Lowy Institute


A Greeek solidarity rally in Madrid yesterday. (Flickr/Adolfo Lujan.)

Even with the Greek referendum result now clear, it will take some time for the implications to evolve. Whichever way it works out, it's bad news for Greece. Leaving the euro would be hugely disruptive. Staying in the euro means a continuation of the failed policy of austerity. Greece is in for a hard time.

Disruption in Greece doesn't help Europe's lacklustre recovery, but it's not big enough to do substantial harm – Greece is less than 2% of Europe's GDP. Moreover, most of the damage has already been done, notably in 2010 when the unfolding Greek crisis diverted budget policies in the advanced economies from expansion to austerity, thus derailing the post-2008 recovery.

The peripheral countries (Spain, Italy, Ireland and Portugal) that seemed so vulnerable to contagion when the crisis began in 2010 may have their financial markets tested, and the drama queens of financial markets will do their best to turn this into another opportunity for profit-making market volatility. But there is not enough substance here to keep such disruption going for long. The European Central Bank has the ability and means to handle any financial fall-out.

Some see this as the beginning of the end for the euro experiment. With Greece staring at departure, will others follow and the euro disintegrate into national currencies? This outcome would be some kind of wish-fulfillment for the euro-sceptics who dominate the UK press. But for all its challenges (past and future), the core countries of the euro have built up massive synergies and benefited enormously, both economically and politically. The degree of integration now accomplished will not be abandoned lightly. Greece was always an outlier, a misfit in economic structure and maturity. The parting would be painful, but will not unravel the euro.

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Greek public debt is not insubstantial (the part owed to Europeans is conservatively estimated at 3.3% of the Eurosystem's GDP), but almost all is now owed to governments or international agencies, which can wear the losses without dramatic impact on their economies. The IMF has already asserted (rather boldly) that 'the IMF's shareholders will not suffer losses'. 

What are the economic lessons? Countries can run budget deficits, overly-generous pension schemes, and large external deficits for decades if foreigners provide the funding, but there is no free lunch. Unsustainable policies eventually stop and the longer countries have been off-track, the longer it will take to fix. Living standards can't rise if productivity remains low. Incompetent and sometimes corrupt governance might get by when the economic climate is benign, but can't cope when problems arise.

These are the old lessons. What are the new ones?

There is a melancholy message about the political-economy of decision-making: even when there is a better path for crisis resolution available, politics can sometimes push events down a worse path, which none of the participants wanted. When the current Greek Government was elected early this year, there was an opportunity for a fresh start based on mutually held objectives. There was unanimity among the negotiators that staying in the euro was desirable. There was a common recognition that Greece could not repay its government debt (even after the 2012 restructure), although the creditors were politically constrained from acknowledging this in public. Similarly, there was implicit understanding by all that the austerity package imposed in 2012 needed to be softened.

Skillful negotiators would have found a formula to put the debt to one side, thus opening up the opportunity to shift from the budget austerity required to repay the debt towards a more growth-oriented policy package, emphasising the medium-term nature of the reforms needed.

This would have created an outcome all parties could accept: the debt would not be written off but would be extended, with modest payments in the near-term. This would not only suit Greece, but would have allowed a continuation of the fiction in the creditors' balance sheets that the debt was worth its face value. Greece would have shifted from an austerity strategy to one which addressed structural problems, but at a pace which allowed growth. Greece's feet needed to be held to the fire, but reform takes time when structural problems are so entrenched.

Alas, the negotiators did not have these skills. Just who let down the side will be hotly debated, but it looks like all parties were to blame, with the possible exception of the European Central Bank.

We will learn more about the mistakes of the European Commission and Greece as each participant attempts to shift the blame over coming months. But one thing is clear already: the International Monetary Fund played its cards badly and has lost both prestige and credibility. The Fund should not have become involved in the first place. This was a matter for the Eurosystem to sort out, just as federated states such as the US or Australia would resolve state debt without calling in the Fund.

Dominique Strauss-Kahn, the Fund Managing Director at the time the crisis began, wanted to restore the waning influence of the Fund and perhaps burnish his own political ambitions in Europe. Instead, the outcome has been to demonstrate the Fund's weaknesses:

  • Its Euro-centric governance structure over-rode its own rules and precedents to achieve a support program which at the time suited Europe.
  • It was unable to orchestrate a timely bail-in of excessive private-sector debt in 2010 (thus allowing the private-sector creditors to get off too lightly), or arrange a subsequent realistic restructuring of sovereign debt.
  • Its forecast of Greek GDP in the face of budget austerity was, as usual with these support programs, hopelessly optimistic.
  • It forgot the lessons of the disastrous Indonesian 1997-98 support program. The Fund's detailed involvement in the politically sensitive Greek pension reform seems to be on a par with its insistence on Indonesian petrol-price increases during the fraught political circumstances of 1998. The prerequisite for competitiveness reforms is reminiscent of the Fund's requirement to dismantle the Indonesian clove monopoly two decades earlier.

So much for the economics. Much less has been said about the strategic politics of what is unfolding. Greece's small size keeps the global economic consequences manageable but the same can't be said within the strategic context, where small problems can have large ramifications: 'For want of a nail, the battle was lost'.

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This week the Greek debt crisis entered a new phase, with Athens defaulting on it's €1.5 billion loan repayment to the IMF. A referendum has been called by Tsipras Government for this Sunday, which will ask the Greek population whether they accept to reject bailout conditions set by Greece's creditors. Tristram Sainsbury commented on the bizarre referendum

The long term perspective is that we are witnessing an at-times painful series of negotiations that all contribute to the grand bargain of the European project. In this view, we are simply in a particularly dramatic stage of a complex negotiation path that has already delivered political, monetary and banking union and which will, at some point, result in fiscal union. The Greece case shows that the participation of countries in the project only works up until the point where their populations (and the parliaments they elect) are willing to tolerate the arrangements they are asked to bear. 

Here is Daniel Woker on how the crisis fits into the larger European project:

The Eurozone is not a monetary union such as we have seen before but an economic reaction to the fact that the EU some time ago become one large manufacturing and service-providing area made up of countless cross-border value chains. An area-wide currency provides for a level playing field for suppliers and assemblers regardless of national borders. Contrary to what is often claimed, the political decision to create a single currency (and with it a common banking, regulatory and eventually fiscal union) followed economic reality rather than leading it. As a result, national sovereignty was transferred for the greater good of all. (This is of course anathema to nationalists all over the EU, yet the idea that the UK prefers to opt out of full European integration continues to baffle observers on the continent. After all, Britain without Europe is just an island adrift.)

