June 18, 2018

India: Formula for 10 percent Growth

https://www.sirfnews.com/formula-for-10-growth/

 

Prime Minister Narendra Modi once again elucidated the goal of achieving 10% growth rate in the near future while addressing his brainchild NITI Aayog, and asked to come up with ideas that can help India climb the Mount Everest of growth dynamics. Not long ago, the prime minister had set the target of becoming a $10 trillion-dollar economy. Though China has achieved the feat of growing at a breakneck speed of 10% for almost three decades, India has this distinction of growing at a double-digit rate only once during Rajiv Gandhi era since we made our tryst with freedom at midnight in 1947. What China has achieved for nearly three decades year after year since 1980, we did come at a kissing distance of that at the time of the global boom of 2005-07 when we grew more than 9% for three consecutive years. This was the only Goldilocks economic phase for India when capital was gushing towards India. At the height of this boom, capital flows skyrocketed to 16% of the global GDP, but ever since, it has receded back to the 1980 level of around 2%. Our own savings rate has also fallen from the high of 36% in 2007-08 to below 30% in the last few years. The incremental capital-output ratio, a parameter of capital efficiency has jumped from around 4% in boom phase to 7% in last few years.

While bad loans have piled up in the banking system especially with PSBs due to reckless lending during the boom period, the credit growth has just got struck up in single-digit, the lowest in the last six decades. If it is to be believed, once the insider of RBI, former deputy governor KC Chakraborty says that banking sector NPAs could be as high as Rs 20 lakh crore, which means almost 25% of all loans are in the red zone. The creation of the Insolvency and Bankruptcy Code is definitely a big step forward, but the Debt Recovery Tribunal is caught up in the logjam, which has engulfed the entire legal system. If the state recovers only 15% of bad loans in the subsequent years, it paints a gloomy picture. Japan recovers 92% of all its bad loans, the US over 80% and developing countries like Indonesia make a recovery of over 50%. No doubt, when the resources are getting scarce, it will be a Herculean task of achieving 10% growth, which requires 40% of savings and investment rate with the Incremental Capital Output Ratio of 4. As we are getting foreign capital worth only 2% of our GDP, the savings rate needs to get back to its peak of 36% to achieve this growth rate.

Our economy seems to be making a meaningful recovery as we grew 7.7% in the last quarter of the last fiscal — almost seven years after the recession began in FY12. At the time when Pranab Mukherjee was the finance minister, the economy made a smart recovery from 2008 great recession and grew by 8.6% and 8.9% in FY10 and FY11 on a dose of steroids of a close to a double-digit fiscal deficit. Once the tightening of the belt began amid the inflationary spiral, the economy nosedived to below 5% in the subsequent years. We were trying to make a recovery again in the second half of fiscal 2017, this time around, the lightening of demonetisation struck!

Now that we are approaching 8% growth rate, which seems more plausible given our input matrix, Modi has suddenly emboldened NITI Aayog officials to think beyond and explore possibilities of a double-digit growth. While we spend just 4.2% on capital infrastructure, China achieved 10% growth rate for three decades spending over 10% on building the same. While our resource mobilisation is quite similar to China’s, that country does not spend much on subsidies. Even merit subsidy of health and education has been controlled to free resources for capital creation. India’s subsidies add up to 15% of the national government budget, which does not include the cross and disguised subsidies. The correction of this matrix is a huge task, given our democratic governments. Pulls and pressures often make reforms difficult. The pressure groups make the reform process impossible. China has the advantage of an authoritarian regime, which helped it pursue capital creation at a break-neck speed with a single-minded pursuit, and it is not only the factories of the world now but employing its vast masses productively in them.

Economists have propounded the theory of a circular economy or a regenerative model for a developing country like us to use scarce resources in an effective way. A circular economy, in contrast to the ‘make-use-dispose’ model of the linear economy, focuses on the use of resources for the longest possible time as also recovering and regenerating products and materials at the end of their life cycle. For this, the government needs to enable a regulatory framework for the circular economy. The government needs to push the limits of the circular economy and make it a mass movement. According to FICCI-Accenture study, which was released recently, by adopting the circular business model, India could reap a reward of between $382 to $697 billion by 2030. The circular economy through its innovative business model offers a unique opportunity to decouple growth from resource requirements. According to the report, five factors will be critical to accelerate circular models in India — greater awareness, disruptive technologies, enabling policy landscape, innovative funding models and collaborations and partnerships.

India became the fastest-growing major economy of the world in the last quarter of the calendar year 2017. But this south Asian giant can do even better, potentially even hitting double-digit growth rates, as the prime minister propounds. However, to achieve a GDP growth of 10%, India would need the service sector to grow close to 20%, complemented by 4% and 8% growth in agriculture and industry respectively. The ‘Make in India’ campaign and the country’s young demographics will not just draw a better consumption pattern for the country but also push the overall growth rate towards the double-digit mark.

At present, the overall growth rate of India varies between 7-8%, of which it is 2-3% in agriculture and 5-6% in the industry. This implies that the service sector grows at more than 10% per annum. Growth in agriculture is possible if there are improved irrigation facilities and use of high yielding seeds leading to more production. The farmers should also be properly trained with modern skills. It is a time-taking proposition in India as in any other country. Industrial output will increase if more investments in plant and machinery are made. Traditional Indian industries are tea, sugar, textiles, steel, coal and minerals. New areas are power and telecommunications. Growth here will depend on additional investment, export prospect, the stability of the Indian rupee and domestic inflation. In an era of deglobalisation after the great recession in 2008, export growth has been quite subdued as compared to almost 20% growth in the boom phase. Exports that have retracted to around one-sixth of our output needs to be firmed up to increase the industrial production to as much as 10% per annum, which seems an onerous — if not impossible — task. Thus, the last area of growth is service sector where it is already 10%. If we project agriculture growth at 4% and industrial growth at 8% per annum in the next 5 years, the service sector has to grow as high as 20% to achieve 10% average growth in overall GDP. So, massive investment in infrastructure, software, banking and insurance will be required for such growth. Easier said than done! However, increasing infrastructure like railways and road communication will increase trade and commerce.

