The Asian Balance: Dealing with a vulnerable China

China’s external, economic and ethnic vulnerabilities are worsening

Here’s today’s Asian Balance column in Business Standard.

This may come as a surprise to many, but China today is at its most vulnerable since the Tiananmen Square protests of 1989. That’s not all; it is unlikely that the country will shake off its vulnerabilities – geopolitical, economic and internal security – over the next three to five years.

The developments in East Asia in the past few weeks, focused around the East Asia Summit at Bali, have put China on the defensive. Not only is the United States reinvesting its military assets into the Indo-Pacific region, but almost all of China’s neighbours have moved to construct bulwarks against China. Even Myanmar is showing signs of wanting out of China’s orbit, and is opening up to India, the United States and Vietnam. If countries of the region are ganging up against China, it is largely Beijing’s fault. Picking a fight with each one of your neighbours at the same time is not the smartest of moves. Yet, that’s what China has done over the past couple of years.

What happened in Beijing’s foreign policy kitchen is anyone’s guess but China no longer enjoys a favourable external environment that it used to for the last two decades.

Let’s come to economics. Not only does China hold more than a trillion dollars of US debt, it is likely to have to increase its dollar holdings given the sovereign debt crises in the euro zone. So a lot of China’s money is, and will be for some time, at the mercy of its biggest strategic rival. Continue reading “The Asian Balance: Dealing with a vulnerable China”

On bloggingheads – India, US, China and Af-Pak

The geopolitics of hope?

Here’s a diavlog with Robert Wright, editor-in-chief of bloggingheads.tv on what they’ve titled as the geopolitics of hope. The conversation ranges from India-US relations, US-China relations, Af-Pak and even legitimacy of governments.

So sit back relax, spill your coffee or Fall Off Your Chair™

Jump to segments:
When American jobs go to India and elsewhere (06:21)
Is China malicious or just coolly self-interested? (08:08)
What India gets out of the AfPak mess (05:14)
Pakistan’s “Military-Jihadi complex” (06:11)
Do the terrorists win when we withdraw troops? (08:29)
India’s expanding beat as global cop (05:10)

The Asian Balance: Myanmar’s Narasimha Rao moment?

A pleasant surprise from the east

This is the unedited draft of today’s column in the Business Standard:

In a matter of months, Myanmar’s infamous junta diluted itself out of power, a new ‘elected’ government took office, duly freed pro-democracy leader Aung San Suu Kyi from house arrest, lifted some curbs on the local media, unblocked YouTube, declared that censorship ought to go, announced the intention to introduce economic reforms and — hold on to your seats, ladies and gentlemen — bowed to public pressure and suspended construction on a huge hydro-electric dam that Chinese companies were building on the Irrawaddy river.

So far, so remarkable and so quiet have these developments been that even seasoned observers are in a state of surprise. It seems impossible that a country which appeared so utterly hopeless even twelve months ago — with a closed-minded, curmudgeonly junta presiding over the destruction of generations of human capital — has turned around even to this extent. Then again, this is 2011, the year of geopolitical surprises, where the unexpected is a daily occurrence. Myanmar is unique because the changes happened without ceremony, without round-the-clock television coverage, without foreign fighter aircraft flying sorties over the capital, even without that symbol of early twenty-first century revolution — the twitter hashtag. And so far, at least, it has been good news.

The country may be at its own Narasimha Rao moment. President Thein Sein, who was in India last week, was a top-rung general in the previous military regime and had served as prime minister. Like Rao, he is an unlikely figure to open his country to the world. And like Rao, he might well be the most appropriate. It is way too early to declare that Myanmar has climbed out of the pit its generals dug for it. The new government’s moves are tentative, but they are in the right direction. What happens next depends as much on how the world responds to Thein Sein’s overtures as on his ability to carry his country’s armed forces along.

Because some of Thein Sein’s key decisions preceded or coincided with his trip to New Delhi, some have portrayed them as a vindication of New Delhi’s approach of engaging the erstwhile junta despite its odious human rights record. Such an argument, however, must be tempered with the fact that the Myanmarese foreign minister visited Washington, which had shunned and sanctioned the junta, two weeks prior to Thein Sein’s arrival in India.

Others have cast the developments within Myanmar in the context of a grand contest between India and China, with reformist-democratic forces gravitating towards New Delhi just as conservative-authoritarians are aligned to Beijing. This is misleading.

