Friday, 25 October 2013

Tunisian Islamists look to undermine negotiations

Tunisian security forces found an unexploded car bomb October 24 at the site of a deadly clash between police and suspected jihadists, Interior Ministry spokesman Mohamed Ali Aroui said, AFP reported...The October 23 incident in the region of Sidi Bouzid left six policemen and one militant dead....Elsewhere, protesters in the Tunisian town of Kef burned the office of the country's ruling Ennahda party, Al-Arabiya reported October 24, citing an AFP photographer...Protesters in the capital, Tunis, called for the Cabinet to resign on October 23, and the opposition Salvation Front called for more protests October 24...And earlier, seven Tunisian policemen were killed October 23 during clashes with militants, Reuters reported October 24...The Tunisian government is cracking down on Islamist militants who are receiving weapons and training in Libya...Islamists in Tunisia are attempting to exploit the political chaos in the country...Talks are under way between Islamists and opposition parties to end the political stalemate, and such attacks sow unrest among the various parties wanting to take control of the country...While the attacks may offer leverage for the talks for the Islamist groups, they could end up undermining the Islamists long-term goals be alienating the very people from whom they rely on for support.

Israel targets Hezbollah arms shipment

Israeli jets on October 21 bombed a shipment of arms headed for Hezbollah militants along the Lebanese-Syrian border, an Israeli source said, Now Media reported October 23, citing the Al-Jarida newspaper...The shipment consisted of sophisticated rockets, the source said...This was the fifth interdiction of Syrian arms shipments in 2013, the first four occurring January 30, May 3, May 5, and July 5...According to a source close to Israel’s Defence Minister Moshe Ya’alon the missiles were Iranian-upgraded Chinese rockets with a range of 1500 kilometres...Hezbollah have drawn down their participation in the Syrian conflict over the past few weeks to better deal with increasing violence in Lebanon...The militant group is acutely aware an attrition on their arms and personnel in Syria could undermine their political position in Lebanon, which is one reason Hezbollah are receiving advanced arms from Syria...Israel has an interest in pointing out the ongoing regional spillover threats from the Syrian conflict, especially as US stomach for conflict in Syria dissipates...Jerusalem is concerned a stronger Syria will embolden Iran to push other connections in the region including Hezbollah, although the militant group has been prickly to Iranian orders this year and could be moving away from the controllers in Tehran...It is unclear how robust Israeli intelligence on other arms shipments actually is, but further raids can be expected.

Thursday, 24 October 2013

Understanding America's economic resurgence

It must be confusing for people to look at the United States after the economic troubles of 2008 and still see it standing. But not just standing, growing.

What America went through with toxic debts and a horrific burst of their gigantic real estate bubble seemed to portend the Americans were staring down the barrel of financial collapse and a drift into the rubbish bin of history. Prediction after prediction gleefully proclaims we live in the final days of American Empire. The logical conclusion for many was that this decline was a good thing.

Certainly, the behaviour of the United States over the past half century might have shades of imperialism. And it is true that thousands of people around the world might be in a better position if it weren’t for American blunders and stumbling statecraft.

Then again, an equal amount of people (if not more) would be in measurably worse situations if those same adventures had not taken place. The lesson for strategists and ideologues must be that the law of unintended consequences can very often colour how an otherwise sound policy or political action is received when it actually plays out.

Because the United States has been the world’s centrepiece economy for decades, they facilitated a great deal of what would eventually be called globalisation. And globalisation can look suspiciously like imperialism. Despite how it looks, it is still not clear the Americans ever set out to gain this “empire” as a conscious strategic goal. The reality of developing trade ties with countries demands we build ties with their neighbours until suddenly the world is interconnected.

On top of this, the Americans emerged from the Cold War with a military capacity and fiscal agility strong enough to protect the whole world’s trade routes by itself. Now, the US Navy controls the world’s oceans where some 90% of everything is moved from place to place around the world.

This is an unmitigated good and an unintended consequence of trade which goes largely unnoticed by the media. Yet this particular unintended consequence turned out well for everybody. Americans aren’t used to being in essential control over so much of the world’s dynamics and have had more than a little trouble over the past few decades in coping and dealing with that power. In a very real sense, they don’t know what to do with the power they’ve fallen into.

That power took them on a whirlwind of poorly conceived military adventures, costing enormous amounts of treasure and human lives, which are only just closing under the governance of President Barack Obama. They very nearly took the US down the path of economic destruction predicted by doomsayers. But the country remains strong and it is curious to ask the question why.

Answering is not as simple, but there are a number of factors the Americans enjoy which other economies don’t: their renowned business agility, strong intellectual property laws, a market-driven economy, great legal protection, and a high degree of technological innovation. Using these attributes the United States has emerged from the Global Financial Crisis in a very strong position compared to other market economies. Perhaps they are slightly weaker than when they entered the downturn, but with the surprising assistance of the new fracking energy boom the Americans could leap forward into a new lease of economic life.

Yet those attributes don’t fully explain the imminent return of US economic vitality. Probably one of the better illustrations to better understand some American political actions is considering the country in the analogy of a human lifetime. From birth to death, humans go through mental transformations many times. But so do countries which have turned into pseudo-empires.

