Global Economies

This Week in News

This Week in News is the EastWest Institute's weekly roundup of international affairs articles relevant to its areas of work.

"China blasts US for Asia-Pacific military build-up,” The Guardian. April 16.

"China is a cyberwar victim too," Foreign Policy. April 16.

"Afghanistan opium production increases for third year," The New York Times. April 16.

Duma to Consider Lifting Ban on Child AdoptionsThe Moscow Times. April 17.

"China Asks to Postpone Japan, Korea Summit," The Wall Street Journal. April 18.

"North Korea lays out tough pre-conditions for talks," The Times of India. April 18.

 

Follow EWI on Twitter @EWInstitute for continuing news updates.

Compiled by Michael McShane, Athina Doutis, Alex Schulman and Haolin Liu.

Pakistan's Predicaments

On April 16,EWI Board Member Ikram Sehgal, chairman of the Pakistani security firm Pathfinder Group, discussed Pakistan’s political climate at EWI’s New York Center. He addressed a number of domestic and regional challenges facing his home country, focusing on corruption, the upcoming national elections and the impact of the 2014 International Strategic Armed Forces (ISAF) withdrawal from neighboring Afghanistan.

Sehgal, who is also a political columnist for Pakistani newspapers such as The News International, decried the high level of privilege and corruption in Pakistan’s government. As an example, he noted that “70 percent of the legislators in the last parliament were neither registered taxpayers, nor were paying taxes themselves.”

He also warned that a lethal nexus of “corruption, organized crime and terrorism” is a chronic problem, producing contradictory trends. While the counter-insurgency strategy of Pakistani’s army has scored notable successes, he noted: “We have not really won the war against terrorism. Terrorism is alive and well in Pakistan.” A big part of the problem, he added, is that “the political will to fight terrorism is not really there in the current government.”

However, Sehgal does see some hope in the  May elections. He noted that Pakistani women are increasingly involved in politics, as are growing numbers of newly registered young voters. The latter group has been attracted to politics by compelling figures such as Imran Khan, the former star cricket player-turned-politician. While not a member of Khan’s party, Sehgal insisted that he was “better than the corrupt people that we now have in power.”

Elections aside, the domestic fate of Pakistan is very much dependent on its neighbors—and, in particular, on Afghanistan. What happens following the withdrawal of foreign troops from that country next year will have an immediate impact on Pakistan, he cautions.  

“The Afghan vacuum will spill over to Pakistan,” he declared. Although he does not see foresee a sudden dissolution of Afghanistan after foreign troops exit the country, he predicts that “it will happen gradually” unless the Afghan authorities perform better than they do now.

Nonetheless, Sehgal believes that Pakistan could have a bright future, in part, because of its considerable resources and skilled manpower. “We are one of the few developing nations that can feed and clothe our citizens,” he said. He then went on to rank his country as one of the world’s highest producers of copper, gold, coal, wheat, milk, cotton and other crucial resources. “I am an optimist about Pakistan,” he concluded.

Sehgal previously spoke at EWI’s 9th Worldwide Security Conference in Brussels, focusing on Economic Security in Southwest Asia. Watch the video of his address here.

This Week in News

This Week in News is the EastWest Institute's weekly roundup of international affairs articles relevant to its areas of work.

"Is China ready to abandon North Korea? BBC. Apr 9.

"Friend or frenemy? For China, key issue is how US really views it,” Christian Science Monitor. April 11.

What Kerry Should Tell China,” by Shen Dingli. Foreign Policy. April 11.

"In Seoul Kerry Warns North Korea Against Missile Test," The New York Times, April 12.

"Why the Iranian Nuclear Standoff Won't End Anytime Soon," The Atlantic, April 11.

"Defense News, April 10

 

Follow EWI on Twitter @EWInstitute for continuing news updates.

Compiled by Michael McShane, Athina Doutis, Alex Schulman and Haolin Liu.

EastWest Direct: North Korea’s Cacophony of Threats

EWI’s Thomas Lynch interviews EWI’s Chief Operating Officer James Creighton, the former Chief of Staff of the Eighth U.S. Army in South Korea, about the escalating tensions on the peninsula. 