In the recent past, China achieved sustained growth due to a massive increase in infrastructure and export of Chinese goods. To increase Chinese exports, they devalued their currency; as a result, Chinese imports became costly. The foreign exporters failed to make payment for Chinese goods due to declining Chinese imports. China also felt the heat when it failed to pay back to foreign exporters in the dollar, which became costly relative to the Chinese Yuan. There was a worldwide payment crisis as China is the largest exporter and second largest importer in the world. Thus export-led growth is not an unmixed blessing. It is a truism that simply because there will be 10% growth in GDP, there will be massive employment and removal of poverty.

To conclude, 10% GDP target should be the objective and a moderate average growth rate of 8% in all the three sectors will increase the overall size of the economy based on social justice and creation of adequate employment opportunities in different sectors. As more than half of India’s population depends on agriculture — Sirf News holds that this large demography devoted to one vocation is unsustainable — there is an urgent need for growth of this sector along with industry and service sectors, where the growth must be in yield of crops while a large section of the manpower in agriculture must diversify to other professions. India is a fertile land rich in water and maritime resources unlike many other bigger countries of the world which are barren, cold or grassland. It took about 58 years for India’s GDP to grow to $1 trillion, but only eight years to reach $2 trillion (by 2016). At the current growth rates, it will take about five years to reach $3 trillion, and only three years after that to add the next trillion. Becoming a $10-trillion economy is now definitely within India’s planning realm

Ambiguity and stability in the Baltic Sea region: Defence cooperation between Finland and Sweden increases both

https://www.fiia.fi/en/publication/ambiguity-and-stability-in-the-baltic-sea-region

Ambiguity and stability in the Baltic Sea region: Defence cooperation between Finland and Sweden increases both

PUBLISHED 06/18/2018BRIEFING PAPER 241

SUMMARY

Defence cooperation between Finland and Sweden has created a ‘fleet-in-being’ effect across the Baltic Sea region, with mixed consequences for regional stability, and paradoxically both increasing and decreasing ambiguity at the same time. The implications of Swedish and Finnish security policy coordination for regional stability are clear: the current situation is strategically stable, but if Russia further destabilises it, Finland (and potentially Sweden) would seek a new equilibrium through a change in policies, possibly through joining NATO.

Sweden’s approach to solidarity and preparing to defend the country with others has decreased ambiguity, while Finland’s approach has both increased and decreased ambiguity for regional defence planners. Finland is increasingly transparent about tactical interoperability with Swedish and NATO member military forces, a trend which will increase as Finland prepares to participate in and host large international exercises. Yet, strategically Finland’s foreign policy elite collectively makes reserved statements which, in effect, increase regional ambiguity about Finland’s intentions in a crisis.

 

FINNISH-SWEDISH COOPERATION IMPACTS REGIONAL SECURITY

Finland and Sweden see their own security as being tied to regional stability, and have both reacted similarly to the changed European security environment by pursuing security and defence policies which they see as increasing stability in the Baltic Sea region. This has meant strengthening national defences, and while neither currently wants to belong to a military alliance, both have increased defence cooperation bilaterally, as well as with the United States, NATO and the European Union. Finnish and Swedish bilateral cooperation regarding their defence policy and operationally between the two countries’ defence forces is seen in a positive light domestically, and generally welcomed internationally. The intent of the bilateral cooperation has been to increase both countries’ security by ensuring that there are no military vacuums in the region, and more broadly to improve the stability of the Baltic Sea region by not changing the current geopolitical makeup of the region, where two geopolitical spaces meet, overlap and compete.

In practice, the cooperation has created a ‘fleet-in-being’ effect with mixed consequences for regional stability, both increasing and decreasing ambiguity at the same time. The term, borrowed from writings on naval warfare, denotes that a force can have an influence on an adversary’s thinking and actions, even if it is not actively used. The opponent must consider the possibility that the force will be used, and therefore plan accordingly. Unless there are unexpected changes to the cooperation dynamics emerging in the region, or significant changes to Swedish and Finnish security thinking, this mixed impact of cooperation is likely to continue.

The round of intensified cooperation between Sweden and Finland started in 2014, initially with a view to improving training and logistics in international crisis management operations. After an in-depth study was conducted on the possibilities of cooperation throughout 2014, a new era of cooperation dawned. In February 2015 during the publication of the study, Swedish Defence Minister Peter Hultqvist said that the goal of the cooperation was to enable the militaries of both countries to operate together in situations beyond peace, namely in the event of war.

By 2018, both countries had exchanged foreign and defence policy officials at their respective ministries, while links between the defence forces have now become so commonplace as to defy a complete listing. The Swedish-Finnish Naval Task Group has reached initial operational capability, the two air forces are interoperable, and the land forces are methodically building the ability to conduct high-end operations together at brigade strength. In addition to increasing their own national readiness, both countries have also gained an increased understanding of each other’s operational defence plans, and recent exercises such as Ruska17 and Flygvapenövning18 saw Finnish and Swedish jets practise defending each other’s territory. Moreover, both countries recognize the need to be aware of their respective planning, synchronize these activities where possible, and prepare bi-national operational plans for cooperation in war.

The dramatically deepened military cooperation between Finland and Sweden has made the two countries a significant potential military actor in the heart of the Baltic Sea region. It also means that the military capabilities developed through the increase in interoperability will have an impact across the region. The aforementioned ‘fleet-in-being’ effect was identified in 2013 as an attractive approach for Nordic countries in general.[1] In the case of Finnish and Swedish cooperation, the effect means that an adversary cannot be sure whether they would face the combined aerial and naval fleets of Finland and Sweden, but knows that Finland and Sweden are capable of conducting demanding high-end military operations together. The Finnish government’s report on foreign and security policy describes the effect from the cooperation as “raising the threshold against incidents and attacks”.[2]

 

COOPERATION BASED ON MUTUAL INTERESTS SEEKS STABILITY

Domestically, this deepening defence policy and military cooperation is strongly supported. Public statements made by experienced politicians in both countries emphasize the unique nature of the cooperation, and it is endorsed by 94% of the population in Finland, who have a positive view of it.[3] This is considerably more robust support than for cooperation with any other actor, such as NATO (which 61% view positively) or the United States (which 59% view positively); while cooperation within the EU is viewed positively by 89%, it is ‘softer’ in that a majority of respondents see it ‘rather positively’ instead of the large majority of ‘very positives’ for cooperation with Sweden. Swedish polls do not ask about cooperation with Finland specifically, focusing instead on broader cooperative possibilities with NATO and Finland, which 48% supported.[4]

Trust between the Finnish and Swedish militaries, identified as critical to future cooperation,[5] has improved as daily cooperation on a range of projects continuously expands the number of soldiers cooperating on operationally relevant issues. Officers from both countries have been allowed into the ‘inner sanctum’ of capabilities that each could contribute in a crisis. Combined with clear statements from the political and military leaderships of both countries, this has anecdotally had the effect of increasing support for cooperation within the military.

