Chinese Influence In Southern Asia

There is a useful analysis of Chinese influence across Southern Asia in the Financial Times today. For all its ideological blindness on occasion, the Financial Times still remains a sound source for background to international affairs. This led us to our own assessment of the situation in the Indian Ocean.

The matter for concern here is not just China but the response of India to China. India sits outside the SCO, half-allied to the West, placing pressure on Pakistan through the US, supporting the faltering war on terror and developing its own programme to ensure that it is a naval power in the Indian Ocean.

China Competes

Most geo-political discussion has resolved itself around the Chinese-American relationship which is often co-operative on economic matters but barbed and tense on military issues and on Chinese competition with the West for natural resources and third world influence.

More attention should perhaps be given to the potential for stresses and strains between India and China (much as the Financial Times suggests) as the Chinese invest substantial funds in recreating the American and British imperial model of controlling oceanic nodal points of strategic interest.

It is not China that is being contained by the West but India that is being contained by China. Investment in Tibet increases the ability of Chinese troops to threaten North India where the Tibetan government-in-exile is given refuge. Nepal is now no longer simply an Indian protectorate.

In Nepal, Chinese influence may eventually increase with Maoist influence. This weekend also saw 23 policemen killed in a Maoist insurgency in central India that has gone on for over forty years. This is not China’s doing but India will be wary of where this may lead in any change of political conditions in China.

The Chinese also compete with the US for influence in Pakistan and may find fertile ground for increasing that influence if Pakistani resentment of Indian influence on US counter-terrorism policy grows.

China’s influence is also growing in Sri Lanka and it competes with India, albeit less successfully, in Bangla Desh. Burma is effectively a protectorate against Western influence and there are clearly attempts to build a presence in most of the important island groups in the region.

The expansion of the Chinese and Indian navies must thus be seen in the context of the arrival of the Chinese in the Indian Ocean, ostensibly to protect vital trade routes from the Gulf but also as a rather obvious assertion of Chinese attempts to assert a geo-political challenge to the US.

It is as if the Chinese, unwilling to challenge the US across the vital barrier of the Pacific, have displaced themselves into what they may have seen as a natural vacuum after the withdrawal of Soviet fleets from the Southern hemisphere, one vital to the supply of basic resources from Africa and the Gulf.

India – Too Big To Beat

Of course, whether the Indians would recognize the Indian Ocean as a vacuum is another matter. Yet these tensions should not be exaggerated. India in itself is far too big to beat.

The more overtly pro-Western and smaller nations on China’s periphery (Japan, Taiwan, Philippines, Australia) are probably much more edgy than India about the struggle between the US and China for regional hegemony.

The Europeans no longer have much to say in this zone and the Russians do not care anymore, so the liberal democratic states of the region must look to Washington for protection.

In the current climate, perhaps in the long run, China and India probably have more in common in their dealings with the West than not. However, the geo-political strategies of both become more relevant to each other if either should, for whatever reason, implode or weaken internally.

Chinese issues are quite focused – the Western provinces, Tibet and the working class in the pressure cooker of its industrial zone. India has some serious internal problems - various class insurgencies, Islamism in the north and communalism, especially where modernisation is creating resentment.

In general, India has integrated its internationally-orientated economy with the West, working through its diaspora, trading on its English language skills and high level of middle class education and reinvesting internally for its domestic market through a broadly economic liberal system.

China, meanwhile, trades globally on price and reinvests the surplus in acquiring cheap natural resources. Both are dependent on the international trading system to some extent - China more so.

What we are seeing is an adjustment rather than a confrontation. The Chinese are, at least for the moment, protecting essential economic interests rather than carrying out an ideological crusade. There is no reason for this not to be collaborative if both sides respect the interests of the other.

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Assessing The Damage In Iran

Post-election ‘tidying up’ continues throughout Iran as the regime reasserts its hold on power slowly but surely. It seems that many important networks hedged their bets until they could see which the wind was blowing.

The influential Society of Scholars of Qom Seminary waited until this weekend to remove its doubts and to throw itself behind the President with a message of congratulations. This is interpreted as clerical determination to place the survival of the Islamic republic above any other consideration.

However, the Financial Times also reports that the reformist Association of Scholars and Researchers of Qom Seminary, representing a minority of clerics, took a different view, questioning the legitimacy of the election.

This story seems to tell us that the regime may be secure but that the ‘reformists’ are beginning to coalesce around a narrative that is not necessarily revolutionary but that is almost certainly determined on change. It may yet come to power in a few years through constitutional means.

We also note the claims (still unconfirmed) that the Iranians plan to put on trial a local British Embassy staff member for allegedly helping to instigate the recent protests. This is the only one of the original nine arrested who is still in custody.

