China-Japan Boom-Boom .
Andre Willers
19 Feb 2014
Synopsis :
Unfinished Business . Revenge . Spoiling for a fight .
Typically Human .
Discussion :
1.Large-scale nuclear re-arming of Japan to counter North-Korean
threat has made forward anti-ballistic
missile bases imperative for both sides .
2.Hence the present Chinese rapprochement with Taiwan . To
prevent a war on two fronts .
3.The real reason is not only the oil and minerals on the
seafloor , but the clathrate deposits . Much more valuable than oil .
4. See what Stratfor has to say about it in Appendix A .
5. The Tacit Understanding :
A limited war between Japan and China , ostensibly about the
islands .
This enables both countries to build up military systems to
counter real crazies like North Korea .
Unfortunately , this is exactly the same strategy that was
used Iraq-Iran in the 1990’s .
I do not see any enthusiastic volunteers for the Saddam
Hussein role .
Who is the patsy ?
6. The Limited War will suddenly become unlimited as chaotic
passions are unleashed .
7. Essentially , if a deal between Taiwan and China is
reached , withdraw all investments from that theatre .
8.The analog is the Nazi-Stalin pact enabling the conquest
of Western Europe .
War , limited or not , will then be inevitable .
And I have no confidence in the abilities of any of the
parties involved to keep it limited .
And there are at least 8 nuclear capable nations involved .
9.Interesting Aside :
The nation most able to survive such a conflict is Vietnam .
Been there , done that .
Isn’t geopolitics fun ?
Andre
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Appendix A
By Hung Tran
|
January 16, 2014
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Robert Kaplan, chief
geopolitical strategist for Stratfor and one of the preeminent geopolitical
thinkers of his generation, is troubled by rising tensions between Japan and
China. Kaplan sees a small but very real possibility of upheaval in that vital
region, as China and Japan, the world’s second- and third-biggest economies,
address their challenges and begin projecting more power.
Kaplan, an established
author who will also be a keynote speaker at the Inside ETFs conference
later this month, spoke with IndexUniverse staff writer Hung Tran about China’s
slowing growth; his high hopes for Mexico and India; and his worries about the
emerging markets
of
Indonesia and Turkey.
of
Indonesia and Turkey.
IU.com: In terms of
the biggest flash point on the planet, where is it? Iran? North Korea?
Kaplan: No, I don’t see it in either. I see it
in China because China’s growth rate is slowing down. The economic model of the
past 30 years is grinding to a halt.
Chinese statistics
lie. The growth rate is not 7.5 percent; it’s probably substantially lower,
particularly on the coast. I see China entering a period of more political and
economic upheaval, and China’s challenge is more geographical than economic.
But the economic
problems and social problems will accentuate the geographical challenge, which
is that the Han core of the arable lowlands of China is surrounded on three
sides by the high tablelands of Inner Mongolia, Turkestan and Tibet.
And that’s where all
the groundwater, minerals and strategic metals are. And a more open China,
a China in more economic disarray, is going to be a China with more ethnic
unrest.
China,
a China in more economic disarray, is going to be a China with more ethnic
unrest.
IU.com: The U.S. now
has a prominent naval presence in Australia. What effects is that having on
China?
Kaplan: It was announced about a year and a half
ago that the U.S. is going to rotate 2,500 Marines through Darwin, Australia,
to sort of disaggregate its military force structure, to cover not just the
Pacific, but the Greater Indian Ocean as well.
It’s doing that to
kind of force dispersal so that it can have watch over
the Bay of Bengal, Myanmar, Indonesia, the Strait of Malacca and other places.
The Indian Ocean is the world’s energy “interstate”—all the oil and natural gas
come from the Greater Middle East, across the Indian Ocean to the middle-class
centers of coastal China, South Korea and Japan. That makes the South China Sea
and the Eastern Indian Ocean very strategic.
over
the Bay of Bengal, Myanmar, Indonesia, the Strait of Malacca and other places.
The Indian Ocean is the world’s energy “interstate”—all the oil and natural gas
come from the Greater Middle East, across the Indian Ocean to the middle-class
centers of coastal China, South Korea and Japan. That makes the South China Sea
and the Eastern Indian Ocean very strategic.
The Chinese have
reacted not to this specifically, but to the general accentuation that both the
first Obama administration and the second Obama administration has put on Asia.
The Chinese have had it easy for 20 years. The U.S. was supposed to pivot to
Asia when the Berlin Wall fell. But the U.S. got distracted because of the
first Gulf War, the Northern and Southern no-fly zones for 12 years, then 9/11
and the invasions of Afghanistan and Iraq.
