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Asia, Foreign Policy, Politics, Security

Collateral Impact: The Calculus of AUKUS

The Biden Administration’s strategic shift toward evolving threats in the Indo-Pacific signals an attempt to reaffirm the balance of power there in Washington’s favor. In a short trilateral statement issued from the White House on 15 September, President Biden — with Prime Ministers Scott Morrison of Australia and Boris Johnson of the United Kingdom — announced an enhanced security partnership they call AUKUS. Despite its brevity, the AUKUS declaration supports a profound broadening of pre-existing defense relationships in the region by means of technological, scientific, and industrial collaboration across fields such as artificial intelligence, quantum technologies, and cyber warfare. Though AUKUS was not explicitly aimed at the expansion of Chinese power, some clues about the agreement’s implementation cause most analysts — and certainly those in Beijing — to believe that it is. Regardless of how the messaging surrounding AUKUS is intended or received, it clearly has the potential to complicate Chinese designs in the region.

AUKUS sent a ripple that began in the South China Sea but surged heavily onto world capitals in East Asia and Europe. One heavily touted aspect of the pact is an agreement for the US and UK to provision the Royal Australian Navy with nuclear submarines; a capability that could radically curtail China’s economy in the event of a conflict. Though the submarine deal was presented as an economic move with military implications, Beijing dismissed any attempts at nuance as “extremely irresponsible” and stated the pact “seriously undermines regional peace and intensifies the arms race.” Still, considering the enormous expansion of the Chinese People’s Liberation Army Navy (PLAN) in recent years, including the development of multiple military outposts in the South China Sea and the expanding reach of the Belt and Road Initiative, some enhancement of regional maritime security seems necessary. 

In initial remarks certifying AUKUS, President Biden made clear distinctions between nuclear-powered subs and those armed with nuclear missile systems. This distinction would allow for the use of weapons-grade uranium, provided Australia initiates and adheres to additional strengthening of safeguards on the production, use, and disposal of highly enriched uranium (HEU). Safeguards provided by the Non-Proliferation Treaty (NPT) prevent nuclear warheads aboard the Australian submarine fleet and also restrict the use of naval HEU reactors. The move would make Australia the seventh country to field such assets and the very first non-nuclear weapons state to do so but also raises the concern that North Korea or Iran could obtain similar technology. Though it is not clear what specific contributions the US and UK will provide in terms of technology and HEU, this capability enables Australia to undertake a variety of operations far outside its territorial waters, putting pressure on the Chinese “nine-dash line” and complicating planning for Beijing. 

AUKUS proposes the development of similar nuclear-powered submarines for the purposes of the Australian naval fleet. https://www.navy.mil/Resources/Photo-Gallery/igphoto/2002371154/
(March 15, 2018) The Royal Navy hunter killer submarine HMS Trenchant (S 91) surfaces in the Beaufort Sea during Ice Exercise (ICEX) 2018. (U.S. Navy photo by Mass Communication 2nd Class Micheal H. Lee/Released)

Collateral Effect

Though differences exist between the Trump Administration policy and Biden’s current focus on pragmatism, it is evident that countering the developing threat of China remains at the top of the bipartisan list of priorities. The same is true in the UK where critics of Boris Johnson initially hesitated to label him as a China hawk. However, by capitalizing on the 2007 decision to buy two aircraft carriers, their impact within the Pacific theater is a powerful reminder of “Global Britain.” In this respect, the US has effectively hardened the UK’s line on China. In Australia, the heavy-handed influence of Chinese interference is felt more strongly through cyber-attacks and state agents acting under the cover of Chinese journalists. While foreign policy must weigh necessary contingencies against the country’s developing trade, economic, and investment relations with its autocratic neighbor, stepping into commitments with AUKUS presents much more than a defensive posture. 

This expanding network remains most relevant in the 14-year-old Quad alliance consisting of Japan, Australia, India, and the US. As tensions continue to rise on all sides of China’s borders, the importance of the Quad is increasing tremendously. Taiwan regularly witnesses incursions of dozens upon dozens of military fly-overs, as do Japan’s nearby Senkaku Islands. Similarly, Indian and Chinese troops have repeatedly clashed in high-altitude tension in the Himalayas. Although critics are quick to write off these events as disparities common to the Indo-Pacific region, AUKUS offers more significant value given its intended depth. In addition to hardened physical boundaries, major strategies backed by the Quad and AUKUS have risen in importance over the past months as a counterforce to Beijing’s Belt and Road Initiative. Build Back Better World, or B3W, announced in June at the G-7 summit in Cornwall, U.K., aims to counter Chinese influence through massive investment in infrastructure development of developing countries by 2035. The expansion is led by the principles of the Blue Dot Network (BDN) which sets standards for transparency and environmental impact in infrastructure projects in low and medium-income countries across the world. Among G-7 member states, there is talk of AUKUS broadening to align its activities with that of Japan, although such cohesion remains to be seen. Ultimately, this network will solidify spheres of influence to an extent not witnessed in decades.

