September 21, 2018

One world, two internets

CNBC reports: “Eric Schmidt, former CEO of Google and executive chairman of Alphabet, predicts that within the next decade there will be two distinct internets: one led by the U.S. and the other by China.”

This is a strange type of prediction: There are already two distinct internets: one led by the U.S. and the other by China.

The vast majority of globally popular websites and online services are not easily accessible in China, while a huge proportion of China’s online population hardly ever ventures beyond the walled garden of WeChat.

As China develops its own standards in different fields, it will continue to create an alternative digital world. Today, for example, the BBC asks: “China has ambitions for its rapidly expanding Beidou satellite navigation system to serve the whole world, not just Asia, but will it really be able to rival the well-established — and US-owned — GPS system?” The answer seems to be “maybe,” with caveats such as this: "It's one thing to get it working, it's another to keep it working consistently and create trust among users.” But there’s no question that China will get Beidou working consistently, and then Chinese mobile phones may cease using GPS technology altogether.

Purging foreign content from textbooks and TV

Chinese TV censors are clamping down on foreign shows, according to the South China Morning Post: New rules allow TV stations to “allocate no more than 30 percent of their daily screen time to programmes produced overseas.”

Meanwhile, the Financial Times’ Emily Feng reports (paywall): “China is mandating inspections of all textbooks used in elementary and middle schools across the country to remove foreign content, as education increasingly becomes a target of the Communist party’s ideological controls.” The purge will also affect international schools attended by the children of many expatriate employees in major Chinese cities.

EVENT: AI Superpowers

Kai-Fu Lee

In the 1990s, as the dotcom era began to unfold, artificial intelligence (AI) expert and developer Kai-Fu Lee was busy at Apple streamlining many of the company’s early R&D projects. Those initial days, or the era of development, as Dr. Lee has since come describe it, were dominated by American technological innovation. Corporations like Apple and Microsoft paved the way for Silicon Valley companies to become global leaders. However, as Dr. Lee details in a new book, AI Superpowers: China, Silicon Valley, and the New World Order, we have moved to the era of AI implementation, and Silicon Valley is no longer the center of gravity it once was.

While American tech giants remain formidable players, the most prominent companies in areas of speech synthesis, computer vision, and machine translation are all Chinese. Moreover, Chinese consumers are significantly more comfortable than their American counterparts in embracing the growing role of AI in their daily lives. For instance, unlike in the United States, the overwhelming majority of Chinese transactions now occur on platforms such as Weibo, allowing companies to gather data at an unprecedented rate.

With the increasing industrial application of AI, the potential for huge numbers of American and Chinese jobs to be replaced by technology has enormous economic and political implications. On October 2, Dr. Kai-Fu Lee will visit the National Committee to discuss the future of AI in both countries, as well as possible risks.

Speaker Bio:

Dr. Kai-Fu Lee is the chairman and CEO of Sinovation Ventures and president of Sinovation Venture’s Artificial Intelligence Institute. Sinovation Ventures, is a leading technology investment firm focusing on developing the next generation of Chinese high-tech companies. Prior to founding Sinovation in 2009, Dr. Lee was the president of Google China. Previously, he held executive positions at Microsoft, SGI, and Apple. Dr. Lee received his bachelor’s degree from Columbia University, Ph.D. from Carnegie Mellon University both in computer science, as well as honorary doctorate degrees from both Carnegie Mellon and the City University of Hong Kong. He is also a fellow of the Institute of Electrical and Electronics Engineers (IEEE).

In the field of artificial intelligence, Dr. Lee founded Microsoft Research China, which was named as the hottest research lab by MIT Technology Review in 2004. Later renamed Microsoft Research Asia, this institute trained the great majority of AI leaders in China, including CTOs or AI heads at Baidu, Tencent, Alibaba, Lenovo, Huawei, and Haier. While with Apple, Dr. Lee led AI projects in speech and natural language, which have been featured on Good Morning America and in the Wall Street Journal. He has received 10 U.S. patents, published more than 100 journal and conference papers, and written seven top selling books in Chinese. He has over 50 million followers on social media.

October 2, 2018 5:30pm to 7:00pm EDT

Speaker(s): 

Kai-Fu Lee

Venue: 

Akin Gump Strauss Hauer & Feld LLP

New York, NY

Fundamentals Of Modern Chinese Imperialism And Colonisation Of Africa: Focus On FOCAC 

http://saharareporters.com/2018/09/17/fundamentals-modern-chinese-imperialism-and-colonisation-africa-focus-focac-austin-aneke

NEWSREPORTSOPINION#NIGERIADECIDESPOLITICSBUSINESSSPORTSENTERTAINMENTLIFESTYLEEDUCATIONVIDEOSPHOTOSDOCUMENTS

By Austin Aneke

During the time of slavery and colonialism we had phrases like- “humanisation of Africa; taming the barbarians, and/or extending civilisation to the dark Continent”. However, modern societies are no more receptive to these ones.


BY AUSTIN ANEKESEP 17, 2018

Austin Aneke

The FOCAC (Forum on China-Africa Cooperation) 2018 meeting in Beijing has now ended. According to the signed action plan 2019-2021, the summit confirmed that China and Africa will implement eight initiatives bordering on “industrial promotion, infrastructure connectivity, trade facilitation, green development, capacity building, health care, people to people exchange, and peace and security”.

Historically, similar phrases were applied during all stages of Africa’s tortured development history. In real terms they mean nothing, but theoretically suit perceptions and mood of the world on the nature and ideal forms of acceptable political-economy relationships between countries and continents in neoliberal time.

During the time of slavery and colonialism we had phrases like- “humanisation of Africa; taming the barbarians, and/or extending civilisation to the Dark Continent”. However, modern societies are no more receptive to these ones.

Still on FOCAC, 2018, China also re-affirmed five principles of engagement with Africa, which it called “the Five-No Approach”. This approach entails – “no interference in paths to development, no interference in internal affairs, no imposition of will on African nations, no attachment of political strings to assistance, and no seeking of selfish political gains in investment and financial cooperation”.

Again these are outright lies, save for the fact that China is not interested in reducing human rights violations and corruption in Africa. If Paul Kagame decides to jail his political opponents in Rwanda for daring to be political opponents, it’s his business. If Buhari of Nigeria continues to look away while herdsmen continue to kill Nigerians, it’s his business. If local African governments illegally expropriate land for Chinese “Belt and Land projects”, China will not ask questions. Chinese rules of engagement with African countries are as ruthless, evil, and unacceptable as communism which she practices, at her polity. Incidentally, China is cooperating and partnering with African rulers and not African people.

Nevertheless, some African analysists have praised Chinese model of engagement in Africa. In 2014, Dambisa Moyo, who proposed and promoted the idea of benevolent African dictators wrote an article and argued that “China is helping Africa to develop”. She lied. Make no mistake, China is re-colonising Africa with the same instruments used by slave dealers and ex-colonialists, Technology, and surplus Capital.

What are African countries bringing to the table? Nothing. Nigeria has not signed the intra Africa Trade Agreement because in reality, it has nothing to trade, save for the raw crude oil produced for her by western multinationals. In fact Africa is a continent without value added. Africa virtually produces no finished good that anyone outside Africa wants to buy.

The above facts have prompted some analysts to reflect on the “recent” massive involvement of China in Africa’s development and to critically analyse what is going on. Where did African countries miss their way, that after slavery, colonialism, neo-colonialism she has continued to be an uncompetitive beggarly continent now being spoon fed by communist China? How did China amass all the capital she is currently using as carrot in Africa, and why are African countries unable to do same? Are Chinese loans beneficial to Africa? Is China really helping Africa, or simply adopted and adopting a new model of exploitation, mortgage, and re-colonisation of a docile un-competitive continent? Is Chinese infrastructure spending model yielding expected dividends for both parties? Is the belt and road initiative as it affects Africa, sustainable?  Why is the most endowed continent also the most patronised, the poorest in reality, and the most fed with AID?

 Something must have gone wrong.

One, may further ask again; what is missing in Africa's development process that made her vulnerable to slavery, "legitimate trade", colonial exploitation, exploitation by multinational companies, massive capital flight, and now further exploitation and humiliation by China? What is common among the present and past exploiters of Africa? What differentiates China from these external invaders/exploiters that made people like Dambisa Moyo to begin to refer to China as African Helper?

How do we begin to answer these questions?

Nevertheless, just note that Africa is the only continent today, being massively exploited by all other continents because she has refused to do what others have done.  Africa will start becoming competitive when she starts adopting, adapting, creating, and/or stealing technologies, and applying them to produce goods and services to meet her needs. Every other continent from the Americas to Asia have done it, hence have all acquired the power to dominate, intimidate, and exploit. America stole the manuscripts from UK/Europe, and if you are observant, you must have heard US screaming that China stole and is stealing her intellectual properties, today.

They will scream, but it is game nations play, and the one and only rule is do not be caught.

Africa is pejoratively being asked to concentrate in agriculture, because according to them, she has a comparative advantage in this area. At the same time, Africa is the only continent today, where hunger kills human beings. What a paradox. Africa cannot be competitive in any sector of world trade without her own technological manuscripts. As I have already indicated, she must either adapt, adopt, copy and/or steal the manuscripts in order to begin to be detected in world’s development radar, and to escape recolonization from even previously colonised countries and China.

So why is China really in Africa? China is in Africa as a direct consequence of the natural dynamics of techno-Capitalism. China is today asymmetrically engaged with Africa for no less a reason than why industrial revolution led Europe and America into Africa. So China is not in Africa because she loves or hates Africa; She is in Africa to feed the needs of techno-Capitalist industrial revolution, back home.

China is in Africa to exploit Africa's natural resources because Africa has failed to download available technology apps and manuscripts that would have helped her to extract and process her own resources. It is not just about what is happening in Africa via China, but about the revolution and change still taking place right inside China.

China overtook United States as the World's highest Co2 emitter in 2005. In 2010, while China emitted 8,286,892.0 Kt of Co2, USA emitted 5,433,056 Kt of Co2; (2,853,836 Kt) more than USA.  China needs African solid, liquid, and gas fuels, to fuel her industries back home, and not in Africa to HELP Africa. This is not rocket science. This is why China is in Africa.

Africa represents the only world's continent available and ready to be exploited because her leaders have refused to join the league of downloaders of technology apps and manuscripts, and at the same time have not created the right environment for their people to do so. China is in Africa to do to Africa what Europe and America have always done to Africa; exploit and dominate. She is simply obeying the rules of techno-capitalism- exploit, colonise and recolonise.  ( Aneke, 2014)

China is not just in Africa, she has huge presence on several intercontinental technological and Capital fronts, where it continues to manipulate currency and trade, and attempt to garner other people’s technological manuscripts. In August 2018, the US, under Defence Authorization Act, banned Chinese HUAWEI and ZTE, as they view the two Chinese telecoms as national security threats. The real tech giants operating in Africa are the goose that lay the golden eggs and are treated with soft gloves.

 China’s presence in Africa is inevitable and never because she is consciously seeking to help to develop the continent. Her techno capitalist revolution is pushing her towards greater expropriation and domination of semi-docile territories. So the push factor for her is the huge techno industries at home, and the pull factor remains the untouched available natural resources, untapped by a technology and industry barren continent. China is obeying the rules of techno-capitalist revolution.

Some African leaders are under the illusion that China would help their countries to industrialise and develop. It will not happen. No sustainable development ever comes from outside; it always emanates from within. China, USA, Australia, Europe and UK historically achieved development from within, save for the little Marshall plan. If they help you to properly develop, who will buy their finished products?

