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Weekend catch-up: Merkel, G20, China-Australia FTA, Obama and climate, Iranian nukes and more

by Brendan Thomas-Noone

Bringing together the best longer Interpreter articles you were too busy to read this week.

This week the Lowy Institute hosted both the Prime Minister of Italy, Matteo Renzi, and the Chancellor of Germany, Angela Merkel. Both these visits followed the conclusion of the G20 Brisbane Summit and major speeches in Australia by President Barack Obama, President Xi Jinping and Prime Minister Narendra Modi, among others. It has been busy. Here Lowy Institute Fellow Sam Roggeveen reflected on the 2014 Lowy Lecture by Chancellor Merkel:

I think that what we tend to look for in political leaders is not so much intelligence but wisdom, and Merkel's was on display in the Q&A, where she cautioned patience on Europe's response to the crisis in Ukraine. As someone who saw Germans give up hope of their country ever being reunified, she said we ought not to be too pessimistic about future change in Russia's attitude. But it might take some time for Europe's most powerful tool, its economic might, to take effect. The only danger for Europe is that it becomes divided in the meantime.

Sam also pointed to the global goodwill that Merkel has personally developed, and what this could mean for Germany:

It seems to me that, were Merkel to embrace this opportunity, it could raise her country's standing in world affairs to something unprecedented in the post-war era. For instance, is it really so far-fetched to imagine Merkel taking the leading role in international climate-change negotiations? Her country has diplomatic heft and green-energy credentials. And, if I'm right, Merkel herself has the personal profile to give such an initiative real stature.

Chinese President Xi Jinping's speech before the Australian parliament on Monday, along with the announcement of the China-Australia Free Trade Agreement, has provoked considerable debate. Kerry Brown provided a first take on Xi's speech:

But Xi has made it clear that there needs to  be more diversification, and one of the routes to diversification is finance and services. Xi's recognition of Australia as a place where this sort of business can be done for Chinese today is a big deal. Now it is up to us to re-imagine our relationship with China along lines that are broader than just exporting resources and foodstuffs. If we go this way, we are pushing on an open door.

Lowy Institute Nonresident Fellow Malcolm Cook talked about how the FTA busted several myths about Australia-China relations:

The second strategic myth is that closer relations with the US, to which the Liberals are seen as being more prone than Labor, are detrimental to Australia's key relationships in Asia. Australia's Asian engagement policy would benefit from a more 'autonomous' and 'independent' relationship with the US and its ally Japan, it is argued.

The most sustained and inaccurate criticism of the Abbott Government's foreign policy is that closer relations with Japan and the US will undercut relations with China, with Beijing likely to impose costs on the bilateral economicrelationship. The exact opposite now seems to have occurred, with the signing of the historic Japan-Australia FTA earlier this year clearly an important late-term stimulus to the decade-long China-Australia trade talks.

Hugh White responded:

As Malcolm Cook says, this week's events show that Tony Abbott's strategic policies in Asia have not got in the way of his economic agenda. Mr Abbott has won his free trade agreement with China despite his enthusiastic alignment with Japan and America to resist China's regional ambitions. So those, like me, who thought it might be otherwise have been proven wrong.

Hugh White layed out three possible explanations for why President Xi Jinping has 'been so warm and generous' to Prime Minister Abbott, when 'Mr Abbott has so deliberately opposed himself to China's interests and ambitions'.  Malcolm Cook provided a fourth option

Rather I think Option 4 — China's primary motivation for signing the trade deal with Australia is its global (not regional) trade diplomacy strategy aimed at domestic structural reform – is the most compelling. In this case, China is telling the truth when it says its foreign policy is primarily driven by the domestic concerns of a developing, previously centrally planned, economy in rapid transition.

