21 April 2014

Deterrence debates and defence

Published: April 21, 2014
Happymon Jacob 

The perceived failure of deterrence, despite the possession of nuclear weapons by India, could lead to greater instability in Indo-Pak bilateral relations should there be another crisis with Pakistan 

India’s Defence Research and Development Organisation (DRDO) is scheduled to conduct a ballistic missile interceptor test later this month which forms part of a series of tests to develop and deploy a limited Ballistic Missile Defence (BMD) shield in the country, a project that has been in steady development since the mid-1990s. BMD pessimists — I used to be one myself — have traditionally argued that notwithstanding the fact that BMD is neither foolproof nor cheap, induction of such systems can be deeply destabilising between nuclear-armed adversaries. However, the instability argument assumes the existence of a Mutually Assured Destruction (MAD)-induced textbook deterrence dyad such as the U.S.-USSR nuclear rivalry of the Cold War vintage. The deterrence stability of the Cold War years, premised on the existence of rational, unitary actors, does not exist in nuclear South Asia and hence to believe that mutual vulnerability increases stability is dangerous. No matter how many nuclear warheads India makes and how often it reviews its doctrinal postures, New Delhi’s deterrence dilemmas are likely to persist. 

India can, to a great extent, address these dilemmas by mainstreaming and articulating the strategic objectives of its BMD programme which, at the moment, does not form part of the country’s politically articulated nuclear strategy. 

India’s deterrence dilemmas 

The deterrence effect of nuclear weapons is yet to mature in South Asia. More so, the South Asian nuclear contest is severely complicated by the presence of non-state actors and their ability to draw states into armed conflicts. These and other related issues have been posing multiple deterrence dilemmas for India. 

First of all, there are fears in India about the potential implications of a situation wherein Pakistan-based non-state actors gain control of Pakistan’s nuclear assets. There is also speculation about the repercussions of rogue elements in the Pakistani armed forces engaging in unauthorised nuclear activities. It could be an unauthorised nuclear strike against India or similar to what the former American Ambassador to Pakistan, Anne Patterson argued: “Our major concern is not having an Islamic militant steal an entire weapon but rather the chance someone working in GoP [Government of Pakistan] facilities could gradually smuggle enough material out to eventually make a weapon.” Besides, there could also be genuinely accidental launches of nuclear weapons. 

The political angle 

India’s failure to respond to Pakistani aggression — state sponsored, non-state actor attack, non-state sponsored, non-state actor attack, or attack by rogue elements from within establishment — has domestic political costs as well. The Indian government is widely criticised for not responding to Pakistan adequately, not being able to see through Pakistan’s ploy of using non-state actors and not showing enough resolve, among other aspects. This perceived failure of deterrence, despite the possession of nuclear weapons by India, could lead to greater instability in India-Pakistan bilateral relations should there be another crisis with Pakistan, especially if New Delhi has a right-wing government in power. 

Ensuring continuity in the nuclear programme

Rakesh Sood

The Agni-IV intermediate range ballistic missile on parade during Republic Day

INDIA’S nuclear journey can be categorised into two broad parts, the ‘retrospect,’ covering the period from 1947 to 2008, and the other being the ‘prospect’ phase post-2008, which is still unfolding and whose achievements are yet to be fully harvested. Notwithstanding these phases, an element of continuity is reflected in three policy constituents – an Indian worldview, political will and a military-technical capability, which has to keep evolving.

The first phase actually began even before Independence when Dr Homi Bhabha wrote to the Sir Dorabji Tata Trust in 1944, drawing attention to the enormous potential of nuclear technology and suggesting the setting up of the Tata Institute of Fundamental Research. After Independence, things moved rapidly – establishment of the Atomic Energy Commission in 1948, commissioning of the research reactor, Apsara, in 1956, and by 1969, the Tarapur power plant was on line. It was an optimistic period marked by the sentiment behind ‘Atoms for Peace’ and the establishment of the International Atomic Energy Agency with the idea of promoting international cooperation for peaceful applications.

India spelt out its three stage nuclear power programme with its closed fuel cycle, which remains an integral part of the Department of Atomic Energy’s mandate. This was also the phase when India took a number of disarmament initiatives to curb nuclear testing and the spread of nuclear weapons. However, during the 60s, particularly after the India-China war in 1962 and the Chinese nuclear test in 1964, there was a rethink. The nuclear issue had entered our security calculus for the first time and in the resolution at the All India Congress Committee Session at Durgapur in 1965, failure to obtain security guarantees from the US, USSR, UK and France, and the Indian rejection of the Non-Proliferation Treaty (NTP) in 1969, lay the seeds of the ‘nuclear option.’

MANIFEST VAGUENESS- Political parties’ manifestos mean little for the armed forces

Brijesh D. Jayal
Source Link

The eagerly awaited election manifesto of the principal opposition party is now in the public domain and it is natural for students of national security to look at it in some depth since opinion polls tend to indicate that the next government at the Centre could possibly be led by that party. Whether or not this indeed happens is for political pundits and psephologists to ponder over, but viewed from the perspective of the national security community and more so the armed forces, the document was eagerly anticipated.

The chapter on security is titled “Secure Indians — Zero Tolerance on Terrorism, Extremism and Crime”. Within it are proposals under the broad headings of Internal Security, External Security, Defence Production and Independent Strategic Nuclear Programme. The chapter’s title and the definition of comprehensive national security within it would appear to indicate that not just the traditional national security components of power — namely, military, economic, cyber and energy — but even those related to terrorism, extremism and crime are proposed to be brought under the national security umbrella. Further, even social ones like food, water and health have been added for good measure.