America’s interaction with the world over the past half century has been remarkably adolescent. Their decision making process can be the irrational, knee-jerk, short-term blundering interspersed with clear thinking so reminiscent of an unreasonable teenager.

But just like a teenager with a good upbringing and sound historical pedigree, America is lucky to have thousands of years of liberalism and economic innovative thinking behind it. The “killer apps” of Western civilisation outlined by British historian Niall Ferguson save the United States from slipping into pitfalls and give the country a playbook through which it can succeed. In other words, a big part of what separates the United States from, say, the Chinese, is the underlying strength of this inherited tradition of US capitalism.

Take for example how differently these two countries look at their business models, especially around employment and efficiency.

China’s development is still astounding, even if the country probably won’t return to double digit GDP growth figures in the near future. But the Chinese leadership still emphasise maintaining high employment rates in an effort to avoid the potential tumble into widespread unrest from a jobless majority, which could threaten the Communist Party’s rule.

To do this, Beijing constantly needs to prop up inefficient businesses in favour of more efficient versions rather than let them fail, as they probably should in a natural business environment. Thankfully, China’s pockets are deep enough to keep this up for the time-being, but the sheer volume of bad loans in the Chinese banking structure threatens to send shockwaves throughout the rest of the world when - not if – the system implodes.

Analysts and fund managers will continue to talk about China overtaking the United States, with all the trappings of domination attending such rhetoric. But others are beginning to notice the limits of the Chinese growth model and how a slowdown in China might be more systemic than cyclical.

Where China will struggle to keep their economy growing if they can’t reform their business model, the Americans are quite happy to let inefficient industries collapse if they can’t compete. The nature of risk in the United States is a winner-take-all game with very high stakes. This breeds a learned mindset of flexibility and agility in the face of a relentlessly changing global market.

Without wanting to trumpet the Americans too much (they do not hold a monopoly on good economic or political practice), the US today has better legal protections, stronger intellectual property laws, and a bristling degree of innovation greater than found in many countries.

Whereas while China’s leadership clearly desire reform, the slow pace of actually moving in that direction might prove too little, too late. If Beijing actually needs to stop the money flow into inefficient companies soon, the consequences would be much worse today than perhaps if those reforms were introduced gradually over the years. To a great extent, we’ll never know.

While China still has far cheaper labour rates the United States, by 2020, according to Boston Consulting Group, exports and jobs “reshored” from China back to America could create between 2.5 million and 5 million US factory and service jobs associated with the manufacturing sector.

So the tables are slowly turning between the United States and China. America is coming back onto the scene in a big way. But then again, the United States never really went anywhere. Those jobs are returning to America for many reasons which include China’s slowdown, but also because of the fertile way the US treats its businesses.

And sitting restlessly in the margins is a multitude of emerging economies waiting for their opportunity to grab low-end manufacturing jobs from an expensive China to boost their own growth. Yet the most interesting country ready to experience a return of industry dynamism is the United States. It remains to be seen what their return will do to the prices of goods around the world.


Saturday, 19 October 2013

Is Africa in the grip of transnational terror?

While Africa continues to grow economically, its many nations cohering around a unified future for the continent, a number of serious persistent intra-state security concerns continue to grab headlines in multiple African countries. Worryingly, the reality of African conflict is attracting radical Islamic terrorist organisations enticed by the security vacuums of weakly-governed nations.

al Shabaab members, Somalia
Observant western countries will continue their trend of emphasising the limits of free movement and capabilities of radical Islamic groups, in the interest of international security. But while these groups display serious regional threats isolated generally to within their own countries, their actual capabilities to conduct severe attacks outside of their recognised operational range is highly constrained both by the groups' own ideology and intent, as well as by international intervention.

Strictly speaking, it is uncommon for African internecine wars to threaten developed countries. Unless those developed countries specifically wish to intervene militarily, there is generally little reason to deploy more than the expected groups of United Nations armed forces to contain the internecine hostilities. This is because most African militant’s goals rarely require campaigning armies and are usually sufficiently described in the entirely unimaginative diplomatic verbiage as “low-intensity conflicts”.

Keeping African states stable enough for smooth governance has proven to be a less than simple task. The realistic or unrealistic expectations for African governments to comply with international regulations can sometimes miss the cultural and traditional norms already informing the actions of various African governments. Nevertheless, the international community has identified clear security interests in Africa it feels it must commit military and economic resources to contain.

Instead of ending conflict in general, western containment is generally directed at groups which could pose a transnational threat or those which have aligned with other transnational militant groups. When fighting does break out in African nations, a security vacuum can very often follow, into which militant groups with more ambitious goals collect and thrive. Developed countries looking at the various low-intensity conflicts worry splinter groups or terrorist entities could then leverage failing states as launching-pads for attacks into the West.

Over the past decade especially, controlling the spread of such organisations has been conducted mostly by France, the United States, the United Kingdom, and other NATO signatories. Because maintaining the security of many African nations is going to be a long-term effort, this reality could see western governments conducting many more years of containment and disruption operations as the chances of decisive success against terror groups are low.  