Newly appointed Director of the International Economy Program at the Lowy Institute, Leon Berkelmans, made a compelling argument for treating the new FTA with some scepticism(part 2 of his post is here):

In any case, suppose we take the report at face value. The modelling suggests the agreement will boost GDP growth by 0.04% per year for 10 years. Trend GDP growth is around 3% per year, so 0.04% really does not look like much. In fact, at trend growth, that is how much the economy grows in 5 days. Let me emphasise this point: it is not that the FTA is worth 5 days' worth of output. It is worth the difference between GDP today and GDP in 5 days' time. We should all just calm down a little bit.

President Obama's speech at the University of Queensland on Saturday covered a wide range of topics, including climate change, human rights, the Asia Pacific rebalance and China's economic development. Rory Medcalf with a first impression on the strategic aspects of the speech:

Which brings us to China. Sensibly, Obama's speech today did not directly challenge the legitimacy of the Chinese political system, in the way that his strong words in Canberra did just three years ago ('prosperity without freedom is just another kind of poverty'). 

Still, he did not resile from upholding values of democracy, freedom and human rights – linking them with themes of opportunity, innovation and youth - and pointedly included a reference to Hong Kong alongside Asia's democracies.

In these times when a rules-based liberal global order is under challenge from forces variously of destabilization, disorder, authoritarianism and sheer barbarism, Obama's Brisbane speech may not prove historic, but it has at least held the line. With clarity and conviction about the staying power of democracies, British Prime Minister David Cameron did at least as much in addressing the Australian Parliament yesterday.

Hugh White argued that the speech was tough on China:

However, that matters much less than how the Administration sees Asia and China. Obama spoke more positively than he has done before about China's economic achievement and its significance for the welfare of the people of China, and of course he referred to the deal with Beijing on carbon emission targets. But he more than matched that with a distinctly adversarial tone in describing America's differences with China.

Obama's remarks on climate change have provoked a rare rebuke from Foreign Minister Julie Bishop. Historian James Curran wrote an interesting piece on past breakdowns in the alliance:

The last occasion when there was a serious public rupture in the alliance came with Bill Clinton's refusal to provide American ground troops in East Timor in 1999. Notwithstanding the fact that US logistical, intelligence and diplomatic muscle were crucial ingredients in the success of that mission, both John Howard and Alexander Downer made the point to American leaders at the time that, given Australia's support for the US in various wars over the previous half-century, Canberra could have reasonably expected the participation of a few Marines. Downer's remarks at the time on CNN invited a personal phone call of complaint from then Secretary of State Madeleine Albright.

Mike Callaghan has given his 'tick of approval' to the Brisbane G20 Summit, saying that it produced outcomes that were necessary for the event to be called a success. There was just one hiccup:

If Australia had adopted a more positive approach well in advance of the summit, rather than conveying an impression that it was doing everything possible to avoid the mention of climate change in Brisbane, it could have latched onto the US-China deal on emissions and presented the Brisbane G20 Summit as an important step in building momentum for next year's UNFCC negotiations.

So for all the good work Australia did as G20 chair in 2014 and the substantial outcomes from the Summit, it missed an opportunity for Brisbane to be presented as a major success across all fronts, rather than being overshadowed by the US-China agreement.

It's a pity, because in every other way Australia had a successful G20 year.

In a personal reflection on the feeling in Brisbane during the G20, Hugh Jorgensen provided some colour:

Otherwise, the only really noticeable human activity going on within the vicinity of the Summit site are 6000 sweaty police, a handful of Falun Gong protesters, and a lone monk bearing a placard asking G20 leaders to give peace a chance. I have heard there are a few hundred protesters across the river near City Hall, but as today's mercury moves up to a sweltering 35 degrees, I sympathise with anyone who can think of somewhere better to be that is not in Brisbane's willpower-draining sun.

Danielle Rajendram wrote on Prime Minister Modi's important visit to Australia:

Closer relations with Australia also tie into Modi's broader vision for India's role in East and Southeast Asia. The Modi Government has devoted considerable effort to deepening its partnerships in the region as part of its recently enhanced 'Act East Policy'. Focusing on key partners such as ASEAN, Japan, Vietnam and Australia, the Modi Government has signalled its intention to play a greater role in the region, potentially acting as a counterweight to Chinese influence in the Indo-Pacific. If it is able to carefully manage Chinese sensitivities (no mean feat), cautious Indian engagement has the potential to act as a stabilising force in the region.