Some analysts also advise that Africa needs Chinese capital to develop. It is not true. While 52 high profile cases with Nigeria’s EFCC are financially worth more than 8 billion dollars, FOXCONN, one of the biggest Taiwan/Chinese technology giants was started with only $7,500 dollars. Africa should apply her resources to the right sectors to achieve sustainable development.

FOCAS is one of the most dangerous initiatives in Africa. It guarantees excessive borrowings for initiatives that are elusive, expensive and unsustainable. These are borrowings that guarantee the mortgaging of future of Africa. It is on record that infrastructure projects executed in Africa by the Chinese come at rates possibly three times what it should normally cost.

Latest reports indicate that between the year 2000 and 2017, China has released loans worth a total of about £125 Billion dollars to Africa. Furthermore, during the just concluded summit meeting between China and Africa (FOCAC 2018) China, again promised to commit further £60 billion dollars in loans to African countries. This is dangerous because some African countries have been reported to have defaulted on existing Chinese loans. China is not Father Christmas, so she will find a way to recover its money. The loans are actually debt traps that will trigger tighter grips on African throats, on default.

According to Nigeria’s debt management office, as at June 2018, Nigeria’s debt has risen to $73.21 billion (22 trillion naira). It is believed that a substantial part of the accumulated debt is linked to recent loans from China.

Whichever way you want to brand Chinese presence in Africa- Belt and road Initiative, Social Intervention, or FDI; one thing is clear, these interventions in Africa are aimed at profiteering and exploitation. The reason is because Africa is not on equivalent footing with any other continent with regards to capital, expertise, technology, clout, and confidence. Consequently, they are still unable to counter other continents’ carrots, aggression, arrogance, and ruthlessness. These countries like China fill huge holes and easily become the goose that lay the golden eggs.

At Chinese HOME front, China blocks and detests what she is doing in Africa. She defends itself against foreign investors via her “Renminbi FDI, which ensures that a foreign investor in China opens a dedicated deposit account to be used to pay for start-up expenses and also open another deposit account for funds derived from profits, liquidation, capital reduction, equity transfer, or early recover, to be used for reinvestment within China”.

According to Jeffery Sachs - before industrial revolution, the whole world economy was relatively at par. No part of the world was far richer than the other, and none was poor or underdeveloped in relation to others as we know it today. In other words, industrial revolution was the game changer.

“Even Karl Marx agreed that industrial revolution that transformed scientific knowledge to technology led to the creation of massive capital. Since industrial revolution in 18th century, we now know that technology tills the land, builds the roads, bridges, rails, (infrastructure); extracts and processes natural resources; and confers power to rule, dominate, exploit, and expropriate on any group, or nation that cares to embrace it. "Technological innovations often fuelled by governments, drive industrial growth and help raise living standards (Aneke: 2014).

Most nations/continents realised this simple but complex fact on time, and have adopted, adapted, downloaded and even stole all the technological apps and manuscripts emanating from industrial revolution in England. These nations further re-developed the magic of the steam engine. Africa is the only continent that has not repeated this revolution, hence uncompetitive and susceptible to exploitation.

First, nearly all the countries in Europe copied from England; then the great diffusion of technology manuscripts to USA. Asian countries including the ones normally referred to as tigers followed. They include India, Singapore, South Korea, and Hong Kong. Mr Deng Xiaoping, the reformist Chinese leader, made sure that China was not left out, hence in 1978, steered China towards a techno market economy. The result of Deng's efforts changed the world power balance. China became a political-economic monster, with huge capital ready for re-investment and exploitation of places like Africa. Chinese Industrial revolution now accords China the power to exploit and dominate and not to HELP ( Aneke, 2014).

The history of the world's political economy is the history of exploitation and domination. There is no country or continent that uses its technology generated capital to HELP another. Techno Capitalist dictionary has no HELP in it. This is not how the game works. Capital is always re-invested for greater exploitation, and the aim is always to re-invest in countries/continents that have shown hopelessness, impotence, and lack of will to help themselves.

Unfortunately, the only CAPITAL being invested by Africa in other continents are her billions of dollars stolen by her dubious leaders ( Aneke, 2014).

During the FOCAC meeting, African leaders arrived with their politicians (massive entourage) without technocrats. The Nigerian entourage were seen lining up to view master plans and models of infrastructures that their host country is getting ready to build in Nigeria. They did not arrive China with their own models. However, they have none, save for crude oil and other “rough diamonds”.

Nevertheless, barely 24 hours after the FOCAC meeting, Chinese businessmen landed in Lagos with their finished products to display to their Nigerian compradors to choose for imports from China. Whichever way you look at it China is working, winning, prospering not only at the expense of Africa, but any continent that fails to industrialise.

China is adopting a new world model for domination, expropriation, and appropriation. Gone are the days when Africans were physically enslaved and colonised. So places like China come up with a new and upgraded model of exploitation, expropriation, and appropriation, imbued in an amorphous programme called “Belt and Road Initiative”.

So what is “Belt & Road Initiative? It has been reported that this unusually named initiative is armed with about 1 trillion dollars targeting infrastructural developments beneficial to China, outside China. Chinese foreign minister tagged this initiative “a symphony of all relevant parties”.

Nevertheless, the fact is that this initiative is aimed at linking economies beyond China in a way hugely beneficial to China, via “a modern silk road”. The UK Guardian in 2017, considered it “the biggest development push in history”. The intended maritime link (called road), targets to connect Southern part of China with East Africa and the Mediterranean areas; while the “belt” attempts to connect China with Europe, via the Middle East and central Asia. This initiative has been involved in huge projects in Sri-Lanka, Cambodia, and Indonesia where China has built port, industrial park, and high-speed rail, respectively.

China consciously uses these projects to export her steel, cement, and other technologies. Inland China has already saturated hence the need for export market. A major consequence of all these is that the economy of Xinjiang is being boosted and linked to neighbouring countries.

India considers this initiative a ploy to “seize the Indian Ocean” and their current prime minister said that “China is undermining the sovereignty of other nations” (Guardian, 2017).

The only revolution still waiting to happen in the world is the African industrial revolution. This is the revolution that will keep every continent to itself, or get them to collaborate on equal basis, mutual respect, and partnership. While Africa is not being detected in the world technology radar, she is very visible in every corruption index (Aneke, 2014)

The most worrying bad news is that Africa (especially, south of the Sahara) is not making any serious efforts to endogenously create her own tech manuscripts and apps to pull her from subservience. Out of the 4,075,279 trademark applications filed in the world in 2012, not a single one emanated from Africa South of the Sahara; and out of the 2,170,132 patent applications filed in same period throughout the world, none came from Africa South of the Sahara. How will Africa find its footing in world's techno-political economy with this level of progress? (Aneke, 2014)

Until African leaders begin to download western technological applications and manuscripts, she will continue to be subservient to others. African leaders should start creating Africa's tech zones, start speeding up the catch-up and diffusion, and commence adopting, adapting tech apps and manuscripts. If they don't, even other Asian tigers like Singapore, Hong Kong, South Korea and Malaysia would start trying their hands on the sleeping giant ( Aneke, 2014).

Chinese presence in Africa is for exploitation, expropriation, and recolonization- period.

Austin Aneke is the founder of  june12post.com and Editor of UK Immigrant Magazine, and also the Author of the book- Challenges of Development in Africa.

HOW THE SYRIAN REGIME CONTROLS REFUGEE RETURN: FOUR TOOLS

https://www.clingendael.org/publication/how-syrian-regime-controls-refugee-return-four-tools

17 SEP 2018 - 17:00

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Syrian society is more socially, politically and geographically fragmented than ever before. None of the social problems that caused the 2011 protests have been resolved. Nevertheless, during recent months the Syrian regime has been trying to foster the image that Syria is entering a post-war phase in which a unified and stable Syria can flourish under President Bashar al-Assad. The fact that more than half of the country’s pre-war population is living in exile and has no part in this new social contract of sorts is conveniently omitted from the image presented of this ‘new’ Syria. These refugees will likely continue to live in precarious conditions, with few prospects for safe and voluntary return. 

In this policy brief authors Samar Batrawiand Ana Uzelac identify four tools the Syrian regime has at its disposal to control the return of refugees and Internally Displaced Persons (IDPs). It is the second in a series that explores practical considerations of potential European involvement in specific areas of reconstruction in Assad-ruled Syria (the first policy brief on urban reconstruction can be found here.) The brief puts these tools in the perspective of the broader conflict dynamics affecting refugees and IDPs and identifies implications for Western European policy. It concludes that rather than resigning to the limited possibilities for structural political engagement in Syria, Western European policymakers should invest in ways to mitigate the material and political dispossession of more than half of Syria’s pre-war population.

CHINA’S RISING GLOBAL INVOLVEMENT: A GEOPOLITICAL SECURITY RISK?

https://www.clingendael.org/news/chinas-rising-global-involvement-geopolitical-security-risk


17 SEP 2018 - 22:45

 

China’s increasing involvement on the global political stage has not gone unnoticed. The economic superpower is gaining influence, and not just in its direct neighbourhood, but across the globe. By providing loans for infrastructural projects, China gains access to essential resources and binds foreign nations in political ties. Additionally, China is making major military moves, especially in strengthening the capacity of its air force and its marine. So how should we view this rise of China from a security perspective? What are the implications of China’s growing sphere of influence? The answer to these questions and others will be discussed during Clingendael’s Training Course on International Security.

Want to know more about China on the world stage? Join our Course International Security
China’s increased presence can be easily seen in Asia and Africa, but also increasingly in Europe. On first sight, this appears to be a win-win situation: China develops infrastructure in (South) Eastern Europe to facilitate the access of Chinese companies to the European market while the European countries receive support in their efforts to further develop their countries. But is the win-win actually an even win for all parties involved?

Recently, China opened their first overseas military base in Djibouti, close to the American military base. The US perceives this development as a major threat to their strategic interests. The US has even accused China of positioning their laser weapons towards American aircrafts. Earlier this year, the US published their National Defence Strategy listing China as one of the challenges to American national security interests. 

Moreover, China has started to heavily invest in Eastern Europe, namely in the Visegrad countries (Czech Republic, Hungary, Poland and Slovakia). One of China’s top diplomats called these states 'the most dynamic force' in the European Union. Some Western European states are worried that China is trying to create a divide within the Union by courting Eastern European countries, especially those that have received criticism from Brussel regarding immigration and good governance issues. 

Are you curious about the implications of the rise of China for international or European security and stability? Are you interested in other security issues and dilemma’s in general? If so, the Course International Security is meant for you.

What will you learn?
The Course International Security will take place from 24 October-2 November 2018 at the Clingendael Institute and will address the most important security trends of today. Amongst others, China-expert and Senior Research Associate Dr. Ingrid d’Hooghe will discuss the security implications of China’s Belt and Road Initiative. Additionally, you will analyse and discuss a wide variety of security-related topics, such as cyberwarfare, terrorism, the Russian threat, the future of Trans-Atlantic cooperation, the ring of instability surrounding Europe and (un)intended consequences of peace missions. At the end of the course you will have developed a better understanding of the most urgent contemporary security risks.

CONTACT(S)

Sharon Beijer

Training and Research Fellow

MODERNIZING CONVENTIONAL ARMS CONTROL IN THE EURO-ATLANTIC REGION

18 SEP 2018 - 12:54

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Europe’s conventional arms control architecture requires a thorough makeover. Today’s arms control and confidence-building arrangements are based on two legally binding pillars: the Conventional Armed Forces Europe (CFE) Treaty of 1990 and the Open Skies Treaty of 1992. The Vienna Document on Confidence- and Security-Building Measures (CSBMs), originally adopted in 1990 and most recently updated in 2011, is politically binding and aims to increase the transparency of military postures and activities in Europe. Today, these arrangements are either blocked or in dire need of modernization.

