BRICS isn’t de-dollarizing anytime soon – Asia Times

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BRICS Summit host Russian President Vladimir Putin disappointed both anti-colonial enthusiasts and Western alarmists last week by conceding that the bloc’s members “have not built and are not” building a payment system to challenge the US dollar-based global banking system.

The leaders of the two economic giants present at the summit, China’s Xi Jinping and India’s Narendra Modi, did not mention alternative payment arrangements in their respective remarks.

The technical requirements for alternative payment systems aren’t the problem. The SWIFT system that controls interbank payments in dollars and other major Western currencies merely transmits secure messages.

The challenge, rather, is economic: US demand for imports fuels an outsized portion of economic growth in the Global South. China’s exports to the US amount to just 2.3% of its GDP, but about half of its surge in exports to the Global South since 2020 depends on re-exports to the United States.

While China’s exports to the Global South more than doubled from about US$60 billion a month to $140 billion a month, US imports from the Global South rose from about $60 billion a month to $100 billion a month during the past four years.

Graphic: Asia Times

Dependence on the US market varies widely across the universe of developing countries. Vietnam and Mexico, the two favorite venues for so-called “friend-shoring,” that is, transferring production away from China to putatively friendlier countries, registered big increases in exports to the US as a share of GDP.

Vietnam’s exports to the US in 2023 amounted to about 27% of the country’s GDP, compared to just 10% in 2020, while Mexico’s US exports rose to 27% of GDP in 2023 from 20% in 2010.

Graphic: Asia Times

Singapore and Malaysia, by contrast, showed little increase in US exports as a share of GDP. Indonesia and Brazil export comparatively little to the United States.

Some Asian countries, notably Malaysia and Thailand, export more than 60% of their GDP, mainly to other Asian countries. Brazil, Indonesia and China are far less export-dependent.

Today, China exports just 19% of its GDP compared to 27% in 2010, which means that an increasing share of GDP growth depends on domestic consumption and investment.

Graphic: Asia Times

What makes the United States such an important factor in the economies of the Global South is its enormous current account deficit. The table below ranks the current account surpluses and deficits of the 20 largest economies from the largest deficit to the largest surplus.

With a current account deficit of $80 billion a month, or $1 trillion a year, the US appetite for an excess of imports over exports dwarfs the rest of the world.

Graphic: Asia Times

China is the largest or second-largest economy in the world, depending on whether we count GDP in US dollars or adjust for purchasing power parity, but China’s imports from the Global South have been stagnant for three years.

Graphic: Asia Times

China won’t replace much of American import demand for the time being, given Beijing’s focus on high-tech investment rather than consumer demand. At the margin, that leaves the Global South all the more dependent on the US.

Projecting current trends into the future suggests a steady rise in consumer spending in the Global South, especially in East Asia, and the emergence of robust domestic markets and less dependence on exports.

Below is a chart published by the Brookings Institution think tank last year, projecting that the total consumer market in East Asia will overtake the US consumer market by 2028.

Graphic: Asia Times

Developing countries, though, don’t pay their bills on projections. Arranging payments for goods in international trade is a trivial issue. More challenging is financing long-term deficits.

India, for example, used to run an annual trade deficit with Russia of less than $3 billion. Discounted Russian oil sales to India after the start of the Ukraine war boosted this to more than $60 billion.

What will Russia do with the Indian rupee equivalent of $60 billion? It would far prefer to have another currency, for example, the UAE dirham, that can be used to buy goods in third markets.

The Global South doesn’t yet have the capital markets or the currency stability to convince a surplus trading country to simply hold assets of the deficit country in exchange for goods.

That is what the United States does so well: Its $18 trillion negative net foreign asset position corresponds to the last 30 years’ cumulative current account deficits.

America sells assets to foreigners in return for their goods. The Global South doesn’t have the assets to sell, or at least not in the form that the rest of the world would like to own.