Vanessa Newby recalls her friendship with Peter Kassig, the humanitarian worker held hostage and recently beheaded on camera by ISIS:

Peter was never idle. Usually when I saw him he was on the run from A to B delivering medical supplies to whoever needed them. He never had any money of his own; he spent all his resources assisting others. On the odd evening when he did take a break he was to be found in deep conversation with someone about his work or an issue he felt strongly about. He lived out his beliefs with an authenticity that is unusual. Peter was charming, eloquent, intelligent and highly passionate. It was the last trait that got him into trouble.

Finally, Anthony Bubalo wrote a two-part post on the Iranian nuclear negotiation, which is set to reach its deadline on 24 November (part 2 here):

But the thing that clouds judgments about what constitutes a good or a bad deal, the thing that makes this complex technical negotiation even more complicated and makes the atmosphere around the negotiation highly charged, is that for each of the protagonists — the Rouhani Government, its domestic opponents, the Obama Administration and key regional players such as Israel and Saudi Arabia — the talks are a proxy for their broader objectives.

      
 



Why the Iran nuclear talks are mostly not about nuclear weapons (part 2)

by Anthony Bubalo

Part 1 of this two-part series here.

I would argue that, for the Obama Administration, a nuclear deal with Iran is central to its recalibration of America's policy and posture in the Middle East. Of course it is not explicitly articulated that way, and for obvious reasons cannot be, but it's not difficult to make the case.

Iranian President Hassan Rouhani, World Economic Forum, 23 January 2014.

Obama's approach to the Middle East can be crudely summed up as 'get out of the wars America is fighting in the region and don't get into any new ones'. By withdrawing American forces from Iraq and Afghanistan, Obama has fulfilled the first part of this policy. The second is evident in the way his Administration has either been extremely limited or exceedingly reluctant in its use of military force in Libya, Syria and now Iraq (although in many ways the rise of Islamic State in Iraq is the most serious challenge to his policy).

This second aspect of the policy has also been articulated quite explicitly by Obama, most notably in his West Point speech, where he set out the kinds of things that the US will do in the Middle East, but also the things it won't.

I think Obama also understands that if the US is going to stop fighting wars in the Middle East, it has to come to terms diplomatically with its most difficult adversary, Iran, on the most challenging issue, the nuclear question. There are two key dimensions to this.

First, a nuclear deal is the key to ending 35 years of enmity between Iran and the US that has on many occasions flared into serious clashes and military conflict. Of course, a deal won't on its own end that enmity or resolve all the difficulties in the relationship. But in the same way as the Rouhani Government wants to remove the nuclear issue as an obstacle to ending Iran's political and economic isolation (see part 1 of my series), I think Obama wants to remove the nuclear issue as an obstacle to gradually normalising relations with Iran.

But there is another dimension. Both enhanced sanctions, and now the nuclear negotiations, are not just designed to stop Iran from getting the bomb, they are also designed to stop some of America's allies in the region taking unilateral military action against Iran. In particular, what I think Obama fears is that any military strike by Israel will risk drawing America into any subsequent conflict between the two. To a lesser degree, by diminishing the nuclear threat, Obama also reduces the reliance of regional Gulf allies, in particular Saudi Arabia, on US security guarantees. This again helps him recalibrate American policy and posture in the region.

The problem, however, is that a comprehensive nuclear deal (even one that places very strong limits on Iran's ability to build a nuclear weapon) will leave Iran a stronger regional player. Ending Iran's political and economic isolation will allow it to better pursue its regional ambitions and to realise its economic potential. As I said in Part I, this is what the Rouhani Government hopes for. 

But this is precisely what regional adversaries such as Israel and Saudi Arabia (as well as their supporters in the US Congress) fear. This is not to say that they do not fear a nuclear-armed Iran. They do, but they also recognise that the utility of nuclear weapons is limited and that a nuclear-armed Iran would be isolated and sanctioned, and would bring even stronger regional security guarantees from the US. 