What do you feel is the motivation for this recent ratcheting up of the rhetoric and threats by the North Korean leadership?

In this situation, we have a young leader who feels he has to prove himself—in particular, to his generals. Kim Jong-un wants to solidify his claim to authority after his father’s death. He also has to prove himself internationally and I think he is being advised that this is the way to do it. You can look at similar actions that have occurred earlier – the 2006 and 2009 nuclear bomb tests, for example. They’ve also shut down Kaesong City before, as they did earlier this week. These things were done in the past to demonstrate the nation’s sovereignty; they also seem to think that this bolsters the country’s reputation in the world. I think the difference this time is that everything is happening much quicker. The pace is greater in terms of the amount of rhetoric and the threats to South Korea, the region and even to the embassies in Pyongyang.

Are these actions being taken seriously by the international community?

If you look at reports out of Pyongyang, the embassies have not fled, so it appears that foreign government officials have become immune to the rhetoric. On the other hand, I know the United States takes it very seriously. It’s one of those situations where the probability of an attack is pretty low, but the risk of large scale casualties and damage is dramatic. So you need to take actions appropriately, factoring in the tremendous risk if you get it wrong.

Based on your experiences in South Korea working with the U.S. military, can you offer an estimate of North Korea’s offensive capacity?

Their initial capacity is rather large: there are estimates of up to 7,000 artillery tubes that can reach Seoul, which could produce millions of casualties during an initial assault. On the other hand, the counterattack from the combined forces command would be devastating to North Korea. I believe that they know that. The only thing that they could do is to inflict a huge amount of casualties in Seoul and then the combined South Korean and U.S. forces would attack rather quickly and it would be pretty ugly for North Korea.

So that’s your assessment of the worst-case scenario?

The worst case scenario would be an an artillery and ground attack on Seoul. There would be immediate casualties in South Korea followed by a decisive coalition counter attack. Withan armyof over 600,000 soldiers, South Korea would provide the primary ground troops. The air and naval forces associated with that attack would be strongly supported by the United States.

Setting aside government propaganda, how do you think the average North Korean citizen views the current situation?

North Korea is a country that has been isolated for well over 50 years to an incredible degree. In 1953, the average North Korean and average South Korean were very much alike, even physically. Today the average North Korean is about three inches shorter and 40 pounds lighter than the average South Korean. There has been a policy of starvation for three generations. I think North Koreans support the government because that’s the only thing they know. If average North Koreans had a greater understanding of the outside world and could see the dramatically higher standard of living that South Koreans enjoy, I think they would be opposed to their government’s actions. But, of course, that’s why they’re kept isolated.

Given China’s role as North Korea’s only ally, do you think that it will work to lessen tensions? There were some recent comments from President Xi warning North Korea indirectly not to stir up trouble.

China stands to lose a huge amount, as does the entire region, if the situation spins out of control. The enormous economic progress we’ve seen would be jeopardized. Like President Xi, Russia’s President Putin and German Chancellor Merkel cautioned the North Koreans to avoid provocations. I think that, if needed, both Russia and China would take stronger actions to try to stop Pyongyang from doing something foolhardy.

EastWest Direct is an ongoing series of interviews with EWI experts tied to breaking news stories.

The Importance of BRICS

Writing for The Daily Mail, EWI Board Member and former Indian Foreign Minister Kanwal Sibal stresses the importance of India's role in the BRICS nations.

Media commentary in India on the fifth BRICS Summit, held in South Africa on March 27th, has not been particularly positive. Attention has been drawn to the artificial character of this grouping originally thought up by Goldman Sachs, the conflicting interests of its constituents, the disparate nature of their political systems, the doubtful advantages to India of membership, and, now fears of Chinese domination of this ensemble because of its overwhelming economic and financial weight.

If the logic of this criticism were to be accepted, it will apply partially to the United Nations, the IMF and the World Bank too, where differences in the political systems, power equations and interests of countries are even more marked, with the influence of one country—the United States—being the most decisive. The G-20 also cannot be exempt from such criticism too. Yet India is a member of all these international organizations or groupings, without self-questioning.