Political initiatives are required to start a new East-West détente and to avoid the steady escalation of bloc-to-bloc conflict and the hardening of positions. These initiatives should clarify what sort of regulatory framework and institutional venue will work best to modernize arms control, what the scope should be in terms of territory and capabilities, and how much of the existing arrangements (notably the CFE) can still be used. 

In this report author Peter van Ham presents a number of key questions regarding a future arms control regime:
it should reflect today's geostrategic realities, acknowledge growing distrust between Russia and the West, and make a direct impact on military stability;

there should be sufficient incentives for Russian engagement;there should be a status-neutral approach to conflict areas and a 'bloc-to-bloc (i.e. NATO-Russia) approach;a re-evaluation should be made on whether the focus should still be on force levels and fixed and verifiable territorial ceilings;it should be decided what military systems and capabilities should be included in new arms control arrangements and on the organization of transparency;a decision needs to be made regarding the scope of future arms control arrangements and on if there still should be a 'firewall' between conventional and nuclear arms.

The following elements are widely considered essential to any future arms control regime:
 

numerical limits should not be aggregated into any sort of 'bloc';transparency and verification have to be 'reinvented';a consultative body should be established in order to manage a future new agreement and to resolve any emerging ambiguity and conflicts.

September 20, 2018

LONGREAD: the silicon Silk Road

21 Sep 2018

arhan Faruqui

Group Executive International, ANZ

Just over two thousand years ago, a Chinese government representative headed west, exploring unknown lands, building alliances and finding new markets for trade.

That official, Zhāng Qiān, is credited with charting the legendary route known today as the Silk Road. He laid the foundations for a tradingnetwork that profoundly influenced the history of the world. 

"Trade, finance and logistics have shaped China as much as philosophers, warriors and emperors.”

Not long after Zhāng Qiān’s seminal journey, China introduced the world to paper. We well know the profound impact of paper on the capture and transmission of knowledge across civilisations but it was also an invention that had a profound influence on the evolution of the global trade-finance-logistics ecosystem.

Inventions and trade went hand-in-hand in ancient China. During the Song dynasty, for example, two developments transformed China into a mercantile nation. With the invention of the compass and the emergence of paper money, transportation and finance expanded China’s ambitious trading ambitions.

Trade, finance and logistics have shaped China as much as philosophers, warriors and emperors.

This chapter of China’s rich history reminds us the opportunities before us today are similar to the adventures faced by our counterparts over the millennia. It’s an ageless question for business: how can we find new markets and how do we get there?

Just as ageless is the essence of how successful businesses work. They value partnerships, they seek alliances. They constantly strive for new and better ways to sell and move their wares, just as we continue to explore new technology to improve the efficiency of global trade.

But we are now moving beyond the age of paper. As we used to track, measure and record everything on paper, we are now beginning to create and store trillions of terabytes of information about trade, finance and logistics digitally.

It is little coincidence that banking in China, and particularly the invention of paper money, was born in the Western Triangle along with the charting of the Silk Road.

Early banks facilitated payments, allowing money to be transferred via book entries in branches.  Trade was enabled by road, river and sea connections, allowing merchants to bring fortune to a city.

We are looking to the future but it’s important to consider the legacy of the past - and in terms of documentation, across both banking and logistics, not much fundamentally changed in the last 1,000 years. Today it needs to. Paper-based documentation is one legacy we can do without.

At ANZ, we are well advanced in helping our clients and partners make this transition. For example, the distributed ledger technology (DLT), the basis of block chain, has a key role. Take food safety, a huge concern. We teamed up with Cisco to use DLT to enable Australian farmers to sell their grain to merchants in Asia.

The DLT transaction provided an efficient, documented, verified, and trusted process, removing concerns about the quality and origin of the grain.  Similarly, DLT can verify and guarantee that goods shipped from here in Chongqing are certified in terms of quality and authenticity.

You can see how this would enrich and preserve Chongqing’s brand as a leading manufacturing and logistics hub globally.

The People’s Republic of China (PRC) plans to build a ‘digital Silk Road’ along the same corridors as its Belt and Road Initiative (BRI). In an announcement earlier this year, President Xi Jinping said this would involve helping other countries build their digital infrastructure and internet security to “create a community of common destiny in cyberspace”.

Source: CSIS

Despite its enormous value, the trading routes of the old Silk Road paved over centuries have become beset with processes and systems that are cumbersome, inefficient, time-consuming and riddled with vulnerabilities.   The challenge then is to facilitate a vast ecosystem stretching halfway across the world, with every participant able to operate in a seamless, standardised, secure and hyper-efficient environment.

The paper of yesteryear is the digital of today

Technological change is accelerating. After four decades of exponential increases, we are now doubling an already immense amount of processing power in every two-year period, leading to astonishing leaps forward in technological capabilities.

Add to this the mega trends of globalisation and changing demographics and you can already see the fundamental nature of trade is structurally transformed.

It is little wonder China’s largest logistics investors, as well as the largest payments providers, are actually young tech giants, like Alibaba and Tencent, with a business model centered around data from their e-commerce core.

If we take the lead from these disruptors, it’s clear ‘old industry’ players are likely collateral damage as the new trade giants provide a greater, more efficient, user experience.

Data is their vehicle for creating winning experiences.

Source: TeleGeography

It’s all about the data 

It may be all about data but there is good data and poor data. And the latter can exact a hefty price – as much as 30 per cent of operating budgets.

Experts say there are more than 20 billion documents still in circulation supporting global trade. This is clearly unsustainable.

Digitising paper is how we’ll capture the information already out there but the quantum leap also happening is data nativity –  that means digital processes from the start. 

The monetary authorities in China, Hong Kong and Singapore, working with financial institutions such as ANZ, are building trade platforms to do just that. Using new technology such as blockchain, these platforms will modernise how we oversee, facilitate and expedite trade and finance.

The partners in one project – HKMA, ANZ, Bank of China, The Bank of East Asia, DBS Bank, Hang Seng Bank, HSBC, and Standard Chartered - have also defined a business model and governance framework to advance the digitisation of physical and financial trade supply chains.

Now in the production phase, the platform is designed to digitise trade documents and automate trade finance processes, reducing risks while increasing the banking industry’s financing capabilities by leveraging DLT’s unique features.

MSA is building a National Trade Platform to replace its earlier trade and logistics portals. The National Trade Portal (NTP) will deliver ‘industry-level transformation’ via a trade and logistics IT ecosystem. It will connect businesses, community systems and platforms, and government systems.

The project is estimated to generate SGD6007 million of man-hour savings each year for Singapore firms while helping SMEs trim costs and streamline processes tied to trade.

To realise these outcomes, Singapore is encouraging banks to connect to the platform, even funding their integration.  

These authorities aren’t just looking at their own patches – they’ve already put the building blocks in place for a multinational Connectivity Network that will go live in early 2019 in the Hong Kong – Singapore corridor.

This amazing initiative will pave the way for a single, smart, connected trade finance network covering half the planet - a silicon road as much as a silk road.

Smart Cities

We shouldn’t forget trade takes place between people, companies and towns and cities. The physical infrastructure needs to transform as well.

Efficient resource management is one of the key pillars of a smart city, from using green technology such as renewable energy, self-powered vehicles and machines, to sustainable food and other ecosystems.  To achieve green and smart cities, pollution, air quality, traffic congestion, and living standards will need to be addressed alongside logistics modernisation, advanced supply chain management systems, intelligent warehousing, and autonomous vehicles.

Obviously this comes with a price: According to the World Economic Forum, China will need USD6.4 trillion to USD9.4 trillion to finance its transition to a greener economy, with more than RMB73 billion for the new smart cities.

For Chongqing, already a designated smart city, sustainability will feature heavily as it furthers its ambitions to become a global logistics hub. Logistics and the other industries identified for growth require significant energy and water resources, which creates opportunities for investing in alternative sources such as wind energy.

In the global logistics industry, the winning cities will be efficient and fast. They will be cost-competitive and easy to use. They will replace paper with digital data to enable smart technologies and verified, visible end-to-end processes. And they will provide secure and transparent connections to other parts of the world. None of these things works in isolation, each needs the other for the whole ecosystem to function at its full potential.

We are moving into a fast- changing world fueled by data and to win we need to build a data capability and culture that is adaptive, rather than try to predict the future.

Then - like the merchants of two thousand years ago - we can help shape the future. 

This is an excerpt from the research paper entitled “Getting Chongqing from logistics to a digital supply ecosystem” presented by Farhan Faruqui, Group Executive, International at ANZ to the Chongqing Mayor’s International Economic Advisory Council in China on September 16, 2018. This is the 11th year ANZ participated at the annual meeting and the theme this year was “Chongqing’s pursuit of smart development: Strategies and Initiatives”.   

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

EconomyAsia Pacific






https://bluenotes.anz.com/posts/2018/09/the-silicone-silk-road

The Tehran Summit and Iran’s Regional Ambitions


By Dr. Doron ItzchakovSeptember 20, 2018

Russia-Turkey-Iran Trilateral Summit in Tehran, September 7, 2018, photo via Office of the President of the Russian Federation

BESA Center Perspectives No. 954, September 20, 2018

EXECUTIVE SUMMARY: The recent Russian-Turkish-Iranian summit in Tehran underscored the Islamic Republic’s determination to take an active and central part in the future reconstruction of Syria so as to promote a range of civilian and security interests that are bound to work to Israel’s detriment.

On September 7, the presidents of Russia, Turkey, and Iran met in Tehran in an attempt to reach understandings regarding Syria’s future in general, and the imminent offensive in the Idlib district – the last bastion of anti-Assad regime rebels – in particular. Despite the outward display of unity and the shared desire to exclude Washington from the decision-making process on Syria’s future so as to make the Syrian agenda their exclusive domain, the differences between the three parties were inevitable. What dictated the tone was the attempt by each party to promote its own disparate interests.

Take, for example, the three leaders’ use of the term “terrorist.” While Putin and Rouhani referred to the entire Syrian opposition as terrorists, Erdoğan confined this term to the Kurds and the Sunni jihadist organizations such as Jabhat al-Nusra. Likewise, while Putin’s speech focused on the normalization of the situation and the return of refugees under a UN umbrella, Erdoğan demanded an immediate ceasefire in Idlib to prevent a bloodbath by the Assad regime. For his part, Rouhani devoted his speech to attacking the US and Israel, criticizing the former as an illegal invader of Syria and decrying Israel as an illegitimate entity that inflamed regional tensions and demanding – tongue in cheek – the removal of Israeli forces from the Syrian hemisphere. No less important, the Iranian president expressed the Islamic Republic’s strong desire to see Syria’s reconstruction after the fighting ended.

Viewed from Tehran’s vantage point, cooperation with Russia and Turkey, despite their substantial differences, is a necessary step for realizing its regional ambitions. Keenly aware of Moscow’s centrality in determining Syria’s political, economic, and military agenda, Iran invests considerable effort in persuading the Kremlin to acquiesce in its continued presence in the war-torn country. Furthermore, Russia is not only perceived as a lifeline for Iran’s future presence in Syria but also as an essential component in preserving the 2015 nuclear agreement after the US withdrawal from the treaty. In addition, Tehran puts much effort into raising foreign investment and views China and Russia as important substitutes for the European markets, which are hesitant to challenge the Trump administration’s re-imposed sanctions. It is true that economic factors often put Tehran and Moscow on opposite sides of the divide, such as competition over Syrian reconstruction contracts and in the Asian and Far Eastern energy markets. But Tehran seems well aware of Moscow’s superior position and is unlikely to rock the boat in these respects.

