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China Political Risk Architecture Exposed in South Caucasus

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Photo: News.cn

China-Azerbaijan relations after the Second Karabakh War remain in passive mode. More widely, reactionary foreign policy has exposed China’s Belt and Road narrative as both politically and economically thin. As access narratives across crucial chokepoints for China’s Belt and Road intensified in 2020, China’s foreign policy in the South Caucasus remains ill-defined.

While 2020 saw instability across key Belt and Road chokepoints Azerbaijan, Kyrgyzstan and Belarus China has been exposed as having little political risk architecture with which to engage the region. Despite geoeconomics logistics priorities and an increased geopolitical interest in the Caspian gas pole, Azerbaijan remains more important to the European Union than to China. And for China, Central Asia has been demonstrated to be a more policy-critical geography than the South Caucasus, with a more sophisticated policy architecture deployment.

With a poor regional Belt and Road integration policy and a lackluster position on the Second Karabakh War, China is now being shown up as having no South Caucasus policy. China’s foreign policy hierarchies show that the three South Caucasus countries are all ranked equally at the lowest level of diplomatic relationship of the Eurasian Belt and Road countries. Georgia, Armenia and Azerbaijan are all at the 12th tier in China’s diplomatic hierarchy, Friendly Cooperative Partnership. Whereas the South Caucasus peripheral powers all rank more highly, with Turkey at the 6th tier, Iran in the 4th tier along with Belt and Road strategic economies Kazakhstan and Uzbekistan, while Russia and Pakistan are first and second respectively.

China only established Friendly Cooperative Partnership status with Azerbaijan in 2015, after Georgia in 2006 and Armenia in 2000. Thus for the policy concept of a pan-Turkic corridor from Istanbul to Khorgos over the Caspian Sea, the priority for reaching China is more pronounced on the Turkey Republic and Turkic states side, with little policy attention from Beijing. Aliyev was in Beijing in 2019 for the Belt and Road summit, and both Politburo Standing Committee member Li Zhanshu, and top non-Politburo foreign policy-maker State Councillor Wang Yi visited Baku, but these high-level meetings have not been followed up with any tangible geoconomic policy.

Contrast this with the early days of Belt and Road development when in 2016 Azerbaijan received two very different diplomatic guests from China, Meng Jianzhu then head of domestic security, the tsar of population surveillance, internet control, and internal paramilitary policing, and Zhang Gaoli, the policy architect of the economic side of the Belt and Road, responsible for the infrastructure, industrial transfer, and financial expansion nuts and bolts of Belt and Road in Eurasia. Visits by these senior practical policy-makers signalled clandestine development of Azerbaijan domestic security technology as well as transformative geoeconomic industrial transfer projects.

However China has not built on this early Belt and Road diplomacy and engagement. The Economic and Commercial Office of the China Embassy in Azerbaijan information service is almost entirely commodities and macroeconomic figures updates. Whereas Central Asian economic and commercial offices have more sophisticated analysis and information services across a wider range of economic and social issues. Azerbaijan is also at a strange cross-road in China’s diplomatic discourse. Ministry of Foreign Affairs categorizes Azerbaijan as ‘Asia’ whereas Ministry of Commerce includes it within its Eurasian (post-Soviet) categorization, while some central level Party China foreign policies for the region consider Azerbaijan as part of the China-Arab dialogue. Spatial planning is important in both China’s domestic public administration and planned external geoeconomic policy, meaning the lack of integration in this spatial thinking is indicative of an unclear foreign policy agenda.

Ministry of Commerce remains the most important foreign policy-making office in China’s State Council public administration, and was the spearhead of the practical economic mechanisms of the Belt and Road. The Ministry leads development of the archipelago of Chinese capital in the network of over 80 Overseas Economic Trade and Cooperation Zones. These offshore industrial parks mimic the conditions of early capitalism in China’s onshore Special Economic Zones, cheap labour, low regulation and cheap raw inputs. They are a core geoindustrial institution underpinning the Belt and Road, yet in the South Caucasus, Georgia is home to the only China industrial park, Hualing Kutaisi Free Industrial Zone, whereas there are at least eight industrial parks in North Africa and West Asia, and six in Central Asia, highlighting these two regions’ long-term geoeconomic significance.

