• Type:
  • Genre:
  • Duration:
  • Average Rating:

kjvids

Will Italy leave the European Union

Following a decrease of 0.1% in the third quarter of 2018, Italy’s economy contracted of 0.2% in the final quarter of the same year. As such, Italy is now officially in technical recession; just when it seemed to be recovering from the effects of the debt crisis. This has sparked an intense political debate and has cast doubts over its economic prospects. But what does this actually mean for Italy and the EU?

Technical recession: the domestic debate

The news that Italy has entered into technical recession have immediately triggered a mutual-blaming quarrel between political forces. The governing coalition formed by the Five Star Movement and the League attributed the fault to the former ruler, the Democratic Party; who, on its part, accuses the economic policies of the current executive.

In reality, the situation is way more complex, and the responsibility cannot be ascribed to a single reason. As in all economic issues, there are multiple factors in place whose interplay determines the growth on a given period; therefore, it is difficult to clearly find out who or what is responsible. Economic performance is a long-term issue. Amazon’s CEO Jeff Bezos once said that “if we have a good quarter it’s because of the work we did three, four, and five years ago. It’s not because we did a good job this quarter”. His sentence does also apply to states. So, part of the responsibility can be imputed to the previous governments who, in spite of having managed to reassure the markets and bring Italy back on the path to a limited growth, failed to reduce the country’s huge debt. But it is equally true that the current executive, in power since June 2018, has raised the concerns of investors with the economic policies it has implemented or proposed.

First, it attempted to adopt an expansionary fiscal policy to boost growth by increasing public expenditures. However, this alarmed the EU Commission: even though Italy’s budgetary plan did not break the Union’s rules, it was still considered too risky as it would have caused a fiscal deficit and increased the already enormous public debt. This resulted in a standoff that was ultimately solved when the Italian government partially backed down and reduced the planned spending. Yet, the episode caused stress on the financial markets and harmed trust among investors. Another controversial topic in the economic policy of the incumbent government is the introduction of a basic income for unemployed people: it would increase public spending, but its future benefits are dubious.

Technical recession: the external factors

Apart from the policies of this government or the previous ones, there are many other external factors that the executive cannot control and that probably have had a more important impact on Italy’s economic performance. The country’s GDP contractions comes amid a global slowdown. The growth of the EU as a whole has been limited to 0.3% in the final quarter of 2018. There are some issues on trade as well. China, the world’s second-largest economy and a non-negligible export destination for Italy, is also growing at a slower pace than before. Problems exist also with another and more important trading partner: the United States. President Trump’s protectionist policies have surely had a negative impact on the EU and on Italy. At the end of May 2018 the US imposed 25% tariffs on steel and 10% ones on aluminium. In 2016, Italian metal exports to the US were worth almost 2 billion dollars. This is not an impressive figure, but more important industries could soon be hit and this eventuality could have had an impact. Trump is threatening to put tariffs on cars, that always in 2016 represented 9.5% of total Italian exports to America for a total value of more than four billion dollars. Again, this is not an extraordinary amount, but the spill-over effects on related industries should also be considered. The EU is trying to reach a deal on trade with the Trump administration, also by menacing to impose counter-tariffs wort 23 billion dollars on US products, but in case it fails Italy will surely be negatively affected. The looming possibility of a no-deal Brexit in recent months might also have had a role. The UK is a more important destination for Italian export than China and the US, and the prospect of a no-deal scenario may have had an impact, even though it is still too early to evaluate this. But the most important point probably concerns energy supplies. Italy is dependent on petroleum imports, and the price of oil surged in 2018 to reach the climax at the beginning of October, thus covering much of the period in which the Italian economy has contracted. The price went down since then, and the effects will probably be felt in the coming months.

These are only some of the numerous factors that may have determined Italy’s recession in the second half of 2018. What is important to understand is that the issue is very complex and easy explanations are not effective indicators of the reasons behind the GDP contraction. But what about the future prospects for Italy? Will it leave the Eurozone?

A prelude to leaving the Euro?

Since the debt crisis of 2011 and the subsequent austerity policies, Euroscepticism has become common in Italy’s political discourse. EU institutions were criticized and perceived as technocrats at the service of financial interests, and some even advocated for Italy to abandon the EU or at least the Euro. The most recent recession, albeit marginal by now, might reopen the debate, especially if it were to continue. After all, the two ruling parties were among the most vocal anti-Euro political forces, even though they took more moderate positions later on.

This is a political choice that Italy will have to make, but it will have of course major economic implications. According to the optimum currency area theory, it is economically beneficial to have a single currency in case the region is strongly integrated by intense trade exchanges and a great mobility of production factors. So, a country evaluating whether to enter or leave a common currency area should assess its degree of economic integration with other participants. As a matter of fact, the higher the level of integration, the greater are the benefit and the lowest are the costs of renouncing to monetary sovereignty to have a single currency. For what concerns the benefits, the main advantage of a common currency is to eliminate transaction costs due to exchange and interest rates and their variation. If the economies are closely intertwined with an elevated trade volume and a strong mobility of workers and productive factors, having different currencies brings very high costs that partly eliminate the gains of trade; and adopting a single currency removes these costs. But having a common currency also brings its own costs, because it makes it impossible for states to use monetary policy to counter asymmetric economic shocks, namely recessions that hit only that country but not others. If it has its own currency whose value can freely float, its automatic depreciation will boost export and counter the economic slowdown. But if it has renounced to its monetary sovereignty by adopting a common currency like the Euro, this mechanism is impossible. However, a high degree of economic integration minimizes this inconvenience, as it also allows to reduce the recession’s effects. If the country’s economy is closely intertwined with that of its fellow partners, the diminution of the price of its products will encourage others to buy them, thus increasing its exports. Similarly, if there is a high mobility of workers, then jobless people will be able to emigrate to other countries thus re-equilibrating the domestic labour market. In short, if the economies are strongly integrated, the benefits of having a single currency are high and the costs are low; so, it is wise to adopt the common currency. Now, is it the case of Italy?

For what concerns trade, in 2016 Italy’s exports to Eurozone alone was worth 192 billion dollars, over a total amounting to 450 billion. In the same year, its imports from other Eurozone countries amounted to 207 billion on a total of 397. This shows the importance of its exchanges with the other countries using the Euro. Moreover, its economy is also integrated with the Eurozone via mutual investments, expats, joint-ventures, services and others. If it abandoned the Euro, then it would lose all the advantages of having the same currency as its main economic partners. In addition, if it came back to the lira it would have to face the short-term shock. The currency would rapidly depreciate, and while it is true that this would boost export, it would also bring back consistent transaction costs. Moreover, inflation would erode the people’s purchasing power and there would be deep consequences on its debt with soaring spread and strong difficulties to obtain new loans. The situation would surely stabilize with time, but all in all, this does not seem to be an economically-convenient move for Italy.

Conclusion

The fact that Italy has entered in technical recession is surely no good news for it and the EU. Blaming each other at the political level will not solve the issue, also because there are many factors at play and responsibility cannot be fully attributed to anyone. Much will depend on future economic developments; but the contraction is limited by now and, in spite of the Eurosceptic positions of the current government, there is nothing that indicates that Italy will leave the Eurozone anytime soon.

The geopolitics of the Indian Ocean

The Indian Ocean is an immense maritime space of great geopolitical and geoeconomic importance. It is a crossroad for sea trade that connects the advanced economies of the East and the West. At the same time, there are also many factors that threaten its stability. These are often closely related with the international dynamics of the Asia-Pacific, to the point that the two areas can be considered as single reality.

West: Challenges and Opportunities for Africa

On its western part, the Indian Ocean touches the shores of the vast African continent. This creates a peculiar mix of opportunities and challenges for coastal states like South Africa, Mozambique, Madagascar, Tanzania and Kenya. Thanks to their position, they can easily reach important economic areas such as India, the Middle East, Europe and the Asia-Pacific. Engaging in maritime trade with these regions could provide a major economic boost to these African states and improve the living conditions of their citizens. In addition, emerging powers like China and India are heavily spending in Africa to access its much-needed natural resources and exploit the opportunities for high investment returns. Yet, in the case of China, this also raises concerns. While African states welcome Chinese investments as they come with no legal precondition on the respect of civil and human rights, some worry that its economic penetration might result in political leverage and in a form of economic neo-colonialism.

