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JUNE 2020

 

ASEAN, C-19 and the Vietnam’s Chairmanship

International Institute for Middle East and Balkan Studies (IFIMES)[1] from Ljubljana, Slovenia, regularly analyses developments in the Middle East, Balkans and also around the world. Bich T Tran is a PhD candidate at the University of Antwerp and a Researcher at the Global Affairs Research Center, Ryukoku University. In her comprehensive analysis entitled “ASEAN, C-19 and the Vietnam’s Chairmanship” she is analyzing the role of Vietnam as current ASEAN chair during Covid-19 situation.

ASEAN, C-19 and the Vietnam’s Chairmanship

COVID-19 (C-19) event is posing serious challenges for the Association of South East Asian Nations (ASEAN) in 2020. But Vietnam, as current ASEAN chair, is trying to make the best of the situation and demonstrate leadership. As 2020 marks a mid-term review of the implementation of the ASEAN Community Building Blueprints 2015–25, Vietnam chose ‘Cohesive and Responsive ASEAN’ as the theme for its chairmanship.

The theme is supported by five priorities identified by Prime Minister Nguyen Xuan Phuc in his keynote speech on 6 January. The priorities include contributing to regional peace, security and stability by strengthening ASEAN’s solidarity and unity; intensifying regional connectivity through the use of digital and novel technologies; promoting ASEAN identities and shared values; strengthening global partnerships for peace and sustainable development; and improving ASEAN’s responsiveness and operational effectiveness.

Despite the goal of intensifying regional connectivity, the C-19 event is disturbing global and regional supply chains. Vietnam had planned to organize more than 300 different conferences and activities during its term to celebrate the 25th anniversary of its ASEAN membership and to promote regional interactions. But the pandemic is causing numerous events to be postponed or even cancelled.

Many countries are in total or partial lockdown to flatten the transmission curve. Still, social distancing is increasing the use of telecommunication technologies used for teleworking and online teaching and learning. This trend, in line with the priority of promoting digital technologies, is enabling Vietnam to carry out its chair responsibilities by holding virtual meetings with ASEAN members and external partners.

Although division among ASEAN on how to respond to China in the South China Sea has undermined unity in recent years, Vietnam as chair of ASEAN is unifying member states in the fight against C-19. Since the beginning of the outbreak, Vietnam has worked closely with ASEAN members to help cope with the complex developments of the disease. On 14 February, Vietnam issued the Chairman's Statement on ASEAN Collective Response to the Outbreak of C-19, which stressed the importance of ASEAN solidarity and promoted cooperation on multiple levels.

On 31 March, Hanoi held the ASEAN Coordinating Council Working Group on Public Health Emergencies teleconference for member states to share information about their situations and the implementation of control measures.

At the ministerial level, Vietnam chaired two sessions of the ASEAN Coordinating Council on 20 March and 9 April, comprised of ASEAN foreign ministers, to discuss ways to strengthen collaboration between the group and its partners.

In the spirit of a ‘Cohesive and Responsive ASEAN’, Vietnam organized the Special ASEAN Summit on Coronavirus Disease 2019 on 14 April to urge member states to remain united and to act decisively in response to the pandemic. The leaders agreed to create a C-19 ASEAN Response Fund and regional reserves of medical supplies.

Non-Aligned Movement for the betterment of Multilateralism

Vietnam is also using the ASEAN chair to advance the organization’s cooperation with countries around the world. It was primarily within the universal organization of the United Nations (OUN).

As ambassador Hasmi Agam and prof. Anis H. Bajrektarevic recently noted in their policy paper on the UN: “…what presents itself as an imperative is universal participation through intergovernmental mechanisms. That very approach has been clearly demonstrated by UN member states, as shown by the active roles played by Indonesia (in the SC, along with another ASEAN and NAM member, VietNam; and on behalf of the general membership of the UN General Assembly), Azerbaijan (on behalf of NAM) and France (on behalf of the P5 and the EU) reaching out to Tunisia – a member of the Arab League (LAS), AU, OIC and NAM. Same line has been also endorsed by the UN Members States on 18 May 2020 in relation to the independent inquiry request over the WHO conduct. … this is well recognised by UN Secretary General Antonio Guterres himself, who recently stated that “With two thirds of UN Member States, the Non-Aligned Movement has a critical role to play in forging global solidarity”. (see: https://www.ifimes.org/en/9819)

But the list of Vietnam’s regional and bilateral activities is extensive too: At the ASEAN–China Foreign Ministers’ Meeting on cooperation in responding to C-19 in Laos on 20 February, Chinese Foreign Minister Wang Yi informed ASEAN of the situation in Wuhan and other parts of China. The bloc confirmed its support for China in combating the disease.