In general terms ‘national security’ refers to the country’s external national security interests and is hence broadly associated with defence, foreign affairs and intelligence. Internal security issues like law and order, terrorism and extremism, on the other hand, come under the home ministry. Whilst there are bound to be some overlapping areas, the message coming out now is that there would be a much broader national security architecture extending beyond just the two. The problem one sees with this definition is that management of traditional national security will then encompass diverse sections of the government, thus diluting the focus of higher defence management. This at a time when there already exist serious organizational and management challenges, which have defied solution precisely because of divergent interests and views.

The manifesto has attempted to pre-empt this reservation with the rider — that national security cannot be compartmentalized with multiple power centres and needs a clear road map to address it head on which, in turn, involves radical systemic changes. Since neither the prescriptive systemic changes nor the associated road map have been further articulated, it is difficult not to draw the conclusion that these are good intentions yet to undergo the rigour of in-depth study and analysis. Since these are issues of wider complexity, for the present, the discussion is limited to the external security aspects and will touch on other aspects only peripherally.

Is India about to elect its Reagan?

Published: April 21, 2014
David Cohen

NATURAL ALLIES: Narendra Modi — his assertive posture against Pakistan reminiscent of Ronald Reagan's stance against the Soveit Union — should be a valuable natural ally for the U.S. Picture shows him with former U.S. ambassador to India, Nancy Powell, in Gandhinagar, Gujarat.

Modinomics can be the perfect antidote to the kleptocratic crony socialism that has kept India from realising her vast economic potential

I recently offered my perspective on India’s elections to an American audience. Writing in The Daily Caller(http://dailycaller.com), a popular online newspaper run by conservative television journalist Tucker Carlson, I compared Gujarat Chief Minister Narendra Modi to former U.S. President Ronald Reagan. Through the magic of social media, my piece quickly made its way throughout the Indian diaspora and all the way back to India. It has clearly struck a nerve: Indian readers were amazed to see a western media perspective on Mr. Modi that was not reflexively negative.

To make my biases clear from the outset, I am a great admirer of President Reagan. I am also a great admirer of India. Where my piece offers some criticisms of certain segments of Indian society, please don’t take that as an American looking down on India. These are the observations of a pro-India American who looks for commonalities — both good and bad — between his own society and yours. And I see several commonalities between Gujarat’s Chief Minister and America’s 40th President. Here is an adaptation of what I told my readers:

Both Mr. Modi and Mr. Reagan rose from humble origins. Both were popular and successful State leaders: Reagan was “chief minister” (governor, as we say) of my home state of California. Mr. Modi, like Mr. Reagan, is an unabashed proponent of free market economics: the term “Modinomics” is of course a nod to “Reaganomics.”

Complexities of Siachen dispute

Indo-Pakistan trust level key to settling the issue
Gen VP Malik (retd)

A security personnel on duty at the Thoise air base — a gateway to Siachen. A Tribune file photo 

The 75-km long Siachen glacier sits astride two disputed boundaries — with Pakistan and China — and covers about 10,000 sq km uninhabited terrain. Along with other glaciers in this area, it is an important source of water to the Indus river which passes through Ladakh and Kargil, and then into Pakistan Occupied Kashmir (POK).

Siachen is claimed by India on the basis of accession of J&K to India in October 1947 and the India-Pakistan Karachi Agreement of 1949 which described the ceasefire line beyond Point NJ 9842 on the map to be 'thence north to the glaciers'.

Thirty years ago, an alert Northern Army Commander, Lt Gen M.L. Chibber, deployed troops to pre-empt Pakistan's military occupation of Siachen and ensured against India ceding this territory by default. The Indian Army occupied the Soltoro Ridge, which runs northwards to secure the glacier and territory to its east.

The military significance of this deployment is that (a) it dominates Pakistani positions west of the Soltoro Ridge and blocks infiltration possibilities into the Shyok valley of Ladakh (b) it prevents Pakistani military adventurism in Turtuk and areas to its south, and (c) its northern-most position at Indira Col overlooks the Shaqsgam valley of Gilgit-Baltistan, ceded illegally by Pakistan to China in 1963, and denies Pakistan an access to Karakoram Pass. Since 1984, the line dividing the military forces of India and Pakistan in the area north of NJ 9842 has come to be known as the Actual Ground Position Line (AGPL).



The extraordinary and gratuitous brutality of Islamist terrorists in Syria, the progressive destabilization of West Asia, as well as the cumulative disengagement of the West – led by the US – from Afghanistan, have pushed South Asian conflicts out of the focus of international attention.

The process has been enormously enabled by broadly, often dramatically, declining trends in violence and fatalities in this region, suggesting a generally positive direction of change. In many theatres, virulent and enduring movements of terrorism and widespread armed violence have receded, though much remains unresolved. According to partial data compiled by the South Asia Terrorism Portal (SATP) database total terrorism and insurgency linked fatalities in South Asia have dropped from a peak of 29,638 (of which 15,565 were in Sri Lanka alone) in 2009, to just 6,668 in 2013. 1,343 persons have already been killed across the region in the first quarter of 2014, suggesting a continuation of this trend, though developments in the AfPak region have significant disruptive potential in the foreseeable future.

In particular, Sri Lanka has seen no terrorism-linked fatalities after 2009, the year in which the Liberation Tigers of Tamil Eelam (LTTE) were comprehensively defeated, and which saw a peak of at least 15,565 fatalities, according to partial data compiled by SATP. An international network of surviving LTTE elements and sympathisers in the Diaspora continue with propaganda activities, including strident posturing in the Indian State of Tamil Nadu, but the capacity for violence on Sri Lankan soil has been entirely obliterated.

