09.08.2018 Views

10-08-2018

You also want an ePaper? Increase the reach of your titles

YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.

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.

Hooray! Your file is uploaded and ready to be published.

Saved successfully!

Ooh no, something went wrong!