On 20 March, Vietnam chaired the ASEAN–EU ministerial teleconference on cooperation in fighting the pandemic. The two sides agreed to heighten information sharing, experience exchange, and policy consultation in diagnosis, treatment and vaccine production.

As chair of ASEAN, Vietnam was invited to the G-20 emergency online summit on C-19 on 26 March. Besides sharing Vietnam’s C-19 control experience, Prime Minister Phuc stressed the importance of solidarity, cooperation and collaboration at global and regional levels. He added that fighting the pandemic should accompany facilitating trade and investment cooperation.

Vietnam also chaired the Special ASEAN+3 Summit on C-19 on 14 April. ASEAN members and their dialogue partners China, Japan and South Korea acknowledged the significance of ASEAN+3 cooperation and its existing mechanisms in addressing public health challenges.

Although the US–ASEAN Summit — initially scheduled for mid-March — was postponed, Vietnam held the ASEAN–United States High-Level Interagency Video Conference on Cooperation to Counter C-19, a senior officials-level meeting, on 1 April. The two sides reiterated the value of the ASEAN–US Strategic Partnership in facing the unprecedented challenges of the pandemic.

The success of this meeting led to the Special ASEAN–US Ministerial Videoconference on C-19 on 23 April with the participation of US Secretary of State Mike Pompeo. Vietnamese Deputy Prime Minister and Minister of Foreign Affairs Pham Binh Minh thanked the United States for its US$19 million for financial support to regional countries in combating the disease. Foreign Minister Pham also proposed further ASEAN–US public health cooperation by sharing information, experience and best practices.

Despite a rough start, Vietnam is demonstrating its leadership through quick responses and proactiveness in coordinating member states and external partners. Still, the accusations between the United States and China over the disease’s origin and their handling of the pandemic are putting Southeast Asia in complicated situation. As both powers are important partners of ASEAN, growing strategic competition between the two will again put ASEAN unity to the test in the post-C-19 era.

About the author:

Bich T Tran
is a PhD candidate at the University of Antwerp and a Researcher at the Global Affairs Research Center, Ryukoku University.

Earlier version of this text appeared with the East Asia Forum.

Ljubljana, 24 June 2020

Footnotes:
[1] IFIMES - The International Institute for Middle-East and Balkan Studies, based in Ljubljana, Slovenia, has a special consultative status with the Economic and Social Council ECOSOC/UN since 2018.


Link (ENG): https://www.ifimes.org/en/9838 (ResearchBich T Tran: )ASEAN, C-19 and the Vietnam’s Chairmanship



June 26,  2020


Iron Fist for Pacific East

Stephen R. Nagy

“Americans performed three very different policies on the People’s Republic: From a total negation (and the Mao-time mutual annihilation assurances), to Nixon’s sudden cohabitation. Finally, a Copernican-turn: the US spotted no real ideological differences between them and the post-Deng China. This signalled a ‘new opening’: West imagined China’s coastal areas as its own industrial suburbia. Soon after, both countries easily agreed on interdependence (in this marriage of convenience): Americans pleased their corporate (machine and tech) sector and unrestrained its greed, while Chinese in return offered a cheap labour, no environmental considerations and submissiveness in imitation.

However, for both countries this was far more than economy, it was a policy – Washington read it as interdependence for transformative containment and Beijing sow it as interdependence for a (global) penetration. In the meantime, Chinese acquired more sophisticated technology, and the American Big tech sophisticated itself in digital authoritarianism – ‘technological monoculture’ met the political one.

But now with a tidal wave of Covid-19, the honeymoon is over.” – recently diagnosed prof. Anis H. Bajrektarevic on these very pages.

