Friday News Roundup — July 16, 2021
Happy Friday from Washington, DC. This week, the Beltway’s eyes are trained squarely on Congress. Like an undergraduate who has put off drafting their term paper, Congress is now in crunch time to finish its work before summer vacation. The bipartisan infrastructure plan that has attracted so much attention still has no official text, nor does the reconciliation bill into which progressive Democrats hope to fund their priorities. The federal debt ceiling could run out over the August recess if no further action is taken. Senator Tim Scott (R-SC) says that the police reform bill he is working on with Senator Cory Booker (D-NJ) and Representative Karen Bass (D-CA) needs to move this month, or it has little chance of passage.
And the thing is that Senator Scott is probably right. When Congress returns after Labor Day, many members will already be looking ahead to the midterm elections and positioning themselves appropriately. There is a lot of work to be done in the next few weeks.
We hope that you saw the report we released last week on how Congress and the Biden administration can secure America’s position in telecommunications by investing in 5G and preparing for the eventual rollout of 6G. If you missed that report, you can find it here. This week, Joshua reviewed On All Fronts: The Education of a Journalist for Diplomatic Courier
In the Roundup this week, Dan looks at unrest in Cuba and an assassination in Haiti to argue that the United States needs new ideas for the Caribbean region. Ethan analyzes the tensions between China, Japan, the United States, and Taiwan over disputed claims in the region. Joshua unpacks the most recent analysis of threats to the U.K.’s security as laid out by the Director of MI5. Michael reflects on how the changes in production and consumption of oil are pushing producers to make painful choices. As always, we end with some stories you may have missed.
Neighborhood Watch
Dan Mahaffee
All too often, our closest neighbors are an afterthought in Washington. Crises in the Middle East, great power competition with China and Russia, rebuilding partnerships with European and Asian allies, and addressing climate change and other global challenges often fills the proverbial inbox long before matters of the western hemisphere are addressed. Recent events, however, are a reminder of the challenges and opportunities in the Caribbean.
First, in Haiti, the assassination of President Jovenel Moïse by a squad of Colombian mercenaries and a pair of South Florida Haitans has everything from a farcical novel — including an emigré doctor believing he could return from abroad to seize the presidency. However, this farce quickly evaporates when you are confronted by the tragic poverty in Haiti, a legacy of global colonialism and racism where Haiti has been embargoed, invaded, and exploited throughout history.
Moîse’s asssassination has the hallmarks of a political squabble turned violent, rather than the imminent collapse of the Haitian government, though there has been long-running uncertainty about just who was governing Haiti, and for how long. While the interim leader called for U.S. military intervention, the Biden administration has been cautious, deploying an FBI and Homeland Security team to gather more information. What Haiti needs is not another foreign intervention, but rather the support and space necessary for Haitians to develop their own political solutions and institutions. The United States and other international partners can support Haiti and allow institutions there to provide basic security and development.
One island to the west, in Cuba, the most widespread protests in years broke out over growing dissatisfaction with the communist regime and the island’s collapsing economy — especially as the pandemic halted the tourism that brings hard currency to the island. While protests in Miami have sought to join their compatriots in Havana and elsewhere in overthrowing the Cuban regime, it is more likely that the regime will crack down, using methods it has practiced propping up Maduro in Venezuela. There, the Cuban torturers were known as the “Islanders”, notorious for their brutality. By cracking down on the protestors using these same methods, the regime hopes to buy time for tourism to resume and Euros to return to Havana’s coffers.
While that is the short term challenge for the Cuban Communists, there is the longer-term one. Beyond tourism and exporting doctors, an opening of the Cuban economy would demonstrate just how uncompetitive Cuban state firms are — an East Germany with palm trees. At the same time, as the Castros leave the stage, how will a new generation of rather uninspiring Communists run the island? Like a Cold War time machine? Epcot for leftists?
