10-08-2018
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STRATEGIC ISSUES<br />
FRIDAY, AUgUST <strong>10</strong>, <strong>2018</strong><br />
5<br />
How much India will be affected<br />
by US-Iran sanctions?<br />
Paras Ratna<br />
The Iranian nuclear deal fiasco<br />
has made the whole world<br />
anxious. U.S. President Donald<br />
Trump announced on<br />
May 8 that the United States<br />
will withdraw from the deal<br />
and planned to reinstate<br />
sanctions against the Iranian<br />
government. The sanctions<br />
were reimposed this week,<br />
making good on Trump's<br />
threat.<br />
The scrapping of the<br />
nuclear deal is bound to have<br />
widespread repercussions<br />
for the regional security<br />
architecture in particular and<br />
global polity in general. Given<br />
New Delhi's engagement<br />
not only with the United<br />
States and Iran but also with<br />
other significant Middle East<br />
countries like the UAE, Saudi<br />
Arabia, and Israel, the diplomatic<br />
headache resulting<br />
from these sanctions has<br />
multiplied for India.<br />
India is increasingly finding<br />
itself between a rock and<br />
a hard place following the<br />
Trump administration's unilateral<br />
withdrawal from the<br />
nuclear deal. U.S. Ambassador<br />
to the UN Nikki Haley's<br />
advice for India "to rethink<br />
their relationship with Iran"<br />
shows Washington's attempt<br />
to manipulate India. For<br />
New Delhi, though, changing<br />
the relationship with Tehran<br />
is easier said than done.<br />
India and Iran share historical<br />
ties, though this<br />
dimension of the India-Iran<br />
relationship is often ignored.<br />
The two shared common<br />
borders until the partition of<br />
the subcontinent in 1947.<br />
Persian influence on Mughal<br />
architecture is pervasive.<br />
Formal diplomatic ties<br />
between India and Iran were<br />
established in 1950. Presently,<br />
Iran is India's third largest<br />
supplier of crude oil. However,<br />
the India-Iran relationship<br />
transcends oil. India,<br />
with an investment of $500<br />
million, aims to develop<br />
Iran's Chabahar port as a<br />
transit hub for Afghanistan,<br />
Central Asia, and the International<br />
North-South Transport<br />
Corridor (INSTC). Additionally,<br />
India is developing<br />
two gas fields, namely<br />
Farzad-B gas field located in<br />
Tehran and the South Pars<br />
field located between Iran<br />
and Qatar. These projects<br />
clearly highlight India's longterm<br />
engagement with Iran.<br />
U.S. sanctions would<br />
severely stymie the above<br />
projects and investments.<br />
Although these sanctions are<br />
unilateral sanctions,<br />
imposed by Washington<br />
alone, the Trump administration<br />
has made it clear that<br />
no company or country dealing<br />
with Iran would be given<br />
access to the U.S. financial<br />
and banking system. More<br />
than 80 percent of India's oil<br />
is imported through foreign<br />
tankers, thereby making<br />
India's energy security contingent<br />
upon the U.S. sanctions.<br />
Similarly, the sanctions<br />
would impact investments<br />
in Chabahar as well as<br />
Farzad and South Pars oil<br />
field. Foreign companies and<br />
even Indian multinational<br />
companies with operations<br />
in the United States or<br />
dependent on the American<br />
financial system are planning<br />
to withdraw operations<br />
from Iran with the advent of<br />
sanctions. The State Bank of<br />
India has already announced<br />
it will suspend payment<br />
operations in Iran starting<br />
from November. Reliance<br />
Industries Limited (RIL) too<br />
has decided to halt its oil<br />
imports from Iran.<br />
In the past, India was able<br />
to successfully negotiate<br />
waivers pertaining to Iran<br />
from the United States. The<br />
previous Obama administration<br />
maintained sanctions on<br />
Iran but granted waivers to<br />
India. Now, New Delhi aims<br />
for an arrangement of the<br />
same kind with the Trump<br />
administration. At a time<br />
when both India and the<br />
United States want to forge a<br />
strong relationship, diplomatic<br />
dexterity should be<br />
prioritized over transactional<br />
orthodoxy. Iran shouldn't be<br />
allowed to be the third wheel<br />
in India-U.S. relations.<br />
However, there is more at<br />
stake for India than its relationship<br />
to Washington. In<br />
addition to the above complexities,<br />
India needs to<br />
maintain the fragile Shia-<br />
Sunni balance while simultaneously<br />
factoring in the concerns<br />
of Iran's rival Gulf<br />
nations like Saudi Arabia and<br />
the UAE. Besides oil, these<br />
India's diplomatic predicament just got worse.<br />
Photo: Flickr<br />
countries have a huge Indian<br />
diaspora and are also the<br />
largest source of remittances<br />
(accounting for approximately<br />