That helps explain why the BRICS Summit’s final declaration relegated the issue of payment systems to feasibility studies:

We reiterate our commitment to enhancing financial cooperation within BRICS. We recognize the widespread benefits of faster, low-cost, more efficient, transparent, safe and inclusive cross-border payment instruments built upon the principle of minimizing trade barriers and non-discriminatory access.

We welcome the use of local currencies in financial transactions between BRICS countries and their trading partners. We encourage strengthening of correspondent banking networks within BRICS and enabling settlements in local currencies in line with BRICS Cross-Border Payments Initiative (BCBPI), which is voluntary and nonbinding, and look forward to further discussions in this area, including in the BRICS Payment Task Force.

BRICS central banks don’t hold each other’s currencies as reserve assets, with limited exceptions. Just 2.3% of world central bank reserves are held in China’s RMB, up from 1.1% in 2016 but down from a peak of 2.8% in 2022. Most of them are buying gold. If the legend on US currency states, “In God We Trust,” gold says, “Trust nobody.”

Sweeping changes across the Global South would be required to make their currencies attractive reserve instruments—transparency and risk management of capital markets, the development of a local middle class, infrastructure, and education.

A great deal of this is happening in stages in many developing countries but progress is gradual and uneven. We now can foresee circumstances under which the Global South might declare independence from the dollar system. But we aren’t there yet and won’t be for years under any foreseeable circumstances.

Follow David P Goldman on X at @davidpgoldman

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BRICS internal rifts buy West time before new direction is chosen – Asia Times

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The recent BRICS summit in the Russian city of Kazan was less notable for what happened at the meeting than for what happened before, or on the margins or not at all. Among the notable things that did not happen was another expansion of the organization.

Since the addition of Egypt, Ethiopia, Iran and the United Arab Emirates (UAE) at the 2023 BRICS summit in Johannesburg, which almost doubled the number of member countries from the original five (Brazil, Russia, India, China and South Africa), further enlargement has stalled.

Argentina, which was also invited in 2023, declined to join. Saudi Arabia, another 2023 invitee, has not acted on the offer to become a member, either. Its de-facto ruler, crown prince Mohammad bin Salman, was among the notable absentees in Kazan.

And Kazakhstan, Russia’s largest neighbor in Central Asia, decided shortly before the summit that it would not join. This drew Russia’s ire, resulting in a prompt ban on imports of a range of agricultural products from Kazakhstan in retaliation.

While invitees have declined the opportunity to join BRICS, a long list of applicant countries have not been offered membership. According to a statement by Russia’s president, Vladimir Putin, at a meeting of senior BRICS security officials in September, 34 countries have expressed an interest in closer relations with BRICS in some form.

This appears to be a substantial increase in interest in BRICS membership compared with a year ago, when South Africa’s foreign minister, Naledi Pandor, listed 23 applicants ahead of the 2023 summit.

But the fact that, since then, only six invitations have been extended – and four accepted – indicates that formal enlargement of the organization, at least for now, has been stymied by the inability of current members to forge consensus over the next round of expansion and the reluctance on the part of some invitees to be associated with the organization.

Meetings on the margins

The summit declaration may offer little of substance. But there were a number of bilateral meetings before and in the margins of the gathering that are more indicative of the direction of BRICS. Perhaps most importantly, India’s prime minister, Narendra Modi, and China’s president, Xi Jinping, held their first face-to-face discussion in five years.

This is a remarkable change from just a few months ago, when tensions between New Delhi and Beijing were intense enough for Modi to cancel his participation in the summit of the Shanghai Cooperation Organisation in Astana, Kazakhstan. Yet, with a deal now reached over their countries’ longstanding border dispute, the two most populous and, in terms of GDP, economically most powerful members of BRICS have an opportunity to rebuild their fraught relations.