Kaplan (cont'd.): And so the Chinese, more or less, were
able to develop their military, their ability to project economic, diplomatic
and military power through the Pacific Basin, with the U.S. distracted
elsewhere in the Greater Middle East. This is coming to an end. So we’re seeing
a natural organic pivot to Asia by Washington and the 2,500 Marines in Darwin,
Australia, is just a very small part of that.
The U.S. dominated the
Pacific, the Pacific Basin and the Western Pacific for the Cold War decades and
a decade or so after. The Pacific Basin was essentially an American lake. So it
was a unipolar military theater environment. That is changing.
It’s becoming more
multipolar. China has put a lot of emphasis on its navy, air force and
land-based ballistic missile force since 1996. So the people up and down the
Pacific, from Japan to Australia, are nervous. They’re nervous about rising
Chinese power, about America that’s still distracted elsewhere, and about
stresses in the American defense and military budgets.
IU.com: You touched on
Japan, and from an ETF perspective, investors were very bullish on the Japanese
market last year, based on “Abenomics.” But should they be just as bullish in
2014?
Kaplan: I think the important thing to watch for
is that the Japanese/Chinese tensions will probably stay where they are, and
may even rise a bit in 2014. So that the East China Sea is going to be very
tense and unstable. This does not mean that hostilities will break out, but it
increases the possibility of an incident that could get out of hand. And that
could affect markets very
much.
very
much.
I see Japanese power
rising and I see Japan returning to being a normal nation with normal
geopolitical goals,
and with an increasingly robust and modernized military. Japan now has four
times as many major warships at sea than the British Royal Navy, so Japan is
becoming a very consequential power.
,
and with an increasingly robust and modernized military. Japan now has four
times as many major warships at sea than the British Royal Navy, so Japan is
becoming a very consequential power.
IU.com: What are your
views on Indonesia and India, which were problematic countries last year for
investors?
Kaplan: I’m nervous about Indonesia because Indonesia
has vast structural and infrastructure problems. I find Jakarta the most
congested city in the world. It can take the better part of a day just getting
from one part of the city to the other.
Indonesia is a
sprawling archipelago that, from west to east, is as wide as the continental
U.S. It’s very badly institutionalized—one of the most corrupt places in the
world. President Susilo Bambang Yudhoyono has been very good. He’s made a lot
of progress and kept the country together, even though a number of analysts had
predicted chaos and anarchy after the overthrow of former President Suharto at
the end of the last century.
But it’s unclear
whether whoever is going to replace President Yudhoyono is going to be as good.
Because, again, institutions are weak. It’s a very difficult geography.
Indonesia may be more a fad than anything else at this point.
Indian growth rates
have come down, but India is still growing faster than most places in the
developed world. India is very stable, whereas China is like a benign
authoritarian system, and has the possibility of upheavals and a return to
a kind of personality cult.
to
a kind of personality cult.
India doesn’t face
those difficulties,
but I think India in 2014 is going to have a national election. You could have
Rahul Gandhi elected or you could have Narendra Modi elected.
,
but I think India in 2014 is going to have a national election. You could have
Rahul Gandhi elected or you could have Narendra Modi elected.
Kaplan (cont'd.): Gandhi would just be business as usual with the same level of
corruption and no real economic reform. He’s there only because of his family
name, not because of any talent on his part. Modi is much more interesting
because he is loved by the Indian business community. Modi is a man who gets
things done. He turned Gujarat state as state minister into the most
business-friendly environment in all of India.
But Modi also is a
Hindu nationalist, tainted by the events of 2002 in Gujarat, where large numbersof
Muslims were killed. He can’t even get a visa to the U.S. at this point because
of that, but he’s very interesting. He’s the most charismatic Indian leader
since Indira Gandhi, and he would have a different economic policy, a different
foreign policy. There would be a lot of focus on India if Modi is elected.
of
Muslims were killed. He can’t even get a visa to the U.S. at this point because
of that, but he’s very interesting. He’s the most charismatic Indian leader
since Indira Gandhi, and he would have a different economic policy, a different
foreign policy. There would be a lot of focus on India if Modi is elected.
IU.com: What is your
take on Vietnam, which was one of the bright spots of the emergingmarkets in
2013?
in
2013?
Kaplan: Vietnam has had quite a long time of
dynamic economic development, and when you have that for quite a long time, you
go through a period where institutions cannot keep up.
With rapid economic
growth, you tend to have more corruption in any society, so you need
institutional reform. You need a lot of kind of dull things that need to happen
before you can get to thenext stage.
stage.
Vietnam is like
nominally communist, where nobody believes in the ideology, but it’s still the
ruling party. I think Vietnam will muddle through and have the capability to be
a sort of middle-level power, a kind of maritime Turkey, if you will.