Cooperation with Turkey is similarly necessary for the realization of the Islamic Republic’s regional ambitions. While Ankara and Tehran are at odds over the legitimacy of the Assad regime and compete for leadership of the Muslim world, Turkey offers a vital channel for circumventing the US sanctions. Moreover, Iran places great hopes on Turkey as a natural gas supply route to European markets via the Tabriz-Ankara pipeline. The two states have collaborated in the past over the Kurdish issue, most recently in their joint campaign against the September 2017 referendum on the independence of Iraqi Kurdistan.

As noted above, in his speech at the summit Rouhani stressed Iran’s desire to take an active part in the Syrian reconstruction, something that had already been demonstrated at the late August signing of an agreement by Iranian Defense Minister Amir Khatami and his Syrian counterpart. Why is Tehran prepared to invest billions of dollars in reconstructing Syria at a time when it is undergoing a sharp economic upheaval? The answer has to do with both domestic and strategic considerations.

On the strategic level, Tehran strives to transform Syria into a protectorate, similar to the model it successfully implemented in post-Saddam Iraq and in Lebanon since late 2006. This model comprises four overlapping circles:

Influence through “soft power.”The formation of proxy armed militias from among recruited volunteers both at home and abroad.Direct military intervention by the Islamic Revolutionary Guard Corps (IRGC), and, in the Syrian case, by the Iranian army as well.Civilian and military reconstruction that enables Tehran to position itself as a supportive factor and, in consequence, to influence the political agenda from within.

Syria’s reconstruction is at the top of Tehran’s list of priorities for the simple reason that this will lead to the establishment of security and intelligence infrastructures that will enable the use of Syrian territory as a front base for Iranian operations.

On the domestic level, Tehran’s interest in the Syrian reconstruction is a corollary of the internal power struggle within the Islamic regime, notably the desire of the IRGC commanders to consolidate their influence on the various aspects of the Iranian national agenda. Dating back to the country’s recovery from the Iran-Iraq War (1980-88), the organization’s penetration of the economic, energy, industry, and agricultural spheres has been deep and pervasive. This is illustrated inter alia by its control of the industrial conglomerate Khatim al-Anbiya (“Seal of the prophets”), which serves as the exclusive concessionaire for most of Iran’s engineering projects – from paving roads, to developing oil and gas fields, to constructing dams. Its survival and expansion of influence are the top priorities of the IRGC, which seems to be (justifiably) looking forward to the day when the next Supreme Leader is chosen. It is clear that the wellbeing of ordinary Iranians is not at the top of the organization’s agenda, which is also why large sums of money are diverted from Iran to regional adventures.

Iran’s consolidation in Syria should therefore be viewed in the context of its wider regional exertions, especially in those countries bordering on Israel. It is not by chance that Tehran is investing great efforts to establish a land corridor from its border to the Mediterranean Sea. While the IRGC has been forced to scale back some of its activities due to a series of military attacks, some of which were attributed to Israel, this should be seen as a tactical rather than a strategic change.

At present, Iran’s efforts to establish itself in Syria are expressed in an attempt to assimilate into the Syrian army in order to disguise its presence and help preserve the Assad regime. Judging by the Iraqi experience, however, Tehran is likely to incorporate the fighters of its Syria-based proxy Shiite militias into the Syrian civilian fabric, thus tilting the demographic balance between the country’s Sunni and Shiite communities.

All in all, while foreign infiltration of embattled countries is not a new phenomenon in the Middle East (e.g., Egypt’s prolonged Yemen intervention in the 1960s, Syria’s intervention in the Lebanese civil war), the recent Arab upheavals, especially the Syrian civil war, have been exploited by Tehran to advance its ambitions for regional hegemony. This policy directly affects the economic wellbeing of ordinary Iranians, who give little credence to the regime’s attempt to ascribe Iran’s growing economic malaise to external factors. Hence the spreading demonstrations throughout the country over the past few months.

This reality seems to be fully recognized by the IRGC, as evidenced by its massive investment in the formation of a national loyalist army that will work to secure the organization’s influence and advance its interests. This in turn means that, in Iranian eyes, the significance of Syria’s reconstruction extends way beyond its economic gains, as it may lay the groundwork for the creation of a military-strategic infrastructure that will serve as a springboard for anti-Israel attacks a la Lebanon.

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Dr. Doron Itzchakov is a research associate at the Begin-Sadat Center for Strategic Studies and at the Alliance Center for Iranian Studies at Tel Aviv University.

BESA Center Perspectives Papers are published through the generosity of the Greg Rosshandler Family.



https://besacenter.org/perspectives-papers/russia-turkey-iran-summit/

Battle with Fate: Russia, Geography, and the Historical Cycle

By Emil AvdalianiSeptember 20, 2018

Putin image by Victoria Borodinova via Pixabay

BESA Center Perspectives Paper No. 953, September 20, 2018

EXECUTIVE SUMMARY: Russia under Putin falls neatly into the Russian historical cycle. When the old state is in decline, chaos ensues, and a new, powerful leader emerges to rebuild Russia. There are plenty of comparisons from Russian history that echo Putin’s rise and success – but there are crucial differences, too, which help explain his inability to transform Russia into a truly global power.

Historical comparisons, when made judiciously, can help analyze current political realities. Russian history contains cycles that recur over centuries.

The cycle runs this way: Russia sinks into chaos, rises from that chaos, returns as a regional and sometimes even global power, aspires to consolidate its gains through strongman rule and the addition of neighboring territories, and then collapses. Then the cycle begins anew.

One of the constants of Russia’s fateful historical cycle is its geography. Russia is vast, spanning almost the entire northern Eurasian landmass. However, far more than half the country is non-navigable (major rivers empty into the Northern Ocean). The climate is so harsh that it hinders any meaningful agricultural work beyond the Ural Mountains.

Russia’s heartland runs from St. Petersburg and the Finnish border southward to the Black and Caspian Seas. This heartland is essentially a series of plains that are vulnerable from all sides. Indeed, Mongol and other nomad invasions from the east in the Middle Ages, as well as European conquerors’ onslaughts from the west in the modern period, have forced Russia to try to expand its borders and create buffer zones between its heartland and rival regional powers in Europe and the Middle East.

To contain this immense geographic sphere, Russian leaders have had to expend enormous financial, military, and political resources. Moscow usually centralized control over its heartland and the surrounding territories, subsidizing the economies of most of the incorporated territories while managing their diverse populations. This drive to expand in order to survive, while successful for short periods, has proven unsustainable in the long run.

Historical cycles in Russia usually begin with a national catastrophe. Sometimes it is a result of internal havoc; sometimes it follows a foreign threat. The end result has always been the dissolution of the existing order in the ensuing chaos. After the collapse comes resurrection. The system that governed during the crisis is usually transformed into something new on the appearance of a strong figure. This new leader creates a stable system and reoccupies both the Russian heartland and the borderlands. New paradigms of a unified Russian space, where Russians and non-Russians would feel comfortable, are created to heighten a sense of national identity.

Three eras in Russian history demonstrate this recurrent pattern, which is rooted in Russia’s geography. This pattern can be seen in early 21st century Russia under the rule of Vladimir Putin.

In the late 17th to early 18th century, Russia experienced a long period of chaos. The old Rurik dynasty’s rule was in a shambles and the entire state structure was in deep trouble. The army, the administration, and links of personal fidelity were weakened or totally destroyed.

The chaos lasted a decade. The result was a restructuring: a new dynasty headed by Mikhail I the Romanov. A new project of the Russian Empire (in all but in name) was born. The new dynasty set out to incorporate borderlands and compete with regional powers. Thus ended the famous Time of Troubles.

In the 20th century, the Russian Revolution caused the downfall of the Romanov dynasty and ushered in a period of civil war and chaos. The Bolsheviks managed to build a powerful base on which to recreate a fallen Russian Empire, albeit on a different ideological basis. Lenin and Stalin set out to reincorporate borderlands and reshape ethnic understanding within the newly created Soviet Union. Control over large territories then came under stress as large resources were spent on exercising control rather than on producing enough for the population. The result was an overextension of Soviet power.

Another good example of this was the fall of the Soviet Union and the ensuing military and social chaos, topped by the 1998 financial crisis. Attempts to transition to a market economy only led to radical privatizations and the rise of oligarchs – which in turn resulted in a nearly 40% decline in GDP. Numerous parties emerged with very different agendas. The security services and military were weakened while the Russian people struggled to find a new identity around which to unite. Secession attempts in some of Russia’s regions led to war, most notably in Chechnya.

As borderlands again rioted against the Russian heartland, so did some territories of Russia proper. It was to be expected that a Russian resurgence of some sort would happen under a new figure (similar to Mikhail I or Lenin or Stalin). Sure enough, under Vladimir Putin, prosperity set in.

Russia is strong militarily. Its economy, although under great duress from internal as well as foreign factors, is still in much better shape than it was in the 1990s. Putin, like his predecessors, set out to regain borderlands. War with Georgia, conflict in Ukraine, support for secessionist regimes across the former Soviet Union as well as the unveiling of the Eurasian Economic Union – these were some of his major moves to reshape Russia and return it to the club of major global powers.

Thus the rise of Putin, and some of his government’s successes, reflect the Russian historical cycle. He plays the role of savior on a par with Mikhail I and Lenin. However, although historical comparisons can be made, one must be careful not to overestimate some similarities.

If Putin’s rule directly followed the pattern, Russia should now be very close to military and economic preeminence, as it was under the first Romanov and Soviet leaders. It is true that he is popular and unlikely to face a real challenger. But Putin’s rule shows fundamental weaknesses. Like his predecessors, he is faced with Russia’s perennial problem – geography. But in Putin’s case, the geographic challenge is more problematic. NATO and the EU are expanding their influence in Eastern Europe and the former Soviet space. China is growing its military and economic power in Central Asia (yet another part of Moscow’s huge backyard). Economic problems are serious, and western resolve to maintain and even increase sanctions against Russia is not abating.

Moreover, unlike the Romanovs or the Soviets, the Putin government does not possess an ideological tool. Putin’s Eurasian concept might be tempting, but it has no real economic essence. Too many important states across the post-Soviet space do not want to join the Eurasian Economic Union.

Historical parallels work, but they fail, too. Putin falls into the centuries-long Russian historical cycle of the rise and fall of the state, but there are crucial differences that will bar his government from transforming the country into a real global power.

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Emil Avdaliani teaches history and international relations at Tbilisi State University and Ilia State University. He has worked for various international consulting companies and currently publishes articles focused on military and political developments across the former Soviet space.

BESA Center Perspectives Papers are published through the generosity of the Greg Rosshandler Family

Is China’s infrastructure boom past its peak?

https://www.economist.com/china/2018/09/22/is-chinas-infrastructure-boom-past-its-peak


A sharp slowdown in investment this year points to a more subdued future

 Print edition | China

Sep 20th 2018| NANTONG

CHINA does not do infrastructure by half measures. It has the world’s longest networks of motorway and high-speed rail (which Hong Kong joins on September 23rd, see article). It has the tallest bridge as well as the longest. It is building nearly ten airports a year, more than any other country. It has the most powerful hydroelectric dam, the biggest wind farm and as much coal power as the rest of the world combined.

But the infrastructure boom has lost steam this year. After expanding at a double-digit pace for much of the past three decades, investment in it has slowed sharply. Since May spending on projects ranging from railways to power plants has fallen compared with a year earlier, the longest weak patch on record.

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The question is whether this is a blip or a fundamental change. Some analysts argue that the decline in spending is only short-term, related to the government’s efforts to rein in debt. As the trade war with America rumbles on (see article), they expect that China will try to boost the economy with another burst of infrastructure-building. But many others believe that even if this were to be attempted, it would not work. Their argument is not that investment should stop. China still usefully spends more in two months on such things as building roads and ports and laying cables than India manages in an entire year. Rather, they say, building at an even greater rate would risk outstripping demand. It is time to find other ways of fuelling growth.