China’s basic political calculus in the South Caucasus is that Azerbaijan, Georgia and Turkey are all useful Belt and Road nodes in a corridor to bypass Russia, but that Armenia has no geoeconomic value. China’s South Caucasus foreign policy also cannot entertain any discourse of Armenian expression of self-determination in Karabakh as this runs counter to the Uyghur policy in Xinjiang. However China’s wider Belt and Road geopolitical position with does Armenia run counter to the ideological discourse construction through the Ancient Civilizations Forum, which includes Armenia but not Turkey. Self-identifying as an ancient civilization is integral to China’s underlying globalization ideology. Yet there remains essentially no engagement with Russia’s Third Rome thesis or anti-Atlanticist position. China entering the South Caucasus geoeconomic space with a thinly researched appeal to ancient history belies a naivety in narrative construction.

For China though, the lack of regional engagement is understandable. Whereas most of China’s Belt and Road policies are geoeconomic, the China-Azerbaijan relationship is geopolitical. China has no need for Azerbaijan hydrocarbon exports as China’s regional sources are Turkmenistan and Russia for gas, Iran for oil. Azerbaijan is though a key node in the Middle Corridor transport corridor with China. However while the Middle Corridor rail freight system is important to China, it has largely been left to the regional economies themselves to develop. China’s strategic interests in Azerbaijan are thus centred not on the utility of regional access itself, but rather on future scenarios of other states’ access, Russia in the Caspian Sea, the European Union in Adriatic gas, and Turkey via the rail freight system. Yet while much of the Belt and Road is designed to circumvent reliance on Russia, but China still lacks the Turkey competence to develop a viable regional geoeconomic presence.

China has little political risk exposure in the South Caucasus. But the negative space of China’s geoeconomic policy in the Caspian and Black Sea geographies is indicative of the policy disjointedness of the Belt and Road. There is now an ideological vacuum in China’s foreign policy which prohibits policy-makers from crafting discourses for the states and regions involved. Azerbaijan in 2020 was a Belt and Road node which demonstrated that China does not have the political risk architecture in place to manage the multivariate policy outcomes present in the Belt and Road hyperpolicy. As the South Caucasus becomes more important for both the European Union’s energy security, and a deepening Russia-Turkey geopolitical contretemps, China will continue to struggle to form geoeconomic policy for the Eurasian Belt and Road economies as long as these states hold little economic or narrative legitimising power.

From our partner RIAC

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Eastern Europe

Latvia developed new tasks for NATO soldiers

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Member of the Latvian Saemas’ national association “Everything for Latvia!” and Freedom”/LNNK Jānis Dombrava stated the need to attract NATO troops to resolve the migration crisis. This is reported by la.lv.  In his opinion, illegal migration from the Middle East to Europe may acquire the feature of an invasion. He believes that under the guise of refugees, foreign military and intelligence officers can enter the country. To his mind, in this case, the involvement of the alliance forces is more reasonable and effective than the actions of the European border agencies. Dombrava also noted that in the face of an increase in the flow of refugees, the government may even neglect the observance of human rights.

The Canadian-led battlegroup in Latvia at Camp Ādaži consists of approximately 1512 soldiers, as well as military equipment, including tanks and armoured fighting vehicles.

Though the main task of the battlegroup in Latvia is country’s defence in case of military aggression, Latvian officials unilaterally invented new tasks for NATO soldiers So, it is absolutely clear, that Latvian politicians are ready to allow NATO troops to resolve any problem even without legal basis. Such deification and complete trust could lead to the full substitution of NATO’s real tasks in Latvia.

It should be noted that NATO troops are very far from being ideal soldiers. Their inappropriate behaviour is very often in a centre of scandals. The recent incidents prove the existing problems within NATO contingents in the Baltic States.

They are not always ready to fulfill their tasks during military exercises and training. And in this situation Latvian politicians call to use them as border guards! It is nonsense! It seems as if it is time to narrow their tasks rather than to widen them. They are just guests for some time in the territory of the Baltic States. It could happen that they would decide who will enter Latvia and who will be forbidden to cross the border!

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Eastern Europe

Changes are Possible: Which Reforms does Ukraine Need Now?

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Photo: Robert Anasch/Unsplash

The past 16 months have tested our resilience to sudden, unexpected, and prolonged shocks. As for an individual, resilience for a country or economy is reflected in how well it has prepared for an uncertain future.

A look around the globe reveals how resilient countries have been to the COVID-19 pandemic. Some have done well, others less so. The costs of having done less well are almost always borne by the poor. It is for this reason the World Bank and the international community more broadly urge—and provide support to—countries to undertake economic and structural reforms, not just for today’s challenges but tomorrow’s.