The ‘No-first-use’ policy and BJP’s dilemma

PR Chari
Prithvi short-range ballistic missile

PRIME minister Manmohan Singh’s recent exhortation that a global no-first-use convention relating to nuclear weapons should be established, is surreal. He argued that the sole purpose of nuclear weapons being to deter nuclear aggression, the nuclear weapon states should formally declare their adherence to this norm, permitting the establishment of a global no-first-use regime, reduction and finally, elimination of nuclear weapons.

The bewildering question is why the Prime Minister chose to make this statement in the dying hours of the UPA government, especially when its return to power seems unlikely. Moreover, India’s present ‘No-first-use’ policy was derived by the BJP and the NDA government that had conducted the Shakti nuclear tests in May 1998, making India a de facto nuclear weapons state. The BJP’s manifesto for the 2014 general elections pledges to “Study in detail India's nuclear doctrine, and revise and update it, to make it relevant to challenges of current times.”

Nuclear impasse
 The problem of attack by non-state actors remains open, which has been the subject of anxious debate in the three global Nuclear Security Summits
 How does one define a ‘major attack’ by biological or chemical weapons? What is ‘major’ and what is ‘minor’ could be interminably debated
 Serious difficulties arise in identifying the perpetrator of a chemical or biological weapons attack. They could be undertaken by a state actor or non-state actor and, conceivably, by a non-state actor assisted by a state actor
 It remains unclear what will be India’s response to a limited attack with tactical nuclear weapons

How the nuclear doctrine would be modified has not been clarified, though there is speculation that India’s traditional ‘No-first-use’ posture would be reviewed. Election manifestoes are not taken seriously in India since they are plainly designed to garner votes. Not so the BJP. Its manifesto in 1998 had stated that if elected to power, it would “Re-evaluate the country's nuclear policy and exercise the option to induct nuclear weapons.” This had attracted little attention except for a few comments. Hence the huge surprise when the Vajpayee-led NDA government conducted the nuclear tests in 1998, ostensibly to counter the threat from China and Pakistan.

Indigenisation of the Indian Aerospace Industry

19 Apr , 2014

LCA Tejas

A National Aerospace Policy, that caters to the interests of all stakeholders, duly synchronised where necessary, is the need of the hour along with an Aeronautics Commission and a dedicated Department of Aerospace with other supporting organisations. The Commission, Department and other supporting bodies should be tasked with designing and realising scientific, technological and industrial targets. This proposal was first placed for a decision in 1994, and later modified and re-submitted in 2004. It is still gathering dust tied up in red tape and ignorance.

The bureaucracy insists upon determining what the Indian Armed Forces need or do not need…

India has been a casualty of self-imposed arms control that has placed significant constraints on its policy of deploying military power as an instrument of furthering its national objectives in a rapidly evolving geo-political milieu. There are many reasons that have contributed to this sorry state of affairs which have led to a stunted capability not corresponding to its status as a regional power and its aspirations of becoming a global power.

Many factors can identify a nation’s military, in the list of which its capacity for economic growth occupies the top ranking. Since independence, Indians have been trying to convince themselves and their neighbours that they are a peace-loving nation committed to the principle of ahimsa (non-violence), as propagated by the Father of the Nation. This has been reflected in maintaining the defence budget around a measly two per cent, always unenthusiastically granted, ever since independence. Having been increased briefly, it is now being threatened to be reduced once again, citing economic difficulties. As a result, the defence industrial wherewithal to provide the military the resources to protect the integrity of the nation, has also been found wanting, leading to dependence on imports from foreign nations rather than a march towards self-reliance.

The ideological mindset on defence and security issues, which has been viewing the so-called militarisation and the active role of the private sector in India’s defence production, is another factor for our reliance on imports. In India, the topic of defence is considered as a ‘holy cow’, to be spoken of in hushed tones and in total secrecy. The reason for such an attitude is probably the lack of strategic culture in the political class, or a forfeit of knowledge in defence matters, or a misplaced notion of security.

In addition, the bureaucracy, which exercises ‘civilian control’ over the defence forces by proxy, insists upon determining what the Indian Armed Forces need or do not need and where to buy the equipment from, going to the extent, at times, of even overruling the recommendations of experts from the military. This policy has led to a continued dependence on foreign suppliers while projecting an inflated indigenous capability of the defence related public sector industry.

India’s defence production sector, especially in the aerospace segment, leaves much to be desired…

Our first Prime Minister, Pandit Nehru, had visions of a socialist pattern of society in which public sector enterprises were expected to be the prime movers of the economy. This was applicable to defence production too. Whatever little production of military equipment that took place in the country was, therefore, entrusted to the Defence Public Sector Undertakings (DPSUs) and the Directorate General of Ordnance Factories (DGOF). In a conscious decision taken due to security paranoia, the private sector was kept out of defence production. The defence aerospace sector was no exception.

Handling the energy crisis

Suresh Prabhu 

GENERATING POWER: The government will have to collate a clean coal policy with respect to exploration, mining and use. Picture shows coal workers in Dhanbad, Jharkhand. Photo: Manob Chowdhury 

With India consuming high levels of energy, serious efforts need to be taken by the new government to avoid a severe energy supply crunch 

India will soon witness a new government in control. Among the multitude of burning issues, the new government will have to face the challenge of a growing energy crisis. It will require extraordinary effort, innovative vision and viable solutions to tackle the increasing demand for energy, while maintaining an eco-friendly approach. Energy commodities comprise gas, oil, coal, renewable energy and electricity. 

Currently, high levels of consumption with respect to energy-related commodities are paralysing operations in the country because of non-performing policy initiatives. The demand-supply imbalance is evident across all commodities, requiring serious efforts by the new government to augment energy supplies to avoid a severe energy supply crunch. 