Following lines are a gross-detail insights into a mesmerising dynamic engulfing lately Far East and eastern Pacific. 

****************

Currently, China escalated its economic coercion against Australia by imposing two tariffs on the import of Australian barley. The first is a 73.6 % tariff on the agricultural product and the second, an additional 6.9 % arguing that the Australian government subsidies its farmers to grow this lucrative crop. Seen in tandem with the beef import ban on four Australian abattoirs, Beijing is pressuring Canberra hard to drop its calls for an independent COVID-19 (C-19) investigation and enforcing painful economic pain on Australia for what Beijing perceives as intolerable behaviour to a country that has “benefitted so profoundly” from trade with China. 

These actions raise serious questions for Japan and its friends. How does Japan respond to such a clear demonstration of punitive economic coercion against one of Tokyo’s closest friends in the region? What about other interested parties? Do Canadian, American, and other agricultural exporters take advantage of Australia’s thorny relationship with Beijing as Brazil did in the midst of the US-China trade war by exporting soya beans and other agricultural products?

Looking at the short term, especially in the wake economic damaged caused by the C-19 pandemic taking, the logic of expediency to quickly deliver economic goods to the struggling agricultural industry is sensible.

In that scenario, those countries with amicable relations with China would fill the vacuum being created by economic coercion against Australia. The candidates include Brazil, Russia, amongst others.

In the mid to long term, this sends the wrong message to states that engage in economic coerci messageere is that countries that are vulnerable to punitive economic measures have litttant economic coercion.


One by one, what can be done?

Japan and other liberal democratic states cannot make up for the sheer volume of agricultural and other exports that the Chinese market consumes. Even if they could open their markets as a temporary alternative, there would still be a huge gap. Nevertheless, an agreement to buy goods from a targeted state may relieve some of the economic pressure being applied by coercive states.  

Duanjie Chen of Canada’s MacDonald Laurier Institute correctly points out that Beijing practices economic coercion in a sophisticated and well-worn manner, by discreet to evade World Trade Organisation (WTO) disputes, precise calculation for maximum impact, and they are tailored to split western allies.

To lessen the effectiveness of these practices, Japan and other like-minded states need to mindful of these patterns and build multilateral mechanisms to create more resilience against punitive economic tactics.

In the first area, discreet to evade WTO disputes, Japan and other middle powers need to work collectively to close the WTO loop holes such that they cannot be exploit to deliver painful economic messages to states that are deemed to cross Beijing’s red lines.

To accomplish this task, WTO reform is crucial and that means collectively lobbying the US to work with allies to reform the WTO such that it functions better and can protect member states from economic predation.

If consensus cannot be achieved to reform the WTO, then like-minded states should consider a scrap and build approach that starts with like-minded countries but aims to achieve the same objectives.

The 2nd area Chen identified was the precise calculation for maximum impact. Japan felt this in 2010 with the rare-earth embargo, an embargo that hurt its high-tech firms and automobile industry. Australia is feeling this now with its beef and barley industries beings targeted. Canada felt similar measures against its canola, soya and pork industries in the wake of Ms Meng Wanzhou arrest. The tactics even included the hostage diplomacy of Michael Kovrig and Michael Spavor who are still detained to this day.

 Mitigating this hard-line approach requires a multilevel approach and multilateral cooperation. At the first level, like-minded states need to brainstorm and commit to collective and equal reciprocation of the economic coercion. For instance, collective stopping the export of a key or key ingredient, components or otherwise to China until the respective coercion stops.

Here agricultural products come to mind. The growing middle class in China also has a growing appetite for the high quality and safe agricultural from countries like Japan, Australia, Canada, the US, and the EU. These like-minded states should find ways to collectively limit their agricultural exports when one or more of its members are subject to economic coercion. China is vulnerable in other areas as well.

Reputational costs are also critical levers that should be collectively applied as well. Chen mentions withdrawing membership from the Asian Infrastructure and Investment bank (AIIB) as a possible measure. I would add MoUs signed with the BRI, and 3rd country infra-structure projects as well. These are crucial institutions that China has invested both treasure and political resources in to bolster its international credentials as a provider of global public goods.