While trust has increased between the militaries, there is more than isolated concern about the willingness of Swedish politics to deliver the necessary resources to the Swedish military. In clear terms, unless the Swedish defence budget is quickly increased to the tune of billions of euros, its already limited territorial defence capabilities will begin to shrink in a few years. The lack of funding has affected Finnish-Swedish cooperation and while Sweden possesses world-class military and intelligence gathering capabilities, if Sweden’s capabilities shrink, it makes less sense for Finland to continue investing in deepening cooperation. This concern is well-founded, as Swedish politicians have over the decades been prone to making dramatic defence-related decisions without considering the potential consequences for broader national or regional security.[6]

Politically, deeper cooperation is stated to be based on mutual interests, with the Finnish government’s report on foreign and security policy underlining that “Foreign and security policy cooperation with Sweden is wide-ranging and it is promoted on the basis of shared interests without any limitations…and will be developed to cover operational planning for all situations”.[7]More recently, Sweden’s Minister of Defence, Peter Hultqvist, wrote that as two militarily non-allied countries Finland and Sweden have a shared starting point for security policy, common geostrategic interests and a shared view of today’s security challenges in the Baltic Sea region. Defence Minister Hultqvist ends by writing that continuing Finnish-Swedish cooperation on its current trajectory is the best way to take into consideration history, geographical realities and other limiting factors, ultimately raising the threshold for conflict in the region.[8] More broadly, the foreign and defence ministers in both countries have issued statements saying that one of the goals of cooperation is to contribute positively to regional stability. 

In Finland, led by President Sauli Niinistö, the idea of an ‘active stability policy’ seeks to improve regional stability through increasing transparency among other things. Reducing the number of ‘black flights’ – where military planes fly in international air-space without transponders or submitting flight plans – that can endanger civil aviation over the Baltic Sea being one example of this. Both Finland and Sweden, then, seek to increase stability as well as transparency in the region. Increasing the capabilities of their respective defence forces and improving their interoperability with other militaries, in combination with not being members of a military alliance, are seen as positive contributions to regional security and stability. Yet, in practice, Finland’s and Sweden’s chosen security and defence policies and actions are having mixed consequences for regional stability, and  serve to both increase and decrease ambiguity at the same time.

 

FINLAND AND SWEDEN BUTTRESS GEOPOLITICAL STABILITY IN BALTIC SEA REGION

From the perspective of senior Finnish and Swedish politicians, Finland’s and Sweden’s contribution to regional stability is to reduce the friction that the meeting and overlap of two geopolitical spaces – the west (including the EU and NATO) and Russia – has caused in the region. They view any change to the current alliance status of Finland and Sweden as altering this balance and removing the cushioning effect provided by the two countries’ non-membership of NATO. Thus, the current political leadership in both countries regards not seeking NATO membership as making a positive contribution to regional stability, yet sees NATO exercises and the enhanced forward presence of member-state forces as stabilising factors in the region. Notably, politicians in both countries unequivocally state that the decision not to join NATO (for the moment) is based on national interests, arguing that any change to the status quo would negatively impact Swedish and Finnish national security.

Russia is unperturbed by this viewpoint, as it has made it clear that it does not want to see Sweden or Finland become NATO members. Furthermore, frequent references to the need to consider Russia’s reactions by politicians in both countries at least implicitly enables Russia to feel that it has been granted one of the core elements of being a recognized great power: a sphere of influence. However, as pointed out by President Niinistö after the annual Kultaranta discussions in 2016, Finland’s ‘option’ to apply for NATO membership is an important security policy tool to be used in the event that Finnish security is threatened.[9] This implies that the president sees the deterrence value of both the option and actual membership as being considerable, a message unlikely to have been lost on Russian decision-makers.

Sweden has not made similar statements regarding NATO, rather the current government has underlined that military non-alignment is a basic part of Swedish security policy. At the same time, the number of exercises where Sweden trains together with NATO countries has increased. For example, during the Aurora17 exercise some 1500 American troops practiced the reinforcement and defence of Sweden on Swedish soil, together with smaller contingents from other NATO countries.

The implications of Swedish and Finnish security policy coordination for regional stability are clear: the current situation is strategically stable, but if Russia further destabilises it, Finland (and Sweden) would seek a new equilibrium through a change in policies, possibly by seeking NATO membership.

 

SWEDISH SOLIDARITY AND MILITARY COOPERATION DECREASES AMBIGUITY

At the strategic security and regional defence policy levels, Sweden has been a vocal proponent of solidarity for years. Sweden has for almost a decade continued to emphasize that it would not stand idly by if a fellow EU or Nordic country were attacked militarily, and would expect others to behave similarly towards Sweden. Swedish politicians are not coy about clarifying that this solidarity extends to Latvia, Lithuania and Estonia – a clear security policy difference from Finland, to which we return below.

Even if many observers have questioned Sweden’s ability to provide extensive military assistance for others, the sentiment is consistent with the current idea that Sweden is prepared to defend itself with others. The consistent strategic messages from Sweden are that its organic defence capabilities have improved and that the ability to defend Sweden with others has been tested, for example in the Aurora17 and Flygvapenövning (FVÖ18) exercises. Through these exercises, Sweden has also made it clear just who it would prefer these ‘others’ to be: Finland and the United States are at the top of the list, while Nordic NATO members would certainly be expected to contribute.

Sweden’s announced procurement of US Patriot air-defence systems, letting US AWACS planes fly through Sweden, and a range of other activities certainly suggests that Sweden and the United States have come to a more concrete understanding about how each would behave vis-à-vis the other in the event of regional military conflict. Thus, compared to the Cold War era, Sweden has become considerably more transparent about with whom and in defence of what it would fight – thereby contributing to transparency for regional defence planners. This is in contrast to Finland to some extent.