There are also two states whose situation is particular. The first is Ethiopia, the powerhouse of the Horn of Africa. As other states along the continent’s eastern coast, it can greatly benefit from international sea trade, but unfortunately it is a landlocked country. This largely explains the recent deal it reached with Eritrea to settle their longstanding conflict: turning Eritrea into a friend would enable Ethiopia to access the sea and engage in maritime trade along one of the busiest routes in the world. As a matter of fact, the Red Sea is an obliged passage for ships sailing between Europe and Asia. Ethiopia has even expressed its intention to build a navy, which is a clear sign of its seafaring ambitions.

The second peculiar case is Somalia. In theory, it is also poised to take advantage from its position on the Indian Ocean, but in practice it is a failed state ruled by armed groups where the central government has not enough power to pursue such kind of maritime policy.

This raises the issue of the threats to sea trade along the Western shores of the Indian Ocean. Somalia is part of the problem, as it has become a hub for piracy. The difficult economic conditions have pushed many Somalis to start attacking cargos navigating along the country’s coasts. This became a serious problem that prompted the international community to organize a military operation to patrol the Somali waters and combat piracy. These efforts succeeded in securing the area and in reducing the number of attacks, but as long as the socio-economic conditions of coastal population do not improve, the risk of piracy will remain.

Then, there are two important chokepoints that connect the Indian Ocean with the Mediterranean via the Red Sea, which can be considered as a peripheral area of the Indian Ocean putting it in communication with Europe: first, the Bab-el-Mandeb Strait; second, the Suez Canal. Both passages are essential for sea trade, and any interruption would have a major impact on the global economy.

North: India & Hormuz

Located to the North, India is certainly the main regional player. A large and fast-growing economy, it is one of today’s most important rising powers and its influence is growing worldwide. New Delhi considers the Indian Ocean as “its own” maritime space, a vector for power projection and economic growth but also an area to be preserve from the intromissions of hostile powers for the sake of national security. India can enormously benefit from its position protracting towards the ocean midway along the vital East-West sea lanes, and in fact it already taking advantage from it. At the same time, by building a powerful navy it can extend its power abroad and protect its interests. As a matter of fact, New Delhi is concerned over the presence of foreign actors in the Indian Ocean, most notably Beijing. The PRC is indeed investing heavily in the region on the basis of its Maritime Silk Road plan, aimed at creating a string of ports to sustain trade with Europe. This is of central importance for China’s economy, which relies on sea trade for exporting goods and importing hydrocarbons; but some consider that the real objective of the project is to extend its influence in the region by economic means. In a context of broader Sino-Indian rivalry, New Delhi worries about Beijing’s presence in countries like the Maldives or Sri Lanka, considering it as a potential threat to its security. Similarly, India also sees unfavorably the China-Pakistan Economic Corridor that will connect the PRC with the ocean via the port of Gwadar.

Again, there is also a strategic chokepoint to consider: the Hormuz Strait, which connects the Persian Gulf with the Indian Ocean. This passage is vital for tankers carrying Middle Eastern oil to Europe and Asia and any interruption would have catastrophic economic consequences. Unfortunately, this is not a remote event: in case of a serious standoff between the US and Iran, the Strait would soon become a major flashpoint, since Teheran’s deterrence strategy is largely based on blocking the Strait; which it can do with relative ease due to geographic reasons.

East: the Indo-Pacific

To the East, the Indonesian archipelago and Australia separate the Indian Ocean from the Pacific. Similarly to Somalia, the waters around Indonesia had become infested with pirates in the recent past; and the phenomenon has been reduced only thanks to multilateral military and development efforts. Yet, if the living conditions of coastal populations deteriorated again, the problem may arise once more.

That said, Indonesia and Australia benefit from their position between the two oceans. It allows them to project their power in both directions, to reach the large European and East Asian markets and finally to access Africa with its resources and its potential for investments. Indonesia is particularly relevant in this regard: it is another emerging economy with a great potential, and its virtually controls all the major straits connecting the two oceans: Sunda, Lombok and most importantly Malacca. Indonesia’s growth is largely due to its position on these sea lanes, and Singapore has based its incredible wealth on it. Again, these passages are essential for maritime trade between Europe and Asia as well as for the latter’s energy security; and would become hotspots in case of war, notably between the US and China. If the US Navy closed them, it could seriously harm the tenure of the PRC’s economy. At the same time, they are also essential for American allies like Japan, South Korea and Taiwan; meaning that the US will use its naval power to ensure no hostile power blocks the Straits.

The eastern part of the Indian Ocean plays a fundamental role for maritime security; and the importance of the juncture between the two Oceans is leading many scholars, analysts and policy-makers to consider them as a single maritime region: the Indo-Pacific. The Indian Ocean is extremely important for states in East Asia because it represents the necessary passage to reach Europe; and the security dynamics of the Indian Ocean and of the Asia-Pacific are closely related. China’s New Silk Road initiative, the forays of its Navy in the waters of the Indian Ocean, the Sino-Indian competition, the free flow of oil from the Gulf and piracy in Indonesia are all strategic issues that tie the two oceanic regions. This explains why the concept of Indo-Pacific is also taking importance in American strategic discourse: the economic and security dynamics of the two areas are so intertwined that they must be considered as a single space. Other powers are applying the same logic, and this is having practical consequences: the Quadrilateral Security Dialogue uniting the US, Japan, India and Australia indicates their willingness to strengthen their political and military cooperation to face shared security challenges like the rise of China; and it represents the emergence of the Indo-Pacific as a political and strategic reality.

Conclusion: an Indo-Pacific future?

Many scholars believe that “the future is Asian”, which is even the title of a recent book by Parag Khanna. But Asia’s rise largely depends on trade with Europe and on oil imports from the Middle East across the Indian Ocean. As such, Asian states have major strategic concerns in this area. China, Japan and South Korea need to keep the sea lanes open. India is an emerging power whose influence is growing across the world via the sea. Indonesia is the pivot connecting the Pacific and the Indian Oceans. The United States, the world’s primary security provider, is facing many challenges in both Oceans and is committed to preserving the freedom of navigation. Moreover, the interests of the various stakeholders in the area are sometimes colliding, such as in the case of China and India. As such, with Asia’s importance growing every year in both economic and political terms, the Indo-Pacific is also gaining primary strategic relevance.

That’s all for today guys, thanks for watching another KJ Vid. What are your views on Italy’s recession. Will Italy recover or implode and potentially leave the EU. We would love to hear your views in the comments below especially if you are from Italy.

Please also consider supporting us on Patreon so we can produce more of these geopolitical reports and help to keep us independent from political influence.

That’s all for today, see you next time.

Stabalizing Iraq and Syria

After years of war, it appears that Iraq and Syria are gradually stabilizing. The government forces supported by the US and Russia respectively are restoring their control over the two countries, and the self-proclaimed Islamic State has lost virtually all of its territory. Yet, this may just be an ephemeral peace. The social and economic foundations of the two states remain shaky at best, and many issues are still unsettled; notably the role of Sunni Arabs and the future of the Kurds. Without a comprehensive action to solve such questions, peace in Iraq and Syria will not be achieved on a solid basis.

I’m your host Kasim, welcome to another KJ Vid. In this video we will discuss the future of Iraq and Syria. Just before we begin, we would like to invite you to our Patreon account where you can get the full reports and other perks for our content. Supporting us on Patreon helps to keep our channel independent and create more videos.

Iraq and Syria in chaos

Iraq has been ravaged by conflict with practically no interruption since the US invasion in 2003. The fall of Saddam Hussein’s regime destabilized the country and resulted in a long insurgency against the occupying American forces. Progress in state-building was slow and limited in scope. The US ultimately withdrew its troops from the country in 2011 by a decision of then-President Barack Obama; but Iraq was still too weak to ensure the authority of the central government over all of the territory. In the same year, the Arab Spring broke out all over the Middle East. In Syria, it rapidly degenerated into a violent civil war opposing the loyalists to President Bashar al-Assad and the rebels; a broad term indicating various armed groups of different affiliation, ranging from those who favoured Western-like democracy and jihadist groups.