Take for instance the halting of construction of the Myitsone dam that angered the Chinese government. Given the enormity of public opposition to the dam which mainly benefits China while causing environmental damage in Myanmar, the Thein Sein government confronted a choice between antagonising its own people and angering China. That it chose the latter is a credible signal of its approach to governance. That said, the geopolitical consequences of rubbing a powerful neighbour on the wrong side had to be managed, which explain the overtures to India and the United States. This does not mean that Myanmar will now start favouring India over China in commercial dealings. Rather, it will seek greater policy autonomy for itself by balancing its relationships with regional and world powers. This is still a positive for India, but only to the extent that the playing field will be more level that it was earlier.

So it is up to the Indian government and Indian industry to capitalise on the opening promised by the Thein Sein government. China’s success in South East Asia over the past decade has been due to a combination of money and speed. India’s announcement of a $500 million line-of-credit for development projects in Myanmar can make a meaningful different, but the our government is unlikely — for good reason — to be able to match its Chinese counterpart in the spreading of largesse. We should not get into a spending race. But we should not make excuses for the glacial pace at which India’s developmental projects move forward.

The Kaladan Multi-Modal Project, which connects India’s eastern seaboard to its north-eastern states through Myanmar, is of strategic importance. You should be properly horrified to hear that it is proceeding “slowly”. Also, last week, when one of Thein Sein’s cabinet colleagues broached the idea of re-opening the World War II-era Stillwell Road (which connects Assam and Arunachal Pradesh to Myanmar) our minister of development of the north-eastern region’s reply was: “We have told them that Government of India would consider the proposal after it is formally submitted.” In triplicate, he might have added.

We cannot say for sure that the Thein Sein government will sustain its current course. It may only be aiming at gaining greater international legitimacy and foreign investment while only marginally transforming the nature of the regime. In such circumstances, a tit-for-tat strategy — rewarding desirable movement and punishing backsliding — is called for. New Delhi should work in cooperation with the United States, Japan and key South East Asian countries to put Myanmar on an irreversible course towards freedom, democracy and development.

Copyright © 2011. Business Standard. All rights reserved.

Baburam Bhattarai’s tilted bridge

How Nepal might see relations with India

During an interaction in March this year, Baburam Bhattarai, now prime minister of Nepal, made some points that should interest observers of international relations.

(These were made before he became prime minister and might indicate his personal thoughts and inclinations.)

– Nepal sees itself as being located in between South Asia and East Asia. It is now engaged in a democratic restructuring of social, cultural and international relations.

– Nepal wishes to become a bridge between India and China. For reasons of history, culture and geography this bridge will be a “tilted bridge”, inclined towards South Asia. That said, Nepal seeks an “objective and balanced relationship” with its neighbours and is not “courting” one or the other.

(He also made two points which I interpret as being designed to coerce India into getting over its reluctance to support a Maoist-led government)

– While Maoists will not be able to take over Nepal given the internal balance, a “people’s revolt” cannot be ruled out of the constitutional processes remain suspended, and if the Maoists are denied the share of power that they won at the elections.

– If the political process breaks down, a relapse of armed conflict could make Nepal like another Afghanistan, which would draw in regional and international powers.

The Asian Balance: Assessing India’s East Asian engagement

Geoeconomics is the key to the seas East of Singapore

This was published in yesterday’s Business Standard.

The Asian Balance turns one today. It had promised to “devote itself to chronicling and interpreting the unfolding geopolitics of East Asia. It will be an unabashed advocate of Looking East far beyond the Straits of Malacca”. If anniversaries are a good time for some reflection, recent events make it even more necessary.

I had argued that three factors would shape the Asian balance. First, nuclear deterrence would shift the India-China context away from direct military conflict along the disputed land borders to theatres in and around the Indian Ocean. Second, the small- and medium-sized countries of East Asia would look towards India to help them counter the pressures arising from China’s geopolitical assertiveness. Third, the whole effort to create “one workable grouping (such as the East Asia Summit) is premised on the unfounded hope that a powerful China will play by the rules it promises to”.

It is not uncommon to hear Indian commentators lament how China is expanding its presence in countries traditionally considered close to India, how it has hardened its posture on the border dispute, and how it continues to prop up the Pakistani military-jihadi complex. New Delhi could do little about much of this because, by and large, it lacks direct levers. The structural geopolitics of the subcontinent leads to our neighbours welcoming an outside power to balance India.