 

FINLAND BOTH INCREASES AND DECREASES AMBIGUITY

During the past three years, Finland has become more open about the countries with which it wishes to improve military interoperability to the point that a common defence effort would be desirable and practical. However, when it comes to political transparency, the signals are mixed. For nearly a decade, Finnish politicians spoke about European security in the context of the European Union’s Article 42.7. Despite this, no legislative efforts were made to enable Finland to give or receive military assistance outside of a UN-mandate framework. This was remedied through the passing of legislation in 2017, giving the Finnish Defence Forces a new task, preparing for the giving and receiving of international military assistance (the three other tasks are national territorial defence, assistance to national civil authorities, and international crisis management operations). The Finnish political establishment is thus transparently and unambiguously positively inclined in terms of generically giving or receiving military assistance. In practice, this is not the case, however, even within the confines of the Baltic Sea region.

An illustrative example can be found in the 2018 Finnish presidential elections, when candidates were asked during debates about providing military assistance to Estonia. A frequent refrain was that the primary responsibility of the President (who leads foreign and security policy in cooperation with the government) is to secure Finland’s population. Moreover, nearly all of the candidates agreed that assistance would be considered on a case-by-case basis and could take economic, political, diplomatic and military forms. There were clear disagreements over whether the European Union’s mutual defence provision (Article 42.7) bound Finland to provide assistance. The case-by-case interpretation became particularly clear when candidates were (during multiple debates) asked about whether neighbouring Estonia should be assisted militarily in the event of an attack by Russia. The overall sensibility was reflected in the words of then incumbent and now re-elected President Niinistö when he stated in a December 14, 2017 debate “the best way for us to contribute to the defence of the Baltics is by ensuring our borders are taken care of”. The Finnish political establishment is clearly divided on the meaning of solidarity, and how Finland should behave in the face of a military conflict in the region, and hence Finland’s official position is likely to remain ambiguous.

The ambiguity of Finland’s formal policy is in stark contrast to the decades-long cooperation between Finland and Estonia on developing the latter’s defence capabilities in particular. Additionally, Finland continues to participate with sizeable units in Estonian national defence exercises, such as Kevadtorm2017 and most recently SIIL18. Operationally, Finland is happy to be transparent about the increased interoperability with Estonian and other NATO member forces, a trend which will increase as Finland prepares to participate in and host large international exercises. Yet, strategically Finland’s foreign policy elite collectively makes reserved statements which, in effect, increase regional ambiguity about Finland’s intentions.

 

DECREASING AMBIGUITY WHILE MAINTAINING REGIONAL STABILITY

The relevance of this for Finnish-Swedish defence cooperation is direct. The fleet-in-being effect that deep cooperation has created has impacts on all military actors in the region. The differences regarding strategic ambiguity mean that while the likelihood of each country assisting the other has increased, there are serious questions about whether this assistance would extend to third parties in the event of a regional crisis. For example, if Sweden decided to contribute directly to the defence of a Baltic country and was consequently attacked, would Finland automatically aid Sweden? If the answer is no, then all of Finland’s peacetime partners must form their own plans under the assumption that, despite the legally binding nature of the European Union’s mutual defence provision (Article 42.7), Russia could dissuade Finland from participating in the defence of its neighbours. This again increases regional ambiguity, while in the minds of some it contributes to strategic stability because Russia would not need to be concerned about threats emanating through Finland to its strategically important locations around St. Petersburg or the Kola peninsula.

A formal bilateral defence pact would clarify to the entire region that while Finland and Sweden are not members of a large military alliance, nor do they constitute a military vacuum in the region. In Finland’s case, such a pact would allow it to benefit from some ‘reachback’ functions in intelligence, improve its defensive depth regarding naval and air operations, and reduce pressure on limited maritime security resources. Sweden would gain a formalised shield to help it deflect an initial strike, as well as making it geographically easier to consider a ‘defence forward’ approach to influence the capabilities of an adversary. However, both would also see a decrease in their freedom of action, in scenarios where only one of them is attacked and the other country might be able to stay out of a limited military conflict. A bilateral agreement would demand that all regional defence planners place Finland and Sweden firmly in the western defence context, decreasing ambiguity. Moreover, Russia would be less likely to see such a pact as having crossed its implied red line: NATO membership – thus contributing to the maintenance of the current geopolitical balance and putative stability in the region.

If a bilateral defence pact remains beyond the reach of politicians in both countries, continued strategic signalling and communications can be used to imply a de facto alliance arrangement between the two countries. Individually both Finland and Sweden have engaged in internationally noted strategic communications activities during the past three years, such as Sweden sending out the ‘If crisis or war comes’ booklet to all Swedish households, or Finland sending a letter to 900,000 reservists with information about their wartime tasks.

Should Finnish and Swedish defence and security cooperation subside in the long-term, its impacts on the region’s stability could be manifold. If it led to Sweden seeking NATO membership, the regional geopolitical equilibrium would change, and Finland would have to seriously consider its response. The Finnish population does not seem too fazed by this prospect, as in 2016 34% of Finns thought that Finland should seek NATO membership if Sweden did, compared to 25% who responded in the affirmative when asked whether Finland should seek membership by itself.

Faltering cooperation would also require Sweden to immediately and significantly increase its defence budget (something it should do in any case), so as not to in the 2020s become a security vacuum in the region, negatively affecting regional stability. In Finland’s case, hiccups over deepening cooperation with Sweden (and others) would likely demand increased ambiguity and reduced transparency regarding its possible behaviour in a regional armed crisis. Compared to the current situation, this would impact regional stability negatively, and paradoxically limit Finland’s room for foreign policy manoeuvre – neither an optimal nor sought-after foreign policy for Finland by any means.

Ultimately, because Finland and Sweden have through their defence cooperation generated a fleet-in-being effect, they must now together recognize and address its repercussions in terms of ambiguity and regional stability.

ENDNOTES

[1] Stig Rydell and Stefan Forss, Tie kohti uutta pohjoismaista turvallisuusstrategiaa(Helsinki: Maanpuolustuskorkeakoulu, 2013) https://www.doria.fi/handle/10024/88688, accessed 14 June 2018.

[2] Government Report on Finnish Foreign and Security Policy (Valtioneuvoston kanslia, 17 June 2016) http://julkaisut.valtioneuvosto.fi/handle/10024/75139, accessed 15 September 2017.

[3] Advisory Board for Defence Information, Finns’ Opinions on Foreign and Security Policy, National Defence and Security(Helsinki, November 2017).