NATURE

The perceived anti-West orientation of BRICS is troubling for some. True, the Russians pushed for its creation in order to forge a partnership between major non-western countries to promote multipolarity. Members like India—and this would apply to Brazil and South Africa as well—believe in a reform of the West-dominated international system in which their voice is not sufficiently heard. Groupings like BRICS can act as platforms for calls for change, without the three countries in question slipping into any futile anti-westernism.

We should not overuse the democracy argument to question our cohabitation with China and Russia in BRICS. If we are supposedly in bad company, then it is worth recalling that US financial and economic links with China, or those of major European democracies, are incomparably greater than ours. We should also be careful not to buy into the highly tendentious western criticism of Russian democracy for geopolitical reasons.

We are against policies of regime change, interference in the internal affairs of sovereign countries, politicization of human rights issues and doctrines of humanitarian intervention etc. India-Russia annual summit declarations show congruence of thinking on the principles that should govern international relations. With Brazil and South Africa too we have such consonance. The BRICS platform enables all of us to project our opposition to western efforts to create new, destabilizing norms.

In BRICS only India and China have sharp bilateral differences. Should we be in a grouping that provides space to China to expands its influence internationally, eventually at our expense? Russia too should have similar concerns theoretically, but it is working closely with China politically, economically and, once again, militarily, as the decision to sell its 24 SU-35 aircraft, the very same that lost out in competition for the supply of 126 aircraft to us, shows. This is discomforting for us as it devalues the relative importance of India-Russia relations to China’s advantage.

Despite this negative feature of BRICS for us, there are clear strategic advantages of membership. BRICS is an instrument of pressure for change in the international system. The eThekwani Declaration calls for new models and approaches as regards global governance. It notes the negative spillover effects of the monetary policy of the U.S., Europe and Japan which have led to increased volatility of capital flows, currencies and commodity prices, with negative growth effects in developing countries. It calls for prioritizing the G20 development agenda. It expresses concern at the slow pace of IMF reforms and demands that International Financial Institutions should reflect in their structures the growing weight of BRICS and other developing countries. The core principles and the developmental mandate of the Doha Round is stressed, besides asking that the next Director-General of the WTO should be a representative of a developing country. All this reflects India’s thinking and interests.

DECLARATION

The declaration calls for a comprehensive reform of the UN, including its Security Council, with Russia and China reiterating the importance they attach to the status of Brazil, India and South Africa in international affairs and supporting their aspiration to play a greater role in the UN. This kind of patronizing formulation was not needed by India, which is less than what Russia offers us bilaterally.

The eThekwani declaration is moderate, with no anti-western bias. The paragraph on Syria is balanced; the one on Palestine repeats standard formulations. On Iran, there is a call for a negotiated solution, with concern expressed about threats of military action as well as unilateral sanctions. The paragraph on terrorism accords with India’s position. The one on Afghanistan is unobjectionable. The paragraph on climate change is non-controversial. The importance of peaceful, secure, and open cyberspace through universally accepted norms, standards and practices is emphasized.

STEPS

Because the summit was held in Durban, the focus on Africa in the proceedings—with participation of several African countries in discussions—and the final declaration is prominent.

The decision to set up a New Development Bank with substantial and sufficient initial contribution to finance infrastructure in emerging and developing countries has attracted adverse attention, as if working outside the World Bank or ADB is unacceptable. Differences over the size of funding and fears of Chinese domination have been highlighted. A Contingent Reserve Arrangement (CRA) with an initial size of US$100 billion to help BRICS countries forestall short-term liquidity pressures has also been established. These are steps in the right direction.

We should not be dismissive about the declared aim of progressively developing BRICS into a full-fledged mechanism of current and long-term coordination on a wide range of key issues of the world economy and politics. This is part of our sensible policy of playing on all chess boards with prudence, calibration and no ideological bias.

Read this column at The Daily Mail.

Tewodros Ashenafi Featured in Reuters and Financial Times

EWI Board Member Tewodros Ashenafi, CEO of Southwest Energy (HK) Ltd, was featured prominently in recent articles from Reuters and the Financial Times.

Both articles covered the potential for future energy production in Ethiopia, an area where SouthWest is actively engaged.