For U.S. policymakers, the challenge is addressing the brutality of the Cuban regime, while also acknowledging that our sanctions policy, now after six decades, is wholly ineffective. The exile community may believe that the collapse of the regime is imminent — and such a collapse would warrant a massive U.S. intervention — but we have to reconsider is more a long pathway of various off ramps and reforms for Cuba.
As a contrast to both Haiti and Cuba, it is stunning to look at the Domincan Republic’s relative success. Like the other two nations, it has benefitted from remittances. While it has had its history of foreign intervention and homegrown despotism, the DR’s focus on tourism and value-added, export-led growth has leveraged that nation’s multifaceted relationship with the United States. Since entering into the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) in 2007, the Dominican Republic pivoted away from its previous focus on textile and clothing exports to move up the value chain, while also taking advantage of its central location in the Caribbean to expand free trade zones and other logistics and transshipment hubs. Since 2010, no economy in Latin America has grown faster than the Dominican Republic’s, and a greater focus on exports of medical equipment and expanded agro-business marks that nation’s next move to increase the value of its export supply chains.
Haiti needs to find its own solutions, supported by us and our allies. Cuba requires new approaches in both Washington and Havana, though I fear that change will not come quickly enough for protestors on either side of the Florida Straits. However, the example of the Dominican Republic is something different, a new paradigm for the region warranting further study. The Caribbean and other countries in the hemisphere can serve as ideal conduits for nearshoring away our reliance on Chinese supply chains. Considering the return to great power competition and changing attitudes towards globalization, our attention to our closest neighbors has to go beyond the crisis of the day.
The Senkaku Paradox returns
Ethan Brown
It’s a brave new Pacific theater these days, where a growing cadre of Indo-Pacom states seem to be getting wise to Chinese aggression in ways heretofore unseen. Most notably, Japan quite pointedly thumbed its nose at Beijing, releasing its annual defense report on Tuesday with Taiwan at the center stage of its strategic posturing, and China tagged as Tokyo’s main threat vector. In response later that day, the CCP sent four of its coast guard vessels into a locale well-trodden in the Japan-China theater of competition and plain old bad blood: The Senkaku Islands (Japan territorial label). Or as China’s territorial claim prefers to assert, the Diaoyu Dao Islands, while Taiwan has also made some historical claims on the beholden nature of the islands, although that may correlate more to Chinese-Taiwan common ancestry than a true sovereign national assumption. But the point here is that those handful of sparsely populated rocky knobs in the wide expanse of the Pacific ocean represent a potential powder keg for regional conflagration.
Amidst a community awash with theorems and catchy conversation starters (Thucydides’ trap comes to mind, since we’re talking about China yet again), but the events this week bring about the well-worn concept colloquially known as the Senkaku paradox. It is an international relations trope, one well summarized by Dr. Michael O’Hanlon’s book of the same name about the very same thing, because this isn’t the first time aggression over these islands has caused international spectators to draw in their collective breaths, the only real difference is that the stakes never seem to contract — they always seem to deepen.
In short, the Senkaku paradox is based on the paradigm of state confrontation (read: all out war) not being commensurate with the impetus that might prompt a retaliation, i.e. a small excursions or activities by a state like China in sovereign air and maritime spaces which doesn’t quite constitute hostility. This places the United States at a difficult decision point based on the potential for conflagration, where the lack of response to miniscule maneuvers by aggressors signals either indifference or perceived powerlessness, although again, escalatory activities are not commensurate with the initiating action if it results in the next global conflict. If, for example, when Japan drops a formal recognition of hostility or an incendiary assertion of overt threats from neighboring China, and China then sends its forces in typical fashion to frolic in the Senkaku brown water regions, does the United States or another Indo-Pacom partner continue to escalate? Over what? An increasingly commonplace incursion by Chinese forces?
