Shinzo Abe’s Balancing Act with Russia

International Relations and Security Network, 30 October, 2014

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Japan and Russia have been engaged in a diplomatic cat-and-mouse game for many years now. The latest round of events saw Russian President Vladimir Putin and Japanese Prime Minister Shinzo Abe meet briefly on the sidelines of the Asia-Europe Meeting (ASEM) in Milan, with the two agreeing to continue their discussions at the APEC Summit in November. For both men, however, the stakes of this game are rising. Japan needs to diversify its energy supplies following the post-Fukushima nuclear shut-down, and building an energy relationship with Moscow would offset growing Chinese dominance of the continent. For Russia, the stakes are equally high: Putin shares Abe’s desire to balance against growing Chinese continental strength and wants to carry out his own ‘pivot’ to East Asia and the Arctic. He aims to do this through a combination of smart diplomacy with powers like Vietnam and Japan, and by shifting Russia’s energy focus from the stagnant European market to the growing Asian one. He also plans to economically develop Russia’s East and gradually restore its military power in the region. But despite these high stakes and compatible interests, closer ties between the two countries remain hobbled by uncertainly over one issue in particular: the future of the disputed Kuril Islands. Tokyo would like to regain its lost “Northern Territories,” seized by Stalin immediately after the Second World War, but it is unclear whether Moscow is willing to make a deal.

Foreign policy matches

By any account, Putin’s foreign policy has been in shambles since last year’s successful chemical weapons deal protecting the Assad regime. Since then, Russia has become increasingly isolated and marginalized diplomatically, first over anti-homosexual legislation, and then over Ukraine. The unexpected fall of key ally Victor Yanukovych in the 2014 Ukrainian Revolution precipitated a conflict on his doorstep and provoked an impulsive decision to secure Russian naval interests in the Crimea by force. The decision to annex the Crimea, while popular at home, has come at a great price, wiping out decades of good-will in Europe and the United States. Putin, however, does not seem to mind Russia’s isolation, which puts him in good company with the Japanese Prime Minister. Under Abe’s leadership, Japan has become similarly isolated in Northeast Asia, where Abe’s nationalist leanings have offended the Koreas, China, and even the US. Despite long-standing institutional closeness within the US-Japan alliance, Abe’s nationalism has caused some frostiness between him and the White House, with his decision to visit the controversial Yasukuni Shrinelast year drawing a rare rebuke from Washington.

Until a few years ago, discussions between Moscow and Tokyo were dominated by the territorial issue and by a long-discussed proposal for a gas-pipeline or LNG deal to supply Japanese and South Korean energy needs. These two states are the two largest LNG importers, and would represent a sizable catch for Putin if he can land them. James Byrne, an energy consultant at the Tokyo-based Mathyos Energy states: “Faced with declining demand in Europe, Russia and Gazprom must break into new markets in China, Japan and South Korea. The recent pipeline deal with China forms the backbone of a much larger planned far-eastern supply network that includes an LNG plant that would supply Japan. Also under consideration is a large-diameter gas pipeline.” According to Interfax, as Putin was pushing through the agreement to annex the Crimea through the Russian parliament, Igor Sechin – a Rosneft official close to Putin – was simultaneously in Tokyo offering Japan sizable concessions at a Russia-Japan Investment Forum, saying that Russia was “prepared to offer the most extensive opportunities for cooperating in meeting potential demand” as well as offset opportunities in shipbuilding.

Despite the domestic debate in Japan over the energy deal and concerns about crossing Washington over Crimea, Abe sees the current situation as an opportunity to gain concessions. On the one hand, he has followed the West in imposing sanctions on Moscow and promised US$1.5 billion in aid to the new Ukraine government. But, on the other, he met with Putin five times in the 18 months prior to Ukraine and initiated a2+2 meeting (featuring the defense and foreign ministers of both countries). If he can sweeten the pipeline negotiations with a deal on the islands, he will make his mark on Japanese politics as a historical leader: after all, the issue has become a perennial one for Japanese Prime Ministers, with Hatoyama, Kan, Aso and now Abe all pushing to be the man who brings the islands back into the fold.