The Planning Commission indicates that by 2016-17, the country will manage an approximate 6.7 million tonnes of oil and by 2021-22, this will rise to 850 million tonnes. However, this will meet only 70 per cent of the expected demand; the remaining 30 per cent will have to be sourced through imports. 

Even though India possesses a rich heterogeneous mix of energy components, deterring policies have created a difficult environment for potential investors. 

Why a Regional Security Force Will Not Work in Afghanistan

Talk of a new regional force is unrealistic. There is only one way to keep the peace after 2014.
By Arwin Rahi
April 20, 2014

As NATO-led coalition forces prepare to withdraw from Afghanistan, we are increasingly hearing the idea that a multinational regional security force (MN-RSF) would be a viable option for Afghanistan. The reality on the ground, however, suggests otherwise.

In short, the deployment of an MN-RSF is simply not feasible. To begin with, China is unlikely to change its policy of non-intervention anytime soon. Nor does it want to get involved in a war of attrition at a time when it is seeking to modernize its security forces for a larger possible showdown in the Pacific.

Next, the deployment of troops to Afghanistan by Pakistan and Iran would be highly sensitive, even if it were made within the framework of an MN-RSC. Both countries and the international community acknowledge this, which is why at the Bonn Conference in 2001, Iran and Pakistan’s names were kept off the table when the idea of a U.N.-led multinational security force was discussed.

Not only does that perception of Iran and Pakistan persist, but with the growing Pakistan and Iran interference in Afghanistan’s affairs, Afghans are becoming ever more sensitive towards these countries. In fact, the logic behind the endorsement of the Bilateral Security Agreement (BSA) by Afghanistan’s Loya Jirga was curbing Iranian and Pakistani influence in Afghanistan—let alone allowing them to deploy troops. Afghanistan’s Pashtuns are already accusing Iran of stirring linguistic and cultural tensions, which makes it more than difficult for Iran to put boots on the ground.

India, meanwhile, is not interested in getting involved on the battlefields of Afghanistan. Any Indian involvement would provoke Pakistan, which in turn would further destabilize the entire region. Pakistan’s Inter-Services Intelligence (ISI) has already bombed the Indian Embassy in Kabul in response to India’s growing presence in Afghanistan. New Delhi itself acknowledges the ramifications of provoking Pakistan, and has to date rebuffed President Hamid Karzai’s requests that India sell heavy weapons to Afghanistan.

Book Details Pakistan’s Clandestine (But Not-So-Secret) Role in War in Afghanistan

April 19, 2014
‘The Wrong Enemy: America in Afghanistan, 2001-2014’ by Carlotta Gall
Shamila N. Chaudhary
Washington Post

In 2012, I rode in a white Toyota Corolla past upscale villas and cafes to the outskirts of Islamabad, arriving at a hidden complex that was home to Pakistan’s Inter-Services Intelligence (ISI), the country’s chief intelligence agency. In my many previous trips to the country, including several in 2010-11 while working at the White House National Security Council, I had witnessed a drastic deterioration in security. This trip revealed a Pakistan under siege by Islamist militants. Militants had recently shot 14-year-old schoolgirl and education activist Malala Yousafzai. Mullah Fazlullah, the Pakistani Taliban commander who ordered the attack, had found safe haven in Afghanistan. The shooting underscored what many Pakistanis increasingly believed to be true: Afghanistan was complicit in Pakistan’s destabilization.

The driver skillfully navigated through at least a dozen jersey barriers and multiple checkpoints to the building’s entrance, where I met an ISI general who had another take on the crisis facing Afghanistan and Pakistan. He told me that “the U.S. cannot win in Afghanistan” and should look to Pakistan to be America’s guarantor of security there.

Journalist Carlotta Gall shreds the Pakistani general’s blueprint in her book “The Wrong Enemy” by arguing that Pakistan is “perfidious, driving the violence in Afghanistan for its own cynical, hegemonic reasons.” She writes of a Pakistan that is more an active participant in the conflict than an invisible hand governing by proxy, the more common perception among most of those who have followed the diplomatic wrangling in the region.

In November 2001, American planes bombed Taliban front-line positions in northwestern Afghanistan while, according to Gall, “hundreds of Pakistanis: scores of military advisors and trainers, members of Pakistan’s Inter-Services Intelligence” secretly assisted the Taliban. As many as 3,000 Pakistani troops and advisers were trapped at the Kunduz airfield, a 12-hour drive from the Pakistani border. Pakistani military airlifts evacuated most of them, while “nearly a thousand low-level Pakistani fighters were left to fend for themselves.”

Gall’s attention to detail partially lifts the veil on the shadowy operations of the ISI, best known for its clandestine support of anti-Soviet Afghan fighters during the Soviet occupation of Afghanistan. But “The Wrong Enemy” reduces a decades-long national security strategy to a tactical level, oversimplifying the psychology of Pakistan’s relations with the Taliban and distracting from the real question at hand: Why does Pakistan want to influence Afghanistan?

America’s Last Task in Kabul

APRIL 18, 2014 

WASHINGTON — Until now, fighting the Afghan war has been an American project, and Americans have feared most that their withdrawal will be followed by chaos. That’s why they have focused on handing over the fighting to Afghanistan’s military.

But the first round of the presidential election on April 5 opened a new prospect. Just by turning out in large numbers in defiance of Taliban denunciations, Afghans showed that they craved a stable future — and would need friends in the neighborhood to help broker their differences. That creates an incentive for every nearby country to collaborate on holding Afghanistan together after the Americans leave.

With that in mind, it might be best for the United States to focus first on handing over the peacemaking to Afghanistan’s neighbors, as the most credible strategy for ending the war quickly. Ever since 9/11, Washington demanded that the region’s powers support its strategy in Afghanistan. But the region was split: India and Russia were content to see America seek outright victory over the Taliban and pursue the war to its end; Pakistan and Iran, which share ethnic roots with groups in Afghanistan, have long wanted America to end the fighting by negotiating its way out.