While many of these groups operating in Africa have indicated intentions to attack western targets, few actually possess the ability to do so. Western-led military training programs of local African armed forces in troubled countries aim to maintain this status quo. Groups such as al Shabaab - an al Qaeda affiliated terror organisation based in Somalia - and Boko Haram - which operates out of north-eastern Nigeria - are just two examples of the more serious radical Islamic groups in Africa.
Islamic militant groups across northern Africa

Recent headlines buzz with horrific terror attacks roughly follow the line of the equator over Somalia and Nigeria. The al Qaeda- linked group known as al Shabaab is now launching daring attacks further than expected from their usual stomping ground in war-torn Somalia. Although historically the group has been unable to attack targets outside of east Africa, and presently is focused on consolidating their control over Somalia, al Shabaab could be developing the skills necessary to evolve into a transnational threat.

For instance, Kenyan authorities fought a prolonged inner-city battle with members of the Somali terrorist organisation in the heart of downtown Nairobi during the closing days of September. The attack killed at least 72 people and wounded 175, including members of western diplomatic families. This particular attack involved al Shabaab gunmen controlling a popular shopping centre, a strategy similar to other time-tested terrorist tactics. Should the group evolve their intent, as well as their links to other organisations, and develop better tactical abilities, a repeat of such an attack further afield is possible.

However, the technical and tactical abilities of al Shabaab suggest the group is still a regional, rather than transnational threat. Even though the group has presented oscillating military competency fighting peacekeeping forces inside Somalia, al Shabaab remain an ideological and regional militancy. The skills necessary to be able to conduct even marginally sophisticated terror attacks appear to be eluding al Shabaab, as do the international connections required for critical logistics.  

This reality was fortified by an explosion in the Ethiopian capital Addis Ababa October 13. Occurring in a predominantly Somali section of the city, two illegal Somali immigrants were allegedly assembling multiple explosive devices when they accidentally detonated. The blast appears to have killed only the alleged bomb-makers, probably as a result of poor improvised explosive building techniques.

The two may not have had the requisite training for the attack, and clearly relied on local fellow Somali civilians. Scene evidence however indicates al Shabaab deeply wishes to operate in countries adjacent to Somalia, and could be increasing the tempo of attacks. Ethiopian authorities claim they discovered components of explosive suicide vests alongside replica football shirts, possibly indicating the deceased men meant to conduct an attack at the World Cup qualifying football match taking place the same day. Such an attack would have been similar to the July 11, 2010 al Shabaab attack in Kampala, Uganda which killed 70 football fans in the capital.

Remains of a car following a Boko Haram attack, Nigeria
In the west of Africa, Nigerian militant group Boko Haram is facing intense pressure domestically as Nigerian security forces arrest members of the group and conduct targeted raids to kill other members. Boko Haram is not the only militant group in Nigeria, but it is the largest. Just like al Shabaab in Somalia, Boko Haram has traditionally focused their attacks almost exclusively on Nigerian targets. Much of the group’s justification for existence is political, intended to influence the government in Abuja to recognise laws more in line with a strict Islamic doctrine.

Boko Haram is nervous of attracting significant foreign intervention from the United States. Lessons have been learned when other groups publically announced intentions to evolve into transnational organisations and attack western targets. Each time, those groups see a corresponding reaction from western governments severely disrupting that militant group’s operations, as seen in Somalia, Mali, and now in the Central African Republic. The Nigerian radical Islamic group is very careful to remain mostly unaligned to other Islamic groups and limits their rhetoric by concentrating on Nigeria as their sole target.

Abuja recently brokered a cease-fire with the militant group. Militant attacks are certainly down since the cease-fire, but the reality in Nigeria is that unrest follows predictable political patterns. Splinter groups make it difficult for the Nigerian government to negotiate with an overarching militant body. Add to this the unaddressed issues arising from poverty and high unemployment and militancy from Boko Haram can be expected to persist for some time yet.

Despite the international attention, militancy in most parts of Africa has not yet reached the point to threaten targets outside the continent. Much of the dangers posed by radical groups place the populations of countries experiencing unrest - and sometimes adjacent nations - at risk. Distant countries, while understandably concerned, might better focus their worries on copycat attacks from local grassroots actors sympathetic with those radical Islamic groups.

More capable terror groups such as al Qaeda in the Arabian Peninsula could offer to fill the operational and technical gaps in many African militant groups’ repertoire. Western countries are wise to maintain containment operations and build up the capabilities of local armed forces in troubled African countries. This present security environment may change in the future, but African militant groups will need to develop significantly more competent and proven terrorist techniques to reach the stage of true transnational organisation.


Thursday, 17 October 2013

Will the United States soon reach energy independence?

Two pieces of news this month show how quickly the United States is evolving its domestic energy industry. By early as next year the United States could become the world’s largest oil producer, overtaking Russia and Saudi Arabia and potentially transforming the global energy landscape, according to PIRA Energy Group.

However, the prospects of a new era of domestic American energy independence in which the US never have to rely on foreign sources ever again are probably overwrought.

Right now greater amounts of oil are being produced every day in the US, and in the near future there could be more oil coming out of America than there ever has been. The country’s oil production has increased by nearly 40% over just the past three years alone. Add into this mix Canada’s own increasing oil production and it is clear North America is now the world’s largest energy producer.

America now produces over 600 billion cubic metres of natural gas annually while Canada recently discovered a further 300-600 million barrels of oil deep in the cold waters off Newfoundland in the North Atlantic.