The Great Game: Northeast Asian style

Close observers of Abe have noted that the Japanese Prime Minister is interested in more than just energy and the islands. Indeed, he has a far more complex foreign policy towards Moscow than previous Japanese leaders, which contains a personal element: his father Shintaro Abe was instrumental in improving Russo-Japanese ties in the early 1990s and had a close relationship with former Soviet leader Mikhail Gorbachev. As his father’s secretary and aide, Abe’s formative political years were spent working on ties with Russia. Because of this relationship, Abe sees the bilateral with Moscow as crucial in the growing geopolitical contest for Northeast Asia. In April 2013, he met Putin in Moscow and signed a memorandum of cooperation on a number of different projects, including joint development of the Magadan oil and gas field under the Sea of Okhotsk, an agreement for Rosneft to sell 1 million metric tons of LNG annually to SODECO, 1.25 million metric tons to Marubeni, and to establish a joint LNG plant in Vladivostok.

Of course, all of this pales in comparison to the US$400 billion deal between Moscow and Beijing in May of this year, a deal that shook energy markets. Although the dealpromises to bring down LNG prices across Asia, the formation of a Sino-Russian bloc would be a disaster for Japan, given its close proximity to the borders of both. It has territorial disputes with both states, and cannot risk having them coordinate their efforts.

What would you give for an island?

It is difficult to know whether Moscow would be willing to make a deal on the island. Putin has offered a compromise in which Russia would keep two of the larger islands and give two of the smaller ones to Japan, but no Japanese leader has favored such a deal. Instead, many inside Kasumigaseki – Japan’s equivalent of Whitehall – believe that Russia’s estrangement from the West bodes well for Japan’s chances of regaining all four islands. Despite Abe’s careful maneuvering, however, it is not clear what President Putin intends to do. On the one hand, Putin needs Japanese investment, technology and energy cooperation; on the other, he knows that Japan needs to buy his LNG as much as he needs to sell it. Talk of an American shale revolution exporting to the Asia market has yet to materialize, and Japan needs energy in the meantime. Putin is also keen to fight Washington’s efforts to isolate him. A deal with Japan, a close American ally, would drive a wedge between the two and serve his East Asian foreign policy push.

But while many argue that Putin is a pragmatist before he is a nationalist, he may still be unwilling to give up Russian territory for two reasons in particular: first, the mood of the country is against it, and second – in a real twist of fate – many of the 30,000 inhabitants of the islands emigrated from the Ukraine during the Cold War. Moving them forcibly would present him with grave domestic challenges, to say the least. As it stands, Russia has already carried out a US$630 million policy of investment into the islands, and expanded its military presence there. Russia, therefore, may continue to dangle the islands in front of Japan, and Japan will continue to play for them. Although neither country quite believes in a deal, neither is quite willing to give one up. It will be interesting to see how this odd game of cat and mouse plays out.


The Islamic State and the Future of Iraq

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Rear Admiral Christopher Parry as the dinner speaker

Tuesday, 21 October at 19:00 – 22:00

Naval and Military Club

The Policy Dinner Club is proud to announce that its next speaker will be Rear Admiral Christopher Parry, who will speak about the Islamic State (IS) at the Naval and Military Club on the 21st of October. A dinner discussion will then ensue on the topic offered. The Islamic State, also known interchangeably as ISIL or ISIS, is an organization which has created headlines worldwide for its radical take on Islamic doctrine and, especially also, for its barbaric means of achieving its goal to exercise political control over Muslim-inhabited regions in the Middle East and beyond. A U.S. military intervention was launched in September 2014 with subsequent support from regional and international allies, to ‘degrade and ultimately destroy’ the group. To date, international efforts have been unable to deter, much less destroy, IS or diminish its appeal amongst radicalized communities regionally and internationally.

The status quo prompts a range of questions: Which combination of factors led to the formation of IS? Will Western-led military intervention help or hinder further radicalization of the group? Which strategic specificities are essential to heighten prospects of military success and minimize mission creep? How to intercept the war-economy that sustains IS? Which security threats (material and normative) does IS pose for the West, including its non-radical Muslim community? What does the future of the Iraqi state(s) look like? Such questions are necessarily interlinked and equally crucial to understanding the complexity of Islamic State, and implications of the group’s existence for international security, economy as well as issues related to faith.

Who:          Rear Admiral Christopher Parry CBE

When:        19:00-22:00, 21 October, 2014

Where:        The Naval and Military Club (map)

Cost:           £TBC

Please note that dinners are filled on a first-come, first-served basis. Please also note that there is a dress code at the Club and diners are expected to adhere to that.

