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The “Silk Railway” leads to Pyongyang

Giancarlo Elia Valori

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Besides modernizing the Korean peninsula’s whole network, the railway cooperation between the two Koreas, ratified on June 26 last, will permit the connection to the Trans-Siberian Railway, which can be defined as the starting point of what is called “The Silk Road of the XXI Century” – in more precise terms the construction of a new”Silk Railway” as a bridge connecting two worlds, with a clear reference to the ancient Silk Road that united China with the territories of the Roman Empire. Instead, this rail network will connect South Korea to North Korea and – through the Trans-Siberian Railway – toEurasia, so as to allow the fast movement of people, goods and resources.

This agreement seems to have been the real goal of the joint declaration between the two Koreas on April 27 last – the day of the historic Panmunjom Summit – to open up to the world.

It is a grand program that could represent the mainstay of a new economic roadmap for a sound and balanced development of the whole peninsula, which is also very rich in mineral resources.

A high-speed railway line which would connect North and South Korea to Russia, as well as a series of ambitious economic projects, were discussed extensively during the memorable meeting held in Singapore on June 12 last between US President Donald Trump and North Korean leader Kim Jong Un.

The issue involves the whole Korean peninsula, which needs more modern infrastructure that can connect it to the rest of Asia and, at the same time, let it seize the same opportunities as countries like Thailand which are growing at a very quick pace.

Also supported by China, which has promised adequate investment, the South Korean government has announced its intention to back the construction of major works that can also benefit North Korea, such as the construction of modern railways capable of connecting the Korean peninsula to China and Russia.

The inter-Korean railway infrastructure

The ambitious plan envisages the construction of a modern railway network for the entire peninsula, through innovative projects enabling to relaunch the region. The strategic axis of the initiative is precisely the implementation of a railway line uniting the two Koreas which, according to the “Panmunjom Declaration” signed by the two leaders at the end of the Summit, should connect Seoul, the capital of South Korea, to Pyongyang, the capital of North Korea, by crossing the city of Kaeseong.

Once reached Pyongyang, the railway line should continue up to the city of Shinuiji, North Korea, thus reaching the border with Dandong, China. Indeed, the railway link is only the first step of a much more ambitious project, which would require an important investment of approximately 35 billion US dollars.

The South Korean government’s plan envisages the construction of a high-speed railway line connecting Seoul to Shinuiju, passing through Pyongyang, to be built by using the existing tracks of six old lines that currently allow the transit of trains travelling at a speed of just 50 kilometres per hour.

However, there is a wider plan behind this roadmap: the Gyeongui line can connect to the Trans-China Railway in Shinuiji, which is connected to Europe, while the Donghae line is connected to the Trans-Siberian Railway in Hasan. Instead, the east coast railway network would be the shortest way to the main port of Wonsan, the Trans-Siberian Railway and Vladivostok.

The modernization of the network would be matched with the construction of new tunnels for the installation of railway networks and bridges, because the current structures rely on small cars and narrower tracks (narrow-gauge) than those of a modern high-speed railway network.

High-speed rail networks and global trade

The plan of the “New Economic Map of the Korean Peninsula” fits into the broader context of the great project initially known as “One Belt One Road” (OBOR) – promoted by the President of the People’s Republic of China, Xi Jinping, with a view to improving global governance through international cooperation – which is designed to integrating Asia and Europe by building six land and sea transport corridors, through which goods, technologies and culture will circulate.

The “New Economic Map of the Korean Peninsula” is a major project for relaunching the region which depends on two components: geopolitical and diplomatic, on the one hand, structural and economic, on the other, because the huge infrastructure of high-speed rail networks will not only connect the two Koreas, but will also strengthen the link between the peninsula and the rest of Asia, particularly China and Russia. This plan should turn the region into a strategic hub for world trade, thus making it become a transit area for the goods travelling from East Asia to Europe.