Pending Reprisal

The most profound outrage regarding the AUKUS alliance erupted not in the Indo-Pacific, but in France. French President, Emmanuel Macron, was not notified of the pact before it was announced. France’s unsurprising response expressed betrayal by two NATO allies and aggrievement at the economic losses to its lucrative submarine deal with Australia. Though the French arguments seem justified, there was notable dissatisfaction with the submarine deal which was estimated to be nearly $70 billion over budget. Though observers debate the righteousness of French outrage, the opportunity it presents for China to drive a wedge between NATO allies is certainly more important. Faced with what European leaders are calling a “stab in the back,” Beijing’s recourse to diplomatic vindication is not unexpected. Indeed, Chinese diplomats contend that France’s vision of “strategic autonomy” is code for avoiding over-reliance on America. If China can effectively present AUKUS as an erosion of the NPT, it could provide further leverage in their efforts to divide the United States from its European allies far beyond Paris and in ways that are not directly connected to AUKUS. 

President Biden’s apparent willingness to risk relations with France over AUKUS suggests a rearrangement of US security priorities back toward something that resembles the Obama Administration’s “pivot to Asia.” The extent to which this may justify the Elysee’s push for “strategic autonomy” will shape how well Washington can maintain a balance of power against China. For some, this balance is increasingly urgent. Michéle Flournoy conveys this sentiment more precisely in a Foreign Affairs essay in 2020: “It will take a concerted effort to rebuild the credibility of US deterrence in order to reduce the risk of a war neither side seeks.”

Lino Miani, CEO Navisio Global LLCTravis Johnson is an active duty US Marine pursuing a MA degree in intelligence studies and is the associate editor for The Affiliate Network. 

Lino Miani is a retired US Army Special Forces officer, author of The Sulu Arms Market, and CEO of Navisio Global LLC.

Africa, Politics, Security

South Africa Faces a Downward Spiral

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This article has been republished with permission from our partner, Stratfor. The original version was first published in Stratfor’s WORLDVIEW and can be found here.

Highlights

  • Beset by infighting, the ruling African National Congress is incapable of effectively tackling the country’s worsening economic and social situation.
  • Those problems will drive more highly skilled individuals to emigrate, robbing the country of productive workers and tax revenue in the years ahead.
  • Deepening economic malaise and internal fissures will accelerate the erosion of the ANC’s once-dominant electoral position, possibly opening the door to more extreme parties, with serious policy implications.
  • As South Africa struggles to get its house in order, its influence over the rest of southern Africa will wane.

“We are sorry for what happened,” South African President Cyril Ramaphosa told a group of workers earlier this month in Durban. “Our image, our standing and our integrity [were] negatively affected.” Ramaphosa offered the heartfelt mea culpa following yet another wave of xenophobic riots across South Africa, yet presidential apologies are unlikely to stanch more violence directed against foreigners there — or cure the deeper malaise that drives the unrest. That’s because successive governments in Pretoria have failed to foster essential economic growth in South Africa, which posted an eye-popping unemployment rate of 29 percent earlier this year. Every week, thousands of its citizens are forced into unemployment or underemployment in the extensive black market.

The Big Picture

Years of economic and social woes have taken a toll on South Africa. As the country grapples with yet more indications of weak or negative growth, sky-high unemployment, massive crime rates and coming political change, its ability to remain a continental economic powerhouse will be under threat.

See 2019 Fourth-Quarter Forecast

See Sub-Saharan Africa section of the 2019 Fourth-Quarter Forecast

See Old Leaders in a New Africa

And it’s not just joblessness that is eating away at the rainbow nation; a host of other factors are driving home the severity of the country’s crisis: rising government debt, crumbling infrastructure, collapsing education standards, rampant crime and violence, currency volatility, investment outflows, and more. Together, it’s given rise to the sentiment that South Africa is increasingly a country of “haves” and “have nots,” tearing at the country’s social fabric, resulting in mass alienation and disenchantment with the political system. And with the ruling African National Congress (ANC) seemingly unable to get its own house — let alone South Africa’s — in order, the continent’s powerhouse will go through plenty more trials and tribulations before it sees any glimmer of hope.