All remarks and discussion taking place after the initial speech are off-the-record and not-for-attribution, so as to further the warm and informal nature of the dinners. Should you wish to book seats or have any other questions, please let Magdalena Delgado know immediately by emailing her at m.c.delgado@lse.ac.uk.

Speaker’s Biography

After reading Modern History at Jesus College Oxford, Chris Parry spent 36 enjoyable, rewarding years in the Royal Navy as an aviator and warfare officer.  He also had five Joint appointments with responsibility for operational and developmental issues relating to all three Services.

As well as sailing every sea, he experienced regular operational tours and combat operations in Northern Ireland, the Gulf and the Falklands, where he was mentioned in despatches for his part in rescuing 16 SAS from a glacier in South Georgia and the detection and disabling of the submarine SANTA FE.  As a Rear Admiral, he was responsible for determining the future strategic context for operations and leading the conceptual development of all three armed forces out to 2030.

Nowadays, he runs his own strategic forecasting company, advising governments, leading commercial companies and banks about strategic issues, high-level leadership and systemic risk.  A regular broadcaster and commentator in UK national newspapers and magazines, he is an active author, most recently the best selling ‘Down South – a Falklands War Diary’, published in February 2012 and ‘Sea Power in the 21stCentury’, published in May 2014.


Scottish independence would have a negative impact on security

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British Politics and Policy at the LSE, 17 September, 2014

For most of the past few weeks, debates about Scottish independence have focused on the financial impact of separation, dominated in turn by the currency debate. Indeed, what independence will mean for defence and security have been obscured by this debate. Unfortunately, as with currency and EU membership, the SNP seems to have a penchant for having its cake and eating it. The party has laid out defence priorities without due consideration for cost, nor has it considered the degrading of its own (and UK) capabilities by doing so. Its impact can be analyzed at two different levels: firstit can be examined at the transatlantic level, in the realm of intelligence and defence; secondat the UK level, and how it will affect the defence of the British isles.

The Scottish White Paper, released by the SNP, identifies five defence priorities for an independent Scotland:

  • Maintaining the commitment to a budget for defence and security in an independent Scotland of £2.5 billion
  • Securing the speediest safe withdrawal of nuclear weapons from Scotland.
  • Building a focus on maritime capabilities, such as air and sea-based patrol, and specialist forces able to operate around Scotland’s coasts. These assets will initially be drawn from the current Royal Navy.
  • Progressively building to a total of 15,000 regular and 5,000 reserve personnel over the 10 years following independence.
  • Reconfiguring the defence estate inherited at the point of independence to meet Scotland’s needs, including the transition of Faslane to a conventional naval base and joint headquarters of Scottish defence forces. This approach would appear to be focused on maritime defence.

In addition, the Paper also states that Scotland would establish a Scottish intelligence agency (SIA), that would combine the work of the three agencies that currently do such work in the UK, MI5, MI6, and GCHQ. The White Paper also establishes that Scotland would seek to remain inside NATO, playing a more ‘Nordic’ role in defending the Alliance’s northern maritime border.

Scottish independence would affect transatlantic security at two levels: at the five eyes, intelligence-sharing level, and at the NATO level. In terms of the five eyes, an intelligence-sharing network dating to World War 2, which counts the US, UK, Canada, New Zealand, and Australia as members, it’s likely that Scotland would be pushed outside the tent of this force-multiplying alliance. Certainly, the other five agencies would seek to continue a relationship with the new SIA, due to their areas of common concern such maritime security and terrorism. They might even lend a hand to ‘capacity-building’, helping the new agency get on its feet. But in terms of sharing wider global intelligence, there would be little incentive to share too much with an untested and potentially leaky new agency.

Furthermore, though the new SIA could potentially professionalise quickly with a cadre of Scottish employees from UK agencies, it would have to make do with fewer resources – the White Paper claims a minuscule £2.5 billion per annum without reference to start-up costs, no small matter for developing costly cyber defence capabilities. In terms of intelligence-sharing, it would be a question of what Scotland brought to the table to justify it. The Home Secretary, Theresa May, has argued that this would be a two-way vulnerability, as Scotland would be a soft target for foreign intelligence services, impacting the UK as a whole.