One country where the dialogue on reform has been longstanding and intense is Ukraine. This is particularly true since the economic crisis of 2014-2015 in the wake of the Maidan Revolution, when the economy collapsed, and poverty skyrocketed. Many feared the COVID pandemic would have similar effects on the country.

The good news is that thanks to a sustained, even if often difficult, movement on reforms, Ukraine is better positioned to emerge from the pandemic than many expected. Our initial projection in the World Bank, for example, was that the economy would contract by nearly 8 percent in 2020; the actual decline was half that. Gross international reserves at end-2020 were US$10 billion higher than projected. Most important, there are far fewer poor than anticipated.

Let’s consider three reform areas which have contributed to these outcomes.

First, no area of the economy contributed more to the economic crisis of 2014-2015 than the banking sector. Powerful interests captured the largest banks, distorted the flow of capital, and strangled economic activity. Fortunately, Ukraine developed a framework to resolve and recapitalize banks and strengthen supervision. Privatbank was nationalized and is now earning profits. It is now being prepared for privatization.

Second, COVID halted and threatened to reverse a five-year trend in poverty reduction. Thanks to reforms of the social safety net, Ukraine is avoiding this reversal. A few years back, the government was spending some 4.7 percent of GDP on social programs with limited poverty impact. Nearly half these resources went to an energy subsidy that expanded to cover one-in-two of the country’s households.

Since 2018, the Government has been restructuring the system by reducing broad subsidies and targeting resources to the poor. This is working. Transfers going to the poorest one-fifth of the population are rising significantly—from just 37 percent in 2019 to 50 percent this year and are projected to reach 55 percent in 2023.

Third, the health system itself. Ukrainians live a decade less than their EU neighbors. Basic epidemiological vulnerabilities are exacerbated by a health delivery system centered around outdated hospitals and an excessive reliance on out-of-pocket spending. In 2017, Ukraine passed a landmark health financing law defining a package of primary care for all Ukrainians, free-of-charge. The law is transforming Ukraine’s constitutional commitment to free health care from an aspiration into specific critical services that are actually being delivered.

The performance of these sectors, which were on the “front line” during COVID, demonstrate the payoff of reforms. The job now is to tackle the outstanding challenges.

The first is to reduce the reach of the public sector in the economy. Ukraine has some 3,500 companies owned by the state—most of them loss-making—in sectors from machine building to hotels. Ukraine needs far fewer SOEs. Those that remain must be better managed.

Ukraine has demonstrated that progress can be made in this area. The first round of corporate governance reforms has been successfully implemented at state-owned banks. Naftogaz was unbundled in 2020. The electricity sector too is being gradually liberalized. Tariffs have increased and reforms are expected to support investment in aging electricity-producing and transmitting infrastructure. Investments in renewable energy are also surging.

But there are developments of concern, including a recent removal of the CEO of an SOE which raised concerns among Ukraine’s friends eager to see management independence of these enterprises. Management functions of SOE supervisory boards and their members need to remain free of interference.

The second challenge is to strengthen the rule of law. Over recent years, the country has established—and has committed to protect—new institutions to combat corruption. These need to be allowed to function professionally and independently. And they need to be supported by a judicial system defined by integrity and transparency. The move to re-establish an independent High Qualification Council is a welcome step in this direction.

Finally, we know change is possible because after nearly twenty years, Ukraine on July first opened its agricultural land market. Farmers are now free to sell their land which will help unleash the country’s greatest potential source of economic growth and employment.

Ukraine has demonstrated its ability to undertake tough reforms and, thanks to the COVID-19 pandemic, has seen the real-life benefits of these reforms. The World Bank looks forward to providing continued assistance as the country takes on new challenges on the way to closer European integration.

This article was first published in European Pravda via World Bank

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Liberal Development at Stake as LGBT+ Flags Burn in Georgia

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Photo: Protesters hold a banner depicting U.S. Ambassador to Georgia Kelly Degnan during a rally against Pride Week in Tbilisi, Georgia July 1, 2021. Credit: REUTERS/Irakli Gedenidze

Protests against Georgia’s LGBT+ Pride parade turned ugly in Tbilisi on July 5 when members of the community were hunted down and attacked, around 50 journalists beaten up and the offices of various organizations vandalized. Tensions continued the following day, despite a heavy police presence.

