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Hotbeds of War II- Arms and Sanctions: U.S.A. and North Korea

Osama Rizvi

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A hermit kingdom where government officials flatter their leader with odd songs. A lady in pink, in an enthusiastic tone, announcing some “successful” missile test or the video of the test it-self is the most we get to see of it. North Korea is a different country. Criticism and sanctions has done little to stop its ambitious nuclear program.  

While discussing the conflicts that can lead to an all-out war, the one between North Korea and USA is the most unstable and dangerous one. Time and again, tensions had escalated between the two but the world has been fortunate enough. However, this is not a solution. The conflict can best be described in terms of a volcano that can erupt at any given time.

Even the slightest spark between the countries send ripples across the world. Because the stakes are high, very high. The point of discussion is nuclear. The men concerned, capricious and hence, dangerous. Strings connect other countries and drag them inside most of the times, unwillingly (China is an ally of North, Russia hosts the greatest number of North Korean workers and South Korea looks to USA for help, with thousands of US troops stationed there). Despite sanctions and international criticism North Korea continues to conduct nuclear experiments, blatantly degrading Non Proliferation Treaty. This year the country conducted 18 missile tests. In an attempt to quenching their thirst for nuclear pyrotechnics, they tried a hydrogen bomb as well.

On August 29, 2017, North Korea launched a ballistic missile that flew over the Japanese island of Hokkaido and fell into the Pacific, 1180 km east of Japan. Proving inured to international flak and ire, on September 14th, 2017, the regime launched another missile that followed the same trajectory: flying over Hokkaido islands dropping into Pacific Ocean. This was just after the KCNA, news agency of North Korea, released a statement threatening to sink Japan into the sea. South Korea responded by a fire drill. Japan was on high alert. Evidently, the second test was a reaction to the recently imposed sanctions on North Korea. (See image below).

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Japanese Prime Minister Shinzo Abe has reprimanded North Korea in a stern manner, conducting emergency exercises in Japan teaching people how to evacuate in case of a strike. Mr. Trump has also said that “all options are on table” to deal with DPRK.

By a scrupulously observing the intricate geo-political milieu of the said region one can easily see that there are more than two stake-holders in the game. North Korea shares a border with China. Also, China is the biggest trading partner of the former. Whereas South Korea is a US ally. Both China and USA wants to have a strong hold in this region given the magnitude of international trade and tanker traffic passing through it. South China Sea (which would be analyzed in the last part) is the most disputed and significant area, which is located in this region. China is not happy with their naughty neighbor but acting against the country to an extent that it becomes unstable is not an option. Hence, their balking in adopting a complete oil embargo. If this happens there can a huge outflow of people which will, naturally, enter China…disturbing and disrupting the socio-economic order there. Also, in case of a total economic collapse of North Korea, South can takeover it which in turn will give US an opportunity to “contain” China.

Evidently, there are financial dimensions to it as well. Mr. Mir Mohammad Ali Khan, Wall Street Investment Banker and Chairman of an Advisory Company, shared a very comprehensive view of the financial repercussions of this conflict

“We are about to see an Asian Financial Crisis bigger than 1997 and become a contagion which will make 2008 crisis look like a joke. Mr. Trump without realizing the financial implication of his threatening tweet(s) has promised to sanction banks doing business with North Korea and cut off “All” trade ties with countries doing business with the North Koreans.

The problem is Trump threatening to put sanctions on all financial institutions doing business with Kim Jong’s nation. China is the biggest trade partner of North Korea. 85% of the North Korean trade goes through China. What Trump forgot to realize that the four lenders of China are the biggest in the world. Bigger than JP Morgan. HSBC. Or any other bank in America. The Industrial and Commercial Bank of China has assets over $ 3.47 trillion dollars. China Construction Bank over $2.8 trillion dollars. Agricultural Bank of China and Bank of China, $ 2.93 and $3.02 trillion respectively. And all these banks do business with North Korea. While JP Morgan comes in at the 6th place with $ 2.49 trillion in assets and HSBC at 7th place with $ 2.37 trillion dollars. Another noteworthy fact is that the size of the Chinese lending pool has surpassed the entire Euro Zone lending pool. At above $33 trillion dollars. If Trump does what he is promising to do, to put sanctions on any financial institution doing business with the North Koreans, then we will see the world’s biggest financial crisis. Something which will even dwarf the famous 1929 market crash. This will be a crash of the entire financial sector of the world.