These lines would connect the two countries to China, on one side, and to the Trans-Siberian Railway, which crosses Russia, on the other, thus enabling the goods coming from the Korean peninsula to reach Europe.

Moreover, the transit of the new trains will be matched by territorial development – especially where the new stops are located.

One of the foreseen stretches, the Pyongra Line, is expected to connect the two largest cities of the South, namely Seoul and Busan, to Chongjin, the third largest city in North Korea, and to the industrial district of Rajin, which can boast the highest per capita GDP in the country.

These high-speed trains will become a crucial factor of economic development, both globally and nationally, considering that currently the development of the railway system can generate real benefits in terms of mobility, because it is viewed as an essential tool for growth, since it is powered by electricity and not by fossil fuels, which instead fuel road and air transport.

The railway expert, Mark Smith, has put together several statistics on his website, “The Man in Seat 61”, including an independent study  commissioned by Eurostar on the environmental impact of travelling by train. The reduction of carbon emissions per passenger achieved by taking a train instead of an airplane can even reach 90%.

I believe that the modernization of the railway system in the whole Korean peninsula will have a significant impact and, above all, a direct effect on the economy of transport and hence on the movement of goods.

Both the economic impact and the geopolitical effects, however, open up  further opportunities and initiatives after the successful outcome of the peace negotiations between the two countries, together with the regained stability of a region which is now also linked to international business interests, first of all  China’s and Russia’s.

Probably the new “wise diplomacy” shrewdly initiated by Marshal Kim Jong Un will provide opportunities for new and important stability-related goals, as well as a greater boost to the economy of the entire peninsula.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs "La Centrale Finanziaria Generale Spa", he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group and member of the Ayan-Holding Board. In 1992 he was appointed Officier de la Légion d'Honneur de la République Francaise, with this motivation: "A man who can see across borders to understand the world” and in 2002 he received the title of "Honorable" of the Académie des Sciences de l'Institut de France

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East Asia

How China is helping Iran skirt US sanctions

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Shortly after the Trump administration reimposed sweeping sanctions on Iran, Secretary of State Mike Pompeo said eight countries, most notable China, would be exempted from the draconian sanctions on buying Iranian crude oil.

Shortly after the Trump administration reimposed sweeping sanctions on the Islamic Republic of Iran, Secretary of State Mike Pompeo made an important announcement. It was a calculated move to avoid a major embarrassment. The hawks in the power corridors of Washington had anticipated the backlash of sanctions on US foreign policy with many global powers rebuffing Trump’s foolhardy move.

Pompeo said eight countries would be exempted from the draconian sanctions on buying Iranian crude oil due to special circumstances. The countries included China, India, Italy, Greece, Japan, South Korea, Taiwan, and Turkey.

Many of these countries had quite clearly indicated that they would not be cutting oil imports from Iran under the US pressure, most importantly China, Turkey, and India – three of Iran’s largest oil customers.

While India has its own strategic interests in maintaining good relations with Tehran, for instance, the Chabahar port project in Sistan-Baluchistan, Turkey’s relations with Washington have hit a new low following sanctions and trade tariffs imposed by the US.

China, which has emerged as a viable counterweight to US hegemony in the world and a protagonist of new international economic policy, has unambiguously reaffirmed its commitment to keep alive the Iran nuclear deal and stand by the Islamic Republic of Iran.

On November 5, when the petroleum-related sanctions came into effect, Chinese foreign ministry said it will continue to “hold a fair, objective and responsible attitude” and “resolutely safeguard its legitimate rights”, while reiterating its opposition to the unilateral US sanctions.

“China feels sorry for the US’ decision and we noticed that the international world as a whole opposes the practice of such unilateral sanctions,” foreign ministry spokesperson Hua Chunying said at a press briefing.

She said Iran has been seriously fulfilling its obligations under the JCPOA and its efforts have been recognized by the International Atomic Energy Agency dozen times. She also affirmed that China will firmly safeguard its lawful rights while continuing to adhere to JCPOA and urged relevant parties to stand on the “right side of history”.