A warming of relations between China and India could generate more momentum for BRICS to deliver on its ambitious agenda to develop, and ultimately implement, a vision for a new global order. Implicit in this would be a shift of leadership in BRICS from China and Russia to China and India and, with that, potentially a change from an anti-Western to a non-Western agenda.

This is, of course, something that exercises Putin. He acknowledged as much when he referred to the Global South and Global East in his remarks at the summit’s opening meeting. He also emphasized that it was important “to maintain balance and ensure that the effectiveness of BRICS mechanisms is not diminished.”

In his own bilateral meetings before and during the summit, Putin drove home the point that, despite western efforts, Russia was far from isolated on the world stage. One-to-one meetings with Xi, Modi, South African President Cyril Ramaphosa and UAE President Mohammed bin Zayed Al Nahyan gave Putin the chance to push his own vision of BRICS as a counterpoint to the US-led West.

This may be a view shared in the Global East – Russia, China, Iran North Korea – as well as in non-BRICS members Cuba and Venezuela. But many in the Global South – particularly India and Brazil – are unlikely to go all in with this agenda. They will focus on benefiting from their BRICS memberships as much as possible while maintaining close ties with the West.

Lacking a coherent agenda

India is the most significant player in BRICS when it comes to balancing between East and West. NATO member Turkey is the equivalent on the outside. That country’s president, Recep Tayyip Erdoğan, traveled to Kazan and did not shy away from an hour-long meeting with his “dear friend” Putin.

The relationship between Moscow and Ankara is fractious and complex across a wide range of crises from the South Caucasus to Syria to Libya and Sudan. Yet on perhaps the most divisive issue of all, Russian aggression toward Ukraine, Turkey has consistently maintained opened channels of communication with Russia and remains the only NATO power able to do so.

The fact that there has been relatively little public pressure from official sources in the West on Erdoğan to stop is probably a reflection that such communication channels are still valued in the west. This and Nato’s continued cooperation with India point to a hedging strategy by the West. India cooperates with the US, Australia and Japan – the so-called Quad group of nations – on security in the Indo-Pacific, and it has maintained political dialogue with NATO since 2019.

Turkey and India may not see eye-to-eye with the West on all issues. But neither do they fully align with the Global East camp inside BRICS, and especially not with Russia. If nothing else, this limits the ability of BRICS to forge a coherent agenda, deepen integration and, ultimately, mount a credible challenge to the existing order.

Relying on India and Turkey to do the West’s bidding in undermining BRICS is not a credible long-term strategy. BRICS may have achieved little as an organization, but the Kazan summit declaration indicates that its key players continue to harbor aspirations for more.

However, as the flailing expansion drive of the organiZation indicates, there is also an internal battle in BRICS over its future direction. This, in turn, creates space and time for the West to exercise more positive and constructive influence in the ongoing process of reshaping the international order.

The Global East may be beyond redemption, but there is still a massive opportunity to reengage with the Global South.

Stefan Wolff is a professor of international security at the University of Birmingham.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Europe can’t be defended against Russian attack: report – Asia Times

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A shocking but accurate record on European and European defense has been released by the German Kiel Institute. According to the report, the state of Germany, Europe, and the United States is nevertheless terrible.

Bottom line: Despite all the talk of a NATO combat, the alliance, including the United States, is not prepared for any conflict with Russia. Additionally, it makes the suggestion that the cost of security products is causing profit for defense companies but not for the sake of security as a whole.

The Kiel Institute, founded in 1914, is regarded as Germany’s leading significant think tank. In September, the Institute&nbsp, produced a study &nbsp, called” Fit for war in decades: Europe’s and Germany’s slow rearmament vis-a-vis Russia”.

The review makes a significant point about how ready Germany and other European nations are when Russia attacks them. Additionally, it tells a terrible story about how expensive and unsatisfactory European protection manufacturing has become. &nbsp, &nbsp,

A fantastic example is Germany’s Caracal weather abuse car. A Caracal is a kind of crazy rabbit found in Africa, Pakistan, the Middle East and parts of India. The German car, an unarmored gussied-up car based on a Mercedes G group vehicle, was put up by Rheinmetall, Mercedes-Benz AG and ACS Armored Car Systems GmbH.