In other developments concerning the international economy, the AIIB's Articles of Agreement were announced. First, Philippa Brant had a great breakdown of all of the key provisions:

China was successful in getting its favourite language into the Agreement: 'The Bank, its President, officers and staff shall not interfere in the political affairs of any member, nor shall they be influenced in their decisions by the political character of the member concerned.' Interestingly, this was taken even further, by stating that 'only economic considerations shall be relevant to their decisions.' I suspect this latter point will in reality be relaxed, as it will be challenging to make sound investment decisions without taking the political economy of a country into account.

Mike Callaghan warned that China needs to hasten slowly on establishing the Bank:

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It will be important for the AIIB to have in place thorough processes and procedures before it starts lending. Among the steps necessary for the AIIB to be fully functional: the establishment of a treasury function so that the bank can access international capital markets; the recruitment of an international (and not predominantly Chinese) workforce with the appropriate expertise; and the development of rigorous procurement procedures and safeguards policies covering the environmental and social aspects of the bank's activities.

What appeared to be coordinated terrorist attacks occurred last week in Kuwait, Tunisia and France. ISIS, or ISIS-affiliated groups claimed responsibility for two of them, while the attack in France was likely a 'lone wolf' operation. Rodger Shanahan on the bombing in Kuwait:

Kuwaiti authorities have indicated that the mosque bomber was a Saudi national who flew into Kuwait on the morning of the bombing, which would indicate that there are some linkages between Saudis willing to blow themselves up and regional ISIS support cells who want to use them. There are already more than 3000 Saudis fighting with ISIS in Syria and Iraq, and one English-language Saudi newspapers reported that more than 1300 ISIS sympathisers have been arrested in the Kingdom in the last eight months. As with its al Qaeda problem a decade ago, Saudi Arabia's educational and social system makes it a rich hunting ground for would-be jihadists.

Here is former intelligence analyst David Wells on the broader 'attribution' strategy ISIS may be employing:

So preventing Australian citizens (dual or otherwise) from becoming ISIS cannon fodder in the Middle East is responsible governance. As is doing everything we can to prevent terrorist attacks occurring in Australia. But fundamentally, a much bigger problem is emerging across the Middle East and North Africa, one that could lead to more failed states, civil wars, and the continued forced migration of millions of innocent civilians from war zones.

International Security Program Director Euan Graham wrote on the upgraded strategic partnership between Australia and Singapore announced this week:

The upgrading of Australia-Singapore security relations should be appreciated in a broader strategic context that extends to the South China Sea, as well as in the political context of the currently under-performing relationship with Indonesia. Asked about the South China Sea at a joint press conference with Prime Minister Lee Hsien Loong, Tony Abbott was keen to stress that 'like Singapore', we 'deplore any unilateral alteration of the status quo' and 'uphold freedom of navigation on the sea and in the air'.

Has the IMF begun to rethink austerity? Stephen Grenville:

If a country pays down its debt, it has to do so by raising revenue or lowering spending, which will slow growth. On the other hand, once the debt is down, underlying growth will be faster because the cost of servicing debt will be a smaller burden on the economy. What's the trade-off here? The IMF authors argue that these two effects are equal, so there is no compelling reason to think that getting the debt down is a policy priority. As they say, 'When and only if countries have ample fiscal space, there is no need to obsess about paying down the debt. Living with the debt is likely to be the better policy.'

There are rumours circulating that Turkey is considering a military intervention into northern Syria. Lauren Williams doubts it will happen after the recent election:

It's highly unlikely that a large-scale military invasion of Syria could be made by an outgoing government. Sources close to the Government say talk of intervention is genuine, but one has to wonder whether the leak was aimed at denting the AK Party's standing as it courts potential partners to form a coalition. An invasion of Syria aimed at the Kurds would almost certainly end Turkey's peace process with the Kurds, a key achievement of Erdogan's leadership and a campaign platform.

Julian Snelder with a piece on the container trade:

A conflict in the South China Sea is just one threat to world trade. But there will be plenty of consequences of 'peak Box' in any case. For instance, the value of trade could continue to rise while the mix moves towards more information products and services (where Washington's trade interests are focused) and away from physical merchandise and bulk materials. China may have already passed its maximum steel and coal demand, years ahead of miners' expectations. The miners know there will never be another China. Its urbanisation and trade globalisation have been the two pillars of world economic growth.

China announced its climate change pledge ahead of the international climate change negotiations in Paris in November. Frank Jotzo believes it is a significant commitment:

China's target is a 60% to 65% reduction in the emissions-intensity of the economy by 2030 pegged at 2005 levels, with carbon dioxide emissions peaking around 2030, perhaps earlier. China has also pledged to increase the share of non-fossil fuels to 20% of total energy use and a large increase in forest carbon stocks…

The emissions-intensity target means reducing the ratio of carbon dioxide emissions to GDP by 60% to 65%, or conversely, increasing the amount of economic output per tonne of carbon by almost two-thirds. It's the only new commitment in addition to what China pledged at a joint announcement with the US at last year's APEC meeting. And it packs some punch.

Nick Bryant on New Zealand's efforts on the UN Security Council as it takes over the Presidency:

Benjamin Netanyahu, after meeting Murray McCully in Jerusalem earlier this month, sounded a warning to New Zealand and others pushing for a Middle East peace resolution. 'The main thing we have learned,' the Israeli Prime Minister said pointedly, 'is that peace is achieved, as we did with Jordan and with Egypt, through direct negotiations between parties, and not by fiat.' But the very fact that Israel is even paying attention to New Zealand is testament to the diplomatic clout that comes with membership of the Security Council. On the most nettlesome international issue of them all, Wellington* has become a significant player, if not a decisive or central one. 

Here is Dina Esfandiary with an update on the Iranian nuclear negotiations, which have been extended a week:

As part of a final agreement, Iran will sign up to the Additional Protocol (AP), the most intrusive legal verification regime to date. While the framework agreement didn't outline when and how long for, US Energy Secretary Ernest Moniz explained that AP ratification would be immediate and indefinite. Implementation of the AP (and Iran's commitments under the Non-proliferation Treaty, of course) will extend beyond its P5+1 agreement, which is why the 'sunset clause' criticism of the agreement is unfounded.

Finally, Bob Bowker reported on the deteriorating situation in Egypt:

Draconian measures from the Egyptian Government will barely impede the jihadists. The Sinai conflict will continue to grind along its deadly path, mainly at the expense of ill-prepared and poorly-led conscripts in the military and police. Unless the Government radically changes its tactical and strategic approaches, the result will be a growing number of impoverished and bereaved Egyptians disillusioned with the Government and opposition alike. 

Photo courtesy of Flickr user thierry ehrmann.

