Pax Indica: East of Singapore

The waters east of Singapore hold the key to the lands west of the Indus

Yesterday’s post was about the developments in East Asia. In today’s Pax Indica column, I argue that India must be part of the security equilibrium in that region. Excerpts:

India’s strategic power projection will not be unwelcome in South East Asia. It will also enable the United States to remain engaged in Afghanistan-Pakistan by freeing up resources that might otherwise be employed in the western Pacific. Also, regardless of what the United States does, an Indian strategic commitment in East Asia will strengthen its overall negotiation position with China.

Whatever might have caused China to bully its neighbours this year, it has opened another window of opportunity for India to engage with the region. Pre-occupied as it is with the game in the north-western part of the subcontinent, it is unclear if New Delhi sufficiently realises that the seas east of Singapore hold the key to the lands west of the Indus.

India must vastly increase its economic, diplomatic and military presence in and beyond South East Asia. [Yahoo! India]

Kim crosses China’s line

Brinkmanship does not work beyond the brink.

“Either a nuclear-equipped DPRK or a collapsed DPRK,” Wu Chaofan concludes, “would cause disastrous interruption of the process of China’s peaceful development.” As long as the North Korean regime was playing inside these boundaries it was possible for China to use the situation to apply strategic pressure on the United States, Japan and South Korea. The threat from North Korea prevents the United States from concentrating its resources on Taiwan, and to that extent, reduces China’s cost of maintaining a balance of power across the Taiwan straits.

So it would be terrible for China if North Korea crossed those boundaries.

…many Chinese experts and advisors are more concerned with the threat Pyongyang’s nuclear weapons poses to China’s security. After adoption of Resolution 1874, the DPRK responded with a big rally in its capital. Its leaders announced that the country would stick to its own path, regardless of whether friendly countries sided with it and the effect on international aid. Such an attitude on the part of Pyongyang is a warning that China should reconsider its national interests.

Pyongyang’s nuclear tests, which took place only tens of kilometers from the Chinese border, might cause an environmental catastrophe in a densely populated area, not to speak of the threat it is to peace and stability in East Asia and the world as a whole. Any deadly accident following Pyongyang’s nuclear tests would not only inflict enormous losses on the Korean people but also seriously damage the environment in Northeast China and the surrounding region. [China Daily]

Mr Wu quotes two Chinese scholars who essentially warn North Korea’s neighbours to be prepared for the worst. China has been unable to persuade North Korea to stand down. Meanwhile Japan and South Korea have not only taken a hard line against Pyongyang, but have—in the delicate style of East Asian diplomacy—asked China to deliver. More than the US airstrikes that the Chinese scholars warn about, the real threat to China comes from the prospect of both Japan and South Korea developing their own nuclear deterrents.

If the North Koreans don’t oblige, then China will be, well, in a soup.

When in a corner, show teeth

A chastened but sanctimoniously aggressive dragon

Qin Gang, China’s foreign ministry spokesman, made some eminently reasonable and sensible points yesterday. The Asian Development Bank’s approval of a loan package to India—which includes financing of a project in India’s Arunachal Pradesh state (which China calls ‘Southern Tibet’ and claims as its own)—he said, “can neither change the existence of immense territorial disputes between China and India, nor China’s fundamental position on its border issues with India…On China-India border issues, China always believes that the two sides should seek for a fair and equitable solution acceptable to both through bilateral negotiation.” (via Indrani Bagchi’s Globespotting blog)

In other words, ADB’s approval of a loan doesn’t change the positions of India and China with respect to the territorial dispute, and that bilateral negotiations (not multilateral economic fora like the ADB) are the place to sort the issue out.

So who were those unreasonable and insensible people who thought otherwise? None other than the representatives of the People’s Republic of China. None of their counterparts on ADB’s governing board agreed. Diplomacy being the art it is, it was left to Mr Qin to sound as if it was someone else who was flagrantly violating the norms of conduct at multilateral economic institutions.

The Chinese foreign ministry, however, does not stop at that. Mr Qin goes on the offensive. The ADB, he warns, “should not intervene in the political affairs of its members. The adoption of the document has not only dealt a severe blow to its own reputation but also undermines the interests of its members. The Chinese Government strongly urges the ADB to take effective measures to eliminate the terrible impact thereof.”