Following closely on this news, the US government announced that the United States has been overtaken by China as the world’s largest oil consumer. Ramping US domestic supply and evolving Chinese energy needs both contributed to the change in top spot. 

The evolution in the Chinese energy consumption comes from the increasing number of those who now drive their own passenger vehicles as the average wage increases in China. Although the ratio of cars to people in China is unlikely to match the US, economies of scale dictate that even minor fluctuations in Chinese car ownership will change how much oil they need to import.

While their economy shows signs of slowing - and probably won’t return to double-digit growth - China’s population will need more cars for many decades so oil imports will continue to rise in the world’s largest population.

The US Energy Information Administration said of the rapid energy boom that “this is a new era of thinking about market conditions...you wouldn’t in a million years have dreamed about”. And the benefits are certainly tangible for the American economy.

These increases in US oil production are not exactly a surprise. However, the predicted benefits of a boom, such as allowing the US to attain energy independence and lessen Washington’s focus on the Middle East, are likely to remain long term goals. They are by no means assured.

Russian energy major Gazprom publically believes the US shale “bubble” will soon burst. Some Russian think tanks suspect that Russia will be the big loser in the global market as the US ramp up energy production. But for now, as the US surges into the top spot of oil production, they return to a position they occupied only a few decades ago.

Thanks to a revolution in shale oil extraction technologies American shale oil output has leaped in the past six years with 10 million barrels per day (bpd) over just the last two quarters. This is the highest output level for the Americans for many years, and does not even include the rising levels of biofuels and other refinery gains. Estimates by the energy arm of the OECD predict US liquid fuel production will average 11 million bpd in 2014, whereas Russian output will likely only reach 10.86 million bpd for the same period.

The same OECD group described how the US growth should compensate for declining oil production and output in other countries and help cushion the oil price which might have otherwise risen higher than the current US$110 a barrel. Despite Saudi Arabia producing more oil over the past three months, the output rates are still lowering from many other important sources.

The greatest benefit to the United States will probably be to its bottom line due to the realities of global oil trade. America will still be attached to the global oil market, but the technology and eventual exports are going to create a robust industry even if the US cannot become 100% energy independent.

Self-sufficiently might still be something of a pipe-dream, but the US will ultimately be in a better economic position regardless. This is because all energy is not created equal. Energy can be split between two broad categories: transportation fuels and power generation.

Natural gas cannot yet be entirely swapped for the standard petroleum-based power for transportation, especially in personal vehicles. Ideally the growing production of oil in the US would help towards lowering petroleum and crude oil prices, which would bring down transportation costs. However, it is natural gas, drawn from enormous shale deposits, that is the major energy type currently experiencing a boom in the United States, rather than the crude oil necessary for transportation uses. The US is already self-sufficient in coal and is moving inexorably closer to the same goal with natural gas.

This is why domestic oil production - even with Canada factored in - is unlikely to reach the levels necessary to replace current American imports. So despite the huge finds of natural gas and oil, crude oil will remain as a staple import for the United States for many years to come.

On the other hand, that current shale gas and oil boom will fit nicely into the power generation category and help bring down the cost of heating and power generation, while lessening the reliance on other dirty fossil fuels such as coal for power.

It is true that the United States has flooded so much natural gas into the global market there are now fears of a glut, pushing down prices of natural gas, which in turn is forcing some drilling operations to close just as they are becoming more prolific and necessary.

Yet in the long run, while gas prices fall as a result of the glut, energy analysts suggest they should stabilise as demand moves to match production. The glut may disappear altogether over time as the prospect of continued low prices drives out marginal producers and as demand leaps higher when people switch to gas fuels to power more energy technologies and technological innovation opens more opportunity for natural gas usage.

It might not create self-sufficiency immediately, but American energy will directly impact the world market. Certainly, the numbers surrounding the United States’ new energy dominance are huge, and growing. The US may be able to stretch their exports and impact the global market with the potential to change the landscape for international energy dependence. The connection between energy and geopolitics is always robust, and in this case perturbations can be expected from rising US production.

But why isn't the price of natural gas more stable? The relative profusion of shale gas coming from the American drilling fields currently reflects oil’s stranglehold on transportation fuels and the low cost of production. Its long term future depends on significantly higher gas prices than where they presently sit. It remains to be seen how much natural gas those US fields truly possess and how long the current boom can last. Some high end estimates predict enough natural gas for 100 years from present fields, but more realistic and conservative figures put the time remaining at between 10 and 20 years.

Increased energy security can damper any effects of fluctuating markets, and the US will be more protected as the boom progresses. But America will still rely on other country’s oil for many years yet. Nevertheless, some foreign countries more than others will be keeping close tabs on the American energy revolution and will deeply appreciate an alternative energy supplier, which is where the true power of the American energy revolution arises.