[4] Opinioner 2016 Allmänhetens Syn På Samhällsskydd, Beredskap, Säkerhetspolitik Och Försvar (Myndigheten för samhällskyd och Beredskap, 2016).

[5] Charly Salonius-Pasternak, Deeper Defence Cooperation: Finland and Sweden Together Again? (Helsinki: Finnish Institute of International Affairs, 12 March 2014)https://www.fiia.fi/en/publication/deeper-defence-cooperation, accessed 14 June 2018.

[6] Charly Salonius-Pasternak, The defence of Finland and Sweden: Continuity and variance in strategy and public opinion(Helsinki: Finnish Institute of International Affairs, 7 June 2018) https://www.fiia.fi/en/publication/the-defence-of-finland-and-sweden, accessed 11 June 2018.

[7] Government Report on Finnish Foreign and Security Policy.

[8] ‘Peter Hultqvist: Finland Värt Att Försvara’, Dagens Industri, 2017. https://www.di.se/debatt/peter-hultqvist-finland-vart-att-forsvara/, accessed 24 May 2018.

[9] ‘Presidentti Niinistö: Nato-jäsenyyttä ei kannata sulkea pois laskuista’, Aamulehti, 2016. https://www.aamulehti.fi/kotimaa/presidentti-niinisto-nato-jasenyytta-ei-kannata-sulkea-pois-laskuista-23738975/, accessed 24 May 2018.

CHARLY SALONIUS-PASTERNAK

SENIOR RESEARCH FELLOW - THE GLOBAL SECURITY RESEARCH PROGRAMME

World Security update: JustSecurity


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TRUMP-RUSSIA

Special counsel Robert Mueller is investigating a meeting between President Trump’s adviser Roger Stone and a Russian national during the 2016 presidential campaign, according to Stone’s friend Michael Caputo, who is a witness in the probe. Stone has alerted House Intelligence Committee chairman Devin Nunes (R-Calif.) about the meeting, which he failed to disclose in his testimony before congressional investigators in September; a meeting that he says was prompted by an offer of information detrimental to presidential candidate Hillary Clinton, Shelby Holliday reports at the Wall Street Journal.

The Russian national, Henry Greenberg, reportedly wanted Trump to pay $2 million for the political dirt, according to Stone, who recalled that he replied “you don’t understand Donald Trump … he doesn’t pay for anything,” before rejecting the offer. Manuel Roig-Franzia and Rosalind S. Helderman report at the Washington Post.

Caputo, who spoke to Greenberg on the phone, claimed that he “assumed [Greenberg] was a U.S. citizen,” adding that “it was May 2016 … Nobody was talking about Russia, collusion, etc.” Caputo said he now believes the Russian who met with Stone was an F.B.I. informant because “the O.S.C. [Office of Special Counsel] knew more about it than I did.” He added that it was not until prosecutors informed him that Greenberg was Russian that he learned the man he had spoken with in 2016 was not a U.S. citizen, Maegan Vazquez, Sarah Westwood and Boris Sanchez report at CNN.

Records indicate that although Greenberg was previously an F.B.I. informant, he had stopped working with the agency after 2013, though Caputo told the Washington Post that, “if you believe that [Greenberg] took time off from his long career as an F.B.I. informant to reach out to us in his spare time, I have a bridge in Brooklyn that I want to sell you.” Jaqueline Thomsen reports at the Hill.

Trump’s lawyer Rudy Giuliani said Sunday that he “doubted” the president knew about the reported May 2016 meeting between Stone and Greenberg, claiming that “I certainly didn’t know about it. It’s news to me, I just read it here in the Washington Post.” Martin Pengelly reports at the Guardian

F.B.I agent Peter Strzok has agreed to appear before congressional committees that invite him to testify, his lawyer said in a letter published yesterday, with Strzok having been sternly criticized by the Inspector General last week for exchanging anti-Trump text messages with Lisa Page, an F.B.I. lawyer. Del Quentin Wilber reports at the Wall Street Journal.

“Why was the F.B.I.’s sick loser, Peter Strzok, working on the totally discredited Mueller team of 13 Angry & Conflicted Democrats,”  Trump commented in a message yesterday on Twitter, adding, “when Strzok was giving Crooked Hillary a free pass yet telling his lover, lawyer Lisa Page, that “we’ll stop” Trump from becoming President? Witch Hunt!” Maegan Vazquez, Jeremy Herb and Laura Jarrett report at CNN.

Strzok’s lawyer Aitan Goelman said Strzok “wants the chance to clear his name and tell his story,” adding that Strzok “thinks that his position, character and actions have all been misrepresented and caricatured, and he wants an opportunity to remedy that.” Matt Zapotosky reports at the Washington Post.

President Trump went on the offensive Friday in his ongoing tussle with investigators, making comments in an interview to “Fox & Friends” and then to reporters outside the White Whites in which he described a new Justice Department report as confirmation of his claim of a “deep state” conspiracy against him; lambasted the “scum on top” of the F.B.I. who were out to get him; and suggested that former aide Michael T. Flynn did not lie – even though he pleaded guilty to lying to investigators. Peter Baker and Eileen Sullivan report at the New York Times.

“I would never want to get involved in that,” Trump replied when he was asked if former F.B.I. Director James Comey should be “locked up,” adding “certainly he, they just seem like criminal acts to me …what he did was so bad in terms of our Constitution, in terms of the well-being of our country. What he did was horrible…Should he be locked up? Let somebody make a determination.” Eileen Sullivan reports at the New York Times.

A federal judge revoked Trump’s former campaign manager Paul Manafort’s bail Friday and sent him to jail where he will await trial, citing new charges that Manafort had attempted to influence the testimony of two government witnesses after he had been granted a temporary release. The new felony charges mean that Manafort  cannot remain free even under arduous conditions, and Judge Amy Berman Jackson of District Court for the District of Columbia commented “this is not middle school … I can’t take away his cellphone.” Sharon LaFraniere reports at the New York Times.

Sending Manafort to jail could boost the pressure on him to strike a deal with Mueller, although it is unclear what information Manafort could provide that would interest prosecutors enough to offer significant concessions, Josh Gerstein reports at POLITICO.

Giuliani said yesterday that he hopes for a thorough investigation into the origins of special counsel Robert Mueller’s investigation into alleged Russian collusion in the 2016 presidential campaign, commenting that “it’s crying out for someone to investigate the investigators. There should be a full and complete [Inspector General] report and grand jury investigation of what happened here, after it became the Russia probe…What was the purpose of it? What did they gather?” Luis Sanchez reports at the Hill.