Things got more complicated in 2014 with the rise of a Sunni extremist group that would later become known as Islamic State. Exploiting the chaos that reigned in Syria due to the civil war and the power vacuum caused by the withdrawal of American troops from Iraq, it took control of large swathes of lands in the northern parts of the two countries. In particular, it seized important facilities such as oil fields and dams in Iraq and it even threatened Baghdad. This prompted the US to organize a multinational coalition to support the Iraqi government in its fight against the terrorist group by deploying special forces and by conducting air strikes. Soon, they also started operating in Syria, where the conflict was about to turn into a major international matter involving various foreign powers that supported the government or the rebels to pursue their own interest.

Russia intervened actively since 2015 to sustain Bashar al-Assad, its main ally in the area. Western powers assisted the rebels and bombed facilities to punish the loyalists for allegedly using chemical weapons against civilians. Turkey, who opposed the al-Assad government, became directly involved in 2016 with the main objective of preventing the formation of some kind of Kurdish territorial entity. As a matter of fact, the Kurds had rapidly proved to be an effective combat force in fighting the IS, and received support from the American-led coalition. This allowed them to take control over a large strip of territory at the border with Turkey, who feared the area would become independent or at least a rear base for Kurdish fighters operating against its territory. As such, it conducted several military operations to secure the lands along its borders and expel Kurdish forces. Iran also took part to the war by sending weapons and troops in support of al-Assad on the basis of the common Shia faith and of converging geopolitical interest. To counter its growing influence, Israel also carried out airstrikes in Syria against Iranian outposts.

Now, it seems that the two intertwined conflicts are about to end. In Syria the government is slowly restoring its authority and the Islamic State has lost almost all of the territory it controlled there and in Iraq. Yet, many issues remain unresolved, notably the role of Sunni Arabs and the Kurdish question.

Sunni Arabs: excluded from power

Sunni Arabs belong to the largest of the two main branches of Islam, the other being the Shias. But even though they are a majority in the Ummah as a whole, their situation in Iraq and Syria is particular.

For what concerns the former, Sunnis are indeed a minority. Most Iraqis are Shias, which also means that they are politically closer Iran, the main centre of Shiism. Yet, Sunnism had its glorious days in the country. During the Middle Ages, Baghdad was the heart of the mighty Abbasid Caliphate, from which today’s Islamic State took many symbols. More recently, Sunni Arabs formed the ruling elite in Iraq during the years of Saddam’s rule. His Ba’athist regime was dominated by Sunnis, which meant that in Iraq a minority was ruling over the majority. But the situation was reversed after Saddam was overthrown following the US invasion in 2003. Since Sunnis had formed the backbone of Saddam’s dictatorship, they were removed from their posts and largely excluded from power to the benefit of the Shias. At that point, the Sunni Arab community became the main pool of recruitment for the anti-American insurgency and then for the Islamic State. The situation has improved since then, but properly integrating Sunnis in Iraqi political life remains a central matter to stabilize the country.

The situation of Sunnis in Syria is the opposite and resembles that of Iraq under Saddam, albeit inverted. Sunni Arabs form the majority of Syria’s population, but the governing elite belongs to the Alawite movement, which is a sect of Shia Islam. This generated much resentment among Sunnis, who felt politically emarginated. As a result, many of them joined the ranks of the rebels when the uprising started in 2011. Now, the government seems close to prevailing, but it will have to establish a more inclusive form of governance to ensure peace in the long term.

The Kurds: a stateless people

In the case of the Kurds, the problem is slightly different. Here, it is not about a religious divide, but rather an ethnic and linguistic one. The Kurds are mostly Sunni and speak their own separate language, and as a single people they count around 40 million individuals. They live in a region located at the crossroad of Syria, Turkey, Iran and Iraq. Yet, their demands for an independent state have systematically been frustrated, and today they remain a stateless nation with little prospects of getting their own independent country.

Yet, they play an important political role. The lands where they live include the oil-rich areas of northern Iraq. The Kurdistan’s Workers Party, or PKK, has been waging a decade-long insurgency against Turkey to obtain independency or at least autonomy for Kurdistan; but Ankara has always firmly opposed their demands without hesitating to use violence and there is no indication that things will change anytime soon. In Iraq, several tens of thousand Kurds were killed by Saddam’s regime during the ‘80s in what is known as Anfal genocide. Later on, Iraqi and Syrian Kurds became America’s most effective on-the-ground allies in the fight against the Islamic State. But this angered Turkey out of fear that Kurdish-controlled territory could turn into an independent state or a base for operations on Turkish soil. As such, Ankara dispatched its military several times to secure Kurdish areas along its borders. However, this has led to a clash with the US, in a moment when bilateral relations are already strained. Washington has been supporting the Kurds and needs to reward them somehow; but any concession implying autonomy would upset Ankara, who is also an important ally. At the same time, Turkey cannot defy the US because the political and possibly economic retaliation might be too harmful. This has resulted into a stalemate that remains unresolved.

As in the case of Sunni Arabs, solving the Kurdish question will be of central importance for ensuring a long-lasting peace in Iraq and Syria, but finding a common agreement is even more difficult in this case: it is not a mainly domestic matter, but a transnational one involving various stakeholders, which makes finding a solution an even more complex endeavour.

Conclusion: ensuring inclusivity

As we have seen, conflict resolution in Iraq and Syria demands to integrate both Sunni Arabs and Kurds in the social and political life of the two countries. This is essential for granting peace in the long term: if Sunnis are not adequately represented, the Islamic State or a similar organization may soon rise again; while the Kurds may take arms and start a large-scale insurgency that would be difficult to tackle. Unfortunately, actually doing so is not easy. Both groups have powerful enemies and are internally fragmented, and other players can exploit these divisions for their own interests. As a matter of fact, major powers like the US, Russia, Iran and Turkey all have their own interests in the area; which is another complicating factor. In addition, given the large number of tribes, parties, armed factions, ethnic groups that live in Iraq and Syria, finding an agreement that satisfies everyone is extremely difficult. But to prevent the emergence of new jihadist groups or a new violent phase of the Turkish-Kurdish conflict and to ensure the stabilization of Iraq and Syria, a solution must be found in this sense.

That’s all for today guys, thanks for watching another KJ Vid. What are your views on CPEC, is it a good thing or bad thing for Pakistan? Is it likely to succeed or fail? We would love to hear your views in the comments below.

Please also consider supporting us on Patreon so we can produce more of these geopolitical reports and help to keep us independent from political influence.

Is the China-Pakistan Economic Corridor (CPEC) Failing?

The China-Pakistan Economic Corridor, or CPEC, is a massive infrastructural project announced for the first  time in 2013. It is part of the broader “One Belt, One Road” initiative, launched in the same year and also called OBOR. However, the CPEC has recently received several setbacks that are raising doubts over its completion. So, what is the future of the project?

Why the CPEC?

The CPEC is one of the six “Economic Corridors” that China is creating in cooperation with other countries in the context of the OBOR initiative to improve transportation, intensify trade and boost the respective economies with the broader aim of extending China’s economic and political presence across the globe and ultimately reaching the vast European market. The CPEC should pass through Pakistan to connect China’s landlocked Xinjiang province with the Arabian Sea; and it pursues multiple objectives.

First, Xinjiang hosts significant natural resources but is economically poor and affected by discontent among the local Uighur population. With the CPEC and other region-focused projects, China wants to develop the area so to improve its living conditions, exploit its economic assets and make of it a crossroad for East-West trade.

Second, the PRC wants to open an alternative access to the ocean. Today, cargos sailing to and from Europe as well as oil tankers from the Middle East need to pass through Malacca and other straits, which are extremely vulnerable chokepoints that could easily be blocked by the US Navy in case of war. This would be catastrophic for the PRC, which consequently wants to have an access to the sea that avoids these exposed passages.

Third, the CPEC will foster relations with Pakistan. The two countries are already primary partners, and the project will create closer ties by increasing economic interdependency and by improving the living conditions of locals. A solid bilateral partnership is also mutually beneficial considering their relations with India. Especially for Pakistan, having China as an ally is extremely useful to keep India at bay; but the contrary it is also true, even though Beijing tries to downplay the existing problems with New Delhi.

The CPEC in practice

To reach these strategic objectives, China plans to build a series of infrastructures in Pakistan. By now, it has already invested at least 60 billion US dollars in the initiative; which includes motorways, railways, ports, electric power plants, pipelines and more. Several Special Economic Zones will also be established. All these projects will be connected one with the other to some degree, with the aim to create economic prosperity and link Xinjiang with Pakistan’s southern shores.