The recent infrastructure-spending slump certainly relates to efforts to curb the country’s massive build-up of local-government debt. Many cities had been borrowing heavily, often using murky channels, to build flashy transport systems. A crackdown on shadow banking has left them short of funds. The central government has also targeted spendthrifts. Last year it ordered a halt to the construction of a subway in Baotou, a city in Inner Mongolia, a northern province where government debts are sky high.

But the slowdown is not just because of a short-term squeeze. Chinese officials are also becoming more conservative in their planning. In July the government decreed tough new standards for subway systems. Cities must have a population of at least 3m to qualify for one. They must also have their debts under control, and cover at least 40% of building costs from their own revenues.

In recent weeks big cities with much healthier economies than Baotou’s have scaled back their subway plans, too. One example is Chengdu, the booming capital of Sichuan province, which has produced a revised blueprint for its transport system. It features six fewer subway lines than had previously been planned.

Nantong, a city about 150km north of Shanghai, demonstrates both China’s prowess in infrastructure and what seems to be a newfound restraint. Builders are close to completing a cable-stayed bridge (pictured) that will be the longest of its type in the world. Yet at the same time Nantong has tempered its ambitions. Its urban centre is home to 2m people, spread over anarea larger than London, below the required population for a subway system. It was already building its first line when the rules came into effect, and was allowed to continue with that and a second one.

But even without the new edict, Nantong had been having second thoughts. The city’s traffic already flows well. Zhong Qingwen says she is typical in getting from her home to her office, at a medical-testing company, in less than 20 minutes by bus. The city had been planning eight urban-rail lines. Their combined length of 330km would have surpassed that of Tokyo’s subway. Now the government is moving more slowly. The first line will not be finished until 2022, four years later than the original target. Beyond the second one, further expansion is off the table for now.

One reason why many cities had such big dreams was because they expected a white-hot economy and a rapid influx of migrants from the countryside. Rising demand had seemed more or less assured. But both economic growth and the pace of urbanisation are tailing off. Spending on infrastructure still accounts for a fifth of China’s annual output, far above the level of most other countries. Liu Shijin, a member of the central bank’s monetary policy committee, said at a conference this month that the economic benefits of this were waning fast. Instead, he suggested, the government should spend more on health care and welfare.

Mr Liu may well be right. China’s stock of government-invested fixed assets—a proxy for infrastructure—is already about the same per person as Germany’s or Britain’s, according to IMF data that use exchange rates adjusted for purchasing power. The stock is much greater than in other countries at China’s income level. It is well behind America’s, but it would have caught up within a decade had China continued spending on infrastructure at its previous feverish rate (see chart). Even the rosiest projections of China’s infrastructure needs suggest that demand will slacken. Julian Evans-Pritchard of Capital Economics, a London-based research firm, says investment growth will slow to low single digits.

Yet the current slowdown has gone too far for the government. After a meeting on September 18th China’s cabinet called for more “efficient” investment. Having slammed on the brakes to control debt, the central government is now making it easier for fiscally responsible localities to spend on infrastructure. It has resumed approvals of some large projects. It has also encouraged banks to buy local-government bonds, including ones earmarked for infrastructure spending.

As a result, the flow of money into subways, bridges and the like may increase slightly, says Yao Wei of Société Générale, a French bank. But Ms Yao reckons that the voices for prudence will win out, even if the trade war with America begins to take a bigger toll on the economy. Unlike in the past, China will, she predicts, play it safe on debt and let growth slide.

One dividend from China’s past infrastructure-building sprees has been the expertise it has gained in construction work. In Nantong a site managed by the China Railway Group, a state-owned company, is immaculate. Workers stand in front of a body-length mirror to check their safety gear. Cranes lay down a latticework of metal poles nearby to reinforce the terrain. A sign declares that it is a “100-year project”—a subway that should long serve the city. After a mad rush to build, China is also learning to live within its means.

This article appeared in the China section of the print edition under the headline "Life in a slower lane"

September 24 escalation forebodes a long and bloody conflict — trade war, day 77

Supchina.com

September 24 escalation forebodes a long and bloody conflict — trade war, day 77

We’ve been calling it a trade war for a while. “Day 1,” by our counting, was marked by the first tit-for-tat round of tariffs on $34 billion worth of goods on July 6. The amount of goods tariffed then ratched up again on August 23, to $50 billion on each side.

But now that we are four days away from the amount of tariffed goods more than tripling, with taxes to be imposed on nearly half of all traded goods between the U.S. and China, the Economist is saying, “America and China are in a proper trade war” (emphasis added).

The Economist shares the bleak outlook of many other English-language media outlets, and notes that the Trump administration’s escalating trade war with China coincides with the U.S. undercutting the World Trade Organization by “blocking the appointment of judges to the body’s court of appeals.” Starting in October, “only three will be left — the minimum needed to rule on a case.”The Economist concludes that “without the multilateral rules-based system to contain the conflict, the trade war between China and America could get much bloodier.”

More signs it will get bloodier:

No exemptions will be made to the latest U.S. tariffs, Bloomberg reports(porous paywall), contrasting with previous rounds that allowed for companies to apply for leniency.Why? Because shifting supply chains away from China is a major goal of the Trump administration, it is becoming clear. Bloomberg says that officials have built in the September 24 tariffs to start at a rate of 10 percent, then rise to 25 after three months, to give companies time to shift away from Chinese factories.But “companies cannot shift their supply chains on a dime,” Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, complained, adding, “It takes months, if not years, to find new suppliers who can meet all of a retailer’s sourcing requirements.”Nevertheless, Robert Lighthizer at the U.S. Trade Representative, and other officials, are continuing to force a radical change in U.S.-China trade relations.A Bloomberg profile of Lighthizerdescribes him (porous paywall) as an “ascending figure in the Trump administration,” who is “also a longtime China hawk who has spent years preparing for an economic war with Beijing.”“Any deal where Lighthizer is not responsible for the architecture doesn’t see the light of the day,” Mexico’s economy minister told Bloomberg, illustrating why China hesitated to — and probably won’t — agree to last-minute negotiations with Steven Mnuchin at the Treasury Department.A few weeks into the trade war,Lighthizer told the U.S. senate, “We’re going to have a problem with China that’s going to go on for years.”Jack Ma, the Alibaba co-founder who recently agreed with Lighthizer that the trade conflict will last for years — as much as “20 years,” he said — backed down today from a silly promise he made to Trump back in January 2017 that he would create 1 million jobs in the U.S.Ma told Xinhua (in Chinese) that “The promise was made on the premise of friendly US-China partnership and rational trade relations...that premise no longer exists today, so our promise cannot be fulfilled.”

For more trade war news and analysis, please click through to SupChina.

—Lucas Niewenhuis



Upcoming China events — London, Shanghai, Beijing, and D.C.

Supchina.com



These are worth your time if you’re in the right place:

The China Defense and Security Conference, the Jamestown Foundation’s annual China security nerd-fest, takes place October 11, at the Carnegie Endowment for International Peace, Washington, D.C.

China Town Hall, an event on October 9 organized by the National Committee on U.S.-China Relations, will feature a national webinar with former Secretary of State Condoleezza Rice, paired with many dozens of local events through the U.S. and beyond.

34 years among the birds of China:New species and new threats” is the title of a talk by Swedish ornithologist and professor Per Alstrom on September 29 at the Bookworm in Beijing.

The Scribblers Mafia: Radical ideologues in Mao’s coalition,” a seminar with Professor Victor Shih, on September 25 at SOAS, London.

Fine art photography: Shanghai is taking “center stage in China's burgeoning photography scene,” says CNN, reviewing Photofairs Shanghai at the Shanghai Exhibition Center from September 21 to 23.

—Jeremy Goldkorn

Pakistan raises treatment of Uyghurs with China

Supchina.com


The Nation, a respected Pakistani newspaper, has this noteworthy report:

Pakistan has demanded China to soften restrictions on Chinese Muslims living in Xinjiang province. Federal Minister Pir Noorul Haq Qadri while meeting Chinese Ambassador Yao Jing said that strict regulations and laws fuel extremism and in order to curb intolerance and promote religious harmony China should deal with patience.

The minister proposed that Pakistani religious scholars can visit the troubled region and can play their role in ending extremist ideology and promote moderate thinking.

The Chinese ambassador promised that his government will soon facilitate Pakistani delegation of religious scholars to visit Xinjiang province.


The article also notes that earlier this year, the Gilgit-Baltistan Legislative Assembly “through a unanimous resolution urged the federal government to take urgent steps for the release of over 50 Chinese wives of Gilgit-Baltistan men detained in Xinjiang.”

This would seem to be the first official response from a Muslim majority country to growing global concerns about the situation in Xinjiang.

Other new writing on the worsening situation in Xinjiang:

Calls grow for U.N. action on China's Muslim 're-education camps' / Reuters
“France and Germany have called on China to close ‘re-education camps’ in its restive far western region of Xinjiang.”Time for China scholars to speak up on rights abuses in Xinjiang / SCMP
An open letter by Kevin Carrico of Macquarie University and godfather of China legal studies Jerome A. Cohen urging scholars and others to sign up for their Xinjiang Initiative.Editorial: Will Donald Trump stand up to China? / NYT (porous paywall)
“He’s cracking down over trade, but it’s urgent that he protest Beijing’s human rights abuses as well.”China says booming tourism shows everything is fine in crackdown-hit Xinjiang / Daily Telegraph

And then they came for the tech research executives

Supchina.com


TechNode reports that the “disappearance of high-level officers at China’s leading research, statistics, and consulting group iResearch is causing a stir on Chinese social media.”

Company president Henry Yang (Yang Weiqing 杨伟庆) and Chief Technical Officer Jason Hao (Hao Xincheng 郝欣诚) are apparently incommunicado.iResearch responded to the social media rumors with an announcement that “some managing officers” are “assisting investigation performed by some relevant departments” but that the company is operating normally.A possible reason for the disappearance of the executives cited by TechNode — “recent concerns about fabricating market data, especially in TV ratings.”

I would add that many tech firms use iResearch data in their pitch materials to attract investment, and in their prospectuses and IPO filings. I imagine there’s a lot government investigators could potentially ask Yang and Hao about.

A final point: Like the disappearance of actress Fan Bingbing 范冰冰, there is no official explanation for Yang and Hao’s absence. They’ve simply vanished from public view without a word.

Shortage of Humanitarian Funding Threatens the Welfare and Food Security of Thousands of Vulnerable Displaced Iraqis and Syrian Refugees

Kurdistan Regional Government

Representation in the United States

Washington, DC

Shortage of Humanitarian Funding Threatens the Welfare and Food Security of
Thousands of Vulnerable Displaced Iraqis and Syrian Refugees

Statement from the KRG's Joint Crisis Coordination Centre
18 September 2018

The Syrian civil war since 2011, the invasion of ISIS in 2014 and Iraqi military operations have forced millions of people to flee their homes and seek safety in the Kurdistan Region of Iraq (KRI). Currently, the Kurdistan Region hosts approximately 245,000 Syrian refugees and 1.2 million Iraqi internally displaced people. Despite the declaration of victory over ISIS in 2017, insecurity and hardship continues to compel civilians to seek safety in camps established in the Kurdistan Region. New displacements have outnumbered the voluntary return of IDP families. During the first eight months of 2018 alone, the KRI has received over 15,000 IDPs from Ninewa and other provinces. These new displacements are adding to the already heavy burden and exhausted capacity of the KRG and partners. 