It’s a clever, devious game Beijing is playing expertly, knowing full well that it is not in the interests of Japan or the United States to throw fire and fury at something that even chances Beijing looking like a victim on the world stage, the CCP would gladly accept anything to distract the world from Wolf Warrior rhetoric. There are some historical parallels here — such as when the world breathed a haggard sigh of relief as World War II came to a close, only to find western Democratic forces at odds with Communist forces on the streets of Berlin. Another authoritarian leader, Joseph Stalin, a shrewd and ruthless tyrant, was constantly playing Senkaku paradoxical-esque chess moves — small annexations, access checkpoints at sites previously open to pro-democratic and communicst forces, finally sealing off the Allied headquarters by enveloping the entirety of Berlin actual — at one last move leaving western command marooned by Russian forces surrounding the annexed island in the middle of the city. With this one last bold, but nary a war-inciting move, “from Stettin in the Baltic to Trieste in the Adriatic, an Iron Curtain descended on the continent”.
Then-President Harry Truman faced a calculus strikingly similar to what President Biden faces today with China’s steady, slow, seemingly inexorable creep outward into our allies sovereign domains. With years of ongoing illicit intellectual property theft and electronic confrontation, congress recently passed a bill aimed at boosting the U.S. and deterring Chinesetechnological ambitions. The United States has made regular, consistent proclamations about our commitment to the Pacific rim of nations, with the aim of protecting sovereignty and critically, international trade routes. To a certain degree, this theater seemed destined for the Cold War premise of quiet, sub-confrontation while the ‘war’ continued to be waged in the digital realms.
Then along came Japan with the annual report (the one whose cover has some sweet sweet Shogun: Total War vibes) that has, for all intents and purposes, called one hell of a bluff. First, kudos to Japan’s Ministry of Defense for standing-to on line with Taiwan’s democratic interests. Chinese crackdowns on Taiwanese independence is, and must remain, a core item in any engagement or discussion regarding Beijing. Second, knowing full well the deeply rooted antagonism that goes back centuries between these two national titans is always ripe for stirring, Japan has sauntered onto the playground looking for the bully that the younger-grade kids have been whispering about ahead of recess. Japan doesn’t make these kinds of intensive assertions without the full confidence of its alliances well in hand — which says something about the United States in all of this…allies have regained their confidence in our teamsmanship.
This overt assertion by Japanese policy makers is an important geopolitical move, to be sure, but while the policy rollercoaster is in full swing, the CCP was swift to do something, even if it was little more than returning to the trope of yesteryear by steaming a small flotilla through the Senkakus. This, along with other vociferous lunges through its local playground, would at first denote a flagging brute staggered from an unexpected blow. Hardly. The Chinese government and its strategists know full well that its behavior of casual sovereign border crossing has become so normal that the Senkaku stunt this week is a matter of course — it doesn’t change the fact that the CCP is moving to undermine western and alliance interests in a myriad of other fields. The PLA sent ships into the area because it wanted Japan to think it pricked a nerve.
Now the U.S. and President Biden face a 1948 Berlin-like challenge, but it is hard to say what a 2021 Berlin Airlift trump card might look like. The stakes, as said, are as high as they have ever been. But in the interest of pushing back on Beijing’s aggression, there was an inevitable injunction when someone with Pacific interests outside of Washington had to make a clear, emphatic assertion against hostilities in the region. Maybe Japan’s defense paper was that critical next brick in the foundation. Even if this moment passes with a whimper, less a bang, it’s never a bad thing to deflate the CCPs balloon a little. Coming from a typically stoic state like Japan, vice a traditionally more overt signaler like Australia or South Korea, this portends a positive step for Pacific partnerships, if only because Beijing’s carte blanche publicly took a shot across the bow.
Oil Producers Prepare to Diversify
Michael Stecher
With all the talk in policy circles about the future of green energy — including in these pages — it is easy to overlook the role that fossil fuels, especially oil, continue to play. According to BP’s Statistical Review of World Energy, oil is still the largest component of the global energy mix and made up more than 35% of U.S. energy consumption in 2020. Oil is still central to geopolitics, and competition among oil producers and the long-running battle by the Organization of Petroleum Exporting Countries (OPEC) — the global cartel of major oil producers — to manage supply is the highest of high politics.