A particular relevance has been given to Gwadar, located in south-western Pakistan along the coast next to Iran. It will be the endpoint of the CPEC, and one of its main centres. In particular, Gwadar’s harbour is being expanded and upgraded: it will be transformed into a “smart port” surrounded by a Special Economic Zone that will host a large industrial area. It will be served by a new international airport, several facilities to improve the local living conditions, and it will be linked with the rest of the country and with China by road and train. The port became partially operational in November 2016, when a joint Sino-Pakistani truck convoy successfully travelled from north to south across Pakistan and reached Gwadar where the containers were shipped to overseas destinations. Yet, the remaining projects are still under construction.

As far as other components are concerned, nine of them are already operational. These include a coal-powered electricity generation plant in Karachi and a similar one in the Punjab region, several windfarms and the Quaid-e-Azam solar park, one of the largest in the world. Other thirteen facilities are being completed and are scheduled to become soon operational.

Yet, there have been some setbacks as well. Combined with Pakistan’s shaky financial condition, this has raised doubts over the general tenure of the CPEC project.

The problems of CPEC

The first aspect to consider is that Pakistan’s political and financial situation is not very promising for the future of the CPEC.

Former Prime Minister Nawaz Sharif was a supporter of the project, but in August 2018 he was substituted by Mr. Imran Khan, who on the contrary has criticized the initiative out of concerns over corruption and lack of transparency. He also complained that the billions of dollars that China is investing in the country bring little benefit to Pakistani workers, as the facilities are almost entirely build by Chinese nationals. This does not mean that he has rejected the CPEC, but he is certainly less enthusiast than his predecessor. In addition, Pakistan is crossing troubled waters in financial terms. According to The Express Tribune, a Pakistani newspaper, the country’s owes 40 billion to China. This has raised the alarm over a “debt trap”; meaning that China may exploit its financial leverage on Pakistan to exert political influence. In this regard, it is true that Pakistan’s net public debt is estimated at 67.6% of the GDP, that its external debt amounted to 82 billion dollars at the end of 2017, and that the federal government must face a chronic penury of foreign currency; which is a problem when having to repay external debts.

Therefore, there are doubts about Pakistan’s financial tenure in the immediate future. The country received various loans from the IMF in the past, but it has rejected the latest 8-billion-dollar bailout plan. Instead, Mr. Khan’s government preferred to demand financial aid to a few “friendly countries”, notably Saudi Arabia, the United Arab Emirates and China. This has already brought some fruits. An agreement has been reached between Islamabad and Abu Dhabi for a support package worth 6.2 billion dollars, with 3 billion scheduled to be sent shortly. Similarly, Saudi Arabia’s Prince bin Salman will soon sign a deal for building a 10-billion-dollar oil refinery in Gwadar, thus adding further significance to the port city. Cooperation in other sector will also be discussed.

In regard to China, the situation is more complex. Bilateral relations remain good, but there are growing concerns about the completion of the CPEC; at least in all of its parts. In the context of its troubled financial situation, Pakistan has recently announced its withdrawal from the Rahim Yar Khan power station, on the basis that electricity production capability is already sufficient and that consequently the project would not be economically viable. Yet, this may be a political excuse to hide the real problem, namely that there are not the funds for it. In addition, there are delays in the construction of the smart port in Gwadar. In this regard, Chinese companies have allegedly warned that Pakistan will need to pay to cover the additional costs caused by this postponement.

These events have created much speculation about the completion of the CPEC as a whole, especially in India, where major newspapers like the Times of India have reported such news. As a matter of fact, there is a sensible degree of strategic rivalry between Beijing and New Delhi, who perceives its northern neighbour and its close ties with Islamabad as a potential threat. On its part, China has responded to the recent events along a double line. State-sponsored media like the Global Times have soon published articles where they reassure about the solidity of the Sino-Pakistani partnership and about the determination of both sides to end the works on the CPEC. At the same time, they have accused other countries of being “jealous” and of having “aggressive intentions”. It is clear that the message was a response to the news about the recent setbacks of the CPEC project reported by Indian media. By explicitly addressing the recent reports by Indian news channels, the Global Times has also downplayed the entity of Pakistan’s China-owned debt and have suggested third parties not to meddle in the issue; all while affirming that India will also benefit from the CPEC. According to such Chinese articles, which cite the PRC’s embassy in Pakistan as a source for the figures, Islamabad does not owe 40 billion dollars to Beijing. Instead, they claim the debt only amounts to 6 just over billion, including interests.

Apart from this, the security aspect should also be mentioned. The CPEC crosses territories where terrorist and separatist groups are present. Some of them do not see China favourably, and this represents a non-negligible threat to the project. In fact, some attacks have already taken place against Chinese objectives. In August 2018, a suicide bombing injured some Chinese engineers. In November, a secessionist movement called Balochistan Liberation Army targeted the Chinese consulate in Karachi. By now, none of these events has seriously hampered the CPEC, but this may be the beginning of a trend that could hamper the project in the long term.

Conclusion: what about the future?

With such contradictory reports, it is difficult to assess the future of the CPEC and the real entity of the China-laid “debt trap” looming over Pakistan. What is sure is that Islamabad has indeed some financial problems, and that this may negatively impact the project. The recent cancellation of the Rahim Yar Khan power plant and the delays over Gwadar’s smart port suggest that there may already be complications in this sense. Yet, unless Pakistan enters in a serious financial crisis or faces a collapse of the state, it seems that the project will be competed at least in part. That said, the other certain thing is that the CPEC and China’s presence in Pakistan is not viewed positively by India, and in geopolitical terms this is probably the most relevant aspect.

The rise of Indonesia

Indonesia is the world’s largest Muslim country by population and is one of South-East Asia’s most dynamic economies.

Located at the juncture between the Pacific and Indian Oceans, it has the potential to become a leading regional power.

However, its location is also a source of considerable challenges that Indonesia will have to manage attentively in the coming years.

Indonesia’s Geography

The very name Indonesia is revealing: it comes from Greek and means “Indian Islands”. As a matter of fact, Indonesia is an archipelago located at the eastern edge of the Indian Ocean, and this is a key factor that has shaped its geopolitical thinking.

In terms of dimension and configuration, Indonesia is a vast but fragmented state. It counts over 18,000 islands; the most important of which are Sumatra, Java, the southern section of Borneo, Sulawesi and the western part of New Guinea.

These islands, covered by a thick rainforest rich in wildlife, have a volcanic origin. This means that Indonesia is vulnerable to seismic events and tsunamis; something that has a negative impact on its human security environment.

The country extends over almost 8 million square kilometres if we take into account its maritime space including the Exclusive Economic Zone, or EEZ. Combined with its archipelagic nature, this makes it difficult for the central state to exert its power over all the territory; also, because fragmentation is reflected in demographic terms: the population exceeds 260 million citizens divided in more than 300 ethnic groups; and this has important implications on the country’s geopolitics.

Moving on, Indonesia’s position has a deep impact on its foreign affairs. Located at the crossroad between the Indian and Pacific Oceans, Indonesia plays a pivotal role for international maritime trade.

Sumatra is the southern boundary of the Malacca Strait, one of the world’s busiest waterways and a strategic chokepoint. But Indonesia also controls other important straits; notably Sunda, Lombok and Makassar. These are all essential for trade between Europe and Asia, but also for the latter’s energy security.

Most of the oil it consumes transits through these narrow passages; which explains their geostrategic relevance. Indonesia hugely benefits from its role as a gateway between the two oceans, but this also brings considerable strategic problems because foreign powers have always been trying to control the archipelago.

This continues today: China, the US, Japan and India all have major interests at stake in the Indonesian Straits, and are trying to expand their influence on the country. Finally, the archipelago also hosts important natural resources like oil, gas, minerals, timber and fish. These commodities are a source of wealth for Indonesia, but also another driver for the presence of external powers.

Indonesia’s Geopolitical Thinking

Indonesia’s nature as an archipelago and its “crossroad location”, a concept known as posisi silang, have shaped its geopolitical thinking since it gained independence from the Netherlands in 1949. Indonesia had to assert its authority over its surrounding seas to ensure its prosperity and security. A first step in this sense was the 1957 Djuanda Declaration, by which Indonesia claimed its sovereignty over all the maritime areas around the archipelago; especially those located between its main islands like the Java and Flores seas.