The humanitarian crisis in Syria and Iraq has established a protracted displacement situation that is likely to continue for years in the absence of any foreseeable resolution to the Syrian civil war or the security and complex challenges that persist in the aftermath of ISIS. The humanitarian situation itself is merely a symptom and a consequence of a complex economic, political, social, legal, and security crisis that has produced far-reaching destruction in the communities that the displacement originates from. This complex crisis is preventing the majority of the refugees and IDPs from returning to their homes in the liberated areas. Today, over 37% of the refugees and 20% of the IDPs live in 39 camps established in the governorates of Erbil, Slemani, Duhok and Garmiyan Administration. They are completely dependent on government support and humanitarian assistance provided by UN agencies and international and local NGOs. 

In a joint conference on the 10th of April 2018, the KRG and UN Humanitarian Country Team (HCT) launched the Humanitarian Response Plan, Regional Refugee and Resilience Plan, and Priority Small Scale Service Projects plan for the Kurdistan Region of Iraq. The partners requested US $442 million in order to deliver humanitarian assistance to 850,000 of the most vulnerable people: IDPs, refugees and host communities in the Kurdistan Region of Iraq. The requested fund is the minimum amount to implement highly prioritized and critical humanitarian projects and activities in the aforementioned plans in 2018. 

As of today, only 59% of the HRP and 14% of the 3RP has been funded. Lack of funding has obliged humanitarian partners to either reduce or completely terminate services and ongoing projects. This has been particularly detrimental for food security and health services in the camps. The food and health clusters are unwillingly forced to reduce and suspend critical and life-saving services and assistance in the camps. This threatens the welfare and lives of thousands of highly vulnerable IDPs and refugees residing in the camps and lacking means to survive. The continued and severely underfunded humanitarian crisis creates dire consequences for the displaced populations as well as the host communities who have shouldered the bulk of the humanitarian burden. 

The KRG remains committed to its rights-based policy and will continue to do everything possible to alleviate the suffering of the refugees and IDPs and provide security, protection, services and opportunities. We will continue strengthening our vital collaboration and cooperation with humanitarian partners including UN Agencies and local and international NGOs to help vulnerable people and prevent a humanitarian catastrophe. Yet, our capabilities are limited and we alone will not be able to carry on the ongoing services and implement the planned projects. 

Alarmed by the threat to the welfare and food security of displaced populations, the Kurdistan Regional Government calls upon the federal government and the  international community to prevent a potential humanitarian tragedy by allocating needed resources. Without additional  funding, the KRG and our national and international partners will not be able to cope with the pressure and make crucial assistance and services available any longer. Addressing the critical needs of displaced families is a shared responsibility and requires continued cooperation and support from all sides. Inadequate response will have dire consequences for the displaced populations and host communities and inflict a heavy cost of inaction on the government and the international community. 

The Kurdistan Region is severely affected by the impact of the costly war with ISIS during the last four years, the large-scale and protracted humanitarian crisis, the drastic drop in oil prices, and the federal government's decision to withhold Kurdistan's share of the Iraqi national budget since 2014. This has resulted in the suspension of all investments across the Kurdistan Region, severe degeneration of public services and a regression of many health, education, social and development targets for the region. It will take years to deal with these consequences and to get the economy back on track. 

Finally, we continue to work and cooperate with our partners to review, assess and prioritize the needs to ensure the available resources are utilized effectively and efficiently to support these vulnerable people, especially as we are approaching the harsh winter.

The Foreign-Policy Tools of Small Powers: Strategic Hedging in the Persian Gulf

https://www.mepc.org/foreign-policy-tools-small-powers-strategic-hedging-persian-gulf


Volume XXII

Spring

Number 1

  

Yoel Guzansky

Mr. Guzansky, of the School of Political Sciences, Haifa University, and the Institute for National Security Studies (INSS), Tel Aviv University, is the co-editor of One Year of the Arab Spring: Regional and International Implications (INSS Publication 2012) and author of The Arab Gulf States and Reform in the Middle East: Between Iran and the "Arab Spring" (Palgrave-Macmillan, 2015).

This article analyzes the foreign-policy tools that Kuwait, Qatar, Bahrain, the United Arab Emirates (UAE) and Oman use in dealing with Iran. It argues that a policy of strategic hedging reduces the danger of conflict with Iran in the short term, while preserving contingency plans that address the severity of the threat and the uncertainty of the relationship in the long term. We could have expected that, because of their sense of threat, the small Gulf states would adopt a behavior of balancing Iran's power or, alternatively, of bandwagoning with it. However, these states have consciously chosen to adopt a "mixed" policy that includes elements of both methods. This stands in contrast to the assumption, widespread in the international-relations field, that they would choose to either balance1 or bandwagon as a way of coping with threats.2

THE GCC AND IRAN

The undermining of the regional status quo in the wake of the 1979 Islamic Revolution and the outbreak of the Iran-Iraq War increased the anxiety of Saudi Arabia and the smaller Gulf states. They realized that a regional institution including a framework for security cooperation was needed. The Gulf Cooperation Council (GCC) was the result of processes that had started before the British withdrawal in 1971. Its goal, as declared in its founding charter, was "to effect coordination, cooperation and integration in all fields."3 The GCC was also an expression of common interests: the monarchical character of the regimes, their religious ties as Muslims and as Sunnis, their common Arab origin, and their concerns about revolutionary, Shia, non-Arab Iran. However, the fraternity and public solidarity shown by the organization's leaders somewhat obscured their competing and contradictory interests and differing views of the strategic environment.

An examination of the GCC through the theory of alliances is instructive: the trigger for its establishment was security, and there is a security component in relations among the states,4even if the organization does not easily conform to the existing definitions in this field.5What distinguishes alliances (in the case of the GCC, a defensive one) from other associations, such as alignments and coalitions, is the formal or informal commitment to security cooperation that is given over time and is not necessarily dependent on a specific event or the alliance's security context. It is also important to examine the security frameworks that exist throughout the developing world, as most of the research on this subject is based on observations made in the western hemisphere.

The survey below reflects the basic concerns of Kuwait, Oman, Qatar, the UAE and Bahrain over cooperation with Iran while attempting to preserve the framework of the GCC, which was established to a large extent because of the Iranian threat. The assumption is that contrasting threat perceptions have made it difficult to establish a joint institutionalized security strategy, and that the cracks in their unity weaken the states' ability to act as a united bloc vis-à-vis Iran. Nevertheless, even when the perception of the Iranian threat, with its various dimensions of military buildup, nuclear ambitions, political subversion and terrorism is essentially agreed upon, each state has chosen to hedge in relation to the dimension or level of threat that it anticipates.

Kuwait has a long history of hedging, dating back to diplomatic maneuvering between the British Empire and the Ottomans and between Iraq and Iran. During these times, Kuwaiti leadership attempted to appease the different factions, while preserving local independence and assets.6Kuwait's current approach to Iran is similar to Saudi Arabia's, leavened with considerable caution due to its geographic proximity to Iran, Iran's subversive activities and Kuwait's considerable Shia minority.7

Saddam Hussein's invasion of Kuwait awakened nationalist feelings among the Shiites. Following the country's liberation from Iraqi occupation, they swore allegiance to Kuwait's ruling Al Sabah family, although many continue to have reservations about the move. During the Iran-Iraq War (1980-1988), Iran had attacked Kuwaiti territory, entering its airspace on several occasions; it was also apparently behind both the terrorist attacks in the country in the 1980s and later instances of subversion. The Kuwaiti response has been restrained, as it has sought to contain the incidents and prevent serious damage to its relations with Iran. The Iraqi invasion in August 1990 led Kuwait, along with its more northern GCC colleagues, which shared a fear of Iraq, to seek closeness to Iran, at least temporarily, as a counterweight to the power of Baghdad. The move, however, led to criticism by the more southern GCC states, which perceived Iran as the greater threat. Kuwait still sees Iran-influenced and Shia-dominated Iraq as a potential threat — greater now since the American withdrawal in December 2011. As a result, its steps toward normalization with Iraq remain slow.

Despite Iran's alleged negative activity, Kuwait continues to try to appease Tehran. It hosted the Iranian president in 2006 and openly supported his ambition for civil nuclear capabilities. Kuwait has declared that it will not serve as a base for an attack on Iranian nuclear facilities and that, in principle, it supports Iran's right to obtain nuclear energy for civilian purposes.8Furthermore, in June 2014, Kuwaiti Emir Sabah Al-Ahmad, 30 percent of whose country's population is composed of Shiites, made a historic visit to Tehran, the first visit since the Islamic Revolution. Kuwait, which more than once has assumed the role of mediator and compromiser between the belligerents, regarded the visit as an opportunity to mediate between Iran and Saudi Arabia, but also to reduce the tension between it and Iran and to promote Iranian gas exports to the emirate.9 Kuwait's relations with Iran have been tense in recent years. As mentioned, Kuwait recognizes Iran's right to nuclear energy for peaceful uses, but at the same time, cooperates, with a few exceptions, with the sanctions regime against Iran and even expelled Iranian diplomats from its territory after accusing the "Quds Force" of subversive activity in Kuwait.10

Qatar has not been a target for Iranian subversion and has maintained close relations with Iran over the years, primarily as a sort of insurance policy. The palace coup of 1995 caused a rift between Doha and Riyadh and encouraged the new Qatari ruler, Sheikh Hamad bin Khalifa Al-Thani, to provoke the Saudis on border-dispute issues and by supporting anti-Saudi propaganda via the Qatari-based Al Jazeera network (and changing the tone when the Saudis turned more favorable to Qatari interests). As tensions built with the Saudis, Sheikh Hamad desired Iranian backing to insure the peaceful development of the Qatari natural-gas fields adjacent to Iranian territorial waters, and to break free from Saudi influence. In this sense, hedging with Iran can also be seen as balancing against Saudi Arabia. Iran, for its part, has viewed its relations with Qatar as a sort of bridge to the other Gulf states — to help improve its relations in the Gulf and push back the American sphere of influence while projecting Iranian resolve as a way to try and drive a wedge between the smaller Gulf states and Saudi Arabia.

Qatar, perhaps more than any other GCC state, perceived the collective-security arrangements attempted by the Arab Gulf states as hollow. Its troubled relations with Saudi Arabia also led to its only minimal participation in the security frameworks that were under Saudi influence. Most of its attention was given to balancing the power of its neighbors by strengthening its U.S. backing, particularly in the field of security. Arguably, the U.S. military presence in Qatar makes it easier for Doha to adopt an active foreign policy because it is confident that its national security will be maintained. Qatar is helping to strengthen its standing in the region through engagement in diplomatic and other forms of activism. This policy — a combination of opportunism, ambition and strategic maneuvering, backed by tremendous economic power and a willingness to use it for political purposes — along with the weakness of former centers of power inside and outside the region, has enabled the emirate to exploit a vacuum and reinforce its political position. By increasing its international profile, Qatar aims to protect itself from the perils of small-state vulnerability.11

Qatar's adoption of an ambitious international policy has alarmed both traditional adversaries and current allies. The role of political Islam and Doha's attitude toward the Muslim Brotherhood have also remained stumbling blocks in relations among the GCC states. On March 5, 2014, Saudi Arabia, the UAE and Bahrain recalled their ambassadors from Qatar because of its support for the organization, which they see as jeopardizing their security and political stability (Kuwait did not join the move in order to serve as a go-between). Eight months later, the sides seem to have reached a modus vivendi that allows them to get past the most recent crisis, at least temporarily; they have agreed not to interfere in each other's internal affairs and not to undermine one another's interests or security.12

While Qatar pays lip service to the Gulf consensus (for example, on the issues of the three UAE islands occupied by Iran and the need to strengthen the joint military force), its policy on various issues, particularly concerning Iran, differs from that of the other GCC states. This independent policy stems from Qatar's desire to increase its regional importance and protect its natural resources.13 Its troubled relationship with Saudi Arabia has resulted in Qatar's minimal participation in every security framework under Saudi influence. Considered the "bad boy" of the Gulf, Qatar keeps one goal in mind: to remove itself as a potential target of Iran.14 It thus extended an invitation to the Iranian president in 2007 to attend the annual GCC summit meeting, held in Doha for the first time since the organization's founding.