The Israeli and Saudi preference, therefore, is to see Iran sanctioned and contained. As I argued in part 1, even if a nuclear deal leaves Iran less isolated and more influential in the region and internationally, I think over time, the end of its economic isolation will pose a more direct threat to the regime and to the interests of hardliners than the current sanctions regime. But for those regional countries like Israel and Saudi Arabia with justified fears about what a more powerful Iran means for their interests and the security of their citizens, this is unlikely to prove reassuring.

What this means is that if we do get a nuclear deal next Monday, or more likely, an extension of the current negotiations, there is going to need to be an effort to address these broader concerns as well. The Rouhani Government and the Obama Administration are right that the nuclear issue needs to be addressed first. But it should only be seen as a first step in building a more stable and less conflict-prone region.

Photo courtesy of Flickr user World Economic Forum.

      
 


The China-Australia FTA: Option 4

by Malcolm Cook

Thanks to Hugh White for responding to my post on the China-Australia free trade agreement (FTA). Hugh lays out three options for interpreting China's decision to go ahead with the FTA despite the Abbott Government's pro-Japan and pro-US stances. I am not an Option 1 believer ('Beijing doesn't really care much about these strategic/political issues, and their importance is outweighed by the economic value to China of the FTA and the diplomatic value of a warmer relationship with Australia'), as Hugh suggests.

Rather I think Option 4 — China's primary motivation for signing the trade deal with Australia is its global (not regional) trade diplomacy strategy aimed at domestic structural reform – is the most compelling. In this case, China is telling the truth when it says its foreign policy is primarily driven by the domestic concerns of a developing, previously centrally planned, economy in rapid transition.

Australia is the fourth developed economy to sign a preferential trade deal with China in 2014, following after Iceland, Switzerland and South Korea. More are on the way. These four were preceded by deals with Singapore, New Zealand, Hong Kong and Taiwan. Not only is China under Xi Jinping increasing the number of trade deals with advanced economies, the scope of these deals, as we can see with the Australian and Korean FTAs, is increasing.

For me, the China-Australia deal is motivated more by China's global trade diplomacy aimed at domestic economic goals than it is by the regional strategic order in East Asia and Australia's perceived position in this order in relation to China and the US. I imagine the same is true for Australia as well.

If Option 4 is the best explanation, this is a good sign for the regional security order and a strong caution against over-interpreting the scope and effect of regional strategic competition. If the Abbott Government is an Option 4 follower, then the China-Australia trade deal is even more of a coup than advertised, and is the sign of a mature, not adolescent, Australia in Asia.

Photo by Flickr user gp1974.

      
 



Shinzo Abe risks ire of disaffected voters

by Rikki Kersten

Why would a prime minister with a two-thirds majority in the lower house of parliament go to the polls two years early? While Abe's Liberal Democratic Party (LDP) is experiencing a slump in the polls at present, it is two years away from having to front the electorate if the normal electoral cycle is followed. If we scratch the surface it is not difficult to find reasons why Abe has taken this extraordinary step. But what really needs explaining is why Abe is risking so much in the process.

Abe's justification for the snap election is to seek a mandate to delay a planned increase in the consumption tax from 8% to 10%, originally scheduled for October 2015. This is a flimsy excuse indeed, given the LDP's overwhelming majority in both houses of parliament. The Government can revisit the consumption tax legislation and get it through whenever it pleases.

The real incentive for Abe here is to placate the party's rank and file, for whom the April 2015 round of local elections across the country loom large. Japan has just officially gone into recession, voters in the regions have not seen the benefits of the quantitative-easing aspect of Abenomics, and their wages are not keeping pace with inflation. When asked if they want to delay the planned tax increase, most voters will yelp 'YES' in response.

There is self-interest at play also. Abe is scheduled to face his own party in September 2015 in the election for the presidency of the ruling LDP. With an electoral slump in April, Abe could easily be blamed for diminishing the LDP's fortunes through the failure of Abenomics, the policy that bears his name. Abe could be tossed out as prime minister if he is not returned to the presidency of the party.