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The view from Jakarta

An Indonesian military aircraft crashed into a residential area in North Sumatra this week, killing 142 people at last count. In Jakarta, the tragedy gave President Jokowi the chance to again take sides in the simmering tension between the military and the police.

The Air Force C-130 Hercules aircraft was headed to the Riau Islands on Tuesday when it crashed only two minutes after take-off from an airbase in Medan. The transport plane was a US-made model from the 1960s, which had been in use by the Indonesian armed forces (TNI) since 1980. The high death toll was due not only to the crash happening in a residential neighbourhood, but because aside from the 12 TNI personnel onboard, the aircraft was carrying more than 100 civilians, a practice which the Air Force chief confirmed was strictly prohibited. Defence Minster Ryamizard Ryacudu and Vice President Jusuf Kalla defended the practice, saying it was commonplace and provided a valuable service to civilians in remote areas.

Jokowi did not condemn the transportation of civilians by the military either, instead taking the opportunity to call for greater resources to be allocated towards modernising the TNI. The President has already pledged to almost triple the defence budget during his term, from around $7.2 billion at the time of his election last year to $20 billion when his term ends in 2019. In the wake of this week's crash he stressed that Indonesia should aim to eventually produce and maintain its own weapons and equipment, rather than buying or accepting them from foreign suppliers.

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Incoming TNI commander Gatot Nurmantyo agreed, telling a closed session at the House of Representatives on Wednesday that the military should give priority to domestic suppliers, or at the very least ensure technology transfer when buying from foreign suppliers. Nurmantyo is Jokowi's pick for TNI chief, against the wishes of the President's party and the reform-era convention of rotating the position among the army, navy and air force. Nurmantyo, currently the army chief of staff, looks set to replace another army figure, General Moeldoko, as TNI commander as early as next month.

Meanwhile, Jokowi was far more critical of the National Police this week when attending a celebration of its 69th anniversary in Greater Jakarta on Wednesday. Speaking at the celebratory event, Jokowi gave a stern warning to the police to regain public confidence by cleaning up corruption and 'mafia' networks within the force. The President also reminded police of 11 priority programs that he had requested be carried out, in line with his theme of a 'mental revolution' for Indonesia. 

Allegations of corruption within the police force have been the bane of Jokowi's presidency. His nomination of Budi Gunawan for police chief earlier in the year sparked public outrage, since Budi was seen as the favoured pick of Megawati, Jokowi's party leader. Deferring the vetting of Budi as a candidate to the Corruption Eradication Commission (KPK) only triggered a mudslinging war that nearly brought down the well-trusted anti-corruption body. Despite all the drama, Budi was still inaugurated as deputy to the new police chief Badrodin Haiti in a closed-door ceremony in April.

As a leader struggling to find support within his own party, let alone from other political powers, Jokowi has developed a close relationship with the military, allowing what many observers have called an encroachment of the armed forces into civilian affairs. His supportive response to this week's tragedy involving unauthorised civilians in a TNI aircraft is another example of a trend which is ringing warning bells for critics who remember Suharto's repressive dwifungsi or 'dual-function' role for the military, which was responsible for both internal and external security during the New Order. It will be interesting to see how the relationship develops once Jokowi's own pick for TNI chief is in charge.

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Another seven days to reach an agreement; that's what the P5+1 decided this week when they weren't able to meet their 30 June deadline for a final deal on Iran's nuclear program. While some differences remain, both sides have come too far to walk away. The potential agreement achieves Western objectives: curbing Iran's program and closing the path to the bomb.

The April 2015 framework agreement was good. It was not a final agreement and it had flaws, but the announcement covered a wider range of areas than anticipated and provided the basis for the detailed negotiations since. Iran agreed to significant concessions on its nuclear program, many of which are irreversible.

The framework agreement, and the final agreement to come, will increase Iran's 'breakout time' from 2-3 months to over 12 months. According to a February report from the UN's nuclear watchdog, the IAEA, Iran had 19,500 basic IR-1 centrifuges, of which 10,200 were operating. An agreement will reduce centrifuge numbers to 6104, of which 5060 are enriching to less than 5%. In other words, Iran's centrifuges will be cut by approximately 68%. 

But the reductions don't stop there. Iran's stockpile of enriched uranium – the raw material for a nuclear weapon – stood at approximately 10,000kg. A final agreement will cut this to only 300kg, a reduction of 97%.

Iran also agreed to other compromises.

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It's R&D on advanced centrifuges will be curbed: Iran can only conduct limited, small-scale, in-lab testing of more advanced centrifuges for the next decade. Tehran faced significant difficulties with the operation of the basic IR-1 technology for large-scale enrichment. The type of testing allowed under the final agreement will not be sufficient to prepare Iran's advanced machines for use when the agreement expires.

The agreement will also close off Iran's second path to the bomb. Plutonium is another raw material that can be used in the production of a nuclear weapon. Iran's heavy water reactor at Arak could produce about 11kg of plutonium a year if completed. Today, the reactor is no longer a proliferation concern. The agreement specifies that it will be redesigned so that it cannot produce weapons-grade plutonium.

All these measures block Iran's existing program and known facilities. But, many rightly argue that if Iran goes for the bomb it is more likely to 'sneak out' rather than break out of its agreement. That is, it will use facilities the UN and the West don't know about. 

So how do you control what you don't know? Through monitoring and verification.

As part of a final agreement, Iran will sign up to the Additional Protocol (AP), the most intrusive legal verification regime to date. While the framework agreement didn't outline when and how long for, US Energy Secretary Ernest Moniz explained that AP ratification would be immediate and indefinite. Implementation of the AP (and Iran's commitments under the Non-proliferation Treaty, of course) will extend beyond its P5+1 agreement, which is why the 'sunset clause' criticism of the agreement is unfounded. 

As part of a final agreement, the  IAEA will have access to all Iranian nuclear facilities for the next 20 years. Importantly, the deal will limit enrichment to Natanz, meaning any diversion will be easier to detect. But there is still some debate over how much access will be granted to non-nuclear facilities.

In Vienna this week, it was clear that the past military dimensions (PMD) of Iran's nuclear program and access to military sites remain outstanding issues. Secretary Kerry's statement that negotiators were focused on the future, not the past, led to criticism that Iran would be off the hook for PMDs. This is a real catch-22 for Iran. For the Western powers, striving for an admission of guilt should not be a barrier to an agreement that curbs Iran's program in the future.  