Wednesday, 16 October 2013

P5+1 talks scheduled as Iran refuses to remove nuclear fuel

Iran and the P-5+1 will meet October 15-16 for a new round of talks on Iran's nuclear program, IRNA reported October 14...EU foreign affairs chief Catherine Ashton will lead the P-5+1, which consists of the United States, the United Kingdom, France, Russia, China and Germany... The United States would welcome more bilateral talks with Iran during negotiations in Geneva over the Iranian nuclear program, U.S. Deputy State Department spokeswoman Marie Harf said October 15, Reuters reported...Iran have refused to send some of their nuclear material out of its borders stating this would be a “red line” and instead wish to negotiate the enrichment of the material...Both the United States and Iran require essentially impossible demands from each other leading into the latest talks...Iran is required to shut down its Fordow nuclear reactor and cease work in the Arak reactor where most of its nuclear fuel will originate, while the US will need to remove all of its sanctions on Iran...Neither position will be realised fully, and can’t be expected to...Iran have historically cheated on their nuclear obligations and are expected to do so again, so the US position only hedges against further breaches...The negotiations, while optimistic and a good future sign for the new president, are unlikely to see significant advance due to the Ayatollah’s hesitancy in ceding too much ground to the US, President Hassan Rouhani’s very short leash, and the American insistence that Iran make the first conciliatory move.

Fixing Asia’s corruption could be make or break for region

It wouldn't be the revelation of the century to recognise that Asia is an advancing economic powerhouse, but ten years ago it was. There might be economic troubles looming on the horizon for the region but the OECD is confident some of the more impressively performing countries - China, India and Southeast Asia - will maintain an average growth rate of 7.4% by 2017.

Yet Asia could be far stronger if it could curb the more insidious forms of corruption and graft. According to the recent Asia-Pacific Fraud Survey Report published by London-based accountants Ernst and Young endemic graft is significantly holding Asia back from succeeding in greater growth. Their survey polled close to 700 executives in eight countries. 

The study points to the slowing growth of the region, weak systems, and disconnect between the anti-graft policies and their actual practise as major factors in businesses and officials cutting corners. To pick just two examples, 34% of respondents in China said that company management is likely to take shortcuts when economic conditions are tough, and 36% of executives in Indonesia say it is commonplace to use bribes to win contracts in their industries.

Ernst and Young suggest five calls to action for companies to effectively manage the risks posed by fraud, bribery, and corruption. These include open two-way communication, sharing accountability from the top to the bottom of an organisation, localising solutions and taking account of cultural customs, conducting regular assessments by independent parties, and investing in resources and tools to deal with the corruption problems of tomorrow.

The United Nations Office on Drugs and Crime agrees that there is greater need for more supervision considering Asia’s growing influence on the world stage.

It is difficult to measure how much economic activity is lost due to corruption, but some of the figures suggest the corrosive effect of graft undermines growth enormously. The American based Centre for International Policy calculates US$2.7 trillion in illegal funds left China between 2001 and 2010 as a result of tax evasion, corruption, criminal financial deals or other activities.  

In response, the new Chinese government led by Xi Jinping is taking a focused approach to exorcise corruption.  The effort has already resulted in multiple high-profile arrests, including disgraced official Bo Xilai. Not even money can immunise as Beijing’s effort snatches up billionaire entrepreneurs and important business moguls alike.

The colourfully-named Central Commission for Discipline Inspection led by Wang Qishan, a historian-turned-economist nicknamed “Fire Chief Wang”, now encourages Chinese citizens to report corruption directly to the government using the portal of the internet.

The graft is similar in many other Asian countries. According to the World Bank for instance, 40 of the Philippine’s richest families control 76% of the country’s GDP. Philippine President Benigo Aquino III is trying to enforce good-governance initiatives but he faces an uphill battle to turn around a fairly well entrenched way of business.

Thailand appears to have more of a problem now than 10 years ago as an enormous US$64 billion of illegal funds departed their economy between 2001 and 2010 in much the same way as experienced in China. Dishearteningly, a recent poll conducted by the Transparency Institute showed that 66% of respondents believe corruption has increased since 2011.But just like China, Bangkok has introduced a smartphone application to give Thai citizens a simple way to expose graft and inform the authorities. 

China is trailblazing the new path to stamp out corruption. Beijing’s effort is praised by independent agencies, but some of the arrests and investigations – as in the case of Bo Xilai - could be more politically motivated than economically as Xi Jinping continues his manoeuvres to consolidate control over the Communist Party.

Those attempts by China are catching on as a good model for the member countries of the Asia-Pacific Economic Cooperation (APEC). APEC considers corruption a threat to social and economic development. In the 21st APEC Summit held in Bali between October 7 and 8, leaders issued a statement outlining a new task force which should strengthen “informal and formal regional and cross-border cooperation to fight corruption”.

Ultimately, moving to disincentivise graft will still be a long term goal as evolving policies and more effective policing will probably fall into second place behind the more gradual generational changes of mindset. With all the new money floating around in Asia, the disparity between the very rich and the very poor continues to grow, which exacerbates the potential for corruption even as rates of education are on the rise.

Compounding the issue, many Asian and foreign analysts of Asian nations now worry that easy credit has masked huge structural problems in the foundations of most of the region’s countries. The economies of Asia are much bigger now than they were 15 years ago when a financial meltdown crippled the region in the late 1990s.

As their economies move through the inevitable boom and bust cycles, the temptation and pressures on officials and businesspeople may encourage illegal activities. A crisis in Asia could affect the entire international economy which puts into perspective just how critical the changes to curb graft in Asia actually are. Rooting out corruption could prove to be the make or break policy pursuit for many of the emerging economies.
 