China has maintained that implementing the Iranian nuclear deal is akin to safeguarding the authority of UN Security Council, basic norms of international law, international non-proliferation treaty and peace and stability in the Middle East.

As one of the remaining signatories of the JCPOA, along with European Union countries who are exploring options to circumvent the US sanctions, Beijing wants to keep the deal alive. China, believe experts, is in a better position compared to other Asian countries as it is not subservient to US interests and is already embroiled in a bitter trade war with Washington.

For all parties of the JCPOA, Iranian crude oil is the main commodity of interest, particularly for Beijing. In 2017, one-third of Iran’s oil was supplied to China, which underlines the significance of oil trade between the two countries. China’s commitment to continue importing oil from Iran is very likely to deal a body blow to US ploy of reducing Iranian oil imports to zero and ‘starving’ the Iranian nation.

Hu Xijin, chief editor of the influential Chinese daily Global Times, told Tehran Times that there was no possibility of Washington reducing the Iranian oil exports to zero, “because Washington lacks righteousness to do so, therefore it can’t have the full support of the international community”.

To continue oil trade in different currencies other than dollar, Iran has been in talks with key allies, including China. On September 29, Foreign Minister Javad Zarif said Tehran would circumvent sanctions by conducting trade in all currencies to avoid using the US dollar. “You can use your own currency. Sell stuff in your own currency, buy stuff in the other country’s currency, and at the end of a specific period, balance it out in a non-dollar currency. It’s quite possible and may even be profitable,”

China, which is the largest oil importer in the world with around nine million barrels imports every day, has been making concerted efforts to reshape the global oil market with increased usage of its currency in oil trading. If Chinese currency manages to replace the US dollar, it will be a masterstroke.

US has been rendered friendless and isolated in its quest to tear up the Iran deal and force countries to cut oil imports from Iran. European Union has already refused to back down on the Iran deal, exploring ways to develop payment channels to facilitate payments related to Iran’s exports. The goal, according to a statement issued by EU, “is to protect the freedom of other economic operators to pursue legitimate business with Iran”.

Beijing has expressed its full support to the EU’s proposal to set up a “special payments system” to facilitate trade with Iran and safeguard the Iranian nuclear deal, which experts believe will significantly reduce reliance on the US dollar in the global oil trade. That will be a game-changer.

First published in our partner MNA

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East Asia

The Implication of China’s Diplomacy in APEC and ASEAN

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It is truly unusual that the Chinese President Xi Jinping and its Premier Li Keqiang are visiting the same area during nearly the same time: Xi’s visit to APEC from15th to 21st November and Li’s visit to ASEAN on 15th November. Yet, if we look into China’s foreign policy towards this area over the past years since President Xi took power, it is not difficult to understand both Xi’s and Li’s official visits to the “larger Pacific” and the meaning beyond.

As we know, President Xi has reiterated that the Pacific is large enough for the countries involved to share the prosperity with each other. In order to achieve the inclusive rather than exclusive benefits for all, China’s diplomacy aims to reject any kind of unilateralism, trade protectionism and anti-globalization. Given this, Xi’s at APEC and Li’s at AEASN is defined as a signal of China’s diplomacy to further reform and bold openness.

As a rising great country, China is surely eager to expand its investment and trade with the south Pacific area, and Papua New Guinea (PNG) is the first country visited by Chinese president. What is more, PNG joined the Asian Infrastructure Investment Bank (AIIB) early 2018 and then became the first state of Pacific islands to sign the MoU on “The Belt and Road Initiative” construction. As the theme “Harnessing Inclusive Opportunities, Embracing the Digital Future,” the APEC summit will focus on Regional economic integration, digital economy, connectivity, sustainable and inclusive growth and so forth.

Also during Premier Li’s visit to the ASEAN, he highlighted the necessity of the collaboration and mutual benefit among the countries involved on the 21st China-ASEAN leaders meeting. This is also the 21st ASEAN Plus Three Summit (10+3) and the 13th East Asia Summit (EAS).