The most significant unresolved issue for the Iranians is the timeline and scope of sanctions relief. Clarifying this issue is vital because sanctions relief is the incentive that will encourage Iran to comply with its commitments and make the deal durable. After calls for removing all sanctions up front, the P5+1 and Iran reportedly found common ground on lifting sanctions once Iran complies with its obligations. While Iran insists on this carrot, the P5+1 also devised a stick to ensure Iranian compliance: a sanctions 'snap-back' provision.

Both sides continue to claim that the other is asking for too much, but negotiators are closer than ever to a final agreement. It is no longer possible that there will be no deal. The question now is whether the implementation of the deal will be as rocky as the negotiations.

Photo courtesy of Flickr user US Department of State.

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In a lengthy piece published earlier this week, Vox media journalist Max Fisher details how a conflict between the US and Russia could spiral into a nuclear war. As with all Vox content, it has pop-art, like this 'choose your own adventure' World War III flow-chart.

Fisher does brush over a few things. He says Cold War leaders considered limited nuclear war, in which tactical nuclear warheads would be used on the battlefield rather than 'strategically' against population centers and cities, as 'unthinkable' and that they thought this type of conflict was not survivable or winnable. Not all Cold War leaders thought this, and there were significant debates throughout the period about escalation control and different theories about how each side would interpret the use of a nuclear weapon on the battlefield.

But incidents like the close call during the Cuban Missile Crisis, when a Soviet nuclear torpedo was almost fired at a US aircraft carrier, eventually proved to many the need for limits on tactical nuclear weapons. By the end of the Cold War, there was consensus that tactical weapons were inherently destabilising, and this led in part the Intermediate-Range Nuclear Forces (INF) Treaty in 1987.

But the INF Treaty did not cover all types of tactical nuclear warheads, merely their launchers. In fact, the 180 US nuclear weapons that are still deployed to bases in Belgium, Germany, Italy, the Netherlands and Turkey are hold-overs from this era of strategic thinking. These weapons are 'variable yield' models. Their destructive capacity can be changed for tactical and strategic purposes, depending on their intended use. These nukes, and their predecessors, were intended to be used against superior Soviet conventional forces in Europe by NATO in the event of a conventional war. Now, they act more or less as a physical guarantee of US extended nuclear deterrence to Europe.

What's really important about Fisher's article is his call for attention on the growing danger of Russian nuclear doctrine. Sometimes strategic thinking is more dangerous than the capabilities themselves, and in this case, the destabilising nuclear strategic thinking that characterised the early Cold War have returned to Putin's Russia (some strategists in Washington are also beginning to advocate for investment in more tactical nuclear weapons in the face of Russia's policy in Crimea and Ukraine).

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First, Fisher argues that the mood in Moscow has substantially changed. He cites Russian strategic analyst Fyodor Lukyanov:

'The perception is that somebody would try to undermine Russia as a country that opposes the United States, and then we will need to defend ourselves by military means,' he explained. Such fears, vague but existential, are everywhere in Moscow. Even liberal opposition leaders I met with, pro-Western types who oppose Putin, expressed fears that the US posed an imminent threat to Russia's security.

Essentially, to reinforce Russia's growing strategic interests and to compensate for its substantial asymmetric disadvantage in conventional military means vis-a-vis the West, Putin has begun to reinvest in short- and medium-range nuclear-capable missiles, as well as lowering the threshold for potential nuclear use. A good example is the Russian ambassador to Denmark's comments earlier this year that if Denmark were to integrate into NATO's missile defence shield, Danish warships would then be targeted by Russian nuclear weapons. Here's Fisher on Russia's nuclear compensation:

 To solve the problem of Russia's conventional military weakness, he has dramatically lowered the threshold for when he would use nuclear weapons, hoping to terrify the West such that it will bend to avoid conflict. In public speeches, over and over, he references those weapons and his willingness to use them. He has enshrined, in Russia's official nuclear doctrine, a dangerous idea no Soviet leader ever adopted: that a nuclear war could be winnable.

The real danger of this shift is the idea of a 'de-escalation' strike, which has now been incorporated into Russian nuclear doctrine:

That corollary is Russia's embrace of what it calls a "de-escalation" nuclear strike. Go back to the scenario spelled out in Russia's military doctrine: a conventional military conflict that poses an existential threat to the country. The doctrine calls for Russia to respond with a nuclear strike. But imagine you're a Russian leader: How do you drop a nuclear bomb on NATO's troops without forcing the US to respond with a nuclear strike in kind, setting off a tit-for-tat cycle of escalation that would end in total nuclear war and global devastation?...

...Russia's answer, in the case of such a conflict, is to drop a single nuclear weapon — one from the family of smaller, battlefield-use nukes known as "tactical" weapons, rather than from the larger, city-destroying "strategic" nuclear weapons. The idea is that such a strike would signal Russia's willingness to use nuclear weapons, and would force the enemy to immediately end the fight rather than risk further nuclear destruction...

..."Such a threat is envisioned as deterring the United States and its allies from involvement in conflicts in which Russia has an important stake, and in this sense is essentially defensive," Sokov wrote. "Yet, to be effective, such a threat also must be credible. To that end, all large-scale military exercises that Russia conducted beginning in 2000 featured simulations of limited nuclear strikes."

Tactical nuclear weapons, particularly when paired with a doctrine that calls for their use in a seemingly oxymornic 'de-escalatory' fashion, are dangerous. Since the end of the Cold War, this is something analysts have mostly worried about in the South Asian context. The fact that this thinking has re-entered the world's most important nuclear relationship, that between the US and Russia, is an alarming step backwards.

Photo courtesy of Flickr user Megan Eaves.

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On the first Friday of each month the Interpreter will publish Digital Diplomacy links instead of the weekly Digital Asia links. As Australian digital diplomacy strives to catch-up to the rest of the world, these links will highlight the most creative and effective ways in which countries are leveraging the Internet for foreign policy gain.