This week, Saudi Arabia and the United Arab Emirates reached an agreement to increase oil production and bring down global prices, ending an Emirati veto at the consensus-based OPEC. The proximate cause of this dispute was purely technical, but it shows how even the most hydrocarbon-rich states are positioning themselves for a long-term future in which oil’s influence wanes.
Oil demand collapsed in 2020 because of the COVID-19 pandemic. In the United States, consumption of gasoline, diesel, and jet fuel fell by 15% according to BP, and the rest of the world had a similar decline. In response, OPEC and a group of Eurasian producers led by Russia (collectively called OPEC+) agreed to cut production by 20%. Now that demand is coming back, oil prices have crept back up and OPEC would like to increase production back towards its prior levels.
UAE put up a roadblock to this plan because of the way that production targets are allocated: they are pegged to the amount of sustainable production capacity each country had in October 2018; the Emiratis, however, have invested substantially in new production since then and claim that their available production was 20% higher in April 2020 and is continuing to increase. They voted against the production increase on July 7 in order to put pressure on the rest of the group to allocate them a higher baseline.
In the long-term, oil producers face two countervailing pressures. If prices get too high, consumers adapt: they carpool more and in the long-run buy cars with better fuel efficiency — last week, the Wall Street Journal ran a view from a single family in South Jordan, Utah, who now only take trips in their hybrid minivan rather than their pickup truck. An even graver threat comes from shale oil production in the United States and Canada. North American shale oil is still underdeveloped, and many of the producers need oil prices of at least $55/barrel to be economically competitive.
At time of writing, West Texas Intermediate, the benchmark oil price in the United States, is above $70/barrel. Because of that, investors are getting more comfortable lending to oil producers in the United States. Interestingly, however, these investments are not structured to increase the total amount of production domestically. Instead, they are designed to improve the financial health of producers so that they can be viable at prices of $50/barrel or below. This is OPEC’s worst nightmare. According to the International Monetary Fund, only Saudi Arabia can have a balanced budget at prices that low, meaning that other producing countries would have to make painful choices to stay in the black. In 2014, in response to this exact threat, OPEC, led by Saudi Arabia, allowed oil prices to collapsein order to stop the shale oil boom.
The Emiratis clearly believe that the days of OPEC managing the global oil supply at a price that can fund generous public welfare programs are numbered. If oil demand slows or even drops, countries that had counted on their oil reserves to keep them rich will decide that getting a low price for a barrel of oil today is better than getting a lower price tomorrow. They will pump more out of the ground faster, even at lower prices, slowing the transition to clean energy — yes, this is a perverse incentive that advocates of a carbon price should think about. The UAE plans to increase production by another 20% in the next decade in order to try to fund their economic diversification plans for a post-hydrocarbon world. The Emiratis say that they do not plan on leaving OPEC, but they are positioning themselves to succeed even if it becomes too difficult to hold the cartel together.
Even Saudi Arabia is making moves to prepare for oil’s long goodbye. That is why they sold part of their national oil company, Saudi Aramco, in late 2019. In essence, the Kingdom of Saudi Arabia sold the rights to 5% of their total unpumped oil wealth. Earlier this week, CNBC reported that the Saudi Public Investment Fund was considering issuing a green bond to help the country finance its transition to renewable energy. On the one hand, this is a great idea: the Saudis consume more oil per capita than any other country on earth. On the other hand, as Bloomberg Opinion’s Matt Levine points out, the investors who buy green bonds tend to be Environmental, Social, and Governance (ESG) funds, many of whom might feel conflicted about “Saudi Arabia’s absolute rulers [who] sometimes kidnap their critics abroad, torture them to death and then dismember them”.
All of this is to say that the major players in the oil markets are preparing for a world of slowing oil consumption and prices that trend towards $50/barrel, but could stay lower for longer. This is a dramatic change from a decade ago, when persistently high oil prices were a brake on global growth and helped accelerate investments in shale production, electric vehicles, and renewable energy. The transition towards electrification and renewables is probably too robust at this point to be stopped by the price of a barrel of oil and, increasingly, major producers are seeing the writing on the wall.