A European Caracal Air Assault Vehicle.

The Caracal lacks weapons on its wide-open sides. Over 3, 000 of these cars have been provided to Ukraine at a cost of&nbsp, 1.9 billion dollars, which works out to 620, 000 dollars per product. &nbsp,

For less than$ 35, 000 per copy, you could pin an antitank weapons or equipment gun on a four-wheel drive industrial jeep. And since Ukraine has no evacuation ability, an air abuse aircraft dropped onto the field is a non-starter. ( The euro now trades at$ 1.08 to the US dollar. )

30mm weapons for the German Puma troops fighting car is an equally abhorrent case. The Puma costs a remarkable$ 5.3 million each, while its 30mm weapons charges around &nbsp, 1, 000 dollars per chance! &nbsp,

Puma you fire up to 600 rounds per minute. That compares to a US 30mm High Explosive Dual Purpose round ( more specialized than a run-of-the-mill bullet ) at$ 100. European 30mm ammunition costs ten times more than American 30mm weapons.

Additionally, soldiers are getting defensive defense headsets from the German army. Tactically available commercially available tactical headsets retail for$ 299. If additional features like noise cancellation are added, the price may go up to$ 400, but not more. But European devices cost a whopping&nbsp, 2, 700 dollars each.

Bottom line: People and businesses are making a lot of money by providing Western armies or sending goods to Ukraine. Some people believe it to be openly corruption because institutions are involved in these transactions. Mind that the Kiel Institute just goes as far as to claim these payments are uber-expensive, no more. &nbsp,

A European Puma Tank.

The fact that Russia’s defense industry is growing rapidly and that North Korea is then adding more supplies with artillery shells and missiles is a lot, according to the Kiel record. &nbsp,

North Korea, it seems, has been grinding out weapons also in excess of anything it can use, and until now, it did not trade them. Of course, the Kim Jong Un tyranny is sustained by the Russian agreement with North Korea by providing funds or the equivalent and funding the projects.

All of this helps present, in part, that Germany’s opportunities in security are corrupted ( I think that is the right word ) by excessively expensive equipment. &nbsp,

Also if Germany really meets the NATO target of 2.1 % of GDP for defence spending, what the European military ends up receiving is incredibly expensive. Not to mention that a lot of it ends up in Ukraine and is only gradually, if at all, replaced on the domestic before.

Even with sufficient saving, what money is spent on boggles the mind. Very much, for instance, is going into heat defense, something that is important for Germany’s potential defense needs.

Nevertheless, NATO-supplied air defenses have done a poor to horrible work in Ukraine, a forerunner of a dangerous upcoming in Europe unless the problem is corrected. An interesting note ( website 25 ) in the statement, set in ultra-small form, discusses Ukraine’s ability to shoot down Russian missiles and uavs:

Sample interception rates for commonly used Russian missiles in 2024: 50 % for the older Kalibr subsonic cruise missiles, 22 % for modern subsonic cruise missiles ( e. g. Kh-69 ), 4 % for modern ballistic missiles ( e. g. Iskander-M), 0.6 % for S-300/400 supersonic long-range SAM, and 0.55 % for the Kh-22 supersonic anti-ship missile.

There is little information about the infiltration levels of hypersonic weapons: Ukraine claims a 25 % intrusion price for the Kinzhal and Zircon, but Ukrainian options also claim that to interceptions of this nature require the fire of all 32 launchers in a Patriot battery made of US-style to have any chance to shoot down a single hypersonic missile. By contrast, European Nationalist batteries have 16 rockets, and Germany has 72 launchers in full.