Thursday, 10 October 2013

Is China becoming too aggressive in space?

According to recent news reports, a Chinese satellite used a mechanical arm to capture another satellite in orbit last week. The satellite was launched in a Long March-4C rocket on July 20 and was apparently observed manoeuvring before last week’s capturing test.

That a Chinese satellite can move to grab another satellite while still in orbit is a significant achievement for China, but probably not a strategic threat. There is such a dearth of information on the Chinese space programs that it is difficult to ascertain exactly how far along they really are.

The experimental space vehicle could be part of a testing system for more advanced civilian satellite systems in the future, perhaps for a new space station, or even as a lab tool. Equally it could herald an impressive new capability for China’s covert anti-satellite program.

It remains unclear whether the manoeuvrable satellite is entirely part of China’s growing anti-satellite program, or whether it is a civilian satellite which can double as a military tool. Such a robotic arm is useful for orbital maintenance and may not have been built especially to disrupt other satellites at all. But the capability now exists.

The US Defense Department has been monitoring the movement of Chinese satellites, according to a Pentagon spokesperson, three of which were involved in last week’s test.  The experimental satellites have been identified as the Chuangxin-3 (Innovation-3), Shiyan-7 (Experiment-7) and Shijian-15 (Practice-15).

As far as open source research can uncover, the action was likely limited to a single satellite, and does not necessarily point to a coordination of craft performing anti-satellite warfare. Chinese officials have also allayed fears of an impending satellite war by explain the craft are only “scientific experimentation satellites”.

China’s strategic focus on space is still years behind the United States, even while the Americans have stopped their own rocket travel and are using Russian rockets launching from Central Asia. The Chinese space program has nevertheless advanced in leaps and bounds since its official beginning in 1958.

Their first manned mission occurred in 2003 and an anti-satellite missile destroyed a depleted Chinese satellite in 2007. That particular anti-satellite missile test caused over 3000 pieces of orbital debris ranging from the microscopic to dinner-plate size. So there is little wonder fears are being voiced over another potential anti-satellite test from China.

Most of that space debris will eventually fall into the earth’s atmosphere to be destroyed, but until it does, it whips around the earth at colossal speeds endangering other satellites. The US State Department and NASA worry such tests threaten the peaceful and international use of space.

The United States fears around China’s growing capability in space are probably largely rhetorical. However, Pentagon officials will know more about China’s space capabilities than what is available in public records, and their fears could only be scraping the surface. The big worry for the US is not necessarily the movements of a few satellites, but the entry of a third major international participant in space.

The United States has had to compete with only Russian technology in space for decades. China’s growing interest in securing a long term presence essentially threatens the status quo.

China’s satellite program is run almost exclusively by government industry and has relied on copying other country’s programs and technology, rather than indigenously developing their own models. This gives the Chinese program competent technology systems, but limits their ability to experiment with truly fresh technology.

What the robotic arm test shows is that China’s space abilities are quickly positioning the country as a major player in the strategic arena. Admittedly the test has implications for military uses, but in reality it displays a fairly standard capability for any future orbital maintenance of China’s fleet of satellites or space stations.

China’s plans for more satellites are part of the country’s drive to develop a full range of intelligence, reconnaissance, and communications platforms which will assist both their geopolitical and economic development.  

If their plans are to deny access to other space-exploring countries by forming the ability to physically remove adversary’s satellites, there are easier ways to anger the international community. So just because their satellites can remove other craft, this does not mean the intention exists.

Thursday, 3 October 2013

Iran's weakening position leads to talks with Obama

US President Barack Obama talked directly with Iranian President Hassan Rouhani at the end of September. This was the first time any leader of the two duelling countries conducted bilateral talks with each other for 34 years.

Some are already calling the discussion a breakthrough, but in reality the geopolitical situation in the Middle East has changed so dramatically that Iran are in a much weaker position now than they were a few years ago. On the other hand, while the US might throw their weight around in the region, they truly do not want to kick-start another conflict in the Middle East if it can be avoided. So talking now makes perfect sense for both sides.

Talking is something many analysts hoped for when Mr Rouhani entered office as a successor to the firebrand Mahmoud Ahmadinejad. Mr Rouhani is considered a moderate in comparison, with a clear record of diplomatic competence, especially surrounding the controversial nuclear project.

And beyond any other strategic complications between the two countries, Iran’s nuclear path has proven to be the most troublesome. Tehran has used their nuclear ambitions to both threaten others and protect Iranian interests the Middle East, all without actually having a viable or deliverable nuclear weapon.

Their strategy of working towards, but never actually possessing, a nuclear weapon is a finely-tuned process of political leverage on the world stage. If the Iranian regime actually owned a nuclear weapon, it can be assured that sanctions would not be the only measure of force visited upon the country.

The US and Israeli intelligence apparatus might be fallible, but if they ever discovered a nuclear weapon in Iran, the international community would move fairly swiftly to remove the threat by whatever means necessary.

This is why having a nuclear weapon sits in the right hand column on the list of worst-case-scenarios for Iran. Tehran knows it can use their nuclear project as a bargaining chip with the West in a way they never could if they boasted a viable nuclear weapon. So long as the project was credible and the threats were scary enough, they could distract the US and Israel from their real objective.