This stance was later recognized internationally by the UN Convention on the Law of the Sea in 1982. The Djuanda Declaration was the first step towards a more comprehensive doctrine called “Maritime Archipelagic Outlook”, or Wawasan Nusantara Bahari. First formulated in 1966, this Doctrine still stands today. It considers that Indonesia’s location leaves it vulnerable to foreign meddling and that its fragmented geography endangers the unity of the state; but it is also the basis for justifying Indonesia’s leading regional role.

In geostrategic terms, the doctrine considers Java and its sea as Indonesia’s core, which must be protected from external threats. Applying a mandala logic, it identifies three concentric layers that are the base of Indonesia’s foreign and defence policy.

The innermost circle is Indonesia itself, the middle one extends to South-East Asia and Australia, while the external zone includes the rest of the world. The sea is equally important from a geoeconomic point of view.

Indonesia is a trade crossroad, it has an important fishing industry and its waters host important hydrocarbon deposits, estimated to hold 3.7 billion barrels of oil and 2,900 billion cubic feet of gas. As such, securing the sea has a primary importance for the country’s economy.

Finally, in geopolitical terms, it considers the sea as the space connecting the various islands that form its geographically and culturally fragmented territory. This configuration makes separatism easier, and therefore is seen as a threat to the unity of the state; even though it is also argued that the separation of the different national groups reduces the risk of inter-ethnic conflict. Moreover, the sea is the mean by which foreign powers have reached the archipelago in the past.

Consequently, Indonesia believes that controlling the sea is a precondition to preserve the unity and the independence of the state. In this sense, it seeks to achieve resilience both at home and in neighbouring states, assuming that Indonesia is safe only if the archipelago and the surrounding countries are stable.

Yet, Indonesia must face several challenges. Apart from numerous secessionist movements, some of which have been successful, it must also cope with illegal fishing, smuggling, unauthorized immigration and piracy. The latter was once a major problem, but it has been greatly reduced thanks to multilateral efforts and by improving the living conditions of coastal areas.

Terrorism is also a matter of concern, and several attacks have already taken place.

In economic terms, even though Indonesia’s national strategy emphasizes the cohesion of the state and aims to limit foreign meddling, most of its hydrocarbons and of its resources in general are exploited by foreign corporations. In addition, there is a great disparity between urban areas like Jakarta and the rest of the country, especially outside Java.

Indonesia’s power

Indonesia can be considered a middle power, but it is definitely a rising one. Its GDP is the largest in South-East Asia, and in 2017 it amounted to 3.25 trillion measured in US dollars of the same year in terms of Purchasing Power Parity. This ranked the country as the world’s 7th largest economy, and it is projected to become the 4th by 2050. Indonesia’s steady 5% growth rate is helped by low inflation, a budget deficit under control and a public debt representing just 29% of the GDP. Moreover, saving is quite high at around 32% and investments are flowing in, thus paving the way to a continued growth. The trade balance is positive, driven by the export of commodities like oil, gas, coal, metals and palm oil; but also many other low added-value products such as clothing and electric components. Always in terms of PPP, its per capita GDP reached 12,700 dollars in 2017: a still low figure, but a remarkable progress from past levels. Unemployment is only 5.5%; yet, agriculture still retains 32% of the workforce and around 10% of Indonesians live below the poverty line, with 21% remaining at risk. The country also has real problems in terms of corruption and inequality, and must face notable environmental challenges: rising sea levels, deforestation, and extreme weather are already causing notable losses to its economy and are menacing its human security.

Indonesia’s armed forces are also evolving. It spends about 0.8% of its GDP on defence; and in spite of the emphasis given to the sea, the Army has a greater importance than the Navy. Land forces, notably marines and special forces units trained for asymmetric warfare, are indeed important for such a fragmented country; but the Navy remains underdeveloped. It mainly relies on corvettes, and having only 8 frigates and less than 5 diesel-electric submarines seems insufficient, even though it has a good park of minesweepers and there are talks to buy more subs. Similarly, the Air Force only counts around 40 fighters and some attack aircraft. These two branches have quite advanced equipment and are better than those of most ASEAN countries, but Indonesia will need to expand them to affirm itself as a regional power and to cope with challenges like China’s rise.

Conclusion: Indonesia’s foreign policy today

The maritime dimension, control over the straits, internal stability, autonomy from foreign influences and an active regional role have been the cornerstones of Indonesia’s foreign policy for decades. In 1955, Indonesia held a conference in Bandung that marked the birth of the non-aligned movement of states that did not want to side with neither the US nor the USSR.

Today, it still keeps this stance. Regionally, it supports integration through the Association of South-East Asian Nations, or ASEAN; and it aspires to become its leader. In its relations with external powers, notably the US and China, it attempts maximizing its autonomy by keeping ties with all of them. Indonesia maintains good political and trade relations with both, but it is worth mentioning that it hosts a significant Chinese diaspora which represents around 1% of the population and runs many successful business activities. At the same time, it also cooperates with other powers. Japan and India are important economic partners and security cooperation is growing, especially with the latter. Indonesia also trades with European countries; which are also important arms suppliers.

It is expected that Indonesia’s foreign policy will continue along this line in the next future: trying to maintain its partnership with multiple countries so to maximize its benefit and freedom of action. But in the evolving international scenery of the Indo-Pacific, where the US maintain a strong presence all while China and India are rising, it will be hard for Indonesia not to take sides.

Will Putin become the Arctic Boss?

Geostrategy of the Arctic’s Chokepoints

 As the Polar ice cap melts, new shipping lanes are opening across the Arctic. Navigation in the area is still in its initial stages, but in the long term it has the potential to transform international maritime trade and to profoundly affect the geopolitical scene. In particular, if this happens, new chokepoints will take a central strategic importance: the Bering Strait and the North Atlantic passages.

The four Arctic routes

The idea of reaching the Pacific Ocean by navigating through the Arctic is not new. centuries ago, explorers risked their lives to find the fabled Northwest Passage. It sails north of Canada and then crosses the Bering Strait to arrive in the Pacific, and it is the first of the possible Arctic Routes. The second one is the Northern Sea Route, or NSR, which is the most debated today. Starting from the Pacific Ocean, it passes through Bering and proceeds along Russia’s northern coasts towards Europe. Then, there are two other options: the least important is the Arctic Bridge, which connects Northern Europe with Canada; the other is the Transpolar Sea Route, that crosses the centre of the Arctic Ocean instead of passing along the coasts like the NSR does. While this is theoretically possible, in practice this area is still covered in ice and therefore it will become navigable only if the Polar cap disappears almost completely.

For centuries, the Arctic ice cap made it impossible to sail across these frozen waters during most of the year, but things are different today. Global warming is dissolving the Arctic’s ice, and this is opening these passages to navigation for increasingly long periods. As a result, the NSR and the Northwest Passage are becoming commercially viable, something this could radically change the world’s maritime trade patterns. The reason is that such lanes are way shorter, and therefore time- and money-saving, than the traditional ones passing through the Pacific and Indian Oceans. This is why more and more ships are already using these lanes and the NSR in particular, even though the trade volume remains only a tiny fraction of the one flowing along the ordinary seaways. But apart from merely economic considerations, Arctic lanes present other geostrategic advantages for the various powers that are interested in their development.

Why the Arctic?

The first country that wants to develop the NSR and Arctic trade in general is Russia. As a matter of fact, Russia is the region’s prominent power: first, because most of the coast around the Arctic belongs to it, and then because of its unrivalled fleet of ice-breakers and of the military forces it has deployed there. Moscow considers the NSR as an excellent opportunity to develop its northernmost territories and ports by providing logistic support to the ships sailing across these waters. Moreover, the Arctic also hosts large oil and gas reserves, which would further strengthen Russia’s stance as a world-class energy supplier. Of course, such projects are technically challenging due to the rigid climate and they require huge investments to develop the necessary infrastructure, but Russia is already working on it; and most importantly it can cooperate with other powers that want to open such routes and access the Arctic’s resources.

As a matter of fact, many Asian countries are also interested in the Arctic. Among them, the most important is certainly China, who is already operating in the region. There are three reasons behind its interest. First, gaining access alternative hydrocarbon sources and reduce its reliance on the Middle East. Second, opening a faster and cheaper shipping lane to Europe and to America’s East coast. The third reason is geostrategic, and it is closely related to the others. Beijing is engaged in a great power competition with Washington, and the traditional southern routes it currently uses for trade with Europe could easily be cut by the US Navy in case of war; something that would compromise its economy and its energy security. Chokepoints like the straits of Malacca, Hormuz, Bab el-Mandeb and Suez are particularly vulnerable.