China’s entire approach to the ADB loan issue signals a dangerous portent for Asia. It would perhaps have been understandable if China had limited its protest to a symbolic pro forma objection. To transform the ADB as a forum to push its position in a bilateral dispute is an entirely different matter—and one that has serious implications for its relations with its East Asian neighbours, with whom it has unsettled disputes too. A charitable explanation is that it couldn’t back down without losing face once it had fired the first salvo. If you feel less charitable, you will see fresh signs of a deliberate strategy to flex its economic muscles for purely political ends. When zero-sum games are pursued at positive-sum arenas, the latter quickly become the former.

Nuclear umbrellas in East Asia and the Middle East

China must act forcefully to stop North Korea and Pakistan from expanding their nuclear arsenals

The Obama administration tasted its first—and crunching—diplomatic defeat at the hands of the North Korean regime last week. After threatening to interdict North Korean ships, just about the only action the US government will take in response to North Korea’s nuclear and missile tests is that the US navy will effectively merely tail those ships around, not stop, board or seize them.

Washington might be helpless in stopping North Korea from expanding its nuclear arsenal or periodically threaten its neighbours, but it can protect South Korea (and quite likely Japan) under the US nuclear umbrella. Yesterday, Mr Obama signaled just that. According to Yonsei University’s Chung Min Lee “This sent a strong signal to North Korea. The move should also allay concerns in some quarters that South Korea and Japan may need to pursue their own nuclear options.” Unfortunately, even this is insufficient to create a stable nuclear balance based on mutual deterrence.

The missing factor is China. Continue reading “Nuclear umbrellas in East Asia and the Middle East”

No room in Chiang Mai

China’s geoeconomic move to strengthen its geopolitical power in Asia

A few days ago, China, Japan, South Korean and the ASEAN states agreed to set up a US$120 billion to manage currency volatility. The Chiang Mai Initiative (CMI) primarily reduces the member countries’ dependency on the International Monetary Fund. It deliberately excludes India.

Here’s an excerpt from an EIU report on the development:

But does it make sense to compare the CMI to the IMF? Given that the meeting of G20 countries in London in early April resulted in pledges to triple the IMF’s reserves, from US$250bn to US$750bn, the expansion in the CMI does not initially look too impressive. Moreover, the severity and synchronisation of the global crisis imply a need for a much larger pool of emergency funding. But US$120bn is still a sizeable amount, arguably enough to allow the CMI to deal with crises in several countries (the IMF bail-out of South Korea in 1997-98 cost US$57bn). A lack of IMF conditionality might also encourage countries to make preventative use of the CMI, and thus to act to before external imbalances became unmanageable.

At the same time, however, the global crisis has changed views of the IMF’s correct role, and of the effectiveness of free-market policies. The IMF has now conceded that its loans need not always have stringent policy conditions. Its new Flexible Credit Line (FCL) embodies this view, as the FCL is designed to be used as a contingency by countries with sound economic fundamentals. To some eyes, the creation of the FCL obviates the need for a special Asian fund. Why bother setting up an Asian facility when the IMF already has a similar programme, and one that no longer carries the stigma that it used to? But although recent moves by Mexico, Poland and Colombia to tap the FCL should encourage others to do the same, Asian suspicion of IMF lending will persist. In any event, an increase in the absolute pool of funds potentially available to ASEAN + 3 countries is welcome, given the severity of the global crisis and the possibility that crises in other regions will create heavy demand for IMF funds.

At the same time, the CMI may not prove to be quite as hassle-free as potential users may imagine. In part for political reasons, countries that act as “suppliers” of foreign exchange—mainly China and Japan—are highly unlikely to impose the sort of formal austerity conditions associated with IMF lending. But they will still expect to see measures taken to ensure that they get their money back when the currency swaps expire. If a “recipient” country is in such straits that this looks unlikely, the donor may be reluctant to conduct the swap. Alternatively, reserve-rich countries like China may be tempted tacitly to extract political concessions from recipients in return for access to swaps, complicating the entire process and increasing the potential for diplomatic friction. At first glance, the CMI may help the likes of China and Japan to be seen as coming to the rescue of their neighbours. But if wrongly handled, the scheme could backfire and cause them to be perceived as seeking to exploit the crisis for strategic gain. [EIU, emphasis added]