Qatar has also avoided criticizing Iran publicly and has even worked to improve relations, including by means of a security-cooperation agreement and reciprocal visits. The two countries, for example, signed a comprehensive memorandum of understanding in 2010 that includes an expansion of cooperation in the War on Terror, and they have held limited joint naval exercises in the Gulf.15 Qatar continues to play all sides vying for supremacy in the Gulf. Although they are on opposite sides of the Syrian civil war, Qatar seeks to smooth things over now with Iran and to reduce any tension between the two countries.16

The UAE position toward Iran has been influenced over the years by geographic proximity, extensive commercial ties, the domestic Iranian population and, above all, Iran's systematic violation of UAE sovereignty over three strategic islands in the Gulf. The UAE strategy has been to draw closer to one of the less-threatening regional powers. During the Iran-Iraq War, it supported the latter, but Iraq's invasion of Kuwait in 1990 led to a measured rapprochement with Iran. The UAE population, mostly comprising foreign workers, is exposed to external subversion alongside escalating Iranian rhetoric and increasing capabilities and ambitions (including the kidnapping and assassination of political dissidents on UAE soil), which are causes for concern in Dubai.17

The UAE favors a diplomatic approach toward Iran, the common interest of both sides being to contain their conflict. Iran also does not wish to attract unnecessary attention: it is already under international pressure. The UAE is aware of the limitations of its own power and wishes to separate the issue of the disputed islands from the other subjects, mainly economic, on the agenda. The UAE, Iran's largest trading partner along with China, sees maintaining open commercial ties with Iran as a sort of insurance policy. But Dubai, which is primarily responsible for trade with Iran, is host to around 400,000 Iranian nationals, and Abu Dhabi has long asserted that that large Iranian-origin community could pose a "fifth column" threat to UAE stability.18 Although Abu Dhabi, the strongest and wealthiest of the seven emirates, has taken a harder line toward Iran, there is a desire to prevent a rift. The UAE went so far as to host President Ahmadinejad in Dubai in 2007, the first visit of its kind by an Iranian president since the Islamic Revolution.

Despite the economic setback it has suffered, the federation supported, with few exceptions, the regime of sanctions against Iran, gave the United States political support (and military support, mainly by providing access to bases in its territory) against the Iranian nuclear program. It even increased the pace of oil production in its territory at various times in order to make up for the removal of Iranian oil from the market. As part of the Iranian "smile campaign," Foreign Minister Javad Zarif visited Abu Dhabi and Dubai in April 2014.19He sought to soothe the federation's anxiety about the agreement between the major powers and Iran on the nuclear question and the reconciliation between Tehran and Washington, which the federation fears is liable to be at the expense of its own relationship with the United States. UAE Foreign Minister Abdullah bin Zayed, who visited Iran in November 2013, went so far as to call Iran a "strategic partner."20

Bahrain has been worried about the Islamic Republic's intentions as a result of the ongoing Iranian claim to sovereignty over Bahrain as one of its districts. Bahrain's proximity to Iran and its sectarian composition — a Sunni minority ruling over a Shiite majority — makes it an attractive target for negative Iranian intervention. There have been periods of tension between the two, especially over Tehran's support for Shiite opposition organizations and attempts at subversion. Bahrain sees Iran as a primary threat to its national security and views domestic and Iraqi Shiite subversion as Iranian driven. Bahrain, therefore, is making efforts to strengthen its alliance networks with the West (including hosting the headquarters of the U.S. Fifth Fleet) as well as bolster the GCC joint stance against Iran. Bahrain's size, location, delicate sectarian balance and depleted energy resources have turned it into a prominent supporter of increased cooperation and integration within the GCC. Bahrain's neighbors, fearing similar problems, particularly among their own Shiite populations, have provided assistance over the years and tend to perceive its struggle as their own.

This is especially true of Saudi Arabia, with which the House of Khalifa is closest geographically and historically, as well as by ties of intermarriage. It was, therefore, unsurprising that, in March 2011, the Saudis dispatched the majority of the "joint Peninsula Shield" forces — along with some from the UAE and a token naval force from Kuwait — to protect Bahrain during its encounter with what is commonly known as the Arab Spring. These troops were meant not only to prevent Shiite rebels from threatening the Khalifahs' rule, but also to signal to Iran that Bahrain is in Saudi Arabia's sphere of influence. Bahrain, for its part, recognizes Saudi protection and appreciates the fact that the kingdom has been supplying it with oil since its domestic resources have been depleted. Bahrain's behavior, however, more closely represents a policy of balancing against Iran or, alternatively, bandwagoning with Saudi Arabia, and is not a true example of hedging. Nevertheless, although it follows a pro-Saudi foreign policy in order to avert Iranian aggression, Bahrain allows Iranian businesses to operate in its territory, avoids criticizing Iran publicly, and frequently announces it will not allow its territory to be used for an attack on Iran's nuclear facilities. Bahrain has also signed a substantial gas deal with the Iranians, investing approximately $4 billion over the course of the next 25 years in the hope of solidifying and normalizing its relations with Iran.21

This tiny kingdom advocates a more aggressive line than its fellow Gulf states towards Iran, accusing it (usually not explicitly) of supporting the Shiite opposition in its territory and even of subversion and attempted terrorist attacks.22These accusations were supported to some degree by the U.S. State Department, which cited in an April 2014 report Iranian attempts to deliver weapons to Shiite groups in Bahrain.23 Bahrain's policy towards Iran is affected not only by the Sunni royal house's problematic relations with the 70 percent Shiite majority in the country, but also by the influence of Saudi Arabia, Bahrain's regional patron and Tehran's main ideological and geopolitical competitor, on Manama. Bahrain publicly supports Iran's right to nuclear energy for peaceful uses and has expressed support in principle for the interim agreement between Iran and the major powers on the nuclear issue (November 2013). The tiny monarchy has, however, expressed concern that the agreement signed with Iran will bolster the latter's influence on the Shiites in its territory and reduce the American commitment to its security.24

Under Sultan Qaboos, Oman has managed to maintain cordial and fruitful relations with seemingly all parties in the region. It was the first to accept an American military presence in 1980, while refusing to ostracize Iran, claiming that "a nation of 65 million cannot be isolated."25 Unsurprisingly, Oman's relations with Iran are relatively close, with extensive commercial ties and even security connections that have grown in recent years. The sultanate generally maintains a policy that stands outside the GCC consensus. It was, for example, the first GCC state to establish commercial ties with Israel and enjoys American military hardware and technology. Sultan Qaboos prefers to "sit on the fence" while displaying a strong sense of cautious pragmatism.26

Sultan Qaboos's unique foreign policy reflects Oman's strategic location, sharing the Strait of Hormuz with Iran, and its relatively modest economic and military capabilities. Another factor is the culture of "conservatism and tolerance" represented by the Ibadi, who identify themselves as Muslims but are neither Sunni nor Shia.27 In recent years, as Iran has increasingly projected an image of strength in the Gulf, a trend toward further rapprochement between Oman and Iran has become evident, perhaps a hint of the behavior that can be expected from other states in the Gulf if and when Iran obtains a nuclear capability. In this context, Sultan Qaboos even made an official visit to Iran in August 2009 after Ahmadinejad was sworn in for his second term, the first by the Omani sultan since the establishment of the Islamic Republic. The two parties signed a number of agreements, including one regarding security cooperation (another was signed in August 2010). In addition, the sultanate has held joint maneuvers and exercises with Iran, and Iranian ships sometimes dock in Omani ports.28

Rouhani's visit to Oman in March 2014 was his first official visit to an Arab country since becoming president. In August 2013, the ailing Sultan Qaboos made the first visit of any head of state to Iran after Rouhani was elected. During his visit, Qaboos again offered the "good services" of his country, this time in secret mediation between the United States and Iran on the nuclear issue. Oman has maintained closer ties with Iran than its neighbors ever since Iran helped Qaboos consolidate his rule and crush the rebellion against him in Dhofar. Oman — home to a small Shiite community, making it difficult for Iran to intervene there — is also exploiting its relations with Tehran as a lever against Saudi Arabia, whose political and religious influence Oman wishes to restrain. Oman and Iran, which jointly hold the key to the Persian Gulf and the world's most important chokepoint — the Strait of Hormuz — further tightened their political and economic relations after Rouhani was elected. In December 2013, a letter of understanding was signed for Oman's imports of Iranian gas. Talks about laying a gas pipeline between the two countries were restarted, and the possibility of building a bridge connecting the two countries over the strait was mentioned.29

Oman, like Qatar, is engaging in the highest level of hedging among the smaller Gulf states. It believes that its ability to maneuver diplomatically, its maintenance of open channels of communication with all parties, and its close ties with the countries that threaten it, have led to recognition of its regional and international status, thereby reducing the risks to its national security. It has been aided in this by its opposition to aggressive measures against Iran and its efforts to tone down GCC decisions against the Islamic Republic. Oman's role as a mediator in the negotiations between Iran and the West is derived from its conflict-avoidance approach. Its seemingly neutral posture reinforced the importance of the sultanate as a unique geopolitical actor and a bridge between the different aspirations of regional and global powers.30

The trust of both sides allows Oman, perhaps more than any other actor in the arena, to play these decisive roles and pass messages between the sides on various issues. However, the rest of the GCC states may try to interfere with Qaboos's will to compromise with the Iranians.31Furthermore, the Saudi initiative to turn the GCC into a union has come up against resistance, principally from Oman: "We are against a union," Foreign Minister Yusuf bin Alawi said on the eve of the thirty-fourth GCC summit. "We will not prevent a union, but if it happens we will not be part of it," Bin Alawi added.32 This rare public refusal, as well as the fact that, to date, progress has not gotten off the ground, indicates the deep divisions among the six states, three-and-a-half decades after the establishment of the GCC. Moreover, when the last GCC summit was held, Saudi Arabia was already angry at Oman because of its role in mediating between the United States and Iran behind the scenes and in jumpstarting the negotiations with Iran.33

EXTERNAL AND INTERNAL CALCULATIONS

The GCC's security is closely connected to the dependence of the Gulf states on outside protection and the necessity for foreign actors to have access to the Gulf economy. Since their independence, the Gulf states have been buyers, rather than suppliers, of security. Their lack of strategic depth, built-in military weakness and hostile neighbors have led the Gulf states to increasingly rely on British, and later, American military presence for deterrence and defense. U.S. involvement in the Gulf has included regular arms sales, the prepositioning of equipment, ongoing training and preparation, the establishment of central bases and even direct military intervention. "Passing the buck" to Washington has made it easier for the Gulf monarchies to adopt a policy of hedging toward Iran.

Four years into the Arab Spring, self-interested elites are willing to support each other, believing that this will reinforce the rule of (Sunni) monarchies. The competition between Iran and Saudi Arabia set the Gulf's security agenda, with the smaller Gulf monarchies maneuvering between them.34Indeed, this policy reflects these states' need to balance their desire to avoid direct confrontation with Iran against their fear of Saudi domination. The Gulf states are concerned that Saudi Arabia is attempting to increase its influence over the small sheikdoms and force them to fall into line with Saudi foreign policy. (Bahrain tends to side with Saudi Arabia, particularly because Iran foments tension between Bahrain's Shiite majority and the Sunni royal house, but also because of historical, geographic and familial ties.) As a result, Saudi Arabia has not yet succeeded in promoting this or previous initiatives to unite the monarchies — such as turning the GCC into a "single entity"35or bringing Jordan and Morocco into the GCC36 — due to opposition from the other members, whether because of the economic burden involved or because of possible harm to their status in the organization.