  • America's #LGBTI digital diplomacy blitz provides valuable lessons for how states – no matter their resources – should conduct coordinated digital campaigns.
  • Israel's Foreign Ministry takes a stab at the international media's coverage of Gaza in this animated video.
  • I argue it's time for Foreign Minister Bishop to champion a forward-looking strategy that commits resources and the right expertise in order to pull Australian digital diplomacy out of catch-up mode and into real-time.
  • The Pentagon's YouTube war with Russia is heating up.
  • It's this French Ambassador's (@gerardaraud) last posting and he's as senior as he can be so, as he explains to the New York Times, there's no better time to take risks.
  • How the British Embassy in Phnom Penh ran a campaign to boost awareness of the UK among youth and grew its Facebook fan base by 24,000% in one year (Australia's embassy in Cambodia isn't on Facebook).
  • Six rules for the use of smart power from UK's Ambassador to Lebanon Tom Fletcher, via his personal blog.
  • This research leverages big data to assess the state of Canadian digital diplomacy. The researchers mapped 467 official social media accounts and graphed the impact of major foreign aid campaigns.
  • Genius, a social site that allows users to comment on online content such as music and news, is attracting foreign policy actors. Current experimenters include Hillary Clinton and Turkey's Office of Public Diplomacy
  • US Secretary of Defence Ash Carter becomes the first Defence Secretary to join Facebook.
  • Australia's Ambassador to Israel Dave Sharma has posted a speech he gave recently on diplomacy in the digital age on his personal blog. It's a shame our own Department of Foreign Affairs and Trade hasn't created a blog so that insights such as these can be shared more widely.
  • This interview with Australia's Ambassador to the UN Gillian Bird is hard to find but worth reading, particularly her views on UN silos and fragmentation (more content for a DFAT blog).
  • The State Department's new Medium account, Foggy Bottom, encourages the public to post responses.
  • Is this Bollywood-inspired video by Germany's embassy in India a stroke of genius or totally ridiculous? Featuring the Ambassador and his partner, who have defended it, you be the judge. But with over 1 million views, there is no denying it is a triumph for German digital diplomacy (h/t Brendan):

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Islamist insurrection has returned to Egypt. There has been a significant growth in the sophistication of the targeting, conduct and lethality of terrorist acts, a crisis of political legitimacy for the Egyptian Government, and the virtual abandonment of any separation of executive and judicial authority on matters deemed security-related.

A new stage has been reached in the contest for the future of the country.

Terrorist attacks on targets beyond Sinai are not new – there have been nearly 200 attacks throughout Egypt in the past year, including a major attack on a poorly-defended police base in the Western Desert. However, recent days have witnessed a car bomb attack which assassinated the Egyptian chief prosecutor, Hisham Barakat, an event beyond anything seen in Egypt in recent decades. A large-scale assault overnight on military and police installations at Shaikh Zuweid, close to Gaza, had the hallmarks of an operation devised according to jihadist experience elsewhere in the region.

The Barakat assassination and the latest Sinai attack demonstrate proficiency in the use of vehicle-born explosive devices, multiple targeting with careful surveillance, and sophisticated planning including measures to impede a counter-attack. 

None of these capabilities are possessed by the Muslim Brotherhood, which has lacked an operational military wing for many decades. Despite its roots in Egyptian society, the Brotherhood is effectively and severely repressed by the current government. Nor is the challenge originating from Gaza, where Hamas is trying to contain its own Islamist problem. 

The challenge is coming from an altogether different and more worrying direction: jihadists antagonistic to the Egyptian Government and the Brotherhood alike, and which are linked to extremist groups across the region. These groups of jihadists have acquired the skills and material for sustaining violent, high-profile action against the political and social institutions which are the foundations of the Egyptian state.

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This generation of Egyptian jihadists has attained a degree of security in the depths of the Sinai Peninsula, especially amid the chaos which followed the fall of the Mubarak regime. They have ruthlessly exploited long-standing tensions in that area between tribal elements and the Egyptian security authorities. Their military capability has been enhanced by the acquisition of weapons, especially from Libya. They have learned from operations in Iraq, Syria and Libya, which have provided networks of experience-sharing and support that earlier jihadist groups in Egypt lacked.

These newly-emerged jihadist groups are now capable of holding their own, militarily, against an Egyptian security and military apparatus that is clearly lacking in counter-insurgency doctrine and skills.

Those skills can of course be acquired, over time and with competent leadership and support. But there are doubts about whether the Egyptian military leadership is capable of making a rapid adjustment in its approach. There are even greater doubts about the capacity of the Egyptian Government to bring about the balanced economic development of the Sinai region which would provide the basis for a durable counter-insurgency. 

In the meantime, in their anger and frustration, Egyptian authorities are seeking solutions that are more likely to add to the problem.

Of particular concern are calls for the expeditious implementation of executions arising from a deeply-flawed judicial system. The Egyptian judicial system has become deeply politicised, characterised by manifest incompetence, which gives military court judges the option of not hearing defence witnesses. 

There is a gadarene rush in the Egytian media to affirm the authoritarian values of the Nasser era. There have been attacks on civil society figures seeking to uphold values that were painfully negotiated to be included in the constitutions which emerged after Mubarak's fall. There is nothing positive being offered to capture the energy and imagination of the millennial generation of the Egyptian middle class. 

The killing  of nine Muslim Brotherhood figures in Cairo by state security forces following the Barakat assassination has produced a call from the Brotherhood for a revolt against the regime, a stance its older generation of leaders, now imprisoned and, in a majority of cases, facing execution, had sought to avoid. 

Draconian measures from the Egyptian Government will barely impede the jihadists. The Sinai conflict will continue to grind along its deadly path, mainly at the expense of ill-prepared and poorly-led conscripts in the military and police. Unless the Government radically changes its tactical and strategic approaches, the result will be a growing number of impoverished and bereaved Egyptians disillusioned with the Government and opposition alike. 

Although most Egyptians fear the extremists and will see the jihadists as responsible for the Government's failure to provide the security they demand, some will wind up lending support to those seen to be acting against the most despised figures in the regime. Should the insurgency increasingly target tourism, energy infrastructure and even conceivably the operation of the Suez Canal, it will pose serious challenges to the Egyptian Government and its leadership.

Photo courtesy of Flickr user Al Hussainy Mohamed.

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By Jackson Kwok, an intern with the Lowy Institute's East Asia Program. He holds a Bachelor of Arts (Honours) degree with specialisations in Chinese language, history, and foreign policy from the University of Sydney. 

Reading through the Chinese media coverage of last week's US-China Strategic and Economic Dialogue in Washington DC, Orwell's Nineteen Eighty-Four comes to mind. In Orwell's novel, Oceania regularly shifted alliances between Eurasia and Eastasia, first condemning one side in its propaganda and then quickly praising it when alliances shifted. In the same way, China's state-aligned media has shifted dramatically from heavily criticising the US to praising bilateral cooperation.

China's State Councilor Yang Jiechi and US Secretary of State John Kerry at the US-China Strategic and Economic Dialogue, 24 June, 2015

For the last month, China's media has constantly portrayed the US as an anxious world hegemon bent on containing China. On the eve of the Dialogue, the conservative tabloid the Global Times claimed the US had recently adopted a strategy of 'opposing China at every turn.' Yet the overwhelming praise for this year's Dialogue among China's media outlets marks a departure from the anti-US line. 