On the face of it, the Georgian state condemned the violence. President Salome Zourabichvili was among the first with a clear statement supporting freedom of expression, members of parliament did likewise and the Ministry of Internal Affairs condemned any form of violence.

But behind the scenes, another less tolerant message had been spread before the attacks. Anxiety about this year’s events had been rising as a result of statements by the government and clergy. Prime Minister Irakli Garibashvili suggested the march “poses a threat of civil strife.” The Georgian Orthodox Church meanwhile condemned the event, saying it, “contains signs of provocation, conflicts with socially recognized moral norms and aims to legalize grave sin.”

For many, these statements signified tacit approval for the abuse of peaceful demonstrators. Meanwhile, the near-complete absence of security at the outset of the five-day event was all too obvious in Tbilisi’s streets and caused a public outcry. Many alleged the government was less focused on public safety than on upcoming elections where will need support from socially conservative voters and the powerful clergy, in a country where more than 80% of the population is tied to the Georgian Orthodox Church.

The violence brought a joint statement of condemnation from Western embassies. “Violence is simply unacceptable and cannot be excused,” it said. The Pride event was not the first and had previously been used by anti-gay groups. Violence was widespread in 2013 — and the reality of attacks against sexual minorities in Georgia remains ever-present.

In a socially conservative country such as Georgia, antagonism to all things liberal can run deep. Resistance to non-traditional sexual and religious mores divides society. This in turn causes political tension and polarization and can drown out discussion of other problems the country is marred in. It very obviously damages the country’s reputation abroad, where the treatment of minorities is considered a key marker of democratic progress and readiness for further involvement in European institutions.

That is why this violence should also be seen from a broader perspective. It is a challenge to liberal ideas and ultimately to the liberal world order.

A country can be democratic, have a multiplicity of parties, active election campaigns, and other features characteristic of rule by popular consent. But democracies can also be ruled by illiberal methods, used for the preservation of political power, the denigration of opposing political forces, and most of all the use of religious and nationalist sentiments to raise or lower tensions.

It happens across Eurasia, and Georgia is no exception. These are hybrid democracies with nominally democratic rule. Armenia, Georgia, Kyrgyzstan, and others have increasingly more in common, despite geographic distance and cultural differences.

Hungary too has been treading this path. Its recent law banning the supposed propagation of LGBT+ materials in schools must be repealed, European Commission President Ursula von der Leyen said on July 7. “This legislation uses the protection of children . . . to discriminate against people because of their sexual orientation . . . It is a disgrace,” she said.

One of the defining features of illiberalism is agility in appropriating ideas on state governance and molding them to the illiberal agenda.

It is true that a mere 30 years since the collapse of the Soviet Union is not enough to have built a truly liberal democratic state. Generations born and raised in the Soviet period or in the troubled 1990s still dominate the political landscape. This means that a different worldview still prevails. It favors democratic development but is also violently nationalistic in opposing liberal state-building.

Georgia’s growing illiberalism has to be understood in the context of the Russian gravitational pull. Blaming all the internal problems of Russia’s neighbors has become mainstream thinking among opposition politicians, NGOs, and sometimes even government figures. Exaggeration is commonplace, but when looking at the illiberal challenge from a long-term perspective, it becomes clear where Russia has succeeded in its illiberal goals. It is determined to stop Georgia from joining NATO and the EU. Partly as a result, the process drags on and this causes friction across society. Belief in the ultimate success of the liberal agenda is meanwhile undermined and alternatives are sought. Hybrid illiberal governments are the most plausible development. The next stage could well be a total abandonment of Euro-Atlantic aspirations.

Indeed what seemed irrevocable now seems probable, if not real. Pushback against Georgia’s Euro-Atlantic choice is growing stronger. Protesters in front of the parliament in central Tbilisi violently brought tore the EU flag. Twice.

The message of anti-liberal groups has also been evolving. There has been significant growth in their messaging. The anti-pride sentiment is evolving into a wider resistance to the Western way of life and Georgia’s Western foreign policy path, perhaps because it is easily attacked and misrepresented.

To deal with this, Western support is important, but much depends on Georgian governments and the population at large. A pushback against radicalism and anti-liberalism should come in the guise of time and resources for the development of stronger and currently faltering institutions. Urgency in addressing these problems has never been higher — internal and foreign challenges converge and present a fundamental challenge to what Georgia has been pursuing since the days of Eduard Shevardnadze – the Western path to development.

Author’s note: first published at cepa

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