House Oversight Chairman Trey Gowdy (R-S.C.) claimed yesterday that House Speaker Paul Ryan (R-Wis.) led a meeting Friday with F.B.I. and D.O.J. officials in which lawmakers “went item by item” through outstanding subpoenas from the House intelligence and judiciary committees. Gowdy commented that “Paul made it very clear. There’s going to be action on the floor of the House this week if the F.B.I. and D.O.J. do not comply with our subpoena request … We’re going to get compliance or the House of Representatives is going to use its full arsenal of constitutional weapons to gain compliance.” Kyle Cheney and Aubree Eliza Weever report at POLITICO.

Campaign chiefs for the U.K. movement to exit the European Union appear to have passed documents detailing an American law enforcement investigation on to a Russian official, according to a cache of leaked emails, which indicate that papers – concerning a probe into dark web money laundering and the arrest of Brexit financier George Cottrell – were shared with the Russian embassy in London by Leave.EU campaign group executive Andy Wigmore. Nico Hines reports at the Daily Beast.

Former British Intelligence officer Christopher Steele, who compiled the dossier alleging links between Trump and the Kremlin, is asking a U.S. court to throw out a defamation case against him filed on April 16 by three Russian oligarchs: Mikhail Fridman, Petr Aven and German Khan. Steele is accusing the three men of intimidation, Natalka Pisina reports at the BBC.

An explainer of “What The Justice I.G. Report Revealed” is provided at NPR.

Mueller should not wait for Trump to testify before making a decision whether to file any further Russia-related charges, Philip Allen Lacovara comments at the Washington Post.

   

YEMEN

The Saudi-led coalition yesterday conducted airstrikes on the airport in Yemen’s port city of Hodeidah, according to witnesses, with the coalition strikes supporting the Yemeni government forces’ attempt to retake to the airport and to regain control of the city, which is held by the Iran-aligned Houthi rebels. Ahmed Al-Haj reports at the AP.

It appears that U.N. efforts to mediate a ceasefire in Hodeidah have lost momentum. The Houthis said yesterday that talks had failed and accused the Saudi-led coalition of escalating attacks, the AFP reports.

The battle for Hodeidah is aimed at forcing the Houthis to negotiate an end to the Yemeni conflict, the U.A.E. Minister of State for Foreign Affairs, Anwar Gargash, told reporters today. The AP reports.

“We are still counting on the U.N. attempt to pull a rabbit out of a hat,” Gargash also told reporters. Reuters reports.

“I emphasize my grave worry regarding the Saudi and Emirati-led coalition’s ongoing attacks in Hodeidah,” the U.N. human rights chief Zeid Ra’ad al-Hussein said today, expressing concern about the impact of the assault on civilians and the wider humanitarian situation in Yemen due to the city being a key entry point for food and supplies. Mohammed Ghobari reports at Reuters.

French Special Forces are in Yemen fighting alongside U.A.E. forces, the French Le Figaro newspaper reported Saturday, citing two military sources. Reuters reports.

Houthi rebels have shelled a village in the center of Yemen today, killing at least eight and wounding 15. Ahmed Al-Haj reports at the AP.

A timeline setting out the key dates in Yemen’s conflict is provided by Reuters, noting that the pro-Yemeni government forces’ recapture of Hodeidah would mark a turning point in the war.

   

AFGHANISTAN

Afghanistan’s Taliban yesterday rejected an extension to a three-day cease-fire coinciding with the holy Muslim holiday Eid al-Fitr holiday, after Afghan President Ashraf Ghani announced a nine-day extension after a suicide bombing killed 36 people on Saturday, hoping that the Taliban would respond in kind. The AP reports.

The Islamic State group have claimed responsibility for Saturday’s suicide bombing, according to the group’s news agency. The bombing occurred two days after the start of the cease-fire, which saw dozens of unarmed Taliban fighters pouring into several Afghan cities to celebrate, prompting unprecedented scenes of soldiers and Taliban insurgents embracing, Ehsanullah Amiri reports at the Wall Street Journal.

The bombing killed 36 people and wounded 65, among them civilians and members of both the Taliban and the Afghan security forces, with officials claiming that the blast was either a suicide bomber or a car bomb. Zabihullah Ghazi and Mujib Mashal report at the New York Times.

The Taliban put out a statement saying they will go back to full-fledged war,reportedly after holding long meetings of their leadership in the Pakistani city of Quetta. The statement reiterated the group’s longstanding demands: that they must negotiate directly with the U.S., and that foreign forces should leave Afghanistan, Najim Rahim and Mujib Mashal report at the New York Times.

“Our fighters will now resume their operations across the country against the foreign invaders and their internal puppets,” Taliban spokesman Zabihullah Mujahid told Al Jazeera.

The Taliban said that the three-day Eid ceasefire proved the unity of their movement and its “wide national support,” commenting in a statement that “the announcement (of the ceasefire), implementation and the wide national support and welcome of the Mujahideen by the people proves that the demands of the Islamic Emirate and the nation are identical – all want the withdrawal of foreign invaders and establishment of an Islamic government.” Rupam Jain and Qadir Sediqi report at Reuters.

“I truly believe the outlines for a peace deal are now discernible through the haze and dust of war,” U.N. Secretary-General’s special representative for Afghanistan Tadamichi Yamamoto had written of the ceasefire. Memphis Barker and Sami Yousafzai report at the Guardian

Dozens of Afghans arrived in the capital Kabul today after travelling across the country on foot, calling for an end to the 17-year war. The Helmand Peace Convoy – which began in the southern city of Lashkar Gah in Helmand province – reached the capital after traveling more than 500 kilometers (300 miles) over nearly 40 days, the APreports.

The march was triggered by a car bomb in Helmand on March 23 that killed at least 14 people and wounded dozens. No group has claimed responsibility for that attack, Qadir Sediqi and Mohammad Ismail report at Reuters.

   

SYRIA

An airstrike by the U.S.-led coalition has killed 40 fighters loyal to Syrian President Bashar al-Assad near the eastern city of Albu Kamal, according to the U.K.-based Syrian Observatory for Human Rights (S.O.H.R.). Reuters and Haaretzreport.