From this perspective then, the December election starts to look like a self-serving attempt to provide a democratic sheen to what is essentially a spot of internal party trouble.

We can also see that, by interrupting the electoral cycle, the LDP will avoid confronting a hostile electorate in both houses of parliament in the same year (2016), thus limiting the fallout should the economy remain flat.

Cynics will point to the fact that the LDP under Abe is clever to time this election for December, because it is difficult to recall a time when the opposition parties have been in greater disarray than they are at present. But this where the spectre of political risk enters the picture.

With several small opposition parties locked in self-defeating hostilities against each other, the LDP is literally the only political force capable of winning power in its own right. But there is another political entity that needs to be taken into account – the non-aligned voter. The LDP is sitting on only 41% approval ratings; 38% of the country supports no party.

So the real contest in December is not between the LDP and the rest but between the LDP and no-one. Voters can express their democratic dismay at the lack of a viable choice by simply staying away from the polling booth. If less than 50% of the electorate turns out to vote, Abe's resort to the fig leaf of democracy will be exposed.

Moreover, he may lose his precious two-thirds majority in the lower house, now that the electorate is really able to react to the policy agenda that has only been revealed after the last poll in 2012. The post-electoral moves by the Abe cabinet to reinterpret the pacifist clause of the constitution to allow for collective self-defence, and his determination to re-start Japan's nuclear power generators, will now receive the electoral scrutiny they deserve.

Abe wants to claim a mandate for Abenomics before economic policy failures become too entrenched by asking voters to answer an easy question: do you want to delay a tax increase? But voters may flex their democratic muscles in quite another way, slicing the LDP's majority and undermining the very notion of a mandate, by staying at home on election day. This is the political risk Abe has chosen to face off against in December. And it is a huge risk, given that this is an election Japan simply did not have to have.

      
 


Why the Iran nuclear talks are mostly not about nuclear weapons (part 1)

by Anthony Bubalo

Next Monday, 24 November, we will know whether months of talks over Iran's nuclear program will end in a comprehensive deal, a comprehensive failure or an agreement to keep negotiating. 

Iranian Foreign Minister Zarif Stand. Baroness Catherine Ashton and US Secretary of State John Kerry, 20 November 2014.

The talks have generated great heat in Iran, in the Middle East and in key international capitals, mainly because Tehran and Washington have never been closer to an agreement (strictly speaking it's a negotiation between Iran and the five permanent members of the Security Council plus Germany, but who are we kidding?). 

If there is one thing that both proponents and opponents of a deal would agree upon privately, it is that the negotiation is not really about Iran's ability to produce nuclear weapons.

Don't get me wrong. At the core of the talks is a highly technical negotiation designed to do three things: (1) prevent Iran from using its nuclear knowledge and technology to build a weapon, primarily by placing limits on its ability to produce fissile material; (2) put in place an intrusive inspection regime to ensure that if Iran does try to make a bomb, the international community would quickly know about it; and (3) establish a sanctions mechanism that both rewards compliance but also has the capacity to quickly punish Iran if it is found to be cheating.

But the thing that clouds judgments about what constitutes a good or a bad deal, the thing that makes this complex technical negotiation even more complicated and makes the atmosphere around the negotiation highly charged, is that for each of the protagonists — the Rouhani Government, its domestic opponents, the Obama Administration and key regional players such as Israel and Saudi Arabia — the talks are a proxy for their broader objectives.

It is these broader objectives that make the protagonists variously more or less willing to compromise on the nuclear issue. And it is these broader objectives that lead opponents of a deal to charge that the proponents are willing to trade anything to get an agreement, and in turn for proponents to argue that there is no deal that would satisfy opponents.

So what are these broader objectives? Let's start with the Rouhani Government and its opposition within Iran. Rouhani is neither a moderate nor a reformist. His goal is not to change the Iranian regime but to strengthen it. What distinguishes him from his internal opponents is his belief that the best way to do that is by striking a nuclear deal. 