Seen from the confines of a subcontinental mindset, New Delhi appears to have few options between resigned hand-wringing and reckless aggressiveness, both accompanied by rhetorical frenzy. But if you realise that the game board of the raja-mandala is global, New Delhi doesn’t look that helpless any more. Continue reading “The Asian Balance: Assessing India’s East Asian engagement”

China’s moment of vulnerability

China is at its most vulnerable moment since the Tiananmen Square upheaval of 1989.

At a recent panel discussion at the College of Defence Management, Secunderabad, I argued that it is important to include the dimension of China’s vulnerabilities in the way we see the India-China dynamic. The following is a summary of my remarks:

First, it has managed to antagonise almost all major nations–Japan, South Korea, Vietnam, the Philippines and India—in its region, causing them to explore ways to counter-balance it. This has raised the demand for a US presence and strategic engagement in East Asia. The upcoming East Asia Summit will essentially be a framework that will attempt to bind China’s rise in the silken bonds of international norms. [See the East Asian kabuki]

Second, it is locked into geo-economic interdependence with the United States in a situation akin to two people with a gun to each others’ heads. China cannot escape the consequences of a US default or devaluation. [See my colleague V Anantha Nageswaran’s pieces on China’s policy tangle, quest for balance and US default.]

Third, China’s internal stability has been rocked by multiple vectors. The three big ethnic minorities are in various stages of unrest: the Mongolians have joined Tibetans and Uyghurs in mass protests. Rising productivity is exerting upward pressure on wages that the Communist Party is being forced to keep a lid on. Some of the labour grievances have erupted into agitations. Farmers protesting against expropriation and eviction have constituted another vector of instability. While many of these incidents might not make it to televisions, newspapers and even websites due to information control, Beijing still has to deal with them.

Fourth, there is certainly a serious factional war raging within the cloisters of the Chinese Communist Party. The recent drama around the health and whereabouts of Jiang Zemin is the latest in a series of events that suggest China’s policies are outcomes of factional contention. For all its attempts to show otherwise, the Chinese Communist Party leadership is not a monolithic entity. The Shanghai faction, the Youth Communist League Faction and the ‘Princeling’ faction have been identified. Even within the PLA, geographical regional loyalties and the changing balance of power between the PLA and the PLA Navy (PLAN) might be shaping China’s behaviour, not least in the East Asian maritime domain.

What should we make of it?

India should attempt to become a swing power. It should aim to achieve better relations with China and the United States than they enjoy with each other. At the same time, it must have the credible capacity to inflict pain and give pleasure to either of the two. This requires an unprecedented level of foreign policy dexterity.

While there is some empirical evidence that China tends to be more amenable to settling boundary disputes when it is internally weak, India should not be (and should not appear to be) in any haste to rush to a settlement. China is and perceives itself to be much more powerful than India at this time, and is likely to insist that disputes are settled only on its own terms. Instead of over-emphasising the Himalayan frontier, India should engage more deeply in East Asia, and contribute to a stable balance of power there [See the Asian balance and on the East Asian dance floor]. This is the primary means for India to acquire strategic leverage vis-a-vis China, for New Delhi is mostly on a weaker wicket on other issues.

The Asian Balance: US-Iran rapprochement

Can we help Washington and Tehran to get over it?

This is the unedited version of yesterday’s column in Business Standard.

As the war in Afghanistan enters what might be an endgame, it remains clear that there is broad convergence of geopolitical interests between two sets of players: Pakistan, Saudi Arabia and China on the one hand, and India, Iran and the United States on the other. If Pakistan achieves its ‘strategic depth’ in Afghanistan, it benefits Saudi Arabia to the extent that such an outcome unsettles Iran, Riyadh’s regional and sectarian-ideological rival. For China, this means the United States is kept away from its south-western land frontiers, that Beijing is saved the messy business of intervening in Afghanistan and that friendly regimes help it manage the restive Uyghurs in Xinjiang.

If Beijing has masterfully managed its relationship with its natural allies, Washington has allowed a dogmatic petulance over Iran take over strategic sense. Why else would it work to undermine co-operation among India, Iran and the United States to address the unprecedented threats to international security emanating from Pakistan’s military-jihadi complex?

Imagine how profoundly the geopolitics of Asia would change were Iran and the United States to co-operate, even if it is in the limited context of Afghanistan. Remember, the Iranians collaborated with their ‘Great Satan’ ten years ago, in the aftermath of 9/11, to get rid of the nearer shaitans to their east.

Since improved ties between Iran and the United States are in India’s interest, we should wonder why New Delhi doesn’t do anything to lubricate a rapprochement.