Similar considerations are at the base of Japan’s and South Korea’s presence in the Arctic. However, in their case the security dimension is different: they fear that China, or a Sino-American war, may disrupt trade along the traditional routes; and because of this they want to open the alternative seaway to Europe.

But will the NSR actually solve their strategic problem?

The new chokepoints: Bering and the North Atlantic

The traditional shipping lanes are effectively exposed to threats. The US can easily block them, but China and other powers also have some capacity in this regard. In addition, piracy can also be a problem. So, China and other Asian countries consider the Arctic routes as a safer alternative. However, they also have their narrow passages, which will assume a great strategic importance if Arctic trade develops.

The first and most important one is the Bering Strait, and 82-kilometres wide channel that divides Siberia and Alaska. It is the only connection between the Pacific and the Arctic, making of it the prominent strategic passage for Polar trade. In other words, who controls Bering also controls the shipping flow across the Arctic. Now, this power can be either Russia or the US. But for them, the Strait is not only important due to trade: it is also a matter of national security. For Russia, it is the only point where it can directly attack the US territory with ease short of using ballistic missiles. Due to the presence of a developed oil industry, hitting Alaska would allow Russia to damage America’s economy and to create a useful diversion. This eventuality, in turn, means that the area takes a significant military importance for Washington as well. Additionally, if Arctic trade develops, blocking the Bering Strait would allow the US to damage both China and Russia, its two main competitors. It is therefore not surprising that both America and Russia have military bases and perform manoeuvers around Bering, whose militarization is expected to continue as long as more and more ships travel through the Arctic. It is likely that both sides will deploy Anti-Access / Area Denial assets along its coasts as a mean to ensure their control over it by impeding the enemy forces to operate.

As far as China is concerned, Bering will also take a major strategic importance. But while its naval build-up will allow it to deploy its Navy in the area, China will have to rely on Russia to ensure that the Strait remains open. This implies that its access to the Arctic could be seriously hampered in case its relations with Moscow deteriorated, which is a possibility that should not be excluded in the long term due to a series of possible contrasts that may emerge. Moreover, from Beijing’s perspective Bering is not even the first chokepoint to be crossed to reach the Arctic: before, its ships need to pass either through the Korea Strait or the La Pérouse Strait. The former divides Korea and Japan, while the latter separates the Japanese island of Hokkaidō from Russia’s Sakhalin. Both are extremely vulnerable, since the US or even Japan may easily block them and deny China its access to the Arctic.

The second susceptible area is located at the other end of the NSR. It is not a single strait; rather, it is a group of maritime zones that connect the Arctic with the Atlantic. Each of them is sensibly wider than Bering, but they are narrow enough to allow a great military power like the US to mount a blockade capable of disrupting the regularity of trade flows; especially considering the performance of modern missiles and aircraft. Among these areas, the most famous and relevant is certainly the GIUK Gap, which takes its name from the initials of the three countries forming it; namely Greenland, Iceland, and the UK. Once the maritime frontline of the Cold War, it lost its importance after the fall of the Soviet Union. But if the NSR becomes a viable lane, its strategic importance will emerge once again; also because the Russian Navy is becoming active in the Atlantic once again and because Chinese ships may follow. That said, there are two other passages in the Atlantic: first, the North Sea; second, the Davis Strait, which divides Canada and Greenland and is one of the extremities of the Northwest Passage. The US and NATO can block both of them quite easily.

Finally, it should be noted that such areas work in both senses: cargos travelling from the Atlantic to the Pacific via the Arctic also need to cross the aforementioned passages. This means that Russia, and to a lesser degree China, may block them to damage Western economies; even though this would also harm themselves. Thanks to its powerful military and to its favorable geographic position, Russia is particularly well placed to act as the “Arctic seaways gatekeeper” and exploit this to exert pressure on the West or, if necessary, on China.

What future for Arctic trade?

By now, the importance of the Arctic’s chokepoints remains limited, because the trade volume across the region is still very low. But as the Polar ice cap shrinks and the Northern shipping lanes are developed, these passages will acquire a greater relevance in both economic and military terms.

Yet, the Arctic seaways will not resolve the chokepoint problem for China and other Asian powers: they will simply move it to the North. Nevertheless, such countries will probably develop such routes, because their economic sense remains as long as peace reigns: they are faster and cheaper than traditional ones. Moreover, energy deposits should not be forgotten as well. It will take decades, but the Arctic routes can reshape the world’s maritime trade; and the northern passages will become a great power battleground in case war breaks out.

Geopolitics of Brazil

Brazil is South America’s emerging power. It is the largest and most populous country in the continent; and it benefits from a favourable geographic position, important natural resources and a growing economy. As such, it is taking a more active international role both in the region and beyond. Yet, it must also face notable challenges; notably corruption, criminality, inequality and others; all of which may undermine its rise as a great power.

Geography and Brazil’s rise

Like any other country, Brazil’s geopolitics can be examined as a combination of three factors: dimension, configuration and position.

Brazil covers a total area of about 8,515,000 square kilometres, making of it the 5th country in the world in terms of size. This puts Brazil in a favourable position to dominate the continent, as it can access any region with relative ease. Similarly, its 7,500 kilometres-long coastline on the Atlantic Ocean enables Brazil to easily project its power abroad and to engage in lucrative maritime trade.

In terms of configuration, Brazil’s territory can roughly be divided in two parts. The north-west is centred on the Amazon river basin and its vast rainforest, the largest in the world and a real treasure in terms of biodiversity. The south-east is made up of ridges and mountain ranges crossed by the Parana river. As a matter of facts, watercourses are an important feature in Brazil’s geography: the country has a complex hydrographic system that brings significant benefits to electric power generation and agriculture, which is also favoured by Brazil’s warm climate. Most of Brazil’s 208 million citizens, the majority of which are young people, live in the cities along the coast. This has resulted into vast metropolis where economic prosperity meets overcrowded slums.

But position is Brazil’s most important characteristic. It borders ten nations, meaning all the countries in South America except Ecuador and Chile. None of its neighbours represents a real threat, and not only because relations are generally good: Brazil is simply more powerful than any of them. Even Argentina, the second most influent country in the continent, cannot seriously challenge Brazil’s supremacy due to a worse geopolitical and economic situation. Other states are not a real matter of concern; yet, they are important for Brazil’s own geopolitical ambitions. Brazil wants to extend its influence westwards to connect the Atlantic and the Pacific Oceans so to unlock its innermost territories, become the centre of coast-to-coast trade and increase its regional influence. To reach this objective, Brazil needs to keep the URAPABOL area in its sphere of influence. This zone takes its name after the three states composing it: Uruguay, Paraguay and Bolivia. They are seen as South America’s geopolitical pivot, meaning that the power who controls them can extend its influence over all the continent and obtain a dominant position. Moreover, the URAPABOL states were also seen as useful buffer zone against foreign threats and Argentina in particular; even though today the likelihood of a war is really remote. For these reasons, Brazil is attentive to maintain a solid political, economic and demographic presence in these three countries. But Brazil’s is also located along the Atlantic’s coasts, meaning that it can easily reach the large American and European markets to the North; as well as Africa with its natural resources and many fast-growing economies. So, Brazil also wants to become a naval power to boost its economy and develop its Navy to project its power abroad.

Brazil’s economic & military outlook

Apart from geography, Brazil also has natural resources, a considerable economic potential and important military means.

Brazil is certainly South America’s leading economy, but its outlook is made of mixed figures. This year, its GDP is projected to reach 1.9 thousand billion dollars, which goes to 3.5 thousand in terms of Purchasing Power Parity. The expected growth rate is of 2.4% in current prices. Brazil was at the 9th place on the list of the world’s largest economies in 2018, and it is expected to reach the 5th position by 2050. Its per capita GDP will stand around 16.7 thousand dollars in 2019, a relatively low figure to be combined with an unequal distribution of wealth. After years of high inflation, the price growth seems to have stabilized at around 3.5%. The debt of the central government is on the rise, amounting to almost 79% of the GDP in 2017, Along with a slight budget deficit of around 1%, this trend can become problematic in the long term. Unemployment affects 10.7% of the population today, and 4% of Brazilians lived below the poverty line in 2016. The trade balance has been in constant surplus for years, sustained by agriculture and manufacturing exports. As a matter of fact, Brazil is a true agronomic giant and its industry is also developing in many sectors. In addition, it also hosts significant hydrocarbon and mineral reserves, and is a leading producer of biogas. However, this has negative environmental consequences: huge swathes of the Amazon rainforest have been cut to grow the crops required for producing biogas; and also for other reasons like timber production. Brazil has nuclear reactors for energy generation and infrastructures are being improved, but much work remains to be done.