Because the neighbors’ interests never coincided in clear support of America’s view, the region watched America experiment — with mixed results — at counterinsurgency and state-building, and later at peacemaking with the Taliban.

Now it will be up to the neighbors, who — despite all their differences — share an interest in seeing Afghanistan avoid a new bloodletting. They question the Afghan Army’s ability to defeat the Taliban in battle; the force is still largely made up of ethnic Tajiks and Hazaras from Afghanistan’s north and west, leaving it likely to provoke resistance among the Pashtuns of the embattled south and east, from whom the Taliban spring. The neighbors remember the collapse of an earlier Afghan army soon after the Soviets who had trained it left, as well as the decade of civil war that followed in the 1990s. No neighbor wants that experience repeated, and a regionally supported peace deal would be the surest way to dissuade outsiders from supporting any Afghans who did.

Pakistan and the Sunni Gulf

Overtures to Pakistan from the Sunni Gulf appear to be linked to the conflict in Syria.
By Umar Farooq
April 17, 2014

Recent months have brought Islamabad a flurry of visits from leaders of Sunni gulf nations, prompting many observers to question just what Prime Minister Nawaz Sharif might be getting the already embattled country into.

Pakistan’s 190 million inhabitants include around 26 million Shiites, giving it the largest population of the minority Muslim sect’s adherents after Iran. While Pakistan has officially tried to remain on the sidelines of the regular Shiite-Sunni flare-ups in the Middle East over the last few decades, backroom deals with Sunni monarchies like those being signed recently have not gone unnoticed domestically.

Pakistan is already witnessing unprecedented levels of sectarian violence, with more than 1,700 killed since 2008. The armed groups responsible for the bloodshed were born out of the global sectarian tensions that followed the Iranian Revolution of 1979, which produced the first modern Shiite theocracy.

Now, as the three-year-old civil war in Syria is encouraging Muslim nations to form Shiite and Sunni blocs, there is concern that if Pakistan were to join the fray globally, things could go from bad to worse domestically.

Bahrain’s king, Hamad bin Isa Al Khalifa, smiles down on traffic in Pakistan’s capitol Islamabad from hundreds of banners lining the streets, a reminder of the ruler’s visit last month, the first by a Bahraini ruler in 40 years.

China’s Ticking Debt Bomb

Apr 16, 2014 

Last month, China witnessed an historic moment — but not one that’s an obvious cause for celebration. When it failed to meet interest payments on its bonds, Shanghai Chaori Solar Energy became China’s first domestic corporate bond default. Soon after, Shanxi Haixin Iron and Steel Group Co., Ltd., defaulted on bank loans. The defaults should not have come as a surprise, since both companies operate in industries suffering from overcapacity. But in a country where the government often steps in to keep economic enterprises in key sectors afloat, the defaults signaled a change in direction. Premier Li Keqiang said during a March press conference that other defaults are “unavoidable.”

Amid predictions that China’s GDP growth rate will slow to 7.5% this year (also the government’s official target rate), Morgan Stanley suggests in a recent report that China will soon be meeting its “Minsky Moment,” or a “disorderly unwind” of private sector and local government debt. High rates of investment, fueled by borrowing, stand now at more than 45% of GDP and contributed 80% of China’s growth over the last 10 years, according to the World Bank. But as those investments grow, the return on them is declining — taking four renminbi of investment to produce 1 RMB of GDP today, compared to a 1:1 ratio in the early 2000s, according to Morgan Stanley. As it becomes harder for borrowers to make money to pay back their loans, Morgan Stanley predicts that China’s GDP growth could slow to 4% in two years, dampening global economic growth enough “to cause a global earnings recession.”

By the Minsky Moment, Morgan Stanley refers to economist Hyman Minsky’s framework identifying three scenarios for an economy: Hedge finance, where borrowers have enough cash flow to pay both interest and principal on their debt; speculative finance, where borrowers have the cash flow to pay only interest and must rollover their debt; and Ponzi finance, where borrowers can’t pay interest or principal and must borrow more or sell assets just to pay interest. The Minsky Moment comes when borrowers can no longer roll over their loans or borrow to pay their interest — often occurring at the same time as the central bank is tightening credit to combat inflationary pressures.

Morgan Stanley sees China at the Ponzi stage moving towards the Minsky brink, noting that China’s private sector and government borrowers are increasingly having trouble paying back loans — while the People’s Bank of China (PBOC) has been gradually tightening credit over the last year. Morgan Stanley’s report cites a litany of woes: Private sector debt, for instance, had risen to 193% of GDP at the end of 2013, up from 115% of GDP in 2007. Meanwhile, local government debt totals $3 trillion, according to China’s National Audit Office. Shadow lending outside the official banking sector now totals 40% of GDP, compared to 12% just five years ago. Now, a third of all new borrowings are used to roll over existing debt, and interest payments on debt represent nearly 17% of Chinese GDP. And more than half of Local Government Finance Vehicles (LGFV), set up for local governments to invest in infrastructure, real estate and other projects, do not have the cash flow to pay interest or principal, according to Japan’s Nomura Holdings.

Africa in China's Foreign Policy

April 2014 
By: Yun Sun

During the past decade, China’s rapidly growing presence in Africa has increasingly become a topic for debate in the international media and among economists and policy analysts. While China’s unique economic approach to Africa meets the African countries’ need for funding and infrastructure projects, the model has been widely criticized. In particular, China’s natural resource-backed loans raise questions about the continent’s future and its capacity for sustainable development.