Xinhua published an article last Thursday which said the Dialogue had 'enhanced mutual trust' and 'consolidated consensus' between the two great powers. An article by the state-owned People's Daily argued that 'cooperation is the only viable option.' Xinhua produced another article on the same day which concluded that 'another solid step has been taken in the construction of Sino-US relations.'

Another article by Xinhua published last Monday hailed the event as a success, especially against the backdrop of bilateral tensions in recent months. The article argued that financial cooperation had become the 'new ballast of bilateral relations.' The sheer number of items agreed upon was also presented as evidence for the success of the Dialogue.

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Chinese media also emphasised the reportedly candid tone of the discussions. Articles celebrated the fact that disagreements on certain issues could be discussed openly. Both Xinhua and the Global Times said this was evidence that the relationship was maturing and praised each side's attempts to find common ground. China and the US diverged on maritime disputes and cyber security, but these were only vaguely mentioned. 

An article published by the People's Daily last Monday examined how the Dialogue has developed over its seven sessions. The author concluded that he had observed a positive shift towards cooperation. Conversation at this year's round of talks was more 'candid', the atmosphere was more 'peaceful' and there was more 'mutual understanding.' Even the often provocative Global Times was impressed by the frank tone of discussion.

A feature page on the English version of People's Daily proudly proclaimed that the talks achieved 'substantial results'.  Provincial news sources were similarly enthusiastic. There seemed to be little divergence from the official line.

As for online discussion, circulations on Weibo leading up to the Dialogue were cynical. Many Chinese netizens expected another round of political fallout between Washington and Beijing. After the Dialogue, many were genuinely surprised at how smoothly the event had proceeded, and praised the 'candid discussion'. Netizens welcomed what they saw as an attempt at engagement with China's position and a departure from Washington's hard-line tactics vis-à-vis the South China Sea.

There are two possible explanations for this shift in attitude. 

One is that the media is attempting to set a cooperative tone ahead of President Xi Jinping's visit to Washington in September. This involves setting up China as a fellow great power and as a responsible actor in the international system. In this way, Xi can approach President Obama as an equal and China will not appear to participate from a position of weakness. This framing also requires that China is presented as magnanimous and committed to sharing world leadership with the US. This message was particularly strong in the People's Daily. A piece on Monday claimed 'the whole world saw that the US and China have a strong desire to strengthen communication, control differences, and expand cooperation.'

The Tang Dynasty poem 'A View of Taishan' featured in a number of reports. The trials of US-China relations are likened to ascending a sacred mountain. Upon reaching the summit, maritime disputes and cyber security will seem insignificant: 'When shall I reach the top and hold / All mountains in a single glance?' Though supposedly 'insignificant', tensions over these issues could potentially derail Xi's US visit. The Chinese media is attempting to downplay them and present China as committed to big-picture goals.

It is also possible that China's media is entering a damage-control phase. Some might argue that China has pushed too hard in the South China Sea, and this softening of tone might be a reaction to Washington's hard-line response. In this sense, it could be a form of managing domestic opinion. Analysts argue that cycles of push and retreat have occurred in the past.

It's still uncertain why we've seen this shift in tone and attitude towards the US. While there is increased magnanimity about the US, there is increasing criticism of Japan and Prime Minister Abe in particular. In the last month, state-aligned media has continued to press the Japanese Government on its wartime legacy. It is possible that China needs to have an 'other' against which it can define itself. If the US is not playing that role, anti-Japan rhetoric is likely to increase temporarily.

It is worth watching how this shift develops in the lead-up to Xi's state visit in September, especially as tensions continue to bubble in the South China Sea.

Photo courtesy of Flickr user US Department of State.

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You're probably reading a lot of headlines today about Greece now being officially in arrears with the IMF. But as Lowy Institute economist Leon Berkelmans explains in this podcast, that's not the most important thing that happened in the Greek crisis over the last few days.

Listen also for Leon's views about the implications of this crisis for Asia. Europe thinks it has this problem contained, but the fall of Lehman Brothers taught us a few things about unanticipated consequences...

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In a little-noticed interview, the chief of Panama's Canal Authority concedes that 'the world and the canal were unlikely to ever again see the booming container trade that characterised the 1990s and early 2000s' due to shifting manufacturing patterns and American thrift.

Obviously, he has business reasons for playing down the market's prospects, now that he is completing his canal's US$5.3 billion expansion. He wants to scare off potential rivals. Moreover, his widened canal is still too small for the growing ultralarge containership segment, so he may not be seeing a fully accurate view of world trade. And Panama container traffic is highly US-centered. Even so, other sources confirm global sluggishness in container traffic, which forms half of Panama's revenue and is a symbol of our connected world economy.

The Box, a celebration of containerisation, was published in late 2007, the year container trade peaked in the Canal. Did this book call the top?

Shipping companies have been worried about trade for a few years now. What the Panama Canal executive says confirms their worst fears: a secular shift down in trade intensity. From the 1980s to the GFC, exports rose at about twice the rate of economic growth; since then they have grown barely in-line. As the price of stuff fell, container volumes did even better than headline trade value, often at two or three times GDP growth. But now this 'multiplier' is anaemic too: globalisation's momentum'has been lost.'

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Despite worries, protectionism has so far been the dog that didn't bark. In the wake of the GFC, many expected far worse barriers. As it turned out, progress on trade liberalisation has been made globally (eg. on agriculture) while anti-dumping complaints have been targeted (steel is one industry to watch).

But the move towards regional preferential trading blocs, and away from global trade negotiations, is clear enough. These blocs always resemble geopolitical groupings. Intra-regional transactions shorten distances compared to global routes, so trade volume (measured in total tonne-kilometers) is adversely impacted. It's natural for neighbours to trade more. In fact, what is remarkable is how supply chains, thanks to the economies of containerisation, became hyper-globalised to begin with.

Whether regionalisation is the reassertion of 'near-sourcing' advantages, or the more ominous result of geopolitical clustering, is the question. It is notable, for example, that the stated priority of the US is to seal trade agreements spanning the Atlantic and Pacific oceans, while China is focused on building trading pathways into Eurasia and across the Indian Ocean. Beijing will be onto something if it can make terrestrial routes cost-competitive with huge container ships.

But Americans still love Chinese imports, buying one-fifth of them all. Fully three-quarters of America's current account deficit is with China alone, an amazing dependency. China has an epic share of some US import categories, like 99% in air conditioners. And the American public is as pro-trade as it has been since 1997.

Still, there does seem to be some China fatigue in rich countries. Since about 2011 the Chinese share of imports into developed economies (mostly the US and EU) has flattened in the 15-20% range. Wage inflation and a stronger exchange rate have tamed China's competitiveness. Today it is still expanding its current account to all-time highs, but at a slower rate, and increasingly at the expense of its South-South partners. The single biggest driver of Chinese export growth in recent years has been industrial goods to emerging economies.