Quite understandable, since the 1960s, the center of world economy has shifted from North Atlantic to Asia-Pacific, its dynamic growth in the region create countless jobs and push the development of world economy. This is the reason that Asia-Pacific region has the most trade agreements and the most complicated economic architecture around world. APEC and ASEAN, as two institutions that possess most member states, are the very pillars of the tumbledown regional economic architecture. APEC was launched by Australia and later included 21 member states in the region, amongst are United States, China, Japan, the economic giant three of the world economy. ASEAN is an institution that consist of ten small and middle states. Though they are not strong enough to meet the challenges from the power politics alone, ASEAN is a core force that firmly facilitate the economic integration of the whole region of East Asia and the Pacific. No matter what the way they embrace, they are the de facto basic regionalism of Asia-Pacific. The withdrawing of United States from Trans-Pacific Partnership (TPP) and hard-achieved Regional Comprehensive Economic Partnership (RCEP) once brought the regional economic architecture a fig leave and strengthened the impact of APEC and ASEAN.

As a result, the two visits of Chinese top leaders to the same region at the same time definitely attract worldwide attention, because they not only represent China’s recent diplomatic focus but also mark the fact that Asia-Pacific region has become one of the vital fields where China’s diplomacy will be actively conducting in terms of the Belt and Road Initiative, and carry on the good-neighbor policy. Since China has argued for creating a peaceful development milieu, to enhance economic transformation and upgrading oversea markets and partners in Asia-Pacific region.

Consider these facets, China, as the second largest economy, aims to promote its well-articulated stance on multilateralism and inclusiveness and globalization. As both President Xi and Premier Li have strongly said that China is ready to work with Pacific island countries to endeavor together and sail for a better future for bilateral relations. For the sake of that goal, China always believes that as long as all the countries involved have firm confidence in each other’s development, cooperation and the future of East Asia, and work closely together and forge ahead, all sides would achieve more and reach a higher level in the next 15 years.

For sure, China belongs to the part of a larger Asia-Pacific family, and the Chinese government defines its goal as the shared prosperity of this region. Therefore, China will continue to work hard and constructively to promote the overall development of impoverished but promising Pacific island countries under the Belt and Road Initiative.

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East Asia

An uncertain step in moving China-Japan relations

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Authors: Meshach Ampwera  & Luo Xinghuan

On October 26, Chinese President Xi Jinping met Japanese PM Shinzo Abe and praised that both China and Japan have pledged to strengthen bilateral ties amid continuous efforts made by the two nations. Xi said, “Bilateral relations have returned to the right track and gained positive momentum, which is something the two sides should cherish.” As the two largest economies in Asia, China and Japan are also the vital players in Asian security and the global development.

In addition, since this is the first official visit to China by a Japanese PM in a seven-year “Cold Peace” period, it is widely assumed that Abe’s visit symbolizes the resumption of high-level visits and will be followed by an increasing rapprochement between China and Japan. True, the leaders of the two economic giants witnessed a wide range of agreements, including a 30 billion US dollar worth of currency swap pact, the establishment of a maritime and air liaison mechanism, and enhancing people-to-people exchanges.

Yet, three factors have to be considered seriously in looking into Japanese foreign policy given the current changing geopolitical landscape regionally and globally. First, Japan has still regarded itself as a “defeated” state during the WWII. Since then, Japan’s postwar posture has frequently described as a new pacifism; yet in fact it is considerably more complex. As Henry Kissinger put it: “Japan had acquiesced in the U.S. predominance and followed the strategic landscape and the imperatives of Japan’s survival and long-term success.” This means that the governing elites in Tokyo used to hold the constitution drafted by U.S. occupying authorities with its stringent prohibition on military action, and adapted to their long-term strategic purposes. As a result, Japan was transformed from the pacific aspects of the postwar order (that prohibited military action) into a nation that has focused on other key elements of national strategy, particularly using economic leverage regionally and globally, though not uncontroversial.