April 14, 2014 

Studies of China’s Africa strategy (or lack thereof) have been overwhelmingly focused on China’s economic interests in Africa, the role played by Chinese government and companies, and the economic and social impacts of such activities on the ground. With a few exceptions, there is a strong tendency to assert moral judgments in the assessment: China’s activities in Africa are often characterized as “evil” when they are seen as representing China’s selfish quest for natural resources and damaging Africa’s fragile efforts to improve governance and build a sustainable future. However, they are characterized as “virtuous” when they are seen as contributing to a foundation for long-term economic development through infrastructure projects and revenue creation.

While economic issues are important to the strategic positioning of Africa in China’s overall foreign policy, Africa’s broader role in China’s international agenda is yet to be thoroughly explored. As China becomes a global economic and political power, a simplistic perception of Africa as China’s supplier of raw materials inevitably neglects other key aspects of Africa within China’s global strategy. Furthermore, even as China’s goals and policies have become more diversified, little effort has been spent examining China’s internal bureaucratic processes by which political, economic and security decisions are made regarding its Africa policy. This paper seeks to examine these largely unexamined basic, internal elements of China’s Africa policy.

*** How to navigate the East China Sea dispute between Japan and China

By Joseph Nye and Kevin Rudd, Saturday, April 19, 5:48 AM

Joseph Nye is a professor at Harvard and former dean of Harvard’s Kennedy School of Government. Kevin Rudd was prime minister of Australia from 2007 to 2010 and again in 2013. 

While the world focuses on Ukraine, ships and planes from Japan and China challenge each other almost every day near a few square miles of barren islets in the East China Sea that Japan calls the Senkaku and China calls the Diaoyu islands. This dangerous rivalry dates to the late 19th century, but the flare-up that led to widespread anti-Japan demonstrations in China in September 2012 began when the Japanese government purchased three of the tiny islets from their private Japanese owner. The issue is bound to arise during President Obama’s upcoming visit to Japan.

When the United States returned Okinawa to Japan in May 1972, the transfer included the disputed islets that the United States had administered after 1945. A few months later, whenChina and Japan normalized their relations in the aftermath of World War II, Japanese Prime Minister Kakuei Tanaka asked Chinese Premier Zhou Enlai about the islands. Zhou replied that rather than let the dispute delay normalization, the issue should be left for later generations. Both countries maintained their claims to sovereignty over the islands. 

For decades, this formula worked. Although Japan had administrative control, Chinese ships would occasionally enter Japanese waters to assert their legal position. When incidents occurred, Japan sometimes would detain the Chinese crew members but would soon release them. Exaggerated reports of undersea oil and gas reserves sometimes raised concerns, but as recently as 2008, the two countries agreed on a framework for joint development of disputed gas fields in the East China Sea

In 2009, relations between China and Japan were improving, and a large delegation of Diet members from the Democratic Party of Japan visited Beijing. Then on Sept. 7, 2010, a Chinese trawler near the islands twice bashed Japanese patrol boats, and Japanese authorities took the trawler to Japan. After several days of Chinese protests, Japan released the crew but brought charges against the captain. China abruptly halted its exports of rare earths to Japan; Japan soon released the captain, butChina did not restore these exports for almost two months. When asked why China had reacted that way, Chinese officials said that they had no choice because once Japan brought charges against the captain, it implied acceptance of Japanese law and sovereignty. 

To Chinese eyes, Japan destroyed the Zhou-Tanaka status quo with the 2010 arrest and then the 2012 purchase. China also believes that Japan is entering a period of right-wing militarist nationalism and that the purchase of the islands was a deliberate effort by Japan to begin a process of eroding the settlement of World War II. Since 2012, Chinese ships have continued to operate regularly in what Japan claims as its territorial waters. Ironically, these Chinese operations are inflaming Japanese nationalism. And so the spiral of action and reaction continues, with no opportunity in sight for both sides to hit the reset button. 

Fast-forward to Prime Minister Shinzo Abe’s December visit to the Yasukuni Shrine, which in part honors Class A Japanese war criminals. Fresh fuel was thrown onto a fire that needed little encouragement. Having watched Sino-Japanese relations closely over many decades, we think it is fair to say things have not been this bad for nearly half a century. 

The Real Reason China Wants Aircraft Carriers

April 16, 2014
China's Carrier Plans Target U.S. Alliances, Not Its Navy

Chinese seamen stand in formation forming six Chinese characters reading "Chinese dream, military dream" on the board of China's first aircraft carrier Liaoning. (Xinhua)

Last week, Secretary of Defense Chuck Hagel was the guest of honor for a tour of China’s aircraft carrier Liaoning, an event that once again raised U.S. media interest in China’s navy, its aspirations, and the role this carrier and others may someday play. 

It is not clear how many or what kind of carriers China will eventually build—whether they will more closely resemble Liaoning or be somewhat more modest in design, akin to U.S. Wasp-class amphibious assault ships. The former point China toward grander power projection missions; the latter toward the more immediate goal of establishing hegemony over its neighbors, many of whom have territorial disputes with China in the South and East China Seas. But it does appear that the People’s Liberation Army Navy (PLAN) has the aircraft carrier “bug” and the implications for the United States are large, whichever course Beijing takes.

Several commentators were quick—and correct—to observe that the PLAN aims to deny the U.S. Navy and American seapower in general access to the Western Pacific. This sensible observation, however, overlooks the strategic objectives China seeks to accomplish by turning to carrier aviation. 

For example, Bloomberg’s editors penned an editorial using China’s secondhand carrier to argue that the PLAN is decades behind the U.S. Navy and therefore not much of a threat. The editors’ failure to confront the larger strategic picture belittles the threat that China poses. It’s these kinds of arguments that insist that the rebalance to Asia is unwise, and that continued deep budget cuts to the U.S. naval and aerospace forces are warranted. 