Take notice that Patriot’s interceptor missiles are in extremely limited stock. Manufacturing these weapons takes a long time, and setting up these weapons has proved difficult. Bolloxing manufacturing lines is also caused by a lack of crucial parts. &nbsp,

Boeing provides crucial components for the missile’s target ( when it works ) while US defense contractor Lockheed Martin is the main manufacturer. Boeing wo n’t solve that problem, at the earliest, until 2027. In addition, Boeing is currently facing a significant business strike and a crisis internally that is still far from resolved.

But there are great questions about air mechanisms. The US has given Ukraine the Patriot and other methods. The Russians put a lot of effort into destroying them, but even when they succeed, their catch level is below par. Europe has supplied IRIS-T, NSAMS and other methods that, so far as can be determined, are almost similar to the Patriot. &nbsp,

On the whole, Jewish methods are greater, but they are not deployed in Ukraine. What is regarded as the major US method for air defence, AEGIS ( in the form of AEGIS Ashore ), is not in Ukraine. The devices are in use in Romania and Poland.

Europe largely has none of its own air defense deployed in Europe. The US is not much more prosperous. Some systems, particularly the Ground-Based Mid-Course Interceptor based in Alaska, are a combined case.

The Pentagon is then searching for better-performing fighter weapons to replace its current ones. The 40 or so weapons in stock merely function about half the time despite some tests that were optimized to ensure success.

The potential is also concerning as fast weapons arrive on the field, seen in Ukraine in the form of Russia’s Kinzhal and Zircon. Hypersonic assault weapons are hardly ever a possibility for systems like the Patriot, Iris-T, or any other NATO air defense systems.

The Kh-47M2 Kinzhal weapon as seen at the 2018 Moscow&nbsp, Victory Day Parades.

The image is n’t particularly beautiful when it comes to drones, which are being shot off by Ukrainians and Russians in droves. They are difficult to kill, and present war tanks and troops fighting vehicles can be destroyed by systems like the Russian Lancet helicopter. &nbsp,

No one has yet devised a successful strategy to stop swarms of drones, not yet Israel, and stop some of the smaller attacks that pass by.

Above all, the Kiel record puts a new and important view on Europe’s security position and, by extension, the US, which is pledged by treaty to help protect Europe.

It is time to step back and assess whether a credible defense of Europe is possible in the wake of NATO’s continued expansion and growing angst in Europe and Russia. Right now, judging by the Kiel report, the answer is no.

At Asia Times, Stephen Bryen is the senior correspondent. He also served as the US Senate Foreign Relations Committee’s staff director and its deputy undersecretary of defense for policy. &nbsp,

This&nbsp, article was originally published on his&nbsp, Weapons and Strategy&nbsp, Substack, and is republished with permission.

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BRICS summit gives IMF gang a run for their money – Asia Times

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It’s going to be a active, anxious and challenge-laden International Monetary Fund meeting in Washington this month.

There, the financial glitterati will fight a bewildering range of hot-button issues ranging from China’s decline to Germany’s crisis to geopolitical risks everywhere to a toss-up US election that’s screening nerves everyday. Put in the IMF’s instructions about a US$ 100 trillion people loan timebomb.

Amazingly, Washington may become hosting this week’s next most effective economic gathering. The more enthralling function will be in Moscow, where the BRICS countries are holding their annual conference.

Some observers predicted that the grouping, which combines Brazil, Russia, India, and South Africa, would eventually have been a sideshow. In 2001, then-Goldman Sachs analyst Jim O’Neill coined the BRIC acronym. In 2010, the four original users added South Africa.

In the decades since, the BRICS seemed to reduce forward thrust. In a 2019 review, Standard &amp, Poor’s said the union had lost impact. &nbsp, Around that same day, O’Neill himself took some photos at his design.

O’Neill recently wrote that” the divergent long-term financial direction of the five states weakens the scientific value of viewing the BRICS as a clear economic grouping.” According to some people, I’ve made jokes about how appropriate it would have been to call the name “IC”&nbsp, given the obvious debacle of the Portuguese and Soviet economies in the last decade since 2011, both of which have obviously performed significantly worse than &nbsp, what the 2050 scenario path laid out.