A Battle Over Spoils

In spite of ever-worsening economic and social problems, the ANC government is incapable of implementing drastic and fundamental reforms to jump-start growth, offering instead “pie in the sky” policy rhetoric that has failed to translate into reality. At the heart of the problem is the ANC itself: The party is riven by massive internal factionalism. In the years immediately after apartheid, ideological differences may have driven the party’s divisions. But since then, the ANC has become mired in corruption and mismanagement, with the effects becoming evermore pronounced in recent years. In effect, the main battle brewing inside the ANC today centers on access to money and resources; policy differences, ultimately, are largely irrelevant. South Africa’s economic boost during the global commodity supercycle driven largely by Chinese demand in the late 2000s obscured this internal conflict and its negative impacts until the good economic times ended in 2014. Since then, bleaker prospects have challenged Ramaphosa and his allies’ efforts to turn around the party and government through anti-corruption efforts, in part because he must contend with other powerful factions — most notably those aligned with his predecessor, Jacob Zuma — that benefit from his administration’s failure to root out graft at all levels of government.

This has serious policy implications. Given Ramaphosa’s flimsy coalition against other ANC factions, the president cannot robustly push “controversial” economic reforms which, in the South African context, entails market-based reforms that demand increased efficiency. For starters, these limitations have hindered Ramaphosa’s goals of overhauling the country’s embattled public utility company, Eskom. After nearly scuttling the South African economy last summer amid blackouts that it instituted to protect the unstable electrical grid, Eskom has already sucked up billions of dollars (necessitating ever-mounting debt) in 2019 to keep the lights on. Unsurprisingly, there is little sign of an improvement in store.

Economic SnapshotDespite the gravity of the situation, several of the country’s powerful unions have vowed to turn on Ramaphosa if he seeks to turn around Eskom by either privatizing the utility or laying redundant workers off. (According to the International Monetary Fund, Eskom’s workforce is bloated by a whopping 66 percent.) Should Ramaphosa opt not to alienate the powerful labor leaders who paved his path to the top of the ANC in 2017, he will have few policy options with which to deal with Eskom. In the end, one thing is certain: Failing to fix the company risks plunging South Africa’s economy into more crisis. As one Eskom board member recently warned, the current electrical grid cannot handle even a relatively minor uptick in economic activity without experiencing a system meltdown.

Over the Cliff

The long-term implications of years of ANC-led mismanagement loom large. For one, recent data proffered by an emigration services company, Sable International, strongly suggests that an exodus of South African individuals with a high net worth, as well as highly skilled workers, is underway. This, naturally, will have consequences as South Africa continues to rely more heavily on its shrinking tax base for government revenue. In addition, the flight of highly skilled workers will affect key sectors in global demand, like healthcare and high-tech, robbing the country of the more productive segments of its society. Most troubling for the government, data shows that the vast majority of these individuals do not return to the country once they emigrate.

Pretoria’s inability to make the tough policy choices to alter course will ultimately result in the country’s economy continuing to take on water. With weak or negative growth projected for the next several years, unemployment will remain high, resulting in yet more misery, high crime and violence. And in addition to Eskom’s woes, the country’s water systems, public transportation, waste management and other critical infrastructure will further deteriorate, pushing the costs and consequences onto its citizens. This, in turn, will encourage more highly skilled workers to leave the country for greener — and safer — pastures. South Africa’s political elites will find this downward spiral difficult to break, paving the way for the country to lose its ability to influence its much smaller neighbors. And as the author R.W. Johnson has pointed out, unlike the case of Zimbabwe — which sent millions of economic migrants over the border to South Africa when its economy collapsed — South Africans trying to escape economic misery have nowhere else in the region to go.

By the time the country’s leaders receive a stronger popular mandate to remedy its dire situation, South Africa will be in a far deeper hole with far fewer human resources to help dig it out.

This constraint on mass emigration will create an increasing number of disaffected voters who will erode the ANC’s once-dominant electoral position. Amid the economic stagnation and political infighting, younger voters who have few memories of the ANC’s struggle against apartheid — and, thus, little loyalty to the party — will look for other options come election day. Quite when the ANC will lose its political predominance is an open question, but South Africa’s poor economic trajectory and the ANC’s internal squabbling mean that a sea change will come sooner than later.