How Chinese Think About Terrorism

By Dingding Chen and Ding Xuejie
April 19, 2014

A survey of Chinese attitudes in the wake of the March attack on Kunming. 

On March 1, 2014, in the southwestern Chinese city of Kunming, a group of eight assailants dressed in black and armed with cleavers, daggers and other knivesbrutally ended the lives of 29 civilians and maimed 143 others at the city’s railway station. Xinhua News Agency announced within hours of the incident that it was “a terrorist attack carried out by Xinjiang separatist force,” authorities and witnesses said the attackers were Uyghurs, a Turkic ethnic minority Muslim group from northwestern China’s Xinjiang Uyghur Autonomous Region.

Uyghurs have long resented China’s Xinjiang policies of coercion, natural resources exploitation, and marginalization of their linguistic and religious tradition. Between 1990 to 2001, Xinjiang experienced more than 200 attacks, killing more than 160 people. The most terrifying incident took place more recently, on July 5, 2009, and left 184 dead and 1,680 injured. The Kunming attack is thus expected to enflame tensions between the Han Chinese and Uyghur ethnic groups, and signals that the conflict has spread from Xinjiang to the rest of China.

After the Kunming incident, my colleague Ding Xuejie at Oxford University and I conducted a survey of Mainland China civilians, aiming at understanding opinions and attitudes towards ethnic conflicts and government policies regarding Xinjiang and its Uyghur minorities. We sent out around 2,000 questionnaires via the Internet and within one week had received 1151 responses. Our respondents were from 30 provinces across the country. Their ages ranged from 17 to 72, with an average age of 33. If the respondents, 51 percent are male, 96.3 percent are Han Chinese, and 78.5 percent have received at least a college education.

Attitudes of Chinese civilians (especially Han Chinese) toward Xinjiang Uyghur after Kunming?

Partly because of widespread media reports, 99.5 percent of respondents answered yes to the question “Are you familiar with the Kunming incident?” In answering the question “Do you think similar incidents will also occur in the city where you live?” only 34 percent of the respondents chose “unlikely” or “impossible,” while approximately 50 percent thought it was “likely” or “very likely.” This result indicates that the spread of violence from Xinjiang to other parts of China has fostered an atmosphere of insecurity among Chinese; ordinary citizens have begun to fear for their safety.

But does this sense of insecurity provoke negative intergroup attitudes, especially prejudice regarding Uyghur minorities? Our results show that Chinese people do not equate Xinjiang separatists with Xinjiang civilians, even after Kunming. Eighty-seven percent of respondents agreed with the statement “Those who support terrorism in Xinjiang are only a small minority among Xinjiang civilians.” Among people who agree with this statement, the proportion of women is significantly higher than men, and the proportion of people who had college education or above is significantly higher than people who never went to college. No significant difference was observed between ethnic groups.

Can China’s New Urbanization Plan Work?

Bringing people to the cities will not be enough. Rural rights also need reform.
By Adam Tyner
April 17, 2014

With the release of the “National New-type Urbanization Plan” by China’s State Council in March, it appears that China’s leadership is betting that urbanization can be a main driver of the country’s economic growth, as the government attempts to shift away from an investment-based economy. The plan has attractive extensive media coverage, which has emphasized that it calls for relaxing restrictions on access to urban household registration, or hukou, and that urbanization could be a way to boost China’s domestic consumption, which has remained consistently low.

This idea that increased urbanization could help the economy was included in China’s five-year plan in 2011, and it is normally associated with the new leadership who came to power in 2013. China’s second-in-command, Premier Li Keqiang, was giving speeches and releasing policy papers advocating for a new urbanization program in the years before he and President Xi Jinping came to power. Setting the stage for formal proposals like the State Council’s new plan, Li argued in 2012 that since urban people had higher incomes and consumed more and because China was still under-urbanized when compared with developed countries, “every rural person who becomes an urbanite can increase consumption by more than 10,000 renminbi ($1,600).”

While the rhetoric of promoting urbanization has been around for a few years now, for China watchers, it is odd to witness the Chinese government pinning its hopes for growth on increased urbanization. For decades, the distinctive feature of China’s urbanization model has been its bias against settling rural-to-urban migrants in the cities, a bias created via the hukou system. While other developing countries accumulated slums and squatter settlements around their cities, China’s policymakers did their best to make urban spaces as unwelcoming as possible to potential permanent migrants by keeping migrants’ access to local public services severely restricted.

In 2014, more than 200 million Chinese migrant workers live in places where they are not registered and are thus legally excluded from some local public services, although not every city’s policy is equally restrictive. This means that there are millions of children of urban workers who live in rural areas apart from their parents because they are legally excluded from the schools in the city. Likewise, many migrants must return to their home villages for health care because they have limited access to these services in the places they live and work.

Shinzo Abe: China is a 'Vital Economic Partner'

Japanese Prime Minister Shinzo Abe acknowledged the economic inseparability of China and Japan.
April 18, 2014

Japanese Prime Minister Shinzo Abe, while criticizing Beijing for its attempts to coercively “change the status quo” in the East China Sea, noted that Japan and China were tied together economically. ”China’s growth is a chance for Japan, and for the world as well. China is Japan’s largest trading partner and we are in inseparable relations economically,” Abe told a symposium hosted by the Economist magazine in Tokyo on Thursday.

He adds, “On the other hand, it is true that China is challenging the status quo with force in the East China Sea and South China Sea.” Abe’s statement refers to China’s actions both in the East China Sea vis-a-vis Japan and South Korea, and in the South China Sea where it is engaged in territorial disputes with several Southeast Asian states.

“It is necessary for not only Japan but many other countries to prompt China to grow peacefully as a responsible country,” Abe added, echoing language similar to that which is used by the United States.