IU.com: You touched on
Turkey, which is an interesting place because of the scandals and corruption
happening there recently. There’s speculation that
the new election is going to happen there in 2014.
that
the new election is going to happen there in 2014.
Kaplan: You have a democratic system and the
same party in power since late 2002. In democratic systems, when you’ve had the
same prime minister for 11 years, the system gets tired and tends to become
corrupt, and different power centers emerge. Margaret Thatcher barely lasted
that long and then she was toppled from within her own party.
The same kind of thing
is happening to Turkish Prime Minister Recep Tayyip Erdogan. But the secular
opposition to Erdogan’s Justice and Development Party really cannot topple him
because they don’t have the support. Erdogan would win an election tomorrow in
Turkey, though by a smaller majority than in the past.
I think the evolution
will not be from the Islamic Justice Party to a secular party. I think it will,
rather, be from Erdogan to maybe the current president, Abdullah Gul, who could
become prime minister.
And Gul and Erdogan
represent different temperaments of the Islamic Justice Party. Erdogan is more
autocratic. He’s more resentful, in terms of being anti-Western. Gul is
different. He’s more moderate, less autocratic and would be better liked by the
West.
So I think it’s the
relationship between Abdullah Gul and Tayyip Erdogan that you have to watchfor
in 2014. I don’t see the Islamists being toppled, but I do see Turkey being
preoccupied internally with politics, which will make it harder for Turkey to
project power out into the Middle East.
for
in 2014. I don’t see the Islamists being toppled, but I do see Turkey being
preoccupied internally with politics, which will make it harder for Turkey to
project power out into the Middle East.
IU.com: And where do
you see the eurozone going this year, with Spain and Portugal all emerging from
recession last year, and possibly followed by Greece this year?
Kaplan: The eurozone will hold together, but
it’s going to be another year of high unemployment rates, low growth. The
European crisis will just go on and on, and I don’t see a breakthrough. The EU
is losing geopolitical strength in central and Eastern Europe,
and the Russians are trying to fill that.
Europe,
and the Russians are trying to fill that.
The Russians are more
and more active in places like Poland, Slovakia, Czech Republic, Romania and
Hungary. I see Europe increasingly differentiating between those members of the
EU within the eurozone and those without the euro, and not a party to the
Schengen agreement [borderless eurozone].
The key thing for
investors to watch for
about Europe is the French economy. Will France go toward the direction of
Italy and Spain; in other words, towards economic dysfunction? Or will France
recover?
for
about Europe is the French economy. Will France go toward the direction of
Italy and Spain; in other words, towards economic dysfunction? Or will France
recover?
Because, remember what
the EU and postwar Europe have always been for 65-odd years: It’s been a
French-German condominium. It’s rested upon France taking the political lead
and Germany taking the economic lead, with both states more or less running
Europe through their own bilateral relationship. If France falters, if France
becomes another Spain or Italy, that’s going to unhinge Europe.
IU.com: In terms of
Brazil’s oil production revving up in recent years, what’s your take on the
future of Brazil and its relationship with the U.S. in the next decade?
decade?
Kaplan: I think Brazil has a higher reputation
than it deserves. It’s weakly institutionalized and has a lot of economic and
social problems. I don’t see it being a robust middle-level power too quickly.
I think the real country in Latin America that was impressive in 2013 was not
Brazil, but Mexico, because Mexico was reforming its economy.
Mexico is opening up
its energy sector to outside investment,
which means investment from the United States primarily, particularly for
Texas. That’s going to bind Mexico and the U.S. closer together. Mexico’s
economic growth has basically led to a severe drop in the immigration of
Mexicans from Mexico to the United States. So the whole notion of the U.S.
being overrun by Mexicans has been proven false, based on statistics of the
last two or three years or so.
,
which means investment from the United States primarily, particularly for
Texas. That’s going to bind Mexico and the U.S. closer together. Mexico’s
economic growth has basically led to a severe drop in the immigration of
Mexicans from Mexico to the United States. So the whole notion of the U.S.
being overrun by Mexicans has been proven false, based on statistics of the
last two or three years or so.
IU.com: Finally,
what’s your view of the U.S. and its position as a superpower?
Kaplan: The U.S., in the first half of the 21st century,
will have enormous energy reserves. It’s still blessed by geography and natural
resources and so, in relative terms, U.S. power will not go down. In fact, it
may even increase a bit because whatever problems you find in the U.S., the
fundamental structural problems of Europe and China are more severe. And
middle-level powers like India, and potentially Vietnam and Turkey, are
precisely middle-level powers. They’re not major powers.
So in terms of
relative positioning, U.S. power will remain supreme for at least the next few
decades.
few
decades.
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