Second, in a recently-released paper written by the former US Secretary of Defense Ash Carter, he maintained that “Japan is a close ally of the U.S. and a rising military power, too, because of legal and constitutional changes of great significance championed by Prime Minister Abe.” In practice, the Japanese administration has engineered an expansion to enable its military to operate regionally and even globally in response to the rise of China, violent extremist activity in Asia, and the alleged North Korean belligerence.

Actually in 2013, Japanese Government White Paper revealed a desire to become a “normal country” with an active alliance policy. In a searching for a new role in the Asia-pacific region, Japan aims to act as an “anchor” of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) concluded in 2018 after the withdrawal of the United States. Now it involves 11 countries and representing 13.4% of global GDP ($ 13.5tri.). As the largest economy of the CPTPP, Japan has been active in moving it forward. Early this year when the British government stated it is exploring becoming a member of the CPTPP to stimulate exports after Brexit in 2019, Abe stated that the United Kingdom would be welcomed to join the partnership. It is said that even the U.S. reconsiders possibly rejoining the CPTPP if it were a “substantially new deal” for the United States.

Japan’s ardent involvement into the US-led strategy in Asia has also been endorsed to expand steadily as a normal power regionally and globally. For example, the Asia-Africa Growth Corridor (AAGC) is the result of the joint declaration issued by the India and Japan in 2016. Although it is premised on four pillars of development and cooperation, it is self-evident that the AAGC reflects a growing special “strategic and global partnership between India and Japan” in which both sides have viewed China’s growing, pragmatic and successful presence in Africa as a menace. There is no question that AAGC is a well-crafted vision and agenda of both India and Japan, linking with their own development priorities. But with increasing pressure from Washington and Brussels, Japan and India are in effect driven by the option for the AAGC to rebalance China’s Belt and Road Initiative (BRI).

From the inception of the BRI, they have more than ever before been concerned with being isolated in Africa by Beijing’s initiative. But, as Ampwera Meshach, a researcher at Jilin University put it, “Africa is on the growth trend and offers potential markets and raw materials. For this reason, Africa largely needs pragmatic and scientific, technological and development- oriented initiatives and these are clearly reflected in China’s BRI.” In light of this, the AAGC does neither reflect a novel nor pragmatic approach on how it fits within the African agenda. Instead, AAGC’s foundational pillars seem more inclined to the Western cooperation approaches that have for decades not been translated into development.

Controversially, two days before Abe’s visit to Beijing, Japan had decided to scrap official development assistance (ODA) to China, which is a program where Japan provides aids to developing countries starting back in 1954. Even though some people argue that Japan’s ODA is reasonably cancelled because China’s GDP is even 2.5 times larger than that of Japan, yet, it is necessary for Chinese to be aware of the reality that Japan is a longstanding ally of the United States. As Japan has long been an economic power, its impressive military capabilities would not be confined to a strict policy of territorial defense—no projection of Japanese power or the U.S.-Japan alliance to the region as a whole.

It is during the Abe’s administration which has recognized an environment of growing Chinese assertiveness, violent extremist activity in Asia, and North Korean hostility, and therefore, Japan has eagerly participated in Asian security, including training and exercising with other nations, beyond a purely passive, home-island defense role. This makes it an increasingly important player serving the US strategy in Asia but challenging the rise of China globally.

It is true that Abe tweeted about the trip — while recognizing the challenges in moving bilateral relations forward, he said that he would still work to “push Sino-Japan relations to the next level”. Given the two countries’ economic links, it is only understandable that there is a need for the two sides to come closer. Moreover, Japanese businesses has been an extremely active force behind the government’s shift of attitude on the Belt and Road Initiative (BRI).

Yet, all in all, we should never ignore that Japan’s ambitious foreign policy has gone beyond the economic goal.

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