Secondly if America breaks all trade ties with China then China will immediately en-cash what it has in United States Treasuries, or what is better known as the American debt, which is 4% of the entire American debt of $19 trillion dollars. If China liquidates almost a trillion dollars of its holdings in the treasuries, the American debt market will crash and it will cause the European Debt market of €13 trillion to crash with it. It’s a wait and see approach at this moment….economic WORLD WAR ONE is in the making. Trump is caught between the Devil (himself) and The Deep Blue Sea. I hope the devil gets his senses back and listens to his advisors.”

Matters are made worse when the leaders on both sides are what they are: unpredictable. If Kim is a dangerous man, Trump is amateur politician. With the hope that things won’t move towards a military action, that would be unimaginably destructive, we can hope for more stringent sanctions that can put a kibosh on any further nuclear plans subsequently preventing escalation.

However, the response from North Korea, after the imposition of recent sanctions, is symptomatic of the regimes’ obstinacy in pursuing its nuclear program. Korean regime may be inured to criticism but had to be stopped at some point. Otherwise, they can be a cause of unnecessary turmoil, for themselves, and for the whole world as well.

Independent Economic Analyst, Writer and Editor. Contributes columns to different newspapers. He is a columnist for Oilprice.com, where he analyzes Crude Oil and markets. Also a sub-editor of an online business magazine and a Guest Editor in Modern Diplomacy. His interests range from Economic history to Classical literature.

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East Asia

Freedom, Sovereign Debt, Generational Accounting and other Myths

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“How to draw the line between the recent and still unsettled EU/EURO crisis and Asia’s success story? Well, it might be easier than it seems: Neither Europe nor Asia has any alternative. The difference is that Europe well knows there is no alternative – and therefore is multilateral. Asia thinks it has an alternative – and therefore is strikingly bilateral, while stubbornly residing enveloped in economic egoisms. No wonder that Europe is/will be able to manage its decline, while Asia is (still) unable to capitalize its successes. Asia clearly does not accept any more the lead of the post-industrial and post-Christian Europe, but is not ready for the post-West world.” – professor Anis H. Bajrektarevic diagnosed in his well-read ‘No Asian century’ policy paper. Sino-Indian rift is not new. It only takes new forms in Asia, which – in absence of a true multilateralism – is entrenched in confrontational competition and amplifying antagonisms.  The following lines are referencing one such a rift.

At the end of 2017, Brahma Chellaney, a professor with the New Delhi-based Center for Policy Research, wrote an article titled “China’s Creditor Imperialism” in which he accused China of creating a “debt trap” from Argentina, to Namibia and Laos, mentioning its acquisition of, or investment in the construction of several port hubs, including Hambantota in Sri Lanka, Piraeus in Greece, Djibouti, and Mombasa in Kenya in recent years.

These countries are forced to avoid default by painfully choosing to let China control their resources and thus have forfeited their sovereignty, he wrote. The article described China as a “new imperial giant” with a velvet glove hiding iron fists with which it was pressing small countries. The Belt and Road Initiative, he concluded, is essentially an ambitious plan to realize “Chinese imperialism”. The article was later widely quoted by newspapers, websites and think tanks around the world.

When then United States Secretary of State Rex Tillerson visited Africa in March, he also said that although Chinese investment may help improve Africa’s infrastructure, it would lead to increased debt on the continent, without creating many jobs.

It is no accident that this idea of China’s creditor imperialism theory originates from India. New Delhi has openly opposed China’s Belt and Road Initiative, especially the China-Pakistan Economic Corridor as it runs through Pakistan-administered Kashmir, which India regards as an integral part of its territory. India is also worried that the construction of China’s Maritime Silk Road will challenge its dominance in South Asia and the Indian Ocean. Based on such a judgment, the Indian government has worked out its own regional cooperation initiatives, and taken moves, such as the declaration of cooperation with Vietnam in oil exploration in the South China Sea and its investment in the renovation of Chabahar port in Iran, as countermeasures against the Chinese initiative.

Since January, India, the United States, Japan and Australia have actively built a “quasi-alliance system” for a “free and open Indo-Pacific order” as an alternative to the Belt and Road Initiative. In April, a senior Indian official attending the fifth China-India Strategic Economic Dialogue reiterated the Indian government’s refusal to participate in the initiative.

The “creditor imperialism” fallacy is in essence a deliberate attempt by India and Western countries to denigrate the Belt and Road Initiative, which exhibits their envy of the initial fruits the initiative has produced. Such an argument stems from their own experiences of colonialism and imperialism. It is exactly the US-led Western countries that attached their political and strategic interests to the debt relationship with debtor countries and forced them to sign unequal treaties. China’s Belt and Road Initiative is proposed and implemented in the context of national equality, globalization and deepening international interdependence, and based on voluntary participation from relevant countries, which is totally different from the mandatory debt relationship of the West’s colonialism.