However, the BRICS have since recovered some of their momentum and are now adding five more users. This year, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates may join the slide.

Mariel Ferragamo, an analyst at the Council on Foreign Relations, information that” the addition of Egypt and Ethiopia will intensify tones from the African continent. Egypt likewise had close business ties with China and India, and social ties&nbsp, with Russia”.

As a fresh BRICS part, &nbsp, Egypt” seeks to&nbsp, get more investment&nbsp, and increase its damaged economy”, Ferragamo information. ” China has long courted Ethiopia, the third-biggest business in sub-Saharan Africa, with&nbsp, billions of dollars of investment&nbsp, to make the region a hub of its Belt and Road Initiative. The addition of Saudi Arabia and the UAE would send in the&nbsp, two biggest economies&nbsp, in the Muslim world and the next and eighth major oil producers internationally”.

The schedule of this growth dovetails with a major BRICS plan: de-dollarization.

The BRICS announced plans to create a “multilateral online lawsuit and pay system” called BRICS Bridge in February, which “would help bridge the gap between the financial markets of BRICS member countries and promote joint trade.”

According to reports, the gathering this week will use a new strategy to make efforts to replace the US dollar more quickly. Udith Sikand, an analyst at Gavekal Dragonomics, notes that one idea is for a gold-backed BRICS monetary unit.

According to Sikand, it seems unlikely that any single currency could get past this compulsion to completely replace the US dollar’s central role.

” A wide range of currencies could, in a more multipolar world, theoretically chip away at their enormous role. The logical consequence of a change would be that while the dollar is still important to global trade and capital flows, its ability to serve as a safe haven when stress is diminished as investors weigh their options from a myriad of alternatives.

The West needs to understand how much it makes the BRICS more comfortable. After all, this opening for the Global South is largely attributable to the Bretton Woods gang messing up their individual economies and, consequently, the global system.

Take the US, which is rife with political chaos at a time when the nation’s debt is over$ 35 trillion. The risks posed by the upcoming&nbsp, November 5 election alone have credit rating companies on edge, particularly Moody’s Investors Service, which is the last to assign Washington a AAA grade.

Germany is flatlining, highlighting headwinds bearing down on the broader continent. As Germany’s Economy Ministry puts it, “economic weakness likely continued in the second half of 2024, before growth momentum gradually increases again next year”, adding that “technical recession” risks abound.

The European Central Bank’s decision to cut rates for the third time this year last week highlights the level of concern.

Allianz Global Investors ‘ global chief investment officer, Michael Krautzberger, claims that” this increase in the speed of rate cuts is justified because the combination of sub-trend euro growth and target inflation supports a much less restrictive monetary policy than is currently the case.”

Krautzberger adds that” there are some hopes that recent Chinese policy support will help trade-sensitive markets like Germany, but we doubt that will be sufficient to offset the region’s weak domestic demand picture.” There is also a chance that trade disputes will return to the policy agenda after the upcoming US elections in November, adding to the risk of negative growth.

Making matters worse, according to the US and China’s combined borrowing patterns, public debt levels are projected to reach$ 100 trillion this year.

” Our forecasts point to an unforgiving combination of low growth and high debt – a difficult future”, says IMF managing director&nbsp, Kristalina Georgieva. ” Governments must work to reduce debt and rebuild buffers for the upcoming shock, which will undoubtedly occur, and perhaps sooner than we anticipate.”

Such unthinkable debt levels pose a serious and immediate threat to the world financial system. In a recent report, IMF analysts wrote that “higher debt levels and uncertainty surrounding fiscal policy in systemically important countries, such as China and the United States, can lead to significant spillovers in the form of higher borrowing costs and debt-related risks in other economies.”