This overview shows that Brazil is indeed an emerging country, but like other economies in analogous conditions it has still considerable challenges to deal with. Corruption, poverty and inequality continue affecting its economy. This has important repercussions on the country’s political life, since similar matters are a cause of social unrest and high crime rates. In fact, Jair Bolsonaro has been elected President largely out of promises of tackling corruption, reforming the economy and crushing criminality.

Brazil is the main power in South America also in military terms. It spends regularly more than 1.32% of its GDP on defence, and it possesses large and well-equipped armed forces who remain politically influential. The Army includes, among others, specialized units for jungle warfare and a vast park of vehicles. It also maintains the Strategic Rapid Action Force, ready to be deployed anywhere in the country at a short notice. In recent years, due to better relations with Argentina and in accordance to its strategy to extend its power westwards, it has relocated many units in the Amazon area. The Air Force operates fighters, cargos and airborne warning & control planes. But the Navy is the most notable component of the Brazilian military, as it is a powerful mean of power projection. Today, it includes diesel-electric submarines, landing ships and a helicopter carrier plus naval aviation and marines; and it also plans to deploy a nuclear-powered attack submarine by 2025. Finally, Brazil also possesses a considerable defence industry and carries on its own space program.

Brazil’s foreign relations

Brazil’s foreign policy is largely based on multilateralism. It maintains pretty good relations with its neighbours, and it is a member of the main regional bodies like the Organization of American States, the Union of South American Nations and the Southern Common Market; where it plays an important role in promoting integration. It provides economic aid to developing countries, notably African ones; but this is also motivated by economic interests, like accessing resources and opening new markets for Brazilian firms. It also takes part to UN missions and promotes the enlargement of the UN Security Council. Moreover, it is a member of the informal BRICS group along with Russia, India, China and South Africa; and it keeps cooperating with all of them all while maintaining good ties with the US and with European countries.

Now that Bolsonaro is President, US-Brazil relations will receive a boost: Bolsonaro is openly pro-American and share many similar views with Trump: they oppose immigration, they are close to Christian and conservative groups, they promise to crush criminality and fight terrorism, they are favourable to death penalty, they support the rights of gun owners, their economic policy focuses on privatization and deregulation at home while protecting their industry from foreign competition by introducing tariffs, they criticize authoritarian regimes and are very friendly towards Israel and other pro-US states like Japan or South Korea, and they are hostile to foreign (and especially Chinese) economic penetration in their countries. Since Brazil is the main power in South America and the only one capable of countering US supremacy to some degree, Bolsonaro’s election is a gift for America: it virtually ensures that Brazil will remain friendly and that it will oppose rival powers like China and Russia. Both of them are indeed expanding their presence in South America to access resources and to subtract the area from American influence, but now their efforts risk being thwarted. Nevertheless, China remains a central economic partner for Brazil, and along with Russia it will continue to extend its presence in South America. Brazil, on its part, will maintain its multilateral approach to diversify its partnerships, maximize its benefits and increase its global influence.

Conclusion

Brazil is South America’s main power and its influence in international affairs will certainly increase in the future. Yet, its economic growth is not as spectacular as China’s or India’s; and it has to face many challenges like poverty and inequality, environmental degradation, corruption and social unrest. All such factors will limit its geopolitical role. But Brazil, is that contrarily to other emerging countries, it is not involved in rivalries with other states and it is not challenging the existing international order. Instead, it focuses on multilateralism and mutually-beneficial cooperation. This is probably the most remarkable aspect of Brazil’s rise: at least by now, it looks that it will be peaceful and not destabilizing.

Is Macron a friend of the Rich?

Recently France has been swayed by large scale protests carried out by tens of thousands of its citizens in response to a series of economic reforms since the new government came to power in 2017. A growing mistrust amid the tax cuts on corporations and high earners while raising taxes for the working class has prompted the people to put pressure on the government to make big changes.

Emmanuel Macron founded the centrist movement named “En Marche!” in April 2016 and much to the surprise of many, won the elections the following year. The French saw promise in Macron’s manifesto, which promised significant economic reforms backed up by his relevant experiences both in the public and private sectors. The fragile economy and mistrust for the previous regime left the people with no options but to take a risk instead of voting far-right candidate Marine Le Pen. However as the recent “Yellow Vests” movement spread out in France the truths behind the reforms have only started to get publicity.

Historical information

Francois Hollande, who preceded Macron as President, failed to live up to expectations having faced major opposition from his proposed economic and employment reforms. He faced criticism for many issues including failing to address difficulties in integrating immigrants into the French society and even pandering to the right with his comments on stripping French citizens with dual nationalities off their citizenship following the high profile terrorist attacks that shook the country, including the Charlie Hebdo shooting in 2015 and the Nice truck attack in 2016. Hollande decided not to re-run for the election due to a combination of social, political and economic frailties and the huge mistrust shared among the French citizens.[1] Macron on the other hand was appointed Deputy Secretary General to Hollande in 2012, while also serving as Minister of Economy, Industry and Digital Affairs between 2014 and 2016, where he formulated several business reforms to aid the economy.[2]

Macron was born in Amiens, France and is an alumnus of the elite École Nationale d’Administration. He showed great aptitude in the areas of literature, politics and theatre at an early age and had been able to forge powerful connections during his time as an inspector at the French Finance Ministry during Nicolas Sarkozy’s tenure as President. However he switched civil service to work in investment banking at Rothchilde and Co where he swiftly rose up the ranks to become managing director before being appointed as Francois Hollande’s staff. [3] His most significant contribution in investment banking was his crucial role in advising Nestlé on its USD 12 billion acquisition of a unit of Pfizer in 2012 which earned the nickname- “the Mozart of finance”.[4]

Despite public protests as, the business reform package he introduced in 2015 as Finance Minister was forced through parliament by then Prime Minister Manuel Valls who invoked the special article 49.3 procedure which also received criticism from within the ruling Socialist party.[5] However he soon resigned (in 2016), and founded En Marche! And announced his candidacy for the 2017 presidential election. His manifesto attracted a lot of attention, and was even able to gain support from both the left and the right, especially through his proposals that aimed at lowering housing and corporate taxes, reforming pensions and welfare, and allocating substantial resources.

He became France’s youngest ever president by defeating Le Pen in 2017. He had received 66.1 percent of the 47 million votes cast. He had never held an elected post but it did not seem very difficult for him to achieve his objective.

Plans for the economy/budget:

The biggest test, and also Macron’s main objective has been to overhaul France’s economy. He inherited a very poorly performing economy from his predecessor with the biggest challenges being[6]:

  • 10% unemployment, and nearly one in four among under-25s
  • Bloated public spending (56% of GDP compared with 44% in Germany and 39% in the UK)
  • Low economic growth

 His twin aims are to boost investment and set up a “new growth model” that is both good for social mobility and the environment. Macron has been advocating a Nordic-style economic model that mixes spending cuts of 60 billion euros with a 50 billion euro stimulus package over the same period. The “spend and save” system that Macron plans is meant to mix targeted public spending with fiscal discipline as a Nordic model. Besides lowering corporate tax rate from 33 to 25 percent he also has plans to slash 120,000 jobs from France’s bloated civil service while lowering companies and households; tax bill by 20 billion euros.[7] These are part of the major economic reforms that Macron has planned while making France stick to the EU government deficit limit of 3 percent of GDP.[8]

Security and Defence

In light of the recent terrorist attacks that have rattled France and resulted in the loss of hundreds of lives, Macron has proposed increase in defence and policing by recruiting 10,000 new police officers and expand prison capacities. He also advocates the idea of an EU army, and has been promoting joint military projects and setting up a permanent European headquarters.

Some of his notable plans for governance includes reducing number of lawmakers by a third in both the Senate and National Assembly, banning the hiring of family-members as assistants of lawmakers, and banning consulting activity for people holding elected office.[9]

Foreign relations and others

France’s commitment to 2015 Paris climate agreement has been among the key global issues that Macron has promised to back-up and promote since his early days in the office.