It is an important “Chinese experience” to use foreign debts to solve its transportation and energy bottlenecks that restrict its economic and social development at the time of its accelerated industrialization and urbanization. By making use of borrowed foreign debts, China once built thousands of large and medium-sized projects, greatly easing the transportation and energy “bottlenecks” that long restrained its social and economic development. Such an experience is of reference significance for other developing countries in their initial stage of industrialization and urbanization along the Belt and Road routes.

In the early stage of China’s reform and opening-up, US dollar-denominated foreign debt accounted for nearly 50 percent of China’s total foreign debts, and Japanese yen close to 30 percent. Why didn’t Western countries think the US and Japan were pushing their “creditor imperialism” on China?

Some foreign media have repeatedly mentioned that Sri Lanka is trapped in a “debt trap” due to its excessive money borrowing from China. But the fact is that there are multiple reasons for Sri Lanka’s heavy foreign debt and its debt predicament should not be attributed to China. For most of the years since 1985, foreign debt has remained above 70 percent of its GDP due to its continuous fiscal deficits caused by low tax revenues and massive welfare spending. As of 2017, Sri Lanka owed China $2.87 billion, accounting for only 10 percent of its total foreign debt, compared with $3.44 billion it owed to Japan, 12 percent of its total foreign debt. Japan has been Sri Lanka’s largest creditor since 2006, but why does no foreign media disseminate the idea of “Japan’s creditor imperialism”?

In response to the accusation that China is pursuing creditor imperialism made by India and some Western countries, even former Sri Lankan president Mahinda Rajapaksa wrote an article in July using data to refute it.

Most of the time, the overseas large-scale infrastructure construction projects related to the Belt and Road Initiative are the ones operated by the Chinese government and Chinese enterprises under the request of the governments of involved countries along the Belt and Road routes or the ones undertaken by Chinese enterprises through bidding.

It is expected that with the construction of large-scale infrastructure projects and industrial parks under the Chinese initiative, which will cause the host country’s self-development and debt repayment ability to constantly increase, the China’s creditor imperialism nonsense will collapse.

An early version of this text appeared in China Daily

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Arrogance of force and hostages in US-China trade war

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Even before the ink on the comments made by those who (just like the author of these lines) saw the recent meeting between US President Donald Trump and his Chinese counterpart Xi Jinping in Buenos Aires as a sign of a temporary truce in the trade war between the two countries had time to dry, something like a hostage-taking and the opening of a second front happened. The recent arrest in Canada under US pressure of Meng Wanzhou, the chief financial officer of China’s telecommunications giant Huawei, is unfolding into a full-blown international scandal with far-reaching consequences.

Meng Wanzhou faces extradition to the United States where she is suspected of violating US sanctions against Iran, namely by making payments to Tehran via the UK branch of the US bank HSBC. The question is, however, how come someone is trying to indict a Chinese citizen according to the norms of American law, and not even on US territory to boot?

China’s reaction was extremely tough with Deputy Foreign Minister Le Yucheng summoning the Canadian and US ambassadors in Beijing and demanding the immediate release of the detainee, calling her detention “an extremely bad act.” First of all, because this is yet another arrogant attempt at extraterritorial use of American laws.

Other countries, above all Russia, have already experienced this arrogance more than once; suffice it to mention the cases of Viktor Bout and Konstantin Yaroshenko, or of the alleged “Russian hackers,” who, by hook or crook, were taken out to the United States to face US “justice”.

Enough is enough, as they say. Russia’s Foreign Minister Sergei Lavrov, who is usually careful in his choice of words, said that while Russia is not involved in the US-China trade war, it still regards Meng’s arrest as “another manifestation of the line that inspires a rejection among the overwhelming majority of normal countries, normal people, the line of extraterritorial application of their [US] national laws.”

“This is a very arrogant great-power policy that no one accepts, it already causes rejection even among the closest allies of the US,” Lavrov said. “It is necessary to put an end to it,” he added.

One couldn’t agree with this more. But first, I would like to know who really is behind this provocation, even though China’s reaction would have been much anticipated. The arrest of Meng Wanzhou sent US markets into a tailspin and scared investors, who now expect an escalation of the trade war between the United States and China.

The point here, of course, is Washington’s displeasure about Huawei’s activities, with The Wall Street Journal reporting that the US Justice Department has long been conducting a probe into the Chinese company’s alleged violation of US sanctions against Iran.