Another area of concern involves the SNP’s goal of remaining inside NATO while at the same time reducing NATO’s nuclear capabilities in the form of a Trident base at Faslane. This is one of the most incredible cases of cake/eating put forward by Salmond. By removing one of only two independent nuclear capabilities in Europe, the SNP will be hurting its own case for NATO membership – indeed, this was discussed at a private meeting on July 6th in the Brussels NATO HQ between Scottish civil servants and senior NATO leadership. At a time of increased insecurity between the West and Russia, chaos in the Middle East, and a potentially ‘revisionist‘ China, the West as a whole will be made considerably weaker. Lord Robertson of Port Ellen, himself a Scot and former Secretary General of NATO, has stated that “the global balance will be substantially upset should one of the West’s key unions and its second-biggest defense power, split up.”

Along with defence capacity, defence industry in both Scotland and the UK will suffer as British companies like Rolls Royce, Thales, and BAE Systems move south of the border. Maintaining their classified building programs in a foreign country would be near impossible without strong intelligence guarantees, something a nascent SIA would be hard-pressed to provide for at least a decade. With such a move, British ship-building would be seriously undermined, possibly forcing London to buy off-the-shelf platforms from NATO providers.

All in all, Scottish independence would not destroy the West or NATO, nor would it lead to irreparable harm to the UK, but it would have negative consequences for UK standing and capabilities, for NATO nuclear deterrence and for the global and European balance of power. For a Scottish nationalist, this may seem a reasonable price to pay, but not all will agree. Their behaviour – though democratic and part of a positive search for identity – will have repercussions, and they should acknowledge them and seek to minimise them. The damage might be relatively short-lived – say a only decade long – if Scottish agencies quickly came up to scratch, the new country spent the required amount on defence (2 per cent of GDP for NATO membership), and if it offered some sort of compromise on the nuclear issue. However, there are a lot of ‘ifs’ before this issue is resolved. We will become extremely familiar with these ‘ifs’ should the vote go against the union on September 18th.


NATO and the ‘Pivot’ after Wales

 

David Cameron hosts the 2014 NATO Summit in Wales.International Relations and Security Network, 12 September, 2014

 

Now that the NATO Summit in Wales is over, analysts are working to understand its implications for the strategic landscape around Europe. One issue that lay behind many of the discussions was the impact of US global strategy on the force-posture of US military assets in and around Europe. Although Hillary Clinton famously quippedthat the United States “can walk and chew gum at the same time”, European allies still wonder how the US ‘pivot to Asia’ will affect its ability to defend the European continent and manage instability in the Middle East.

Overall, the Summit was a success: 28 world leaders came together as a symbol of transatlantic solidarity and moved past much of the awkwardness that had characterized US-German and US-EU ties over the past year. Vladimir Putin’s revanchist policies had reminded them of the purpose of the alliance, as had the growing instability on Europe’s southern border. On the whole, there were no significant differences of principle among member-states, and the leaders of the United States, Germany, France, the UK, and others committed – on paper, at least – to keep Europe “ whole, free, and at peace.”

Some have called the crisis over Ukraine a ‘Munich moment’, referring to the Munich Conference of 1938, when Germany won control of Sudetenland, a Czechoslovakian territory. However, the comparison is a favorable one for this generation. Rather than accepting the dismemberment of Ukraine, NATO member-states pledged support to Kiev in the form of a planned military exercise in Western Ukraine to show the alliance’s commitment. Furthermore, NATO members agreed to invest in reinvigorating the Alliance’s capabilities in three ways: 1) through the development of a new 4,000-strong deployment force, 2) through increased defense spending, and 3) through strategy readjustments to cyber warfare and ‘ambiguous warfare’.

Losing focus?

At a joint NATO-Cardiff University Conference held prior to the official summit, policy-makers and academics struggled to understand how the pivot would affect America’s ability to defend Europe. More than once, the US commitment to allocate more military resources to the Asia-Pacific was questioned. Some even wondered if the pivot was still in place, given the amount of traction that the Ukraine crisis and rise of ISIL were getting in Washington. This was despite US efforts to allay such fears at a press conference held on the 14th of August, where Admiral John Kirby stated that, despite instability on Europe’s eastern and southern flanks, the US remained very committed to the pivot, as illustrated by Secretary of Defense Chuck Hagel’s recent trip to Asia (his sixth as Secretary).

At the August 14th press conference, Admiral Kirby pointed out that five out of seven US treaty allies were located in the Asia-Pacific region, in addition to 350,000 troops and 200 ships. He might also have pointed out that the region is home to some of the world’s largest militaries and now outspends Europe collectively on defense. In addition, as powers like China and India rise, fissures and tensions along their peripheries have begun to threaten the stability of a region that already dominates global trade and is predicted to represent 51% of global GDP by 2050. If the US continues to turn towards the Asia-Pacific, it is out of long-term strategic necessity. Its European allies must recognize this.