Ultimately, the impact of the ANC’s eventual reckoning will depend greatly on which political parties step in to fill the political void. For example, a weakened ANC that loses its majority will likely have to join an alliance with another major political party — an act that in itself that will likely accelerate the ANC’s breakup as dormant ideological debates erupt and battles over resources lead to a final splintering. Accordingly, does the future ANC opt to align itself with the far-left Economic Freedom Fighters? If so, the impact would be huge. To begin with, such a partnership would cause a sharp left turn in the country’s policies, resulting in the accelerated transfers of wealth to the impoverished black majority (at a huge cost to market efficiency). Policies like these would spook foreign investors, increase the brain drain, cause capital flight and send South Africa-based corporations scattering to other major African hubs. Relatedly, it would turn Pretoria’s focus away from the rest of the continent, thereby speeding up South Africa’s decline as a regional economic and political power (with no country in the region likely to assume its place).

An uneasy future alliance with the center-right Democratic Alliance could push the ANC into adopting more market-based policies. However, this scenario would be no panacea, as it could only occur if it receives serious political backing from voters who have otherwise favored populism over market efficiency. (What’s more, it would also likely usher in the ANC’s fragmentation into splinter parties, greatly upending the political system.) Popular support for tougher market reforms is only likely to come after more years of economic and social woes. By the time the country’s leaders receive a stronger popular mandate to remedy its dire situation, South Africa will be in a far deeper hole with far fewer human resources to help dig it out.

Amid its political leaders’ inability to pursue the tough policy choices needed to address the country’s growing socio-economic crisis, South Africa is sinking. The result, for the time being, will be the increase of internal strife and policy uncertainty, the erosion of the country’s economic base, and the loss of its regional hegemony. The only question, then, is just how stern South Africa’s reckoning will be.

Stephen RakowskiStephen Rakowski is a Sub-Saharan Africa Analyst at Stratfor, where he monitors political, security and economic trends unfolding across the continent. Mr. Rakowski holds a master’s in government with a focus on diplomacy and conflict studies from the Interdisciplinary Center Herzliya in Israel. He also holds a bachelor’s in international relations from Franklin University Switzerland in Lugano, Switzerland. In addition to his studies, Mr. Rakowski has traveled and lived throughout Madagascar, Morocco and Kyrgyzstan.

Asia

Chengdu: Canary in the Coal Mine

Feature Photo: Chengdu Global Center is the largest building in western China. It contains a mall, hotel, conference center, and water park.

Chengdu, the capital of Sichuan province in south-central China, is a lighthearted community. Famous as the home of the Giant Panda conservation program, Chengdu occupies an important place in the heritage of greater China. The attractive and prosperous city is also known for the beauty of its women, the spicy heat of its food, and the self-effacing sense of humor of its inhabitants. They will need it. In many ways, Chengdu is a microcosm of China’s rise and may also serve as a canary in the coal mine should the country’s experiment with capitalism begin to fall apart.

Founded during the warring states period by Lord Kaiming as a capital for his dominion, Chengdu means “Becoming a Capital.” With 15 million inhabitants and 3.87 million cars, the youth there sarcastically refer to it as “Becoming a Carpark.” The city’s traffic is indicative of the transformation that has affected China as a whole. Since the 1980s, an entire generation of rural Chinese has migrated to the cities looking for work in the new economy. Their flight has emptied the countryside, changed family dynamics across China, and forced a residential construction boom like the world has never seen. In Chengdu, the pace of change is so astonishing people joke they sometimes go to work in the morning and get lost on the way home because everything changes so quickly. The joke is not far from the truth.

Growth and Prosperity

The rapid transformation of China from a rural Communist backwater in the 1980s to the economic powerhouse of today is arguably the single greatest human endeavor since the Second World War. Since 1978, an estimated 800 million Chinese people have been lifted out of extreme poverty. China’s adult literacy rate in 2012 was 95.1% and climbing with youth literacy reaching 99.65%. Its infant mortality rate dropped from 4.2% in 1990 to 1.2% in 2012. Life expectancy in 2012 was 75.2 years, up from 69.5 years in 1990. Gross Domestic Product (GDP) per capita increased an average of 9.3% annually from 1990.[1] In the space of a single generation hundreds of millions of Chinese citizens stopped having to worry about survival and became concerned about enjoying life. A Chinese version of the American Dream took hold in which young couples marry for love, own their own homes, and expect to retire comfortably without dependence on their children. This “Chinese Dream” once ignited, cannot be extinguished without calamity, forcing Beijing to seek resources to satisfy its growing industry and appetite for consumption.

