the charisma of a Mao or Deng. He is, at the end of the day, a princeling and a party apparatchik.” In line with this, he believes that Xi is not seeking to strengthen himself, but to shore up the institutional base of the Communist Party of China itself.
It is much more difficult to get an understanding as to where the opposition to Xi comes from. Some specialists say that it lies within the special interest groups like the PLA and the giant state-owned enterprises. Others argue that it lies in the middle-levels of the CPC itself.
In some ways, Xi and the CPC are playing a losing game as the party becomes weaker and weaker. A lot of this manifests itself in foreign policy where the CPC is using aggrieved nationalism to rally the people, a situation which triggers a vicious circle, with people then expecting China to behave as a big power whenever it confronts a crisis. As such, as one Japanese expert noted, the top two officials — State Councillor Yang Jiechi and Foreign Minister Wang Yi are not even members of the politburo, leave alone its standing committee. So, in a sense there is vacuum at the top of foreign policy decision-making.
Despite the tensions, which are very serious, Japan and China still have a significant relationship. Japanese aid and grants totalling a massive $300 billion between 1980-2014 helped China build its world-class infrastructure. Even now, the annual flow of people between the two countries is some 8 million. China is the largest trading partner for Japan, and Japan is the second largest for China and remains the third largest foreign investor in China.
India and Japan have had a long relationship, which was never really a factor in their relationship with China. As open societies, India and Japan function in ways that are quite transparent. This is not the case with China, which is quite opaque. In recent years, the rise of Chinese power has given us some understanding of the common challenges we face —such as the Chinese tendency to shift goalposts in their border claims or the mendacity of their foreign policy. Understanding Chinese behaviour and their motivation is important, because it has huge implications for both of us.
Mid Day August 30, 2016