On April 7, the Financial Times reported that, while he concedes that significant energy exploration and production in the country remain years away, Ashenafi maintains that "private equity is out there and looking for opportunities such as ours.”

In a Reuters article posted on April 8, he asserted that Ethiopia "has huge potential and is very underexplored. The Jijiga basin alone is 367,000 square kilometres. That's larger than the North Sea, and there have only been 50 wells drilled." 

Earlier this year, Ashenafi appeared with regional experts at an EWI event hosted by Gallup in Washington to discuss energy prospects in East Africa.

D Magazine Names Ross Perot, Jr. Developer of the Year

On March 20, D Magazine recognized EWI Chairman Ross Perot, Jr. with its Developer of the Year award. Covering its inaugural Commercial Real Estate Awards in Dallas, the magazine lauded Perot's firm Hillwood for its "profound" impact on the region.

In selecting awardees, editors evaluated over 250 nominations and selected finalists in 12 categories.

Citing reasons for his firm's success, Perot maintained “it’s important for large companies like ours to put speculative projects on the ground and develop lots, to lead by example and help get markets going again.”

Read more at D CEO.

Towards a Renewed Transatlantic Bond

Wolfgang Ischinger, EWI board member and chairman of the Munich Security Conference, urges the United States and Europe to make good on their recent rhetoric about redefining and expanding their ties.

This column, which originally appeared in the German daily Handelsblatt on February 1st, is part of Ischinger's regular Monthly Mind column.

In recent months, the words of American politicians on the subject of transatlantic relations have often sounded a bit like the Van Morrison classic: “Have I told you lately that I love you?” Since the U.S. government announced its “pivot” toward the Asia-Pacific, hardly a speech has failed to mention a clear commitment to Europe: ‘Europe is still America's most important partner. America will not abandon Europe. Vice President Joe Biden is not making a special journey to Beijing, but to Germany for the Munich Security Conference.’ And so on, and so forth.

In Europe, and in Germany in particular, we like hearing these things. On both sides of the Atlantic, we seem to have this feeling that our affection for one another needs to be constantly reaffirmed. Where does this insecurity come from? Transatlantic relations are actually more harmonious and less problematic than they have been for a long time. However, in certain ways, we have begun living – staying with the metaphor – somewhat separate lives.

Both of us – Americans and Europeans – have recently been occupied largely with ourselves. The Europeans' attention has been primarily directed towards managing the Euro crisis, while the Americans, for their part, have themselves been struggling with the effects of the financial crisis and a highly polarized and self-obstructing political class. European politicians shake their heads over the endless disputes in Congress about the debt ceiling, while their American colleagues press the EU to finally generate more economic growth in Europe.

In the realm of foreign policy, the U.S. is strengthening its involvement in the Asia-Pacific, whereas Europe is barely considering its own strategic role there. On the other hand, in and around Europe, the U.S. no longer insists on taking the leading role in conflicts and interventions – for the first time since NATO was founded. This was the case in Libya and now once again in Mali.

The U.S. and NATO cannot be everywhere at once, their officials say. At the same time, they warn Europeans against further reducing their defense expenditures. Complaints were recently heard in Paris that the U.S. was demanding large payments for providing urgently required transport capabilities for the Mali operation. Perhaps this was only a misunderstanding - but it somehow seems symptomatic.

Europeans and Americans now have to come to a fundamental understanding of what they want to do together in future, and what each would prefer to do on their own. There are excellent reasons for us to continue to define as many common goals as possible. Just as in every relationship, however, it also means that we will have to invest something.

A significant step would be to set up a common economic area with a common free trade zone as a core, which, according to the estimations of some experts, could allow the gross national product of Europe and the USA to increase by several - highly valuable - percentage points. But such a free trade area would not only benefit both economies. It would also contribute to a dynamic in which standards and rules to which the U.S. and Europe agree become a sort of blueprint for the entire globe.

Fortunately, this idea, which is not exactly new, has found prominent support and has gained ground in European capitals as well as in Brussels and Washington. President Obama has just expressed his personal support. Such complex projects will only be successful if the negotiations are carried out “top-down” and do not simply get pushed back and forth in the respective bureaucracies. The obstacles are numerous and the stakes high. Let us hope that Obama, Merkel, Barroso etc. will persevere.