Among white swans

On estimating political risk in India

India is the only Asian country outside the East Asian region to be included in the Political & Economic Risk Consultancy’s (PERC) Asian Risk Prospects for 2009 report. According to PERC, India is the riskiest country among those analysed, and it’s risk rating is to increase for the coming financial year. The executive summary says:

India faces some of the biggest risks in 2009 because of uncertainties surrounding the coming general election, rising communal violence and terrorism incidents. The global financial crisis is not an entirely bad thing. The economy needs to take a breather and certain sectors like real estate need to experience sharp price corrections in order to restore India’s competitiveness. India’s underlying attractions to foreign investors should remain no matter who wins the next election. The biggest risk is that a deterioration in political and economic conditions in neighboring Pakistan could aggravate social unrest in India further and hurt national security.[PERC]

General elections, communal violence, terrorism—these are neither new nor too much of a bother for foreign investors. It is perhaps the possibility of the Singur type of public agitations that should be more of a concern. Even so, the geographical variation of political risk among Indian states makes a national level risk assessment neither too accurate nor too meaningful. The analytic framework must focus on estimating political risk in India, than that of India.

So is the case with the Pakistan factor: in addition to the geographic factor, unless the channels by which the turmoil in Pakistan is transferred to India are understood and analysed, the conclusion that it will aggravate social unrest in India is too general to be of much use.

Moreover, the risk factors PERC cites in India’s case are well-known and well-understood. The real issues are of the Black Swans that might turn up among the ostensibly less risky, but considerably more opaque East Asian economies.

Concerning Australia’s uranium sales

The Rudd government would do well to climb out of an unnecessary hole it has dug for Australia

Greg Sheridan has a very insightful piece on the India-US nuclear deal and the stakes for Australia (linkthanks V Anantha Nageswaran). He gets it right when he argues that Australia can’t hope to enjoy a close relationship with India if it maintains a discriminatory policy on uranium sales.

Then the deal must be approved by the Nuclear Suppliers Group. Here’s where Australia comes in. With something like 40 per cent of the world’s known uranium reserves, Australia is a key member of the NSG. So far, the Rudd Government has not said whether it will support the US-India deal at the NSG or oppose it.

It has however hinted that it would support the deal at the NSG, a hint Foreign Minister Stephen Smith repeated yesterday. Certainly Australia could kiss goodbye forever the idea of any decent relationship with India if it opposes the deal at the NSG.

Accepting the deal at the NSG would not commit Australia to supplying uranium to India. However, that will be the next big question…

Opposition foreign affairs spokesman Andrew Robb has effectively homed in on the contradiction between the Rudd Government selling uranium to China – which has a terrible, though not recent, record of nuclear proliferation – while refusing to sell uranium to India, which has never passed on nuclear technology to anyone.

..the Rudd Government will face a deep contradiction between supporting the US-India deal in the NSG, then saying it will not sell uranium to India. It will face an even bigger contradiction between its concern with greenhouse gas emissions and taking action, by refusing uranium to India, that impedes the development of clean energy. [The Australian]

No apologies expected

The discomfort with reapolitik

Gurcharan Das came back to New Delhi from a lecture tour of East Asia with some astute observations about how countries in that part of the world perceive India (via Shehjar & Pragmatic). They look forward to India playing a more assertive role in East Asia because “they fear China and desperately want a countervailing power (and) they don’t trust Japan.” Mr Das correctly points out that India does not realise that East Asian countries might actually want a stronger Indian role in the region in order to balance China.

It might be that India’s approach to East Asia suffers from a the legacy of its approach to the countries in the subcontinent, several of who resent Indian dominance.

While Mr Das caught the point made by his East Asian audiences, his own conclusions reveal that he was less comfortable with realpolitik than his interlocutors.

On my way home, I asked myself that if it is true that the Indian state is genuinely less aggressive, then that is in fact the right answer to the original question about why India’s rise does not threaten the world. I, for one, do not want an intimidating India which seeks military greatness.

He conflates the projection of geopolitical power with military greatness as an end in itself. As Mr Das heard, projection of power is necessary to create the conditions for human development through trade and culture. This projection of power —whether aggressive or not—is bound to threaten some countries more than others. As a corollary, it is impossible to project power without being seen as a threat by one or another country.