PROS AND CONS OF HEDGING

Between total defection and full cooperation, a sphere of maneuver exists that states can exploit in order to improve their security situation. Because they cannot be fully convinced as to the intentions of their allies and because their interests will never overlap entirely, they often use strategic hedging. Less than full cooperation with an ally and a certain amount of independence in foreign relations is likely to be a beneficial course for the small power, if it is seeking to create the impression that it might reconsider its policy toward a state that its ally perceives as a real or potential competitor. In the weak player's view, this is enough to create a lever against its stronger partners and improve its situation. However, in many cases, this is merely an attempt to manage and contain perceived threats.

The disadvantages of the hedging strategy are, nevertheless, considerable. It is liable to impair the effectiveness of the balancing process and, subsequently, that of alliance management. The states had the intention, even if it was not declared, to enter into a joint security venture. When the security of the region and the stability of the monarchies were endangered, this was necessary. For more than 33 years, the GCC maintained a considerable degree of coordination. In addition, a certain amount of cooperation has existed alongside an almost built-in lack of agreement among members who were working to maximize their individual security, impeding the establishment of an effective collective-security institution on the western side of the Gulf.

An important question in this context concerns the factors that allow this policy of hedging to continue over time. If the country harmed by such a strategy is a dominant player, it may force its weaker ally to reveal its intentions; that is, it may insist that it take costly action in order to clearly demonstrate which side it is on. In fact, this strategy is not without a price, as was demonstrated by relations between Saudi Arabia and Qatar and Saudi Arabia and Oman. However, in a situation of high uncertainty with a narrow margin for error, an attempt to avoid harm and survive becomes primary, even if it comes at a high price and impairs the effectiveness of the alliances.

The smaller Gulf states do, to varying extents, hedge in dealing with Iran, sometimes even when the level of external pressure is high and alliance literature predicts high levels of cooperation. In spite of the advantages that the monarchies may gain from this strategy, the desire to maintain as many options as possible is likely to be more costly. It requires resources to be sent in opposite directions, both bandwagoning with Iran and balancing against it. Furthermore, the gain may be small; if the inputs are not invested in the best way, the investment can go down the drain. The argument behind the strategy of hedging is that it contributes to the security of states as individual units, even if indirectly it could actually weaken the effectiveness of alliances.

The rationale behind this strategy is understandable. As noted, it allows the five to maintain much of their overall relationship with the actor most threatening to them. They thereby reduce the danger of conflict in the short term (preventing a self-fulfilling prophecy), while maintaining contingency plans that respond to the level of the threat from this actor and the uncertainty concerning relations with it in the long term. Additional findings also fit with this strategy: an unwillingness to use military force could be fed by an approach to security using other means, primarily diplomatic and economic, and by other outside actors. The GCC, as a regional institution, has lasted precisely because of this freedom of action given to its members, though it does harm its cohesion and, hence, its balancing effectiveness.

REFINING THE CONCEPT

While the concept of hedging is not completely foreign to International Relations (IR) theory, it has yet to be sufficiently developed.37 It is a situation in which states seek "to strike a middle ground."38 A strategy of hedging is suited to an anarchic system; it allows a small power, interested in immediate gain, to offset risks and improve its situation in relation to the rising power while avoiding a major confrontation. In the present context, the strategy makes it possible to maintain significant ties with the threatening force and, at the same time, to form alliances to balance the impending threat.

A strategy of hedging is more than sitting on the fence in order to extort concessions from allies and maintaining ambassadors in each other's capitals. Qatar and Oman, which have considerable economic and security cooperation with Iran, are seen in the eyes of their allies as making active efforts to undermine Saudi Arabia's position, strength and even security. This policy includes taking active measures; in this, it is different from a policy of mere neutrality, which includes commitments not to help, directly or indirectly, an adversary of an ally in the event of conflict between them. To the same extent, it is different from pure opportunism. It is a systematic strategy that focuses on the state's survival. For a weak state that adopts a policy of hedging, the ability to influence its senior partner is secondary to the security gained against the adversary.

The importance of the Gulf is well known because of the frequency and intensity of conflicts there, and it can serve as a laboratory for examining IR theories and various assumptions concerning the nature of global politics. However, for various reasons, the international relations of the area have not been adequately studied. The rationale behind strategic hedging appears simple and intuitive, but it must be refined and adjusted to the accepted terms in the field. This attempt to formulate a conceptualization and impose regularity on the subject was intended, therefore, to deal with a certain gap in the theory and to help clarify the strategic preferences of small powers.

 

1 Stephen Walt, Revolution and War (Cornell University Press, 1996), 33.

2 Randall Schweller, "Bandwagoning for Profit: Bringing the Revisionist State Back In," International Security 19, no. 1 (1994): 75-78.

3Charter of the GCC, GCC Secretariat General, http://www.gcc-sg.org/eng/indexfc7a.html?action=Sec-Show&ID=1.

4 Joseph Kechichian, "The Gulf Cooperation Council: Search for Security," Third World Quarterly 7, no. 4 (1985); R.K. Ramazani, The Gulf Cooperation Council: Record and Analysis (Virginia University Press 1988); and David Priess, "Balance of Threat Theory and the Genesis of the Gulf Cooperation Council,"Security Studies 5, no. 4 (1996).

5 Glenn H. Snyder, Alliance Politics (Cornell University Press, 1997), 4; and Stephen Walt, "Alliances in a Unipolar World," World Politics 61, no. 1 (January 2009): 86.

6 Jill Crystal, Oil and Politics in the Gulf: Rulers and Merchants in Kuwait and Qatar (Cambridge University Press 1990), 107.

7 "Iran Cell Planned Attacks in Kuwait, Minister Says," Reuters, April 21, 2011, http://www.reuters.com/article/2011/04/21/us-kuwait-iran-spying-idUSTRE73K3NO20110421.

8 Gregory Gause, The International Relations of the Persian Gulf (Cambridge University Press, 2010), 36.

9 "Kuwait Discusses Gas Imports with Iran," Kuwait News Agency (KUNA), June 2, 2014. http://www.kuna.net.kw/ArticleDetails.aspx?id=2380478&language=en.

10 "Iran Cell Planned Attacks," Reuters, April 21, 2011.

11 Lina Khatib, "Qatar's Foreign Policy: The Limits of Pragmatism," International Affairs 89, no. 2 (2013): 418-419.

12 "Saudi, UAE and Bahraini Envoys to Return to Qatar," Al Arabiya, November 16, 2014, http://english.alarabiya.net/en/News/middle-east/2014/11/16/Gulf-leaders-meet-in-Riyadh-for-surprise-GCC-meeting-.html.

13 Steven Wright, "Qatar," in Christopher Davidson, ed., Power and Politics in the Middle East Monarchies (Colombia University Press 2011), 127-131; and Allen Fromherz, Qatar: A Modern History (Georgetown University Press, 2012), 96-100.

14 Author's interview with a consultant to the emir of Qatar, Doha, May 2012. Also see Yoel Guzansky, The Arab Gulf States and Reform in the Middle East: Between Iran and the "Arab Spring" (Palgrave-Macmillan, 2015), 66-79.

15 "Iran, Qatar Discuss Implementation of Security Pact," Fars News, April 15, 2014, http://english.farsnews.com/newstext.aspx?nn=13930126000748.

16 "Qatar Backs Syria Political Solution on Iran Visit," Al-Arabiya, February 27, 2014.

17 Willian A. Rugh, "The Foreign Policy of the United Arab Emirates," Middle East Journal 50, no. 1 (1996): 58-59.

18 Kenneth Katzman, The United Arab Emirates (UAE): Issues for U.S. Policy (Congressional Research Service, 2014), 19.

19 "Zarif Meets with UAE Prime Minister in Dubai," Daily Star (Lebanon), April 16, 2014, http://www.dailystar.com.lb/News/Middle-East/2014/Apr-16/253466-zarif-meets-with-uae-prime-minister-in-dubai.ashx#axzz3KFvjdkrC.

20 "UAE Foreign Minister Hails 'Strategic' Relations with Iran," Middle East Monitor, April 16, 2014, https://www.middleeastmonitor.com/news/middle-east/10945-uae-foreign-minister-hails-strategic-relations-with-iran.

21 Kenneth Katzman, Bahrain: Reform, Security, and U.S. Policy(Congressional Research Service 2012), 9.

22 Frank Gardner, "Iran 'Set Up Bahrain Militant Cell,'" BBC News, February 20, 2013, http://www.bbc.com/news/world-middle-east-21522074.

23Country Reports on Terrorism 2013, U.S. Department of State, April 2014, http://www.state.gov/j/ct/rls/crt/2013/224826.htm.

24 Kenneth Katzman, "Bahrain: Reform, Security, and U.S. Policy," Congressional Research Service, July 31, 2014, 31.

25 Majid Al-Khalili, Oman's Foreign Policy: Foundation and Practice (Praeger Security International, 2009) 101.

26 Author's interview with a senior official in the Omani foreign ministry, Masqat, April 2011.

27 Jeffrey A. Lefebvre, "Oman's Foreign Policy in the Twenty-First Century," Middle East Policy 17, no. 1 (2010): 110.

28 Al-Khalili, Oman's Foreign Policy: Foundation and Practice, 107-8.

29 "Oman, Iran Plan Causeway over Hormuz," Gulf News, March 6, 2014, http://gulfnews.com/news/gulf/oman/oman-iran-plan-causeway-over-hormuz-1.1300526.

30 Shashank Bengali, "U.S. Iran Thaw Began with Months of Secret Meetings," LA Times, November 24, 2013, http://www.latimes.com/world/la-fg-1125-iran-tic-toc-20131125,0,2689052.story#axzz2leZ1wZy0.

31 Dahlia Kholaif, "Oman: No Gulf-wide Union for Us," Al Jazeera, December 15, 2013, http://www.aljazeera.com/indepth/features/2013/12/oman-no-gulf-wide-union-us-2013121571431541941.html.

32 "Oman Will Withdraw from GCC If a Union Is Formed: Foreign Minister," National, December 7, 2013, http://www.thenational.ae/world/middle-east/oman-will-withdraw-from-gcc-if-a-union-is-formed-foreign-minister.

33 "Secret U.S.-Iran Talks Cleared Way for Historic Nuclear Deal," The Telegraph, November 24, 2013, http://www.telegraph.co.uk/news/worldnews/middleeast/iran/10471030/Secret-US-Iran-talks-cleared-way-for-historic-nuclear-deal.html.

34 Gregory Gause, "The International Relations of the Persian Gulf," 7; and Joseph Kostiner, Conflict and Cooperation in the Gulf Region (VS Verlag Wiesbaden, 2009), 244-245.

35 "Saudi King Abdullah Calls for Formation of Gulf Union," Asharq al-Awsat, December 19, 2011, http://www.aawsat.net/2011/12/article55243928.

36 Sara Hadman, "Gulf Council Reaches Out to Morocco and Jordan," New York Times, May 25, 2011, http://www.nytimes.com/2011/05/26/world/middleeast/26iht-M26-GCC.html?pagewanted=all&_r=0.

37 Evan S. Medeiros, "Strategic Hedging and the Future of Asia-Pacific Stability," Washington Quarterly 29, no. 1 (Winter 2005-06): 164.

38 Brock Tessman, "System Structure and State Strategy: Adding Hedging to the Menu,"Security Studies 21, no. 1 (2012), 192-194.