That objective lies in building up their conventional forces and expanding their sphere of influence across the Middle East with as little interference as possible. Without the United States armed forces positioned in Iraq, Iran’s conventional forces are now the strongest military in the region. This deeply worries Saudi Arabia and the other Sunni Muslim members of the Gulf Cooperation Council (GCC).

It has been suggested that if Iran got enough influence over their immediate region, they could swap their nuclear project (which was never very far along anyway) for recognition of their dominant position in the Middle East. This analysis explains why the US has given so much attention to and sabre-rattling towards Iran over the past decade.

However, Iran’s grand strategy has come somewhat unstuck over the past year or so. Thanks in no small part to the effects of the Arab Spring and various shadow activities of the West’s intelligence services. The last thing the United States needs is another imbroglio in the Middle East. It has tried to extract itself as best it can, on the proviso that its strategic imperatives can be maintained and Iran contained. The conflict in Syria has broken the arc of influence carved out by Iran, which falls right into the United States lap.

Iran needs Syrian President Bashar al Assad to rule Syria for as long as he can. But this is not looking like it will be possible. The outcome in Syria is most likely going to be a terrible choice between partition, perpetual civil war (in a similar form to Lebanon in the 1980s), or some devil’s agreement linking the moderate rebels with the regime against the more radical Jihadist groups. A coherent Syria is not going to emerge, which ruins Iran’s plan.

Bahrain and eastern Saudi Arabia, both predominantly Shiite Muslim regions, were both very close to slipping into heavy unrest over the past few years stirred up by Iranian intelligence services. But for whatever reason - be it natural counter-revolutionary forces or state intervention - the region has not succumbed to Iranian influence. In fact, just the opposite. Tehran’s strategy has failed to entrench support for the regime in all but historically Shiite areas, such as eastern Iraq. Sunni forces in the Arab world have beaten Iran in the game.

All of this brings Iran to the negotiating table with perhaps not the influence it could have had. The Iranians are still in a relatively good position in the Middle East, which is why these talks are only hesitant and probing at this point.

But that seat is eroding very quickly. The geopolitical situation predicts a settlement between Iran and the United States. Talking to Mr Obama last week is really the only salvaging move Mr Rouhani can make at the present time.

Both want to retain their positions and ensure the other doesn’t encroach or threaten their interests. Just how a settlement would be sold to their respective publics is less predictable, as there is significant opposition to detente in both countries.

Finalising a TPP agreement - the obstacles

A new round of talks beginning this week in Bali, Indonesia October 3 – 8 should bring the Trans Pacific Partnership (TPP) negotiations one step closer to finalisation. Asia Pacific markets ranging from the tiny to the tremendous are poised to join together in a highly compromised but effective agreement which will break trade barriers for 40% of fastest-growing sections of the global economy.

There is still a lot of work to be done, especially around intellectual property and convincing labour unions the agreement is more than just a corporate power-grab, but the TPP is actually a reasonably good trade policy. Most members are high-income or upper-middle-income countries with high degrees of economic freedom.

Participating countries include New Zealand, Australia, Peru, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Singapore, the United States, and Vietnam. Thailand and South Korea also plan to join in the near future.

The TPP is the flagship policy of US President Barack Obama’s “Asian Pivot” and the inclusion of the US in the talks back in 2009 changed the partnership from a marginal connection between New Zealand, Brunei, Chile, and Singapore into a global agreement. The US was very interested in gaining better access to a region where 61% of all American exports are consumed.

If the talks are given the attention they deserve, the agreement has a strong chance of early completion. Mr Obama wanted to close the negotiations before the end of this year however the most recent round of talks in Washington were remarkably unsuccessful. US Trade Representative Michael Froman, the official in charge of overseeing the US side of the talks, said in July that concluding the talks this year was going to be a difficult goal but certainly “doable”.

This is beginning to look unlikely as bringing all parties together to be completely satisfied with the outcome is proving to be more difficult than Mr Froman or anyone else expected. The closest conclusion date will probably be late 2014 at this point, regardless of progress in Bali this month.

Japan still has deep fears the talks will eliminate tariffs on its agricultural exports which their farming community still considers very important. Japanese agricultural sector is one of the most protected in the world, and there is little chance the rest of the partnership will allow such protectionism.

To get an idea of how large those Japanese trade measures are, the tariff on rice is 777.7%, butter has 360%, and sugar hovers around 328%. On the other side, all the participating countries wish to protect their own favoured industries or agriculture in some way. So some aspects of a whole swathe of different topics will be considered non-negotiable by one country or another. The ultimate balance is proving difficult to find.

Intellectual property obstacles are also proving to be a real headache. One of the bigger problems lies with the patent disputes around generic drugs in developing countries. Technology patents and entertainment are similarly troublesome and could end up being an obstacle too nuanced for complete agreement across the board. They could even be a deal-breaker if the negotiations aren’t handled correctly.

The talks were always going to be difficult, so there’s little surprise in how slow they are progressing. Bilateral negotiations sometimes take years to formulate, and there’s comparatively few complications in such talks. But bringing together 12 or 14 hugely different nations with potentially mutually-exclusive market processes is a colossal task in diplomacy.