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NATO Wales and the Future of Western Grand Strategy

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International Relations Security Network, 7 August, 2014

By John Hemmings for ISN

By all accounts, the upcoming NATO Summit in Wales is likely to be one of the most important since the end of the Cold War. Originally cast as a post-Afghanistan ‘lessons-learned’ and maritime security summit, events in Ukraine and Crimea have dramatically shifted the agenda since February and highlighted the need to redevelop NATO’s core mission of collective defense and deterrence. The sudden massing of Russian armor and more than 150,000 Russian troops on Ukraine’s eastern border in February at the height of the crisis, reminded Western leaders – particularly those in Poland and the Baltic states – of their vulnerability to old-fashioned conventional forces. However, it has already become clear that these threat-perceptions of Russia are not held equally by all 28 member states in the Alliance, as Germany and Italy balance their security concerns with dependence on Moscow’s energy imports.

These differences may emerge as a serious problem during the summit, stymying a collective path forward. Worse still, European policy elites continue to worry about shifts in US global strategy, particularly the US Pivot strategy and how the shift of US attention away from the European theatre to the Asian one will affect force posture in-region. These fears are likely to run into US frustration over NATO members’ under-spending, a common feature of every NATO summit since the 1990s, and one that will have real – rather than symbolic – meaning this year. Of course, despite all of these challenges, NATO remains the most powerful global defensive alliance, in terms of its combined GDP, military spending, and military technology. As with all collective efforts, its real weaknesses lie in coordination. With the US Pivot to Asia likely to become a permanent feature of its global strategy, the NATO Wales Summit must find a strategic posture for the West that accepts and complements that reality.

What does the Pivot mean to Europe?

The US Pivot to Asia is still poorly understood in Europe. Some believe that the policy is merely rhetorical in nature, while others see it as a misjudged containment attempt towards China, one that – as Australian academic Hugh White contends –fans the flames of great power rivalry. Primarily, European elites view the Pivot in terms of its effect on European security.

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Europe and China: A New Tack?

International Relations and Security Network, 26 June, 2014

At a recent state dinner in London for visiting People’s Republic of China (PRC) Premier Li Keqiang,David+Cameron+in+China+2+December+2013 British Deputy Prime Minister Nick Clegg made a number of undiplomatic comments, saying that the people of China were “politically shackled” to a communist one-party state guilty of human rights abuses. Unsurprisingly, given this government’s economic drive, Downing Street distanced itself from the statement, with Michael Fallon, the business minister, saying that human rights should not “get in the way” of trade links. Instead, UK Inc. reported that BP and Shell were due to announce multi-billion dollar deals with PRC oil companies. Indeed, investment from the entire visit by the PRC delegation was said to be worth more than 18 billion pounds.  That, it seemed, was that.

 Until recently, the policy approach of many Western nations towards the PRC has been based on a singular assumption. This assumption was that the West would do business with an authoritarian regime because it was thought that engagement would change the nature of that regime. In simple terms, trade would change the PRC from within, by building a middle class. The Clinton White House was the first to translate this assumption into policy – in 1994, Clinton delinked trade from advances in human rights and political reform, and, in addition to giving China most favored nation (MFN) status, signed a trade deal in 1999, which helped China accede to the World Trade Organization. The Americans were not alone. Japan, Taiwan, ROK and many EU states like Germany, the UK, and France encouraged trade ties with the seemingly reform-minded authoritarian regime. Many billions of dollars were injected into the country.

So far, business has been good…

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China and America: A Superpower Showdown in Asia

The National Interest, 14 June, 2014

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Over the past several months, tensions between Washington and Beijing have steadily grown worse. Relying again on the incremental approach that has thus far served it well, China dragged a deep sea-drilling platform into Vietnamese-claimed waters, shouldering aside protesting Vietnamese vessels. Then on the 21st of May, President Xi Jinping proposed a new Asian security pact with nations such as Russia and Iran, a pact that pointedly excluded the US and seemed to be a club for authoritarian states. Then in June, Beijing refused arequest by a UN court of arbitration at The Hague to provide evidence of its claims in a case brought by the Philippines. Days later, a video released by Vietnam showed a heavy Chinese fishing vessel slowly crushing a Vietnamese counterpart; the moment seemed to perfectly symbolize China’s new diplomatic strategy towards the region and one could almost see the phrase “Chinese soft power” slipping under the waves with it. If one thought it couldn’t get worse, it did. As the West has continued to look for ways to exert pressure on Russia over its actions in Crimea, China finally revealed where its cards lay: Beijing inked a $400 billion natural gas deal with Moscow and now looks set to sign another. None of it good news for those who think China ought to be a status quo power, upholding the rules of the global system.