Head of MI5 Warns of Increased Threats from Nation-States
Joshua C Huminski
In a public speech on Wednesday, Ken McCallum, the director of the United Kingdom’s domestic security service, MI5, warned that the British public should be increasingly aware of “less visible” threats, such as those posed by nation-states like Russia and China. The increased emphasis on nation-state threats comes shortly after the United Kingdom ended its combat presence in Afghanistan, in advance of, but following along, the United States’ planned withdrawal by 31 August.
The renewed focus on nation-state threats is not unsurprising and is in keeping with the current threat environment. For the last two decades, the primary focus of the security service has been on preventing foreign and domestic terrorism. On 7 July, 2005, the United Kingdomsuffered a series of four suicide bombings on public transport that killed 52 people (and the four bombers) and injured hundreds of others. Other notable attacks occurred, such as the Manchester Arena bombing, resulting in loss of life and countless other attacks were foiled by the police and security services. In prioritizing terrorism, the security services, however, took resources and attention away from nation-state threats, not the least of which was Russia.
Commenting specifically on this, McCallum said, “We are aiming to double the amount of MI5 resources going into state threats activity.” He added, “Our counter-terrorism business has been heavily dominant for the last two decades and the state threats work has unavoidably been squeezed.”
Russia interfered with the referendum on the United Kingdom’s membership in the European Union (the so-called Brexit vote), murderedAlexander Litvinenko in an act of nuclear terrorism, and attempted toassassinate a former spy, Sergei Skripal, with a never agent Novichok. This to say nothing of the normal business of espionage begin carried out both by Moscow and by Beijing.
In his speech, McCallum warned the public specifically about threats from Russia, China, and Iran, but only in general terms, preferring in his words to “focus to be on the response, much of which is agnostic of where threats come from”. He did, however, note the panoply of threats those three states represented including destructive and non-destructive cyber-attacks, traditional espionage, interference, and misinformation. McCallum noted that there were at least “10,000 disguised approaches from foreign spies to regular people up and down the UK” on professional networking sites. On misinformation, he said that there “is a focused role for organisations like mine to detect and call out any particularly damaging foreign-generated disinformation”, but warned that a national-level effort was needed.
Here he referenced the Counter State Threats Bill, which will likely be before Parliament shortly. The Bill would strengthen the country’s counter-espionage laws and include provisions that would require the registration of agents of foreign states, much like the United States’ Foreign Agents Registration Act (FARA).
On terrorism, McCallum interestingly noted that “one in five of our counter-terrorist investigations in Great Britain are Extreme Right Wing,” adding that, “Of the 29 late-stage attack plots disrupted over the last four years, fully 10 have been Extreme Right Wing.” He added an interesting caveat, saying “This threat has some challenging characteristics: a high prevalence of teenagers, including young teenagers.” This highlights the risks of right-wing radicalization online, especially amidst the lockdown and isolation. This is not to say that Islamist extremism has gone away: “Islamist Extremist Terrorism remains a potent, shape-shifting threat.”
McCallum closed with a warning about the dangers of end-to-end encryption and how it would make the service’s job more challenging: “End-to-end encryption, done in the way Facebook is currently proposing, will hand a gift to the terrorists MI5 has to find and tackle — and a gift to the child abusers our colleagues in the National Crime Agency have to find and tackle.” “Let me be clear: we support strong encryption and we support privacy for the population,” he added, but made a call for the tech companies to engage more directly with the government to address the service’s concerns.
McCallum’s annual public address is part of a broader move toward increased transparency and visibility for what has, hitherto, been a largely low-profile organization. He recently did an Instagram Q&A, a first, as part of a larger social media presence for the security service to raise its profile and to attract new recruits. There is also an element of providing more insight into what the service is doing, particularly in the wake of the allegations of Russian interreference, which the government was accused of actively ignoring.