36 percent of the total<br />
India receives). There have<br />
been already attempts by<br />
Saudi Arabia and UAE to<br />
entice India. Companies like<br />
Saudi Aramco and Abu<br />
Dhabi National Company<br />
(ADNOC) have promised to<br />
invest $44 billion - roughly<br />
amounting to a 50 percent<br />
stake - in Ratnagiri Refinery<br />
and Petrochemical Limited<br />
(RRPCL). However, the<br />
actual materialization of<br />
these deals needs to be<br />
assessed carefully before taking<br />
any decision.<br />
India should also pay<br />
attention to the Chinese<br />
dimension. The renewed<br />
U.S. sanctions would force<br />
Iran to drift sharply toward<br />
non-Western powers like<br />
Russia and more so toward<br />
China. Chinese officials often<br />
characterize the relationship<br />
with Iran as "20 centuries of<br />
cooperation" and Beijing has<br />
shown no intention to scale<br />
down those ties. Iran, owing<br />
to its geography, plays a crucial<br />
role in China's Belt and<br />
Road Initiative (BRI). China<br />
could leverage this as an<br />
opportunity to further consolidate<br />
its hold. There is a<br />
possibility of a petrol yuan<br />
emerging, with China using<br />
its renminbi in transaction<br />
with Iran, an important step<br />
toward the internationalization<br />
of the Chinese currency.<br />
China-Iran engagement will<br />
undermine the impact of<br />
U.S. sanctions and put Beijing<br />
on the higher ground<br />
vis-a-vis countries like India<br />
and the United States. Thus,<br />
India needs to carefully asses<br />
these situations while formulating<br />
its response.<br />
What Should India Do?<br />
India should strongly argue<br />
for waivers regarding oil<br />
trade (given Iran's importance<br />
to Indian energy security)<br />
and critical projects like<br />
Chabahar port. The absence<br />
of Iranian oil could shoot up<br />
prices in the oil market, subsequently<br />
raising India's<br />
import bill; with elections<br />
around the corner, a hike in<br />
oil prices could mean tough<br />
times for the Modi government.<br />
India can contemplate<br />
lowering tariffs for U.S.<br />
goods in exchange for a sanctions<br />
waiver. New Delhi also<br />
needs to strongly push for<br />
Chabahar and frame it in<br />
tandem with Trump's objectives<br />
in Afghanistan - the<br />
port would reduce<br />
Afghanistan's dependence<br />
on Pakistan and would allow<br />
India to engage more constructively<br />
in the region.<br />
India should negotiate<br />
with Iran for a rupee-rial system<br />
and efforts should be<br />
made to revive Irano-Hind, a<br />
jointly owned shipping company<br />
that was shut down in<br />
2013. Further, India should<br />
coordinate with EU countries<br />
along with Russia and<br />
China to promote the Iran<br />
nuclear deal or any alternative<br />
arrangement, in case the<br />
United States remains firm<br />
on sanctions. India needs to<br />
do a holistic assessment of<br />
the situation and not tie itself<br />
to any particular country.<br />
What's next for Vietnam-Thailand<br />
security cooperation?<br />
Prashanth Parameswaran<br />
This week, Thailand's minister of public<br />
security paid a visit to Vietnam in<br />
yet another notable official exchange<br />
between the two Southeast Asian<br />
states. The interaction highlighted the<br />
ongoing activity on the defense side of<br />
the strategic partnership that both<br />
sides have forged over the years.<br />
As I have noted before in these<br />
pages, the defense realm has long factored<br />
into wider cooperation between<br />
Vietnam and Thailand, which, though<br />
characterized by animosity for much<br />
of the Cold War, has been warming<br />
somewhat in recent years, with ties<br />
officially elevated to the level of a<br />
strategic partnership back in 2013.<br />
The security aspect of ties has covered<br />
a range of areas, from addressing challenges<br />
such as transnational crimes<br />
and illegal fishing to stepping up visits,<br />
training, and channels of communication.<br />
One of the interactions both sides<br />
have been holding in recent years is<br />
the Vietnam-Thailand Joint Working<br />
Group (JWG) on politics and security.<br />
The JWG has provided an opportunity<br />
for both sides to discuss the full<br />
range of activities ongoing in that<br />
aspect of ties within the context of the<br />
wider strategic partnership, individual<br />
Thailand's minister of public security visited Vietnam,<br />
highlighting defense ties.<br />
Photo: Collected<br />
dialogues held between various ministries<br />
and institutions, channels of<br />
communication set up by agencies,<br />
and issues whether bilateral ones such<br />
as talks on mutual legal assistance or<br />
regional ones including the Mekong<br />
River and the South China Sea. The<br />
last iteration of the JWG, which was<br />