All of this must have been uppermost in President Obama’s mind in late May as he toured the region on what allies called a “reassurance tour” and Beijing called a “containment tour.” The tour failed to make any headway on the White House’s touted trade group, the Trans Pacific Partnership (TTP), but was overall a success by showing US allies and regional partners that the rebalance has the support of the White House. However, despite this brief show of US soft power diplomacy in the region, China’s rise has gradually shifted from being a welcome to an unwelcome event. One can almost see the exam question at some future university:

Were American leaders right to believe that economic liberalization and heavy investment in China would eventually lead to political liberalization, and make China into a responsible stakeholder?

Until recently, the preferred answer in Washington was yes.

It seemed certain to say that the economic liberalization of China was inherently a “good” thing, that raising millions out of poverty demonstrated once and for all the benefits of free market capitalism. The 1991 collapse of the USSR may have proven the failure of the communist economic model, but a successful China had demonstrated to the world capitalism’s strengths. And as every liberal knew, economic success brings with it a rising middle class, the vanguard of a pluralistic system.

Success, partly…

No one disputes that the first part of the story has been a triumphant success: China’s rampant growth as a state capitalist regime has dominated Western headlines for nearly two decades. An unprecedented influx of US, Japanese, Taiwanese and EU investment turned the Chinese economy red hot in less than a decade after Deng’s Southern Tour, with many becoming blasé about China’s double digit growth figures. Surely, Mao turned in his grave during the 2008 financial crisis, when many were calling China the savior of the global (capitalist) economy. Who could have predicted in his time that Chinese leaders would one day lecture their North Korean counterparts on the benefits of the free market? If anyone fretted that the second part of the story had not yet happened – China had not added political reforms to the mix – optimists would always add ‘yet’sotto voce. It was only a matter of time before China’s growing middle classes began clamoring for political as well as economic rights, they said, and saw signs of this in China’s growing online forums, which became miniature town meetings on corrupt officials and abuses of power.

And as Washington has watched with dismay, this Western notion that China would gradually liberalize politically has been dissipated more and more. Not only does President Xi show no signs of loosening Party control at home or of adopting liberal values abroad, his security proposal in Shanghai reveals an inclination to defend and augment authoritarianism. That brief spring felt before the 2008 Beijing Olympics quickly froze over as the regime reasserted control over television stations, bloggers and netizens, threatening three-year sentences to those who spread “internet rumors.” In early May, prominent journalist Gao Yu was detained as part of targeted campaign against activists in the run up tothe 25th anniversary of the Tiananmen Square incident, an anniversary that was eerily silent in Beijing. Contrary to expectations, Xi has also consolidated and centralized power with the party and the military quickly, with the Economistcalling him the most powerful Chinese leader since Deng.

Turning the Tide

Is a new Cold War between China and the United States inevitable? Obama’s foreign policy for the region has sought to avoid definitively answering that question, as well, he might. The consequences of radically changing direction when it comes to China policy would be a dramatic shift in US grand strategy, the greatest perhaps since the fall of Soviet Union. Many in the West have claimed that China cannot be “contained,” pointing to Beijing’s role in servicing US debt as well as its place as a major trade partner to so many pivotal US allies. While there is some truth to this, it is not quiet as unthinkable as it once was. Michael Pettis, a renowned economist at the Peking University, along with many others predict a debt crisis for China in the next 4-5 years, in which Chinese growth rates will all but come to a halt. He argues that the Third Plenum reforms promoted by President Xi (raising savings rates for homeowners, raising the currency, dealing with land ownership and the internal passport system) are bound to come into stiff resistance from Chinese elites, happily profiting from the current system. The stakes are quite high: should Xi fail to push these reforms through, China could hit the growth wall suffered by Japan in the late 1980s. As with Japan in the 1980s, China is called the engine for the global economy, but as Japan stagnated in the early 1990s, the West experienced one of the biggest booms in recent memory. This doesn’t mean that China is a paper tiger, it does cast doubt on the idea that China will is destined to inherit the earth…

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