India’s accumulation of power and influence in Asia will be perceived as a threat by China to the extent that it relatively diminishes Beijing’s own influence. And vice versa. There’s no reason to feel apologetic about this. Aggression and intimidation, like diplomacy and negotiations are parts of a composite toolkit. An offhand rejection of one or more of them is not prudent.

The Quad is dead

Australia has decided that it pays to be nice to China

There’s an interesting discussion going on down under about the death of the “Quad”, a grouping involving India, Japan, Australia and the United States. It was not only seen as an Asia-Pacific “concert of democracies”, but more importantly, as a quiet attempt to balance China’s rising power in the region.

Over at the Lowy Interpreter, Raoul Hienrichs argues that more than the election of pro-China governments in Japan and Australia, the Quad died because China killed it (peacefully, of course).

But there is also something quite revealing about this dynamic. That the Rudd Government did not have to explicitly defer to China’s concerns, because Tokyo and New Dehli had already backed away from the quadrilateral arrangement, is itself a clear indication of China’s rising influence and perhaps Washington’s gradual relative decline in Asia. Moreover, China’s willingness to use its considerable diplomatic weight to prevent the emergence of a regional grouping perceived to be inimical to its interests suggests a new level of confidence in China’s foreign and strategic policy, and an increased awareness among its policy makers of their capacity to independently shape China’s strategic environment. [Lowy Interpreter]

Clearly, at a time when the Australian economy is witnessing a sustained boom thanks to resource exports to China, and that the economic news coming out of the United States is getting worse, the Prime Minister Kevin Rudd’s government might have calculated that now is not the time to attempt to balance China. Snubbing Japan, though, was wholly unnecessary. For if ever Australia changes its mind on its own position vis-a-vis China’s strategic rise, Japan, India and the United States are the only ones it can count on. For them, the interests that led to the move towards the quadrilateral initiative are fundamental—even if current governments are lukewarm about a showy new regional grouping.

We don’t need no indecisive slobs (2)

Cite Pakistan’s failure and draw your favourite conclusion

What’s with editors of leading Indian newspapers? After Mr Gupta, the articulate Vir Sanghvi falls into the same trap: of declaring that democracy is better than dictatorship (linkthanks Pragmatic) and then tripping up while attempting to draw other conclusions. This time about the fates of states vis-a-vis their policy towards the United States.

There were only two major Asian countries that rejected the US prescription for development and foreign policy: India and China. And look where they are today. And look at America’s client states.

Of course, Nehru made mistakes. But can anybody really deny that the principal reason why India and Pakistan, once part of the same country, have followed such divergent paths is because of the choices both countries made in the years following independence?

At first, India’s priorities may have seemed (from a middle-class perspective) wrong-headed and muddled. Pakistan’s may have seemed glamorous and instantly gratifying. But, in the long run, we ended up as the superpower. And Pakistan as the failed state. [HT]

Leave aside that India is far from being a superpower. But citing Pakistan to prove that America’s ‘client’ states in Asia have done badly for themselves is shoddy analysis. Japan and South Korea too were American ‘client’ states in the second half of the twentieth century. Look where they are today. And look at us. South Korea, mind you, was a military dictatorship—much like Pakistan—for much of that time. That, it turns out, did not prevent it from jumping from a poor country to a rich one within the span of one generation. And then look at Taiwan and the other Asian Tigers—it turns out that pro-American states have done rather well for themselves.

Just as it is wrong to blame the United States for Pakistan’s failure, it is wrong to credit Nehru with India’s relative success. Assessing Nehru’s role in India’s development requires the space of several books. But one would think it reasonable to credit several hundred million ordinary people of India for doing little things right that contributed to their country being where it is. It is also reasonable to blame a small number of people for doing big things wrong that left India much behind what it could have been.

Pakistan’s situation could arguably be used to highlight the importance of democracy. But this is not an issue in India. But Mr Sanghvi appears to use it to justify a lot of things in omnibus. Therein lies the danger of comparing India to Pakistan. Almost anything will compare favourably. The irony is that Mr Sanghvi does this in an article that starts off by saying how the whole world, include Indians themselves, don’t make this comparison anymore.