its ninth, was held in July last year.<br />
This week, Vietnam-Thailand<br />
defense ties were in the spotlight again<br />
with the visit of the secretary-general<br />
of Thailand's National Security Council,<br />
General Wanlop Rugsanaoh, to<br />
Vietnam. Wanlop, along with his delegation<br />
from a series of Thai ministries<br />
and sectors, was in Vietnam for a<br />
series of meetings as well as for the<br />
convening of the <strong>10</strong>th iteration of the<br />
Vietnam-Thailand Joint Working<br />
Group on politics and security from<br />
August 5 to August 8.<br />
Vietnamese state media said that the<br />
discussions between Wanlop and his<br />
Vietnamese counterpart, Deputy Minister<br />
of Public Security Senior Lieutenant<br />
Bui Van Nam, touched on a<br />
range of political and security issues of<br />
importance to both sides - including<br />
nontraditional security challenges<br />
such as food security energy security,<br />
climate change, water security, and<br />
natural disasters - as well as wider<br />
regional and global issues such as the<br />
development of the ASEAN community<br />
and the threats from terrorism,<br />
racial and religious conflicts, and territorial<br />
and natural resource disputes,<br />
and the issues they posed for regime<br />
security.<br />
They also discussed the role of the<br />
JWG itself in furthering cooperation<br />
between the two sides and the Ministry<br />
of Public Security and the NSC,<br />
including specific ways to improve its<br />
effectiveness as a key mechanism<br />
within the bilateral relationship moving<br />
forward.<br />
Unsurprisingly, beyond that, few<br />
additional specifics were provided.<br />
But as visits and exchanges continue<br />
through the year and onto 2019 and<br />
2020, when both countries will take<br />
turns to chair ASEAN, the security<br />
component of the Thailand-Vietnam<br />
relationship will continue to be an<br />
interesting area to watch.<br />
How might U.S.-China trade tensions impact the Indo-Pacific strategy?<br />
Photo: Shealah Craighead<br />
Japan to reevaluate their Indo-Pacific Strategy<br />
Mercy A. Kuo<br />
Proximity to the region's long-term<br />
geopolitical challenge, i.e. China's<br />
re-emergence as the largest power<br />
in the region, has compelled Japan<br />
to take the lead in articulating the<br />
necessity for an Indo-Pacific strategy.<br />
China's economic weight,<br />
assertive behavior, and hybrid tactics<br />
to achieve its national objectives<br />
such as eroding sovereignty claims<br />
through lawfare has compelled<br />
Japan to put forth foundational<br />
strategic frameworks such as the<br />
"Security Diamond" that has laid the<br />
foundation for today's Quadrilateral<br />
Security Dialogue (Quad) and the<br />
emerging Indo-Pacific strategy.<br />
The ensuing trade war between<br />
the U.S. and China has marshalled<br />
forces in each country. Beijing<br />
understands the trade war as a coordinated<br />
effort to stunt China's development<br />
and prevent China from<br />
"standing up" and achieving its China<br />
Dream, the great rejuvenation of<br />
the Chinese people and nation. The<br />
Indo-Pacific strategy is understood<br />
as a Cold War 2.0 containment<br />
strategy to cement U.S. regional<br />
hegemony. This highly securitized<br />
view of the Indo-Pacific strategy will<br />
enhance China's commitment to<br />
resisting U.S. trade tactics through<br />
targeted tariffs hurting Trump supporters.<br />
China will also become less<br />
cooperative of signature Trump<br />
diplomacy such as denuclearization<br />
of North Korea. In contrast, in the<br />
U.S. the trade war has bipartisan<br />
support, with both Republicans and<br />
Democrats recognizing the necessity<br />
to recalibrate their economic relationship<br />
and push back against Chinese<br />
assertiveness in the region. The<br />
Indo-Pacific strategy provides a<br />
platform to link a new geographic<br />
geopolitical framework that works<br />
in tandem to achieve economic<br />
objectives including fair, free and<br />
reciprocal (FFR) trade and pushing<br />
back against geopolitical gains by<br />
China in the Indo-Pacific region.<br />
U.S. withdrawal from the TPP<br />
inculcated deep misgivings about<br />
the U.S.'s long-term commitment to<br />
the region. Tokyo turned disappointment<br />
into a leadership opportunity<br />
through the successful pursuit<br />
of the CPTPP, an open trade<br />
agreement that would eventually<br />
allow for the inclusion of the U.S.<br />
among others. The U.S.-Japan<br />
Alliance makes Tokyo Washington's<br />
closest partner in the region. Their<br />
longstanding comprehensive and<br />
strategic partnership thrusts Tokyo<br />
into the role of indispensable partner<br />
and communicator as to the<br />
importance of the CPTPP and U.S.<br />
involvement to achieve a workable<br />