There is more to this whole story than just sanctions though. The US accuses Huawei (as it earlier did the Chinese ZTE) of the potential threats the company’s attempts to use tracking devices could pose to the security of America’s telecommunications networks. The United States has demanded that its closest allies (primarily Canada, the UK, Australia and New Zealand, with whom it has set up a system for jointly collecting and using Five Eyes intelligence) exclude 5G Huawei products from their state procurement tenders.

I still believe, however, that the true reason for this is not so much security concerns as it is a desire to beat a competitor. Huawei has become a world-renowned leader in the development and application of 5G communications technology, which looks to the future (“Internet of Things”, “Smart Cities”, unmanned vehicles and much more.)

Since technology and equipment are supplied along with standards for their use, there is a behind-the-scenes struggle going on to phase out the 5G standard developed by Huawei from global markets.

As for the need “to put an end to this,” the big question is how. Formally, detainees are extradited to the United States in line with national legislation, but at Washington’s request (which often comes with boorish and humiliating pressure from the US authorities and is usually never mentioned in public).

Add to this the US Congress’ longstanding practice of changing, unilaterally and at its own discretion, already signed international treaties and agreements as they are being ratified – another example of “arrogance of power” as mentioned before.

The question could well be raised at the UN Security Council, but its discussion is most likely to be blocked by the US representative. However, there is also a moral side to the assessment of any political practice the work on international legal norms usually starts with.

If China and Russia, as well as other countries equally fed up with the “arrogance of power” submit a draft resolution “On the inadmissibility of attempts at extraterritorial use of national legislation by UN member states” to the UN General Assembly, it would most likely enjoy the overwhelming support by most of the countries of the UNGA, maybe save for just a dozen or so of the most diehard advocates of Washington’s policy…

First published in our partner International Affairs

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Will China Save the Planet? Book Review

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Barbara Finamore has been involved in environmental policy in China for decades.  Her new book, Will China Save the Planet?,is a succinct report (120 pg.) on the short, yet promising history of China’s actions to address climate change and pollution.

Chapter 1 is about the recent global leadership role that China has taken in the fight against climate change.  At first, the PRC was hesitant to commit to specific pollution-reduction benchmarks.  After experiencing increasingly devastating bouts of industrial smog in the 1990s however, China began to take its environmental commitments more seriously.  It has set out to become the de facto leader in combatting climate change through ambitious domestic action and sponsoring international conferences.  The Trump Administration’s withdrawal from the Paris Climate Agreement has only furthered China’s dominance.

Chapters 2-4 give in-depth analysis on China’s efforts to wean itself off of coal, develop its renewable energy capacity and become a global leader in electric vehicle production.  China has long used coal to fuel its unprecedented rate of industrialization.  In recent years, it has pledged to wean itself off of coal dependency by enforcing coal plant efficiency standards, enacting a cap-and-trade program, managing grid output, promoting local politicians based on their success in implementing green policies and supporting green energy developments.  China is now home to many of the world’s top manufacturers of solar panels, wind turbines and commercial & private electric vehicles.

There is much to applaud China for in its efforts.  Finamore writes that, “After growing by an average of 10% annually from 2002-2012, China’s coal consumption leveled off in 2013 & decreased in each of the following three years… Largely because of the dip in China’s coal consumption, global CO2 emissions growth was basically flat between 2014-2016.”  By moving away from coal, China has been able to, “Every hour… erects a new wind turbine & installs enough solar panels to cover a soccer field.” As of last year, “Chinese solar manufacturers accounted for about 68% of global solar cell production & more than 70% of the world’s production of solar panels.”

Chapter 5 focuses on China’s mission to export its green initiatives around the world, particularly through its Belt and Road Initiative (BRI).  The BRI is shaping up to be the largest international infrastructure plan in history, investing trillions of dollars in 65 countries in Asia, Europe, Africa and the Middle East.  China thus has a golden chance to help much of the developing world to adopt clean energy goals and foster economic growth.  The Chinese government is encouraging its citizens to invest in renewable energy initiatives in the BRI countries by implementing a “green finance” system.  Through its pivotal role in the G20, China can also help to lead the developed world by spearheading reports and policies among the 20 member nations.

Barbara Finamore has written a highly readable and informative overview of China’s role in the global climate change battle.  She lists the Chinese government policies that have led the world’s largest nation to meet and exceed many of the green benchmarks that it set for itself.  It would have been helpful if Finamore had written more about China’s water instability and how that ties to the Tibetan occupation, as access to drinking water is one of the top environmental issues in the world today.  As a whole, Will China Save the Planet?is a good primer for environmental policy analysts and anyone else interested in studying feasible solutions to climate change, humanity’s greatest threat.

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