Another area that calls for closer cooperation is the U.S. “pivot” to the Asia-Pacific. The transatlantic conversations about potential common goals and policies in that region have been too timid. Europe will not be willing or able to involve itself militarily in Asia in the same way as Washington - nor should it be. But the EU can - and should - have its own clear positions, e.g. on the Chinese-Japanese conflict. From an Asian perspective, Europe barely appears on the radar when it comes to strategic questions. And a division of labor under which we sell expensive cars while the United States works towards strategic stability in Asia will eventually trigger significant transatlantic frictions. There are a number of issues on which we could work together more closely – with respect to promoting democracy or strengthening multilateral structures and organizations, for instance.

When it comes to NATO, there is also a need to act. Of course, we could continue to make speeches reassuring one another on a regular basis that NATO is the most successful alliance of all time. But in the long term this will be insufficient. The decisive question is how we can define the future of NATO together and ensure that it is able to fulfill its purpose. After all, the member states today have quite different ideas about the primary reason for the alliance’s existence.

It is unsettling that the alliance has increasingly developed into a sort of platform for "coalitions of the willing" in which only a certain percentage of members are actually actively involved. The integrated military structure of Nato is unique. But this alone is no guarantee that we can pursue our security interests together and successfully. It must be supported by a strategy, the relevant capabilities, and a minimum amount of solidarity.

Regrettably, over the past few years, European governments have cut their respective defense budgets without considering the bigger European picture. As a result, important military capabilities are being lost; perhaps they could have been retained had there been prior consultation. We need to use pooling and sharing to finally overcome the European ‘small-state’ approach in the area of defense. We could use the European defense budget far more efficiently if we trained and bought together. Such a step towards European self-affirmation would be met with American support.

We should take seriously the warnings of our American partners, which have become clearer and clearer, that the United Statess is simply no longer in a position to bear to main brunt of every crisis. For decades, Europeans have spoken of a two-pillar NATO, of a partnership of equals. This is their chance to actually turn this into reality. From an American perspective, further European integration and a close transatlantic partnership are no longer an either-or proposition. One depends on the other, and vice-versa.

The two new faces of American foreign and security policy, John Kerry and Chuck Hagel, are true transatlanticist with intensive connections to Europe. They take a genuine interest in us. Both have been loyal supporters of, and participants in, the Munich Security Conference. For the next generation of Americans, however, the connection to Europe is less and less close to the heart. Opinion surveys have revealed a trend that Europe's importance for the USA is slowly but consistently decreasing. In a Chicago Council survey last year, among those surveyed 58 percent aged 35 and younger said that Asia was more important to the U.S. than Europe.

This should remind us that the close transatlantic partnership is not a self-evident truth. We have always been connected by an unmatched level of economic interdependence, a network of stable institutions, many common interests, and last, but not least, our common identity as liberal Western democracies. In the coming decades these connections will become ever more important: in a world with new powers, Europe and the U.S. will only be able to stand up for their liberal values and interests together. In order to be able to do this, however, we must invest in these bonds between us. Maybe, we should not only be telling each other how important we are to one another, and how much we value each other. We should once again be embarking on inspiring projects together.

SC Magazine Quotes Firestein on Chinese IT Regulations

In an article on Chinese IT regulations, SC Magazine featured comments by David Firestein, EWI vice president for strategic trust-building and Track 2 diplomacy.

The article covered the negative reaction among Chinese officials to a new bill that requires a strict approval process for American governmental purchases of Chinese software. 

This requirement, an element of the Consolidated and Further Continuing Appropriations Act of 2013, follows a recent uproar over reports of alleged Chinese cyber attacks on American computer systems. Chinese officials have expressed opposition to the change, calling it a "discriminatory" action.

Firestein explained that “it's no surprise that this rule has generated a lot of attention in China, but one shouldn't overstate what the law seeks to do," continuing "it puts in a quality control premise. It doesn't seek to ban, but to [implement] a vetting mechanism.”

Click to read the article at SC Magazine.

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