The Syrian state media also said today that the U.S.-led coalition carried out the strike. Angus McDowall reports at Reuters.

“There have been no strikes by U.S. or coalition forces in that area,” the U.S.-led coalition’s press office said in response to the Syrian state media and S.O.H.R. reports of the attack near Albu Kamal, which is part of a de-confliction area. The AFP reports.

Iraqi officials said that members of the Shi’ite Iraqi state-sanctioned Popular Mobilization Forces (P.M.F.) militia were among those who came under attack near Albu Kamal, adding that the cause of the attack was not immediately clear. Bassem Mroue and Qassim Abdul-Zahra report at the AP.

The U.S.-backed Kurdish-led Syrian Democratic Forces (S.D.F.) said yesterday that they had captured the strategic village of Dashishah in northeastern Syria from the Islamic State group. The AP reports.

U.S.-led airstrikes continue. U.S. and coalition forces carried out 134 airstrikes against Islamic State targets in Syria and Iraq between June 1 and June 10. [Central Command]

   

ISRAEL-PALESTINE

The Israeli military today struck nine targets belonging to the Palestinian Hamas group in the Gaza Strip, responding to Palestinians flying burning kites and balloons across the Gaza border to Israel. Reuters reports.

The Israeli military has said that its drones have shot down over 90 percent of the kites and balloons, nevertheless the low-tech tactics have sparked fires in Israeli territory and caused extensive damage. The AP reports.

The U.S. ambassador to Israel, David Friedman, told State Department officials not to examine military assistance to Israel in an email last year, saying that “Israel is a democracy whose army does not engage in gross violations of human rights” and that it would not be the U.S. national interest to limit Israel’s access to military equipment. Nahal Toosi reveals at POLITICO.

The Trump administration’s plan for Middle East peace faces huge challenges, as previous failures attest. F. Brinley Bruton and Lawahez Jabari provide an analysis at NBC News.

   

The KOREAN PENINSULA

“Holding back the ‘war games’ during the negotiations was my request because they are VERY EXPENSIVE and set a bad light during a good faith negotiation. Also, quite provocative,” President Trump said in a message on Twitter yesterday, referring to largescale joint U.S.-South Korea military exercises and his offer last week to suspend the drills after meeting with North Korean leader Kim Jong-un in Singapore. Brett Samuels reports at the Hill.

The suspension of joint U.S.-South Korea military exercises is expected to be announced by both countries this week, according to South Korea’s Yonhap news agency, which cited an unnamed government source, adding that the drills would restart if North Korea failed to keep its promise to denuclearize and that the announcement would likely only relate to major exercises and not more routine military training. Josh Smith reports at Reuters.

Trump yesterday hit back at Senate Minority Leader Chuck Schumer’s (D-N.Y.) criticisms of the Singapore summit, saying in a message on Twitter that the talks had achieved a halt to nuclear and missile testing, the destruction of launch sites, the return of U.S. hostages and “much more.” Brent D. Griffiths reports at POLITICO.

The American financier, Gabriel Schulze, approached Trump’s son-in-law and senior adviser Jared Kushner last summer to help set up a back channel between North Korea and the Trump administration, according to current and former U.S. officials and other sources familiar with the secret meetings. Mark Mazetti and Mark Landler reveal at the New York Times.

The back channel established by Kushner led to Secretary of State Mike Pompeo’s secret trip to Pyongyang ahead of Trump’s meeting with Kim in Singapore, according to two sources familiar with the matter. Katrina Manson reports at the Financial Times.

Sports diplomacy between the two Koreas has taken place today, opening the possibility of inter-Korean sports events and representing an ongoing détente between the North and South which began in January this year. Hyung-Jin Kim reports at the AP.

Japan has condemned South Korean military exercises near contested islands in the Korean Peninsula, with the Japanese foreign ministry saying in a statement yesterday that it could not accept the drills. The South Korean drills come amid talks that its joint exercises with the U.S. may be suspended to help ease tensions with North Korea, Brad Lendon reports at CNN.

The president needs to extract more concessions from North Korea before canceling the joint U.S.-South Korea military exercises as the withdrawal would impact combat readiness and change the power dynamics in the region. The Wall Street Journal editorial board writes.

Trump’s statements on North Korea amount to “gaslighting” and demonstrate his tactic of repeating misinformation in order to obfuscate and distract from the fact that little in terms of concrete action was included in the Singapore declaration. Ishaan Tharoor writes at the Washington Post 

   

CYBERSECURITY, PRIVACY AND TECHNOLOGY

U.S. Cyber Command’s status was elevated by the Pentagon in the spring and is now taking a more aggressive approach in countering cyberattacks. David E. Sanger reports at the New York Times.

The possible Russian targeting of undersea cables for spying purposes has come under the spotlight following recent U.S. Treasury Department sanctions against five Russian firms and three Russian individuals, who were accused of having supported Moscow’s “underwater capabilities.” Morgan Chalfant and Olivia Beavers reports at the Hill.

Cyber attackers have upped their game in recent years and cyber weapons have emerged as effective tools for states of all sizes. David E. Sanger explains at the New York Times, setting out what the U.S. should consider when it comes to cyber-policy.

   

OTHER DEVELOPMENTS

Satellite images appear to show that Russia has upgraded a nuclear weapons storage bunker in Kaliningrad, an enclave between Poland Lithuania, with a nuclear weapons expert saying that it is unclear whether nuclear warheads are installed at the site. Julian Borger reports at the Guardian.

At least 20 people have been killed in northeastern Nigeria, there has been no claim of responsibility in the region that has seen an Islamist insurgency led by the Boko Haram extremist group. Ahmed Kingimi reports at Reuters.

A Philippine military offensive against Islamic State group-linked militants near the southern city of Marawi has killed five extremists and led to an exodus of villagers, officials said today. The operation is focused on one of the leaders who led last year’s five-month Islamist militant siege of Marawi. Jim Gomez reports at the AP.

U.S. Secretary of State Mike Pompeo met with his Canadian counterpart Chrystia Freeland on Saturday, their conversation following the recent fractious G-7 meeting, which saw increased tensions between Trump and Canadian Prime Minister Justin Trudeau. Max Greenwood reports at the Hill.

Gen. Khalifa Haftar’s self-styled Libyan National Army (L.N.A.) forces have made further advances in northeastern Libya. The L.N.A. controls most of eastern Libya and is opposed to the internationally recognized government, Al Jazeera reports.