I was in Tehran a few weeks ago attending a workshop organised by the European Council on Foreign Relations and the Institute for Political and International Studies (the think tank of the Iranian Foreign Ministry). The workshop included a long session with the Iranian Foreign Minister, Mohammed Javad Zarif. Two things were evident.

On the one hand, Iran is confident about its position in the region. In particular, it feels that has the upper hand in their long running power struggle with Saudi Arabia. The Saudis have failed in their efforts to dislodge Tehran's key ally Bashar al-Assad in Syria. Meanwhile in Saudi Arabia's backyard, Yemen, Houthi rebels, seen by many as aligned with Iran, have seized the capital. Even the rise of Islamic State in Iraq, while presenting some immediate challenges for Tehran, has played into Iranian hands. Suddenly the international focus is less on the brutality of the Syrian regime and more on Islamic State. Meanwhile, Iran can portray itself as a bulwark against jihadist extremism in Iraq.

On the other hand, there was a strong sense of frustration that despite its strategic ascendancy, Iran remained politically isolated and economically vulnerable. At the workshop it was noted with strong disdain the way that Iran had been left out of the Geneva talks on Syria last year and the Paris talks on the rise of Islamic State in Iraq this year. This is not just a practical matter for Iranians, it is also a question of pride – a sense that Iran is not being accorded its due deference in the region. 

Likewise, Iran's strategic ascendancy obscures a great economic vulnerability. The limited sanctions relief that has already occurred as a part of the interim agreement, combined with better economic management by the Rouhani Government, has improved the economic situation in Iran, particularly with respect to inflation. But this improvement, and the renewed economic confidence that has come with it, is fragile and susceptible to a breakdown in the nuclear negotiation. You sense that for the Rouhani Government, the nuclear talks are not just about staving off future socioeconomic causes of unrest, it's about realising Iran's full potential – something that won't happen while Iran remains economically isolated.

I have no doubt that the Rouhani Government is bargaining very hard to protect Iran's nuclear program. But it also sees the nuclear issue as a stick that has been used to beat Iran down and keep it isolated. In its view, taking that stick out of the hands of its adversaries is key to both Iran's future and the regime's longevity.

I think for this reason Rouhani has been able to convince Supreme Leader Khamenei to give him the leeway to negotiate. Convincing him to sign off on a deal will be more difficult, however, given that the Leader is more naturally predisposed to the views of those opposing an agreement.

The Iranian domestic opponents of a deal do not form a coherent group, nor do they have a single motive. I am sure there are some within the regime who want to preserve and even enhance Iran's ability to produce a nuclear weapon should the regime take the decision to do so (and most analysts assume it has not, so far).

But there are two other groups, sometimes overlapping, that are also opposed to a deal for different reasons. First, there are those within the regime who are ideologically opposed to a deal. They tap into a deep vein of distrust of the outside world in Iran (and not just in the regime) that is sceptical of any promise to deliver real sanctions relief in return for deep Iranian concessions on its nuclear program. There are also those who believe that the regime cannot ultimately survive without preserving its ideological enmity to the US in particular, and the West in general. In this view, ending that enmity would remove a key reason for the regime's unity and existence.

In recent years this ideological enmity has, however, overlapped with a more practical opposition to any deal with the US. Parts of the regime have made enormous amounts of money as a result of sanctions. They have done this by either running sanctions-busting schemes or by filling the economic vacuum left by international companies unable to do business in Iran. The expanded role of Revolutionary Guard commercial entities in the economy is one example.

So for ideological and economic opponents, a nuclear deal represents a threat to the regime and in some cases to their personal economic interest. As a matter of fact I think the hardliners are right. In an isolated Iran, the regime and regime hardliners hold all the security cards and increasingly the economic ones as well. A less isolated Iran will empower new economic interest and actors outside the regime. 

In Part II of this post I will look at the broader factors driving external proponents and opponents of a deal.

Photo courtesy of Flickr user U.S. Department of State.

      
 



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