 Of Ban and Japan

Japan would play a key role here in that Beijing has assiduously courted Japan to join the BRI and 3rd country infrastructure as a way to build credibility for the BRI infrastructure projects. Without partners, China’s signature initiatives cannot be internationalized, and China will not recognized as a globally admired and responsible stakeholder.

Another key initiative to be collectively adopted by Japan and other countries in their trade negotiations with Beijing is a clause that expressly forbids economic coercion on Japan and or its allies. This kind of clause could be included in other trade agreements and negotiations that Beijing deems critical to its socio-economic development.

Thinking creatively, Japan and like-minded countries such as Canada, Australia, South Korea and others should think about ways to introduce their own “poison pill” into trade agreements. The US did this with he USMCA FTA between Canada, Mexico and the US by the inclusion of a clause in which the US had veto over Canada and Mexico’s other free trade partners, in particular if either entered a free trade deal with a with a “non-market country”, i.e. China.

In this hypothetic “poison pill” or let’s call it “Musketeer Clause”, trade agreements would include a clause that required partners to collectively respond to economic coercion of one of its members by applying diplomatic, economic and other pressure on the offending actor. This could be a collective boycott, collective lobbying in international organizations, collective reciprocal tariff increase, etc. In short, an embodiment of the The Musketeers motto of One for all, all for one.

The third area that needs be addressed is the tactics deployed to tailored to split western allies. The above hypothetic clause would go far in doing that by creating as grouping of like-minded states that are interested in protecting their national and collective interests.

This will not be enough. With China being the largest trading partner of Japan, South Korea, Australia and many ASEAN states, an economic re-balancing must take place in which states collectively socially distance themselves from China. Here, the key that they are less dependent on bilateral relations for economic prosperity and more dependent on a balanced, multilateral trade relations with a collection of like-minded, rules-based countries and China.

Complete decoupling from China is not realistic considering the level of integration of our economies. It is also not in the economic or security interests of the states in questions nor the global community. What is in the interests of Japan, Australia, South Korea, Canada and other middle powers and smaller powers is finding ways to buttress a rules-based international order and to push back against a track record of punitive economic policies. 

Resistance is not futile. Victims of economic coercion need to channel their own Winston Churchill and epitomize the his views on never giving up in the face of force.

“This is the lesson: never give in, never give in, never, never, never, never—in nothing, great or small, large or petty—never give in except to convictions of honour and good sense. Never yield to force; never yield to the apparently overwhelming might of the enemy.”



Stephen R. Nagy (@nagystephen1) is a senior associate professor at International Christian University and a visiting fellow with the Japan Institute for International Affairs.



June 18,  2020


International Institute for Middle East and Balkan Studies ( IFIMES )[ 1] from Ljubljana, Slovenia, regularly analyses developments in the Middle East and the Balkans. Dr. Antonia Colibasanu is Geopolitical Futures’ Chief Operating Officer. In her comprehensive analysis entitled “Postponing an Oil Production Catastrophe” she is analysing situation and changes in the energy market in the time of coronavirus pandemic. 


● Dr. Antonia Colibasanu

Postponing an Oil Production Catastrophe


Fresh off helping to broker a global agreement on oil production cuts on April 12, U.S. President Donald Trump has declared American cuts a priority for the country. Texas, however, said it needed more time.

The Railroad Commission of Texas spent April 14 debating whether the state’s oil output should be reduced. The commission regulates Texas’ energy sector, which means it oversees about 40 percent of the United States’ oil and gas production. Like other producers around the world, U.S. shale producers have seen prices crater since late February as the coronavirus crisis set in. And like other producers, the U.S. was hurt by the price war launched in early March after a first attempt at an OPEC+ deal fell through. But pressure on the U.S. has been reduced by this week’s deal, which came about after the scale of the economic damage in Europe and the U.S. persuaded Russia to give way. American producers were also aided by Saudi Arabia’s decision on April 13 to shift more of its supply toward Asia to reduce pressure on the U.S.

Nevertheless, the size of these moves pales in comparison to the challenges ahead. If no adjustment had been made, the point at which production would have become unprofitable would have been weeks away. But with the output cuts announced this week, if current conditions hold and economic activity doesn’t pick up in May, the unprofitable threshold will be crossed in a couple of months. The cuts are clearly not enough to restore the market equilibrium, but they are the best that countries can do right now.