This brings us to two myths about our own relationship with Tehran. Myth No 1 is that without the Iran-Pakistan-India gas pipeline, we can neither buy gas from Iran nor really have a good bilateral relationship with it. Myth No 2 holds that the scope of India-Iran relations is limited by the tensions between Washington and Tehran. If it appears that these are ground realities, and not myths, it is because New Delhi chooses to make them so.

We don’t need a pipeline, over land or under sea, to get gas from Iran. We can purchase it as liquified natural gas (LNG) and ship it across to regasification terminals on India’s shores.

The fascination with pipelines is part economics, part statist mindset, and part due to a belief that a pipeline can bring peace between India and Pakistan.

Shipping LNG might be more expensive than the pipeline, but considering that the IPI pipeline  traverses the most dangerous territory in the world, the risk premium on the piped gas makes the project unviable without government subsidies. In other words, the taxpayer is being asked to make good what is fundamentally an unsound business case. Furthermore, even if pipelines can lock down gas supplies, Russia’s attempts to coerce Europe using its monopoly position at the head end of pipelines demonstrate that being at the receiving end can be uncomfortable.

Proponents of a ‘peace pipeline’ need to be asked whether India needs the pipeline for ‘peace’ or for energy security. Should India’s energy security be hostage to fantasies of those who want to put India’s jugular in the hands of the Pakistani military establishment? It is astounding that a project that deliberately creates a vulnerability that Pakistan can exploit at will is somehow considered part of energy security.

Forget the pipeline. We must make strategic investments in LNG, enabling us to purchase supplies from anywhere, including from Iran.

On to the second myth. With India in a position to be a geopolitical swing power, India’s ties with Iran need not be hostage to the tensions between Washington and Tehran.

Some might argue that this is already the case today, but the results on the ground have been unsatisfactory. Last year, Ayatollah Khamenei included Kashmir in the list of lands that needed to be “rescued from the demonic clutches of hegemonic powers.” US pressure caused India to disallow crude oil purchases from Iran under the Asian Clearing Union (ACU) mechanism, hurting Indian importers and refiners. We are getting assailed by both sides.

New Delhi should declare India’s interest in a rapprochement between the United States and Iran and work to bring them together, unofficially to start off with, and officially when it becomes possible. Indian diplomacy must be focused on persuading the two sides to undertake confidence-building measures. The goal should be to persuade the two sides to begin formal talks, under a ‘truce’ with Washington committing to non-aggression while Tehran halts its nuclear programme. Such a proposal will be rebuffed, but that need not deter us from taking our position.

Ayatollah Khamenei and President Mahmoud Ahmedinejad may not very receptive, but let’s remember ayatollahs and presidents can change, or change their minds. If a moderate Khatami could be replaced by a Ahmedinejad, the excesses of the latter could well cause a shift back to the centre. Similarly, if the United States is cozying up to Vietnam today, and even talking to the Taliban, Washington is not totally devoid of realism.

So things can change. Especially if New Delhi musters the imagination and resolve that distinguish statesmanship from mere diplomacy.

East Asia, yes. Iran, err.

US State Department’s view on India’s regional role

Here’s an excerpt from the transcript of an online Q&A with Robert Blake, US assistant secretary of state for South and Central Asia.

Nitin Pai: You have been one of the few U.S. officials to state that India is part of East Asia. How do you see the partnership between India and the United States shaping up in terms of the balance of power in East Asia? Specifically the South China Sea.

Robert Blake: Thank you for that question. As I said earlier, I expect that how we can expand cooperation and information sharing on activities in Asia will be a real focus of the Strategic Dialogue between the Secretary and External Affairs Minister Krishna. Already we’ve announced that we’re going to have a trilateral dialogue between the United States and India and Japan. And that we look very much forward to India’s increased participation in East Asian institutions such as the East Asia Summit. So I think there’s a tremendous scope for greater collaboration in this area. And again, this will be very much an important focus of the dialogue next week and the week after.

NP: Do you see the India-U.S. strategic relationship as providing a basis for India to attempt reapproachment between U.S. and Iran? After all, if the U.S. and Iran get over their vexed relationship the entire geo-politics of the region would be transformed.

RB: I think the U.S.-Iran relationship is going to be decided on the basis of some of the important efforts that are already underway on the Iranian nuclear program. I don’t expect that India will have a huge role to play in that, although we do value our dialogue with India on Iran. Let me just leave it at that. [State Department]

The entire transcript is here. See reports by Indrani Bagchi, Narayan Lakshman, Indira Kannan, S Rajagopalan and ANI.