When it comes to foreign relations he has voiced support for multilateral institutions such as the UN security council, however also supporting the promotion of the French language and Francophone institutions as “an essential vector of our influence and a weapon against the spread of radicalism”. He stands strong against the Syrian regime led by Bashar al Assad and wants him to answer for his crimes before an international tribunal while being a strong critic of Russian policy, backing EU sanctions following the Ukraine crisis.

Europe

Macron is pro-EU and has campaigned for greater cooperation and integration within the EU on fiscal, environmental and social regulation. In his European agenda he has expressed his plans towards a common fiscal policy, a joint finance minister, implementation of the banking union and a bolstered bilateral relations with Germany.[10]

Macron’s tenure as president

Macron came to power at a problematic time- he faced a massive restructuring of regional powers following the Brexit referendum, as well as US President Donald Trump’s reshuffling of American interests. These major changes made the situation a little more difficult from the very start, and especially after the shocking withdrawal of the US from the Paris climate accord, a decision made my Trump himself, who does not believe in climate change. This prompted Macron to offer France as a second homeland to climate researchers.

One of the first things he did was making a state visit immediately after his election to meet Angela Merkel in his quest for improved Franco-German relations and since forged a strong relationship with Merkel and agreed on a “common roadmap” for Europe. However Merkel has a more cautious approach than Macron when it comes to major issues concerning the EU.[11]

He has always been vocal about increased European cooperation on many issues, and has been pushing for a “European Army” to improve security in the EU-with Merkel quick to endorse Macron’s plan, and . Macron also voiced strong interests to pursue security dialogue with Russia seeking to improve EU-Russia relations especially in terms of security.

In France

Macron had been quick in pressing for reforms soon as he took charge- with one of his first significant contributions being against mass corruption and nepotism in French politics- introducing a ban on elected representative from hiring family members.[12]

Yellow vests movement

In the May 2018, a political movement arose that challenged Macron’s economic reforms. It has been named “Mouvement des gilets jaunes” or the “Yellow Vests Movement” where demonstrations started on 17 November 2018, months after it was created. The main protagonists of the now ongoing movement are the ordinary working and middle class French citizens who strongly feel that Macron is not the leader for the ordinary working class. What triggered the movement was the proposal to keep increasing a direct tax on fuel, as well as the carbon tax. Although Macron stated that these were part of his plans to reduce fossil fuel reliance but it has been widely criticised as an act of “taxing the poor to tackle climate change”.[13]

In his first budget Macron’s business friendly government had proposed trimming corporate rates and a “wealth tax” on the rich, explaining that boosting investment will aid the economy, however also increasing certain taxes such as one on low-income pensioners. While giving tax breaks to big corporations, plans of charging lower taxes on high-paid workers in certain industries have garnered mistrust from ordinary citizens and political rivals alike, with the left-wing calling him “Hero to the rich”.[14] He also moved to loosen hiring and firing regulations on companies to improve France’s paralysed labour market.

Protests have been going on for over a month and hundreds of thousands of French citizens have taken part in what seems to be an anti-Macron rebellion, with the premier making a U-turn by suspending the proposed tax hike amid the protests that have turned violent. French authorities have deployed nearly a hundred thousand security forces during several days of protests detaining thousands and using anti-riot weapons such as tear gas against protestors.[15]

In a very recent bid to end the standoff, Macron announced a package of measures for low-income workers estimated by economists to cost up to 15 billion euros. Besides suspending the fuel-tax hike plans for six months, he also announced raising the minimum wage by a 100 euros per month from 2019 while scrapping the recent increase in social security taxes on pensioners earning less than 2000 euros.[16]

The protests are still ongoing with protestors expecting their 42 directives to be accepted. However recently it has garnered criticism for a lack of leader and organisation, and violence by protestors and use of force by police has already resulted in over 500 injuries. Despite Macron announcing several major changes bowing down to protestors, there are many demands to yet to be met and it is not clear when or how the Yellow Vests Movement will end.

Conclusion

Macron, poised to become “Europe’s next leader” as Merkel nears her exit from politics, saw a major slump in his popularity since the protests. Falling out of favour may mean nationalists such as Marine Le Pen gaining support, and with the rise of the populism in Europe in the past few years, it may not come as a surprise if France leans towards the far-right. A major shift in powers may make the situation in the region volatile and with France being a major power in the EU, and with the UK poised to officially leave the EU in a few months, it would cause a major restructuring in regional powers and interests. Most concerning of all, with countries such as Italy, Hungary and Poland having already given in to populism, a major power joining their ranks will shake up the EU and prove to be a major challenge in the future of the EU. The current situation and its developments in France will have a significant impact on the economic and political stability in the rest of Europe.

[1] https://theconversation.com/where-did-it-all-go-wrong-francois-hollande-flops-out-of-presidential-race-69806

[2] https://www.biography.com/people/emmanuel-macron-050817

[3] https://www.nouvelobs.com/rue89/20160830.RUE5451/au-fait-il-faisait-quoi-chez-rothschild-emmanuel-macron.html

[4] https://www.ft.com/content/9bd62502-12cf-11e7-b0c1-37e417ee6c76

[5] Revault d’Allonnes, David (17 February 2015). “Loi Macron : comment le 49-3 a été dégainé comme un dernier recours”

[6] https://www.bbc.com/news/world-europe-39845905

[7] https://www.bbc.com/news/world-europe-39845905

[8] https://www.ft.com/content/37223e92-3319-11e7-bce4-9023f8c0fd2e

[9] https://www.reuters.com/article/us-france-protests/french-yellow-vests-protest-in-their-thousands-for-fifth-saturday-idUSKBN1OE0BF

[10] https://www.ft.com/content/37223e92-3319-11e7-bce4-9023f8c0fd2e

[11] “Emmanuel Macron and Angela Merkel pledge to draw up ‘common road map’ for Europe”. The Telegraph. 15 May 2017

[12] “France bans hiring of spouses by politicians in wake of Fillon scandal”. Reuters. 27 July 2017.

[13] https://www.politico.eu/article/macrons-mistake-taxing-the-poor-to-tackle-climate-change/

[14] https://www.thelocal.fr/20170927/hero-to-the-rich-macron-cuts-taxes-for-wealthy-in-first-french-budget-france

[15] https://www.reuters.com/article/us-france-protests-tax/france-drops-fuel-tax-hike-as-yellow-vest-anger-persists-idUSKBN1O40PQ

[16] https://www.france24.com/en/20181210-macron-france-tax-cuts-raise-wages-speech-yellow-vest-unrest

Modern Nations – Rise of Muslims Episode 7

Based entirely on the book by Ali Mahmood titled “Muslims” –

Purchase using this link – https://www.kjvids.co.uk/product/muslims/

In this episode, Author Ali Mahmood, looks at the emergence of Muslim nation states following the collapse of the Ottoman empire. He looks at the birth of modern Egypt, Pakistan, Afghanistan and Iran.

Important links we want you to check out;

Sponsor our next video – https://www.fundmyvideo.com/kjvids
Keep us Independent – https://www.fundmypage.com/kjvids
KJ Vids Book Store – https://www.kjvids.co.uk/books
Patreon Perks – https://www.patreon.com/kjvids
Amazon Shop – https://www.amazon.co.uk/shop/kjvids
Get $10 of Rev’s Caption Service – https://www.rev.com/blog/coupon/?ref=kasimjaved
All other enquiries – info@kjvids.co.uk

Watch our other Playlists

Geopolitics – https://goo.gl/haQTbJ
Global Trends – https://goo.gl/9q2NHL
International Relations – https://goo.gl/Jzvous
Leaders – https://goo.gl/46fhwA
Public Opinion – https://goo.gl/BvNicA
Strategy – https://goo.gl/Z1NnqW
Quick History – https://goo.gl/fnVkbA

Africa – https://goo.gl/4MQ4Ts
America – https://goo.gl/cTBuji
East Asia – https://goo.gl/73hZsK
Europe – https://goo.gl/TMq2cv
Middle East & The Gulf – https://goo.gl/Vk9jYD
UK – https://goo.gl/KSW9fz
South Asia – https://goo.gl/Pd2nRf
South America – https://goo.gl/BZH8Ch

Scroll to top