An Incalculable Decline

Oil demand is relatively inelastic — the quantity purchased doesn’t change much when the price does. Yet small changes in demand create sudden (and sometimes dramatic) changes in price. According to the International Energy Agency, China’s lockdown caused a decrease in demand in February of 1.8 million bpd compared to February 2019. Global demand as a whole fell by 2.5 million bpd year-over-year (about 35 percent) during the first quarter of 2020. It also anticipates that the coronavirus pandemic will generate a drop in demand that’s similar to (or worse) than 2009 crisis levels — and that prediction assumes, rather optimistically, that demand returns to normal levels during the second half of 2020. This is impossible to know: Global supply chains have broken down as the coronavirus put countries in lockdown. With emergency measures in place all over Europe and the U.S., the key consumers of oil such as airlines and factories have stopped consuming. Social distancing means that people are mostly indoors and businesses are at least partially shut down. If we knew how long this state of affairs was going to last, we could calculate its impact — but we don’t.


(click to enlarge)

In times of less uncertainty, OPEC has often chosen to micromanage the oil market by subtracting small quantities of supply to balance market prices. Countries with the highest levels of production and flexibility, like Saudi Arabia, could use the cartel to manipulate pricing to their advantage. But never before have changes occurred over a timeframe of several months, with no end in sight, and never before have fluctuations in demand been more than a couple of million barrels per day; analysts now discuss a drop in demand of between 15 million and 35 million bpd over the first quarter, with the bulk of it happening during the last three weeks of the quarter, when the U.S. implemented its emergency containment measures.


(click to enlarge)

The OPEC+ deal on April 12 means to reduce oil output by 9.7 million bpd, just short of the 10 million bpd that OPEC members wanted and market analysts expected. This is obviously too little to bring supply in line with demand, considering the demand projections cited above. But it helps delay the onset of the disaster and allows key political players to save face.


Russia’s Resistance

The idea of a supply agreement dates back to February, when a drop in demand of nearly 10 percent — led by China, the world’s largest importer of crude — began to affect market pricing. Saudi Arabia turned to OPEC, expecting OPEC members and affiliates to follow its lead and voluntarily cut production by 1.5 million bpd. Everyone signed on to the idea except Russia. Russia’s budget is balanced at a lower oil price than it is for Saudi Arabia and other OPEC members, enabling Russia to ride out lower prices while maintaining a budget surplus. And considering its sluggish economic growth since 2015, Russia also wanted to bring more oil to market to bring in extra revenue. Moreover, Moscow saw an opportunity to push U.S. competitors out of Europe by driving prices down to levels at which U.S. shale production would be unprofitable.


(click to enlarge)

Finally, Russia’s climate and geological conditions make it costly for the country to reduce output. Unlike its competitors, Russia gets most of its output from bitterly cold environments, where costs are higher due to technology needed to keep crude flowing into pipes and to keep gas from freezing. In fact, oil extraction is currently unprofitable in about 33 percent of Russian fields. The quality of Russia’s reserves has been deteriorating for the past decade, and production is on the wane. Therefore, the most Moscow was willing to do in early March to reduce output was what it had always done: to feign cooperation and scale up seasonal maintenance periods to slightly reduce output temporarily.



(click to enlarge)

In response, Riyadh launched a price war. It started bringing its spare production online to see how much oil it could dump on the market and to force Moscow to capitulate. Saudi exports grew b billion dollars’ worth of financial reserves, but most of it is not denominated in U.S. dollars. This means the value of these reserves decreases as the U.S. dollar gets ber relative to other currencies — which tends to happen during global crises as investors rush to the safety of the dollar. All these factors combined to push Moscow to compromise. The last thing President Vladimir Putin wants is tomed for economic mismanagement — if reserves drop in value and Russians have to suffer, it needs to be someone else’s fault and not Moscow’s.


American Holdouts

American shale oil companies, like other producers, have been struggling with falling prices since March. U.S. President Donald Trump, facing a re-election campaign and a plunging economy this year, had to respond and therefore made an agreement on production cuts a priority. Apart from the OPEC+ deal, the U.S. got extra help from the Saudis. On April 13, Riyadh announced that it had added $5 to the price per barrel of crude shipped to the United States, while cutting $5 from the price for Asian deliveries. This means the Saudis will stop dumping crude oil on the U.S. market, and therefore many U.S. producers — mostly shale producers — will stay in business a little longer.