Advanced economies might reconfigure away from China to their neighbours, like Mexico for the US or Slovakia for the EU. Within Asia the same pattern of diversification is occurring.

Japanese firms have a 'China+1' strategy, helpfully nudged along by 2012's rare-earth blockade. Korea is busy setting up South East Asian manufacturing hubs as well. But this region is really China's backyard, or its 'bath plug', as Thai strategist Thitinan Pongsudhirak says, somewhat ambivalently. Another commentator recently claimed that Beijing has the upper hand over America in the South China Sea not just because of its geography but because of its asymmetric trade position. Whereas US citizens totally depend on China for myriad necessities, he says, 'China, by contrast, depends on the United States for little of vital importance.' He will not be comforted by Chinese hawks who question whether Americans have the financial stomach for a dispute over the South China Sea. As most everyone knows, this is the single busiest sealane in the world.

A conflict in the South China Sea is just one threat to world trade. But there will be plenty of consequences of 'peak Box' in any case. For instance, the value of trade could continue to rise while the mix moves towards more information products and services (where Washington's trade interests are focused) and away from physical merchandise and bulk materials. China may have already passed its maximum steel and coal demand, years ahead of miners' expectations. The miners know there will never be another China. Its urbanisation and trade globalisation have been the two pillars of world economic growth.

Photo courtesy of Flickr user Paul Townsend.

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The Indo-Pacific is a strategic system encompassing the Indian and Pacific oceans, reflecting the expanding interests and reach of China and India as well as the enduring role of the US. The Lowy Institute's International Security program presents a weekly selection of links illuminating the changing security picture in this increasingly connected super-region.

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The establishment of the Asian Infrastructure Investment Bank (AIIB) reached another milestone on Monday when 50 of the 57 founding members signed the AIIB's Articles of Agreement. Seven countries are still sorting out domestic requirements before signing.

China's Finance Minister Jiwei Lou and Australian Treasurer Joe Hockey, Brisbane, November 2014. (Flickr/G20 Australia 2014.)

The pace of progress has been impressive and the AIIB has gained a momentum that has surprised many, including China.

In October 2014, 22 Asian countries signed a Memorandum of Understanding on the establishment of the new bank. By early April, the list of countries which wanted to be founding members had grown to 57 and, notwithstanding pressure from Washington, included such US allies as the UK, Germany, France, Korea and Australia. 

China's drafting of the AIIB's Articles of Agreement has also been impressive, both in terms of speed and responsiveness in accommodating the views of other countries. China appeased concerns by some countries, including Australia, that the Bank may not truly be a multilateral institution.

 So far, the AIIB has been a big win for China.

It appears that China wants to maintain the pace in getting the AIIB up and running, with Chinese Finance Minister Jiwei Lou indicating that he was confident the AIIB could start functioning before the end of 2015. What constitutes 'functioning' is not defined, but China may be wise to hasten slowly when it comes to entering into its first loan programs.

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It will be important for the AIIB to have in place thorough processes and procedures before it starts lending. Among the steps necessary for the AIIB to be fully functional: the establishment of a treasury function so that the bank can access international capital markets; the recruitment of an international (and not predominantly Chinese) workforce with the appropriate expertise; and the development of rigorous procurement procedures and safeguards policies covering the environmental and social aspects of the bank's activities.

Another crucial first step will be to clearly establish the roles, responsibilities and expectations of the Board of Directors, management and staff. The AIIB has a three-layer governance structure involving a Board of Governors (usually the finance ministers of member countries), a twelve-member Board of Directors, and management/staff. The AIIB has wisely chosen against having a full-time resident board of directors, and unlike most other international institutions, board members will not be officers of the bank, nor will they be paid by the bank. The problem with a full-time executive board is that directors get too involved in the detail of individual loan decisions and do not exercise strategic oversight. The roles of executive directors and management are thus blurred. And there can be a conflict of interest in directors performing as officers of the bank and as representatives of country shareholders.

But for a non-resident board to be effective, its role has to be clearly defined. The expectations placed on management and staff also have to be clearly laid out if they are to be held accountable for their performance. This is not done in other international institutions.

But perhaps the most important first step is to determine the business plan for the AIIB. Some of the key issues to be resolved include:

  • Who will be the bank's clients?
  • What will be its main activities?
  • On what terms will it lend?

There is still uncertainty as to the precise role of the AIIB and how it will interact with the multilateral development banks such as the World Bank and Asian Development Bank. Unlike those institutions, the AIIB does not have a poverty alleviation function. Nor does it have any provision to provide concessional loans to low-income countries. Does this mean the AIIB will be seeking to lend on commercial terms to projects with the highest rate of return?

There are expectations that the AIIB should focus on big ticket infrastructure projects such as power plants, airports, seaports, thus filling a gap left by other lending institutions. But part of the reason for that gap is that big projects have many environmental and social considerations that have raised problems for other multilateral lenders. Good planning and preparation will be essential.

The AIIB will be under close international scrutiny from day one to see if any of the concerns initially raised about this Chinese initiative are realised. Such concerns include the fear that the bank would primarily be a vehicle to promote China's political and social interest, and that it would ignore social and environmental considerations with its loans. Given these concerns, it will be important not only for China but for all the founding members that the AIIB's performance is beyond criticism from day one.

As such, the AIIB would be wise to hasten slowly in its quest to get the bank up and running. The success China has achieved to date could be lost if the AIIB rushed too quickly to get money out the door. This would be a loss not only for China but for the international community, which has much at stake in ensuring that the AIIB is a success.

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Rights activists around the world are hoping that the historic ruling in favour of same-sex marriage in the US last week will help them achieve the same in their countries. For Indonesia, however, changes to the institution of marriage are a long way off, both in terms of law and public opinion.

While the Supreme Court in the US was deciding on the constitutional protection offered for same-sex unions, Indonesia's Constitutional Court was weighing in on other aspects of marriage, with far less progressive results.

The court last Thursday rejected two petitions for judicial review of Indonesia's marriage law, which asked for interfaith marriages to be permitted by the state, and for the minimum age of marriage for girls to be raised from 16 to 18 years. The court rejected both petitions, using religious arguments to defend the controversial 1974 Marriage Law.

Under the current law, girls and women can marry from age 16, while the legal age for men to marry is 19. Both can marry at an even younger age with the permission of the Religious Court or a government official. These conditions conflict with international standards as well as Indonesia's own law on child protection, which defines children as all individuals under the age of 18. In other words, the marriage law as it stands effectively legalises child marriage.