Given this reality, it is perhaps a little surprising that the participating countries continue to talk. Similar talks between the EU and the US - the so called TTIP negotiations - have stalled in the post-NSA spying controversy, while US-China talks are rarely amiable and full of thorns.

But the economic benefits of the TPP are too juicy to forsake over a few navigable obstacles. When Japan joined in July, it opened up the potential for the monetary cream of creating quasi-free trade deal with Japan for all members of the TPP.

Predictions for a rise in incomes to the smaller partners of the agreement averaged around US$16 billion, with large gains going to New Zealand and Australia. Such numbers are keeping everyone excited. The upcoming round of talks in Bali will include the US President, which offers more weight to this round than usual. If this brings more momentum and displays to all observing countries the potential rewards of inclusion in the partnership, the Bali talks could encourage other Asian nations to join as well.

Ultimately, however sound the TPP policy appears on paper - championing as it does free-market principles and including many of the world’s fastest-growing nations - the realities of dealing with multifarious nations is proving to be a more significant obstacle than first thought.

A successful round of talks in Bali may break new ground; it remains to be seen where and by how much.

Wednesday, 2 October 2013

TPP negotiations stumble while America is distracted

Next week US President Barack Obama will visit Southeast Asia for the annual ASEAN leaders East Asia Summit as well as a number of other forums to increase his face-time with top Asian officials. Top of the agenda will be finalising the Trans Pacific Partnership (TPP) negotiations which Mr Obama pledged to complete before the end of the year.

The last round of negotiations held two weeks ago in Washington made no substantial progress on many sectors and only addressed 10 of the 20 “chapters” proposed by the TPP. Notably, a working group tasked with addressing environmental concerns made only a measly 40% of their predicted progress.

Major US business trade groups are not happy about the direction of the talks especially regarding intellectual property, which most other TPP participants demand to complete the agreement. On top of this, New Zealand, Australia, Singapore, and Chile recently upped the ante by offering to eliminate tariffs on all agricultural and industrial goods, which will puts pressure on Japan to open up its politically sensitive agricultural market.

Even if the next talks can make significant progress on finalising the agreement, the White House has limited chance of pushing the package through Congress. The vast scope of the TPP and the recurring trade protectionism from within many negotiating countries is worrying top officials in Washington. So despite the Office of the US Trade Representative’s best efforts the TPP may not even reach the fast track in Congress.

Certainly, the US President’s planned attendance at the various South Asian forums is a good indication of American commitment to the region. This sign is timely because it was beginning to look like the current administration had chosen the Middle East as the centre of its geopolitical vision.

The stalling TPP talks are part of an emerging incoherence within the current US administration. With ongoing domestic fiscal problems in the US, considerable doubt is being thrown on Mr Obama’s efforts to pass the TPP successfully in his proposed schedule.

Part of the reason for the problems emerging with the TPP is geopolitical distraction. Syria has dominated the world’s media cycle over the past few months as the US government hoped against hope that it wouldn’t have to launch military strikes on the country after Syrian President Bashar al Assad called the American bluff banning the use of chemical weapons.

Mr Obama’s strategic gaff opened the door for Russia to try its hand at world-stage diplomacy despite its obvious regional, not global, power. In so doing, years of American grand strategy aimed to limit Russian influence in the Middle East now teeters.

US officials are in damage-control mode trying to clean up what can only be called a very amateurish attempt at international relations which hasn’t actually fixed anything in Syria. All this while the Asia Pacific is ignored and those countries begin to question American resolve to build greater interaction.

This American obsession with the Middle East is to be expected. After all, fighting a decade-long war in the region doesn’t offer easy or painless paths for exit. But the US will have rethink their tendency to react to every niggle in the Middle East if it wants to seriously convince other - more strategically important - countries in Asia that they can rely on the US as long-term partners.

The Obama administration’s thrust was always to remove America from distracting wars and focus on emerging Asia Pacific countries. The previous Secretary of State Hillary Clinton made numerous visits to marginal and major nations throughout the region during her time, setting up what should have been an easy win for the US.

The TPP negotiations were a part of this refocusing of resources. Instead of stepping back into isolationism once the wars finish, the idea was to simply “pivot” and bring the power of the American economy and military juggernaut to the world’s fastest-growing region. But if their true focus remains firmly on dealing with the Middle East, then any suggested commitment to Asia starts to look a lot like empty rhetoric.

Mr Obama’s visit to Southeast Asia might very well be viewed by other nations as preferring to build his personal reputation rather than construct a coherent and long-lasting geopolitical strategy. Only unobservant officials in Asia should expect the pivot policy to be as robust in its continuation as it started out.

Putting oneself in the shoes of the Philippines or Japan, threatened by a rising China and facing the consequences of a diluted TPP agreement, the repetitive pat-on-the-back assurance of American attention without much physical interest must be disconcerting.

If the TPP continues to hit admittedly weak obstacles, and if Mr Obama continues to emit a strategy without a vigorous and fully-engaged mindset, it will be no surprise if the negotiations fail to achieve their many goals. Other parts of the world with greater potential for historical legacy are far too distracting for Mr Obama, and that’s a shame.