While the United Kingdom struggles to find its place in a post-Brexit world, the threats facing the island nation continue to change and evolved. Much like the United States post-9/11, the UK’s security apparatuses’ fixation has primarily, though not exclusively, been on terrorism. The allocation of resources and time took attention away from what was a constant, if underappreciated threat from nation-states.
The challenge facing MI5, and the other law enforcement and security agencies in the United Kingdom, is addressing the hybrid threats posed from Russia, China, and Iran, and the resulting gaps in coverage or operational overlaps. Russian interference in UK politics will not exclusively come from misinformation, but also from dirty money entering the City of London’s financial institutions, which is ostensibly under the purview of Her Majesty’s Customs and Revenue Service, the police, and the National Crime Agency. Equally, the United Front Work Department’s activities in London would almost certainly qualify as foreign interference, yet is not necessarily within the remit of MI5 — despite the UFWD serving as a front for covert interference and intelligence gathering.
News You May Have Missed
Iranian Plot to Kidnap Journalist Foiled
According to an indictment unsealed by federal prosecutors on Tuesday, the Iranian intelligence service was plotting to lure Masih Alinejad, an Iranian-born journalist who hosts a program on Voice of America, to a third country from which they would abduct her to face charges in Iran. In addition to sounding very reminiscent of the Saudi plot that resulted in the murder of Washington Post contributor Jamal Khasshogi, Iran also kidnapped Ruhollah Zam, a journalist living in France, while he visited Iraq in 2019. Mr. Zam was hanged last December for allegedly attempting to “subvert the regime.” In the event that Ms. Alinejad could not be tricked into travelling, Iranian intelligence officials also researched the possibility of procuring a boat that could carry her to Venezuela, from which she could be extradited. All of the charged intelligence officers and agents are in Iran and are unlikely to face American justice for the plot, but it is another sign of the terrible lengths to which authoritarian governments will go to silence their critics.
Rioting in South Africa Raises Concerns of Logistical Crisis, Covid Surge
Following the jailing of former President Jacob Zuma on contempt of court charges faced as part of ongoing proceedings regarding allegations of rampant corruption during his presidency, widespread rioting broke out in KwaZulu-Natal and Gauteng, Zuma’s home province and South Africa’s economic and logistics hub, respectively. While poverty, inequality, and growing dissatisfaction with post-Aparteid government are nothing new, the scope of the violence has led some to believe that the rioting was coordinated to embarrass President Cyril Rhamaposa — who has run on a platform of cleaning up political graft. As the rioting has targeted major stores and warehouses, there are concerns of shortages of food and basic necessities, as well as worries about the spread of Covid as the riots have involved many persons in close proximity and disrupted vaccination campaigns. The South African Defence Force has been deployed, with 25,000 troops and armored personnel carriers patrolling South African streets, while many neighborhoods have formed their own self-defense militias.
French Residents Protest Health Passport Mandate
Liam Miller
This week, the French government has encountered numerous protests and criticisms from its residents due to the announcement of the country’s new COVID-19 health pass. Announced on Tuesday by President Emmanuel Macron, the COVID-19 health pass will require that persons show proof of vaccination,a negative COVID-19 test or proof that they are recovering from the virus before entering public facilities — restaurants, shopping malls, hospitals, or planes. The announcement of the COVID-19 health pass follows Macron’s previous mandate which states that all healthcare workers in France must be fully vaccinated by September 15th — -or be suspended without pay. According to numerous news sources, the new COVID restrictions that have been enacted by the French government are noticeably “much stricter” compared to other European nations. As a result, many French residents have strongly protested the recent actions taken by the French government arguing that they are encroaching on personal civil liberties, especially persons who do not wish to be vaccinated. The French government’s recent actions connect to an ongoing debate about mandatory vaccine passports which has dominated political discourse in countries such as the United States.
The views of authors are their own, and not that of CSPC.