This has implications not only for children's rights, but also for reproductive health in Indonesia. The country this year is struggling to meet a Millennium Development Goals target on reducing its maternal mortality ratio, which is among the worst in the region and has only worsened in recent years. One factor driving the high rate of maternal deaths in Indonesia is teenage pregnancy, which poses health risks to mother and child. The judges in last week's court decision showed less concern for the dangers of teenage pregnancy and more for pregnancy arising from pre-marital sex, which they said would be prevented by keeping a low minimum age for girls to marry.

The panel of eight male judges and one female judge (who also happened to be the only dissenting voice on the issue) further referenced an Islamic teaching that allows marriage for girls at any age after reaching puberty.

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Religion plays a strong role in marriage law in Indonesia. The second article of the Marriage Law states that a union is only considered legal if it is conducted according to one of the officially recognised faiths: Islam, Catholicism, Protestantism, Hinduism, Buddhism, and now Confucianism. This article does not specifically forbid interfaith marriage, but effectively prevents it by not allowing for the option of a civil ceremony, by deferring authority to religious laws on whether interfaith couples can be married, and by creating complications for civil registration of interfaith marriages after a ceremony has taken place. The petition at the Constitutional Court last week challenged the general interpretation of this article, which holds that one party of an interfaith couple must convert to the other's religion if the union is to be legally recognised. But the court rejected the petition, citing moral and religious values.

Lukman Saifuddin, the Minister for Religious Affairs, welcomed the court's decision on interfaith marriage, saying that it reflected the religious values of Indonesian society and the inseparability of marriage from religion. He made similar comments about the ruling by the Supreme Court in the US last week, stating via his Twitter account that 'In the Indonesian context, marriage is a sacred event and a part of religious worship. The state will not recognise same-sex marriage.' In Indonesia's active Twittersphere, the comment attracted some criticism, but mostly received support from netizens who agreed that marriage was primarily a religious matter. 

The difference between the discourse over marriage in Indonesia and the US this week is that in Indonesia, religion was prioritised over human rights. Allowing for girls to be married at age 16 impinges on their ability to fulfil their potential and their rights to health, education special protection as children. Requiring couples to marry under a single religion impinges on their rights to religious freedom. Separating law from religion in this matter will go a long way in fulfilling human rights in Indonesia.

Photo by Flickr user Ashley Ringrose.

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China's long-anticipated formal pledge to international climate change negotiations, it's 'intended nationally determined contribution' or INDC, has arrived.

China's target is a 60% to 65% reduction in the emissions-intensity of the economy by 2030 pegged at 2005 levels, with carbon dioxide emissions peaking around 2030, perhaps earlier. China has also pledged to increase the share of non-fossil fuels to 20% of total energy use and a large increase in forest carbon stocks.

The emissions-intensity target means reducing the ratio of carbon dioxide emissions to GDP by 60% to 65%, or conversely, increasing the amount of economic output per tonne of carbon by almost two-thirds. It's the only new commitment in addition to what China pledged at a joint announcement with the US at last year's APEC meeting. And it packs some punch.

Decarbonisation and how to do it

What it means is that China aims to continue until 2030 the rate of decarbonisation targeted for the 2005 to 2020 period — around 4% per year. This target will require strong action to improve energy productivity and shift to zero-carbon energy sources.

Such a pace of cleaning up  economic growth has rarely been achieved elsewhere over a significant period of time. The decarbonisation rate in the US since its emissions peak in 2007 is 3.3% per year, and this has included an unprecedented boom in cheap gas. EU carbon dioxide emissions peaked in 2002, and its collective emissions intensity declined by an annual average of 2.2% during the following ten years. The main historical precedent for decarbonisation rates above 4% per year over extended periods of time are Russia and other parts of the Eastern bloc following the 1990s collapse of Soviet-era industrial structures.

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The long list of actions listed in China's INDC is a fair indication of the magnitude of the task, and it is an sign of the resolve of the Chinese Government. They range from higher efficiency in coal use and a limit on the total amount of coal; fast development of solar, wind, hydro, nuclear and gas; energy efficient and low-carbon industrial systems; and cutting emissions from buildings and transport. The actions also include broader support for R&D, low-carbon growth patterns, a strong commitment to national emissions trading and to 'make the market play a decisive role in resource allocation'.

Change is underway

Yet China could do better still. China is likely to outperform the 2020 target, given that average annual reductions from 2005 to 2014 were 4.5%, as reported by Beijing. Energy productivity greatly lags that of advanced economies. Enormous gains can be made by further improving technical efficiency and by accelerating the shift in economic structures away from energy-intensive industries. And China will continue to shift its energy mix away from coal and towards nuclear, gas and renewables, and also towards reducing the emissions-intensity of every unit of energy used.

Fundamental changes in the factors that drive China's greenhouse gas emissions are already happening. Total coal use in China fell in 2014 compared to 2013 (on the basis of preliminary data). This is partly because industrial output such as steel has leveled off, heralding the 'new normal' of Chinese economic growth. The era of extremely rapid expansion of infrastructure is coming to an end and the sources of economic growth are shifting to less resource-intensive activities.

Alongside structural changes, China is achieving rapid improvements in the efficiency of energy use. New coal-fired power stations are still being built, but they are state of the art and are replacing old inefficient plants. Industry, road transport and buildings are all getting more efficient and there is huge potential for further improvements. Add to that the push for the expansion of hydroelectricity and nuclear power, as well as solar and wind plants, all of which are beginning to make a dent in China's energy supply.

China's emissions turnaround is driven partly by circumstance and partly by a strong policy effort. That effort is not being undertaken out of altruism for the global climate but for solid reasons of national self-interest. A lower carbon trajectory has tangible short to medium-term benefits for China, as I explained in a recent paper with my colleague Teng Fei from Tsinghua University.

A flat and early peak?

It all adds up to the prospect that China's emissions could peak well before the target date of 2030, as argued recently by Nick Stern as well as Ross Garnaut. Many experts see a peak in the first half of the 2020s as possible, and some think it could happen even earlier.

Ultimately, what matters much more than the date of the peak is the level of China's emissions over years to come. 'Peaking' invokes images of a rapid increase in carbon emissions, then a turning point followed by a rapid decrease. But the historical experience is that countries' emissions trajectories simply flatten out, and the peak is a point not much higher than many others on a drawn-out plateau. The profile looks more like Mount Kosziousku than Mount Everest.

The climate pledge submitted this week does not give an estimate of that level, because it depends on the future growth rate of China's GDP. But that growth rate is slowing, and it could be that emissions levels will rise only gradually in coming years before a peak. That would be very good news for the climate.

Photo courtesy of Flickr user Asian Development Bank.

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