Without Saudi oil on the U.S. market, American production doesn’t really need to be cut. The nature of U.S. shale is different from that of more conventional oil fields. Shale isn’t pumped; instead, natural pressure in the rock formation pushes the oil up and into pipes that carry it to loading facilities at ports. Lifting costs are minor, and much of shale producers’ daily operating costs stem from pipeline rates. Under the present circumstances, when little to no other oil will compete for the American market, shutting in may incur higher costs for producers than simply letting things run normally.

Furthermore, even though the U.S. brokered the historic OPEC+ deal, it lacks the legal tools to force its own states to implement oil cuts. The federal government doesn’t have a state-owned company, and its regulations are not as centralized as those of Russia or Saudi Arabia. It is instead up to the states and the companies themselves whether to cut.

At the same time, U.S. producers are very responsive to price changes, which means shale producers will keep production going only as long as it is profitable for them to do so. And with prices continuing to slide despite the OPEC+ deal, that won’t be long. On April 10, Trump asked the U.S. Department of Energy to purchase crude oil for the Strategic Petroleum Reserve, which will boost prices temporarily. But eventually companies will close down production because of low prices — something Washington can pass off as a “cut” to the OPEC+ countries.


Defining the Limits

The Saudi announcement on price differentiation between American and Asian markets means that, in spite of the OPEC+ agreement, Riyadh will effectively intensify its price war in Eurasia. Whatever Saudi output is not sent to the Gulf of Mexico will be sent to Asia, where Saudi Arabia competes with Russia (and others, to a lesser extent, including Iran, Nigeria and Iraq). Though Saudi Arabia knows that Russia will break the agreement — as it has before — it also knows that Saudi oil has only limited time to gain profits.

The global storage capacity is estimated to be between 900 million and 1.8 billion barrels. This is equal to roughly 9-18 days of global supply based on output in 2018, when the world produced nearly 95 million bpd. Assuming that 10 million bpd is put into storage, facilities would be filled in between 90 and 180 days. Since early April reports have been coming in that the United States’ Caribbean and Cushing storage hubs are nearing capacity. The math suggests this will soon be true for the rest of the world. Saudi Arabia, as well as Russia and other producers, is interested in selling as much oil as it can until storage capacity is reached. At that point, the production price of oil will fall close to or even below zero if the coronavirus crisis hasn’t abated and the world is still effectively quarantined.

Even assuming that all producers stick to the OPEC+ plan, if we take the median of the estimate of global storage capacity — 1.35 billion barrels — then the world’s stocks of oil storage will be full by early June. If the deal collapses, and everyone maximizes output, then production prices will fall to single digits or even zero earlier, potentially by mid-May. This reality can be avoided only if the coronavirus outbreak is quickly contained and the global workforce is able to get back to work.

About the author: 
Dr.Antonia Colibasanu is Geopolitical Futures’ Chief Operating Officer. She is responsible for overseeing all departments and marketing operations for the company. Dr. Colibasanu joined Geopolitical Futures as a senior analyst in 2016 and frequently speaks on international economics and security topics in Europe. She is also lecturer on international relations at the Romanian National University of Political Studies and Public Administration and associate professor for the Romanian National Defense University Carol I Regional Department of Defense Resources Management Studies. Prior to Geopolitical Futures, Dr. Colibasanu spent more than 10 years with Stratfor in various positions, including as partner for Europe and vice president for international marketing. Prior to joining Stratfor in 2006, Dr. Colibasanu held a variety of roles with the World Trade Center Association in Bucharest. Dr. Colibasanu holds a Doctorate in International Business and Economics from Bucharest’s Academy of Economic Studies, where her thesis focused on country risk analysis and investment decision-making processes within transnational companies. She also holds a Master’s degree in International Project Management. She is an alumna of the International Institute on Politics and Economics at Georgetown University.

Copyright 2020 Geopolitical Futures, LLC. Republished with permission.

Ljubljana/Bucharest, 9 May 2020


June 1,  2020

 

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