An overview of the latest developments in the South China Sea is provided by Christopher Bodeen at the AP.

Indialogue: No Progress on NSG Membership Despite Indian Pushes at Latvia Plenary


Hi,

This week’s brief looks at India’s push for membership in the Nuclear Suppliers Group, confusion over India’s position regarding the Belt and Road Initiative, and a faltering deal regarding a naval base in the Seychelles. On domestic front, I look at Prime Minister Modi’s proposal to include lateral entry for certain position in the civil services.

- Aman

No Progress on NSG Membership Despite Indian Pushes at Latvia Plenary

Thursday and Friday, the Nuclear Suppliers Group met in Jurmala, Latvia where India continued it’s push for membership in the international organization that controls access to technology and guards against non-proliferation. India had initially applied for membership in the NSG in 2016, but was blocked due to opposition by China. However, after having “reset” relations with China, India had hoped that China would withdraw their objections to India’s membership. Indeed, Prime Minister Modi met Chinese President Xi Jinping twice in the last two months, once in Wuhan in April and again in Qingdao in June.

However, despite this push, there was no real headway at the plenary. Indeed, the NSG statement on said that it “continued to consider all aspects of the implementation of the 2008 Statement on Civil Nuclear Cooperation with India and discussed the NSG relationship with India.” Moreover, reports emerged that there seemed to be no public change in the Chinese position.

Expert Opinion: Rajeswari Pillai Rajagopalan notes “Becoming an NSG member would be a major foreign policy achievement for the Modi government but given China’s opposition, it is unlikely that this week’s plenary will see any forward movement. Nevertheless, given India’s technological advancements and its potential to engage in nuclear commerce in the future, it should be an imperative for the participating governments to bring India into the NSG tent rather than leave it outside.”

Translation Troubles over India’s Support (or Lack Thereof) for the BRI

Following the Shanghai Cooperation Organisation’s Summit, the member states released a statement on June 10 called the Qingdao Declaration. The initial English translation, which was uploaded to the SCO’s website, statedthat “Reaffirming their support for the Belt and Road Initiative (BRI)” of China, Kazhakstan, Kryrgyz Republic, Pakistan, Russia, Tajikistan and Uzbekistan, “the Member States express appreciation for the joint efforts taken towards its implementation.” This translation didn’t make it clear whether the specific countries listed were the ones that supported the BRI, or all member states did. Indeed, China had been seeking unanimous support for the BRI at the summit.

However, India pointed out that it staunchly opposed the BRI due to sovereignty concerns, given that the China-Pakistan Economic Corridor cuts through India-claimed and Pakistan-occupied territory in Kashmir. Indeed, Prime Minister Modi said that India “welcomes new connectivity projects that are inclusive, sustainable, transparent, and those that respect the sovereignty and territorial integrity of nations” and reiterated that “connectivity with SCO and neighbours is a priority for India.”

Prime Minister Modi at the SCO Summit

Insight: Connectivity in Asia, and the BRI in particular, is likely going to be at the center of future ties, especially as the friction between India and China grows as they continue to face off in each other’s periphery. China has indeed tried to bring India into the fold as it has pitched India and Nepal a trans-Himalayan corridor similar to CPEC. While the “reset” may have created a surface-level thaw, this is likely a space where tensions are sure flare up once the honeymoon period of the post-Wuhan period is over.

Prime Minister Modi’s Proposes Lateral Entry into the Civil Services

Prime Minister Modi recently announced a proposal to invite professionals for a lateral entry into public service. The move would invite ‘talented and motivated’ individuals working outside the government to work as a Joint Secretary (typically a person heading a Ministry Division) in ten different sectors – agriculture, environment and climate change, revenue, financial services, road transport, shipping, new and renewable energy, civil aviation and commerce.

The move has attracted much controversy, as does any move that looks to reform the civil services at large. Indeed, lateral reform has been a subject of discussion since the mid-2000s, but has faced much opposition from specifically the Indian Administrative Service and also opposition parties no matter who was in power.

Opinion Round-up

Shah Faesal writes “The question is: what does an IAS officer bring to the table that a professional lateral entrant can’t? Take my example. I am a medical sciences graduate who qualified for the civil services examination with public administration and Urdu literature, got a hands-on training at the LBSNAA and went on to supervise agriculture, rural development, revenue administration as a district collector, and headed school education and energy sector of the state in the last eight years of my service. It is obvious that only an IAS officer can dare to dabble in so many subjects without having a formal educational background in any of these.”

Sanjay Dixit, a current IAS officer,notes “First, a three-year contractual joint secretary will carry no gravitas in the government system. Second, the criteria and method of selection are both opaque. Third, when Russi Mody could not shake the behemoth called Indian bureaucracy, what would you expect 10 poor joint secretaries to shake? They are just going to be ignored by the power structures in the ministry. The IAS, the IPS and other central services’ officers are not going to take these officers seriously.”

Smriti Kak Ramachandran reportsthat “The Centre’s decision to induct specialists at the joint secretary level through lateral recruitment has generated criticism from opposition parties and a Dalit member of Parliament from the Bharatiya Janata Party (BJP) over the new policy sidestepping caste-based reservations.”

Confusion Abound over Assumption Island Base in Seychelles

India is seeking clarification from the government of the Seychelles over the status of a joint project between the two countries to develop a naval base as Assumption Island in the Indian Ocean. Recent comments from Seychelles President Danny Faure cast doubt regarding the project when he said “In next year’s budget, we will put funds for us to build a coast guard facility on Assumption ourselves. It is important for us to ensure that we have a military post in this area.” Indeed, there has beengrowing opposition in Seychelles to the project.  

Prime Minister Narendra Modi in Seychelles

India has requested that the President clarify his statements regarding what he meant, arguing that “while Seychelles funding its own coast guard facility was not an issue, India is hoping it would not be kept out of a project, envisaged as a 20-year agreement, that it sees as crucial to its strategic interests — particularly given China’s growing influence in the area.” Faure is slated to be in India on June 26 for a bilateral visit, and a complication on the naval base deal would significantly strain ties.

Insight: Given the location of the Island along key Indian Ocean maritime routes, India sees the development of this naval base a key part of its Indo-Pacific strategy, allowing it to help develop and manage aviation, maritime, and communications facilities, allowing it to monitor most, if not all, movements in the region.

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