Indo-Pacific strategy.<br />
China's bilateral relationships<br />
with India and Australia play a<br />
determining role as to how Japan<br />
enlists both states in implementing<br />
the Indo-Pacific strategy. India fears<br />
open support for the Indo-Pacific, in<br />
particular military commitments to<br />
an open and free, rules-based maritime<br />
region as it could result in an<br />
escalation in Sino-Indo geopolitical<br />
tension with China potentially complicating<br />
Inda-Pakistan relations,<br />
amongst others.<br />
Australia's economic relationship<br />
with China, in contrast, places it in a<br />
difficult position as there is a mismatch<br />
in its economic interests and<br />
security/political interests. Australia's<br />
prosperity is directly related<br />
to economic ties with China.<br />
Notwithstanding, there is deepening<br />
concern about Chinese political<br />
interference in Australia and China's<br />
rejection of cherished middle power<br />
international institutions and rules.<br />
Better than most, Tokyo has clarity<br />
about the disaccord between economic<br />
and security interests when<br />
advocating the Indo-Pacific strategy.<br />
In the case of India, Japan has<br />
focused on forging economic ties<br />
through ODA and FDI, the creation<br />
of a strategic partnership, and<br />
stressing ad-hoc, selective participation<br />
in the Indo-Pacific strategy and<br />
the Quad. This is purposeful; India<br />
has comparative advantages such as<br />
population, geographic location,<br />
and identity that allows India to be a<br />
norm-maker without eschewing is<br />
pacifist traditions.<br />
Taiwan is an active player in the Pacific, home to many of its remaining diplomatic allies.<br />
Photo: Presidential Office, Taiwan<br />
Taiwanese strategy to compete<br />
with China in the region<br />
Alexandre Dayant<br />
Concern about China's aid investments in the Pacific Islands<br />
region have reached a fever pitch in the last year, with the general<br />
public waking up to the reality of the Pacific as a contested<br />
geopolitical space. China's engagement, of course, has not<br />
happened overnight. There are even diaspora connections<br />
that date back generations. China began stepping up its<br />
engagement in 2006 when it held the first China-Pacific<br />
Island Countries Economic Development and Cooperation<br />
Forum, pledging increased funding to the eight countries with<br />
which it has diplomatic relations. The 2015 (updated in 2016)<br />
the Lowy Institute's Chinese Aid in the Pacific Map revealed<br />
the full scale of how far that funding has grown.<br />
While China has been making the headlines, today's release<br />
of the Lowy Institute Pacific Aid Map reveals that China isn't<br />
the only nontraditional partner that has been busy in the<br />
region. Taiwan has been eagerly shoring up its relationships<br />
as well. The Pacific Aid Map is an interactive tool that has been<br />
developed by the Lowy Institute over the past 18 months to<br />
enhance aid effectiveness in the Pacific by improving coordination,<br />
alignment, and accountability of foreign aid through<br />
enhanced transparency of aid flows. The Pacific Aid Map has<br />
collected data on close to 13,000 projects in 14 countries from<br />
62 (traditional and nontraditional) donors from 2011<br />
onwards. This raw data has been made freely available on an<br />
interactive multifaceted platform, allowing users to investigate<br />
the data in a variety of ways. The Pacific Aid Map reveals,<br />
for the first time, the scope of Taiwan's engagement in the<br />
Pacific Islands region.<br />
The Pacific Islands is an important region for Taiwan. After<br />
Burkina Faso, the Dominican Republic, Panama, São Tomé<br />
and Príncipe, all cut ties with Taipei in the last two years, a full<br />
third of nations maintaining diplomatic relations with Taiwan<br />
are now in the Pacific Islands. These nations - Kiribati, the<br />
Marshall Islands, Nauru, Palau, the Solomon Islands and<br />
Tuvalu - have a combined population of just over 800,000,<br />
three quarters of which are based in the Solomon Islands. Given<br />
this concentration of support in the Pacific Taiwan has<br />
been on the charm offensive with these countries, with President<br />
Tsai Ing-wen recently touring the region. These countries<br />
also receive significant financial support from Taiwan.<br />
The Pacific Aid Map has collected data, through a combination<br />
of budget materials, government announcements, and<br />
social media sources, on Taiwan's aid to the Pacific.<br />
For the period of 2011-2016 our data shows that Taiwan has<br />
given more than $190 million to its supporters in the Pacific.<br />
This likely undersells the amount Taiwan has given to the<br />
region - budget documents from both Palau and Tuvalu are<br />
quite opaque on the subject, as is the Taiwan government.