China’s political aspirations have risen with its economic power. There is a sense at every level of Chinese society that after centuries of shameful disunity and perceived exploitation by outsiders, it is finally time to reclaim China’s place at the “center of the universe.” An air of inevitability and a disregard for short-term consequences now permeates Beijing’s foreign policy, but China lacks the cool confidence exhibited by Japan or Thailand, the only two Asian nations that were never colonized. Instead, China bullies its neighbors with incomprehensible urgency. Shamelessly and without hesitation, Beijing attempts to divide and conquer in political and economic matters, raising the level of uncertainty in the region and leaving little doubt it will act militarily if required. East and Southeast Asia are regrettably vulnerable to this approach, leaving only the Association of Southeast Asian Nations (ASEAN) and the US system of alliances to thwart Chinese hegemony in the region. In this way, the US Navy’s 7th Fleet is the ultimate regulator of China’s military, economic, and political aspirations—and this makes Beijing restless.

In response, China’s military expansion is almost as astonishing as its economic growth. Since 1989, the budget of the People’s Liberation Army (PLA) has increased an average 9.56% per year though some estimates put the figure much higher.[2] China has the luxury of focusing its military efforts against a single paradigm: the United States Military. In pursuit of parity, the PLA has acquired nuclear weapons, carrier and stealth aviation, modern command and control systems, submarine-launched ballistic missiles, and special operations capabilities. Some believe the Chinese may actually lead the world in cyber, anti-ship ballistic missile technology, and even quantum computing—a capability that could obviate any attempt at communications security. Though the United States Military is a large and robust rival, China’s drive for parity requires only that it learn from the Pentagon’s successes and avoid its mistakes. Accordingly, Chinese officers miss no opportunities to study America’s weaknesses and develop countermeasures. For them, parity is only a matter of time and persistence, something the Chinese are more comfortable with than Americans are. It is not surprising then that the PLA is not just a military force, it also carries political and economic weight within the Chinese system.

chart
This chart illustrates the rapid but steady rise of China’s military budget.

China’s Future: Unite or Ignite?

Unfortunately, China simply cannot sustain the economic growth required to keep it all going. The problem is dire. Even a moderate reduction in the pace of growth will profoundly affect tens of millions of workers. If a contraction stratifies and unbalances China’s economy, the country’s fractures will begin to re-emerge. Income and quality of life will become a matter of struggle between ethnic groups and geographic regions. China’s coastal cities are extremely important to its economy; those in the interior are less so. Profound cultural differences exist between those from the north and those from the south as well as between east to west. Xinjiang and Tibet already dream of an independent future as do some in Hong Kong and of course Taiwan. Igniting rebellion in these places requires only a spark. More profoundly, if the Chinese economy stagnates, there is simply no way to keep 600 million military aged men busy, unified, and politically obedient without expansion and conquest. Economics may thus force China to decide between conflict at home and conflict abroad.

China’s Communist Party leadership is already preparing for this eventuality. Efforts to control information and stamp out dissent serve to inoculate the country against the centrifugal forces that threaten to spin it apart. The PLA appears to have three principal goals: develop a power projection capability, use that capability to solidify control of energy supply lines, and build positive relationships with the Chinese people through disaster response. China recognizes it will need all these things if it decides to embark on a policy of conflict overseas. Though at the moment Beijing pushes its territorial ambitions incrementally, it openly experiments with hard power solutions in the South China Sea, the East China Sea, and elsewhere. Any disruption in the quality of life in Chinese cities like Chengdu may provide an early warning as to whether Beijing will militarize its foreign policy. In the lengthening list of things that Chengdu is becoming, perhaps “canary in the coal mine” is the most significant.

[1] Statistics from the United Nations Children’s Fund (UNICEF).

[2] Figures in constant 2015 US Dollars. Raw data analyzed from the SIPRI database. SIPRI’s data typically exceeds official Chinese government statistics that are believed to be underreported.

Lino Miani is a retired US Army Special Forces officer, author of The Sulu Arms Market, and CEO of Navisio Global LLC.