The Iranian authorities also released a Greek journalist: his arrest was for the rather mild matter of exceeding the duration of his visa. With the analyst far from certain to face charges, it is a question whether Western hysteria or Islamic villainy offers the best explanation of recent events.

We detect a sort of sub-racist attitude to Islamic justice based largely on some particularly nasty anti-homosexual and other communal incidents in the backwoods.

This is probably like condemning the US Constitution on the basis of lynching in the Deep South but liberals are determined to label this regime as only one step down from that of the Nazi Party.

Even if Western worries about an Iranian ‘white terror’ have clearly been overdone, the EU, at British request, was placing maximum but ratcheted pressure on Iran, starting with a summoning of Iranian Ambassadors and warnings of tougher measures, including visa restrictions.

However, it is equally clear that there was no stomach in Europe for a few possibly slightly naughty diplomatic auxiliaries to be allowed to derail a dialogue with Iran. The sentiment is likely to be similar amongst high officials in Tehran.

The problem here is that the conspiracy theory about Western interference is like the counter-conspiracy theory of vote-rigging. Both rely on suggestive circumstantial evidence. Neither side has full access to the facts available within the other side’s system.

In a sense, the West started this tit-for-tat in hysteria by shifting from criticism of the handling of protests in the direction of full acceptance of protestors' claims about the implied legitimacy of the regime.

Tehran now has every incentive and perhaps some need to create a show trial in which it can present its case, based on its intelligence data, for Western, specifically British, dabbling in its internal affairs.

From there, it can track back into the Iranians complicit with a plot which they may yet be able to prove (not necessarily as official at all) regardless of the protests of the FCO whose impotence is now out there for all to see.

The targeted individual is a ‘respected political analyst’ who could face a long jail sentence and it does point up the ambiguity when a local analyst offers advice to officials of a foreign power but the whole business does seem to have been over-egged by all sides.

Meanwhile, the Israelis continue to stir the pot with claims that Mossad has advised that, as a result of ‘secret’ talks with Saudi officials, the Kingdom would turn a blind eye to Israeli jets flying over its territory. The Saudis deny talks but Israel is clearly placing a direct attack on Iran back on the agenda.

There is much at stake. The question is not whether the arrested individual is released but whether the release is political despite any British involvement in Iran’s internal affairs in order to keep dialogue with the West on track.

And if the matter goes to trial, the issue becomes whether the trial is fair and fairly reported despite FCO determination to protect its own. This may all be sorted out diplomatically but the underlying questions surrounding the nature of British direct or indirect support for the reform movement remain unanswered.

The Israeli-Saudi reference is important in this context. Decision-making within Iran is taking place under the same perceived atmosphere of external threat that fuelled the turn to terror after the French and Russian revolutions. 

It will take some restraint on the part of the Iranian regime not to be provoked into unnecessarily draconian measures. If the UK and the EU are trying to calm things, the Israelis are clearly trying to fuel paranoia for reasons that are malign and dangerous both to peace and the reform movement.

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Faltering Confidence In The Global Economy?

Analysts have been exploring various scenarios for the next stage of the global economic crisis – hoping for one that allows Governments to unwind their emergency measures. This very much depends on how the US and eurozone economies develop in the coming months.

Uncertainty is high so we expect no precipitate moves from the Federal Reserve or the ECB but central bankers clearly want to unwind their easing measures safely without reversing the tentative signs of a return to growth.

A Financial Times analysis on June 29th suggested four scenarios: a) a steady low inflation/low interest rate recovery; b) a faster recovery than expected; c) a fall back to deflation and continued recession; and d) stagflation because of soaring commodity prices (primarily, oil).

The consensus forecasts are for a return to 2007 levels of growth for the US (and rising) by mid-2010 and a return to some, if very low, growth for the eurozone around the same time. Consensus forecasts on inflation are 2% or below in 2010 but with the Eurozone lower than the US.

But this air of uncertainty in itself tells you to be wary of talk of premature recovery. Sure enough, July 2nd saw a bigger-than-expected fall in US employment that had a major knock-on effect on shares and commodity prices.

The US unemployment rate rose from 9.4% to 9.5%, the highest level since the early 1980s. Since the US is the motor for global recovery, this is serious news for the rest of the world. It will be particularly worrying for the British whose entire fiscal strategy is built on the deus ex machina of Obamanomics.

There has also been growing interest in the real effects of high public spending in the US. The Administration is letting it be known that it calculates that the US economy will see the boost from emergency spending within the next few months.

It is clearly nervous that political pressures might result in a tightening of monetary and fiscal policy before recovery is well established. It is tentatively suggesting that the economy is close to ‘stabilisation’ but this is rapidly becoming a matter of faith rather than certain knowledge.

Uncertainty is the enemy of business but we are living in a very uncertain period with conflicting signals coming from various parts of the global economy. We should expect volatility and further aftershocks from the initial crisis, with the situation becoming clarified by the early Autumn.

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