Abe’s remarks come at a time when relations between China and Japan are at their lowest point in recent memory. Strained by a long-standing dispute over the Senkaku/Diaoyu Islands in the East China Sea and Japanese Prime Minister Shinzo Abe’s image in China, bilateral relations are at a standstill.

However, there are signs that China and Japan may be entering a period of relative detente. Neither Shinzo Abe nor Chinese President Xi Jinping have met in a formal setting (although the two briefly brushed shoulders at last year’s APEC Summit). Still, as The Diplomat noted earlier, high-profile exchanges have somewhat resumed between the two countries.

Hu Deping, the son of former reformist General Secretary of the CCP Hu Yaobang, visited Tokyo earlier this month with the approval of both the Japanese Foreign Ministry and the Chinese Communist Party. In a somewhat reciprocal move, newly elected Tokyo governor Yoichi Masuzoe will go to Beijing next week. Masuzoe’s visit is aimed mostly at increasing city-to-city diplomacy between Beijing and Tokyo.

Enter Asia: The Arctic Heats Up

The Arctic, always before on the frigid edges of the international imagination, is becoming a hot topic in world affairs, particularly in Asia, because of its virtually untapped resources and increasing strategic importance. In 2012, the amount of cargo transported through the region more than doubled, and in May 2013 the Arctic Council, traditionally membered by Europe’s Nordic countries, along with Russia, Canada, and the US, granted observer status to China, Japan, India, South Korea, Singapore, and Italy, a reminder that climate change is opening the Arctic to wider use and commercial exploitation, especially by Asian interests. Indeed, a Chinese shipping company sent that country’s first commercial voyage through the Arctic in September 2013. And Russia is negotiating with Korean shippers about using the Northern Sea Route (NSR) for energy shipments. These developments are already bringing the Arctic and Asian security agendas together, and in the process changing Asia’s strategic boundaries and planning.

Beijing officials believe that by the end of the decade five to fifteen percent of their country’s international trade, mainly container traffic, will use the NSR. With plans to put a second icebreaker into service this year and launch three scientific expeditions by 2015, China’s interest in the Arctic has taken a major step forward during the last year. After the council meeting in May, Yu Zhengasheng, chairman of the Political Consultative Conference, visited Finland, Sweden, and Denmark to increase general trade and cooperation with those countries, particularly in the Arctic, and Beijing announced plans to expand its polar research, in collaboration with Nordic research centers, with the aim of crafting better climate-change policies. State-owned Chinese businesses have also rolled out a series of related energy deals, including one plan to begin oil exploration off Iceland’s southeast coast and another to finance a major international mining project at Greenland’s Isua iron-ore field. China National Petroleum Corporation, which last year signed a major long-term deal to buy oil from the Russian state-owned company Rosneft, has also agreed to become the “anchor customer” of the liquefied natural gas project run by Novatek, an independent Russian gas producer, on the Yamal Peninsula, in northwestern Siberia, which stretches into the Arctic.

China is not the only Asian nation displaying heightened interest in the Arctic. According to an article last May in the Straits Times, “Singapore’s ‘Arctic diplomacy’ is driven primarily by an ambition to exploit an emerging market niche in which it sees itself as a technological and expertise leader.” And because of its rapidly accelerating energy requirements, India too has been forced to look to the Arctic for possible relief. Along with China, India had an Arctic research station in place in Norway in advance of the Arctic Council decision, and the New Delhi government is looking to buy or build an icebreaker.

Ukraine crisis proves cyber conflict is a reality of modern warfare

By Jarno Limnéll
19 Apr 2014

Cyber attacks in Ukraine show how aggression is crossing over from the virtual world to the real one, says Jarno Limnéll

Unidentified soldiers block the Ukrainian naval base in the village of Novoozerne, near Simferopol Photo: Ivan Sekretarev/AP

A hundred years ago, World War I moved warfare into the skies. Today no nation regards its security as complete without an air force, and no serious future conflict will lack a cyber aspect, either.

Russia and Ukraine apparently traded cyber attacks during the referendum on Crimea. Media reports indicate NATO and Ukrainian media websites suffered DDoS (denial of service) assaults during the vote, and that servers in Moscow took apparently retaliatory – and bigger – strikes afterward.

Observers tend to miss, though, that these are relatively modest skirmishes in cyber space. They routinely break out among competing states, even without concurrent political or military hostilities. Angling to hobble an opponent’s web resources by clogging networks with junk traffic? Another day at the office.

I see three distinct levels or “rings” to contemporary cyber conflicts. Only the first is clearly apparent in the Ukraine crisis. Full-blown cyber war is not yet occurring. The prospect of escalation, however, is real and worrisome. The West should watch carefully, because developments in Ukraine offer a model for contemporary conflicts worldwide – which will henceforth have integral cyber elements for all but the least developed nations.

By observing Ukraine we can deduce not only the capabilities of cyber weapons, but the goals and policies behind their use.

The first category of cyber conflict is the “business as usual” level – DDoS attacks and similar crude incursions. Website disruptions exert minor pressure on an enemy. They are the most visible strain of cyber attack, since anyone can verify success. (When the web page won’t load, it worked.) These little thrusts tend to be ongoing; they are everyday espionage. During diplomatic conflicts or worse, however, the number and variety of attacks increase.

The first-category attacks in Ukraine show evidence of outsourcing. As was the case in Russia’s earlier confrontations with Estonia and Georgia, the attacks seem to come from mercenaries or state-backed “patriotic hackers” rather than the armed forces or intelligence apparatus. In other words, the job of doing the attacking was handed off to proxies. This is worrying, as hiring hacktivists affords governments plausible deniability regarding involvement in cyber assaults.