These spillovers could make monetary policy decisions in both Asia and the world more difficult.

Officials from the Bank of Japan are declaring their intention to keep raising rates in Tokyo. Yet that’s despite data showing renewed weakness in retail sales, exports, industrial production and private machinery orders. and concerns among ministry of finance officials about the potential return of deflationary forces in the months to come.

Even though inflation is easing in Japan,” the central bank has made clear that it will raise interest rates”, says Danny Kim, an economist at Moody’s Analytics. ” At best, this will slow growth. At worst, it could trigger a wider economic decline”.

All of this raises the question of whether the world’s top economies are complacent about potential dangers. &nbsp,

As officials arrive in Washington, there’s considerable relief that the US has n’t experienced the recession that the vast majority of economists predicted. Or that China’s downshift had n’t pushed mainland growth too far below this year’s 5 % target.

However, there is reason to believe that this is the last sigh before the storm. The geopolitical path is as dangerous as they can get. Middle East tensions are rising as Russia’s war against Ukraine drags on, aside from the ominous debt milestone that the IMF has flagged. And then there’s the return of the” Trump trade”.

Polls indicate a close race between Kamala Harris and former US President Trump. The betting markets, though, suggest Trump might prevail. If so, Asia could quickly find itself in harm’s way.

Trump’s threat to slap 60 % tariffs on all Chinese goods is just the beginning. Many people predict that a Trump 2.0 administration will impose much higher taxes and trade restrictions, wreaking havoc on Asia in 2025.

Even if Trump loses to Harris, he’s hardly going to accept defeat and move on peacefully. Many people are already concerned that their supporters may launch an attack on the US capital to protest his demise because the election was stolen. That’s likely to imperil Washington’s credit rating anew and spook investors pushing Wall Street stocks to all-time highs.

The fallout from the Trump-inspired January 6, 2021 insurrection was among the reasons Fitch Ratings revoked its AAA rating on US debt, joining Standard &amp, Poor’s. The question now is whether Moody’s downgrades the US, too.

This uncertainty favors the BRICS. Southwest Asia is also clearly orienting its attention toward the BRICS countries. &nbsp, All this is a global game-changer that few in the West saw coming.

Earlier this year, Malaysia detailed its ambitions to join the intergovernmental organization. Thailand and Vietnam are also interested in joining the Association of Southeast Asian Nations, which is a group of nations. In Indonesia, an increasing number of lawmakers are BRICS curious, too.

Joe Biden, the president of the United States, may be dealt a particularly bad blow by Southeast Asia’s involvement. Since 2021, a regional bulwark has been a hallmark of the Biden era in opposition to China’s growing influence and attempts to replace the US dollar in trade and finance.

The BRICS phenomenon demonstrates a growing stutter in relations between the US and many ASEAN members. This, at a time when&nbsp, Saudi Arabia&nbsp, is looking to phase out the “petrodollar”. As China, Russia, and Iran square off against old alliances, Riyadh is making more efforts to de-dollarize.

” A gradual democratization of the global financial landscape may be underway, giving way to a world in which more local currencies can be used for international transactions”, says analyst&nbsp, Hung Tran at the Atlantic Council’s Geoeconomics Center.

” In&nbsp, such a world, the dollar would remain prominent but without its outsized clout, complemented by currencies such as the Chinese renminbi, the euro, and the Japanese yen in a way that’s commensurate with the international footprint of their economies”, Tran says.

According to Tran, “how Saudi Arabia approaches the petrodollar continues to be a significant predictor of the financial future as its creation occurred fifty years ago.”

This week in Moscow, that potential future is on full display. Officials in Washington ignore those machinations at their own risk, 800 kilometers away.

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BRICS summit gives IMF gang a run for its money – Asia Times

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It’s going to be a active, anxious and challenge-laden International Monetary Fund meeting in Washington this month.

There, the financial glitterati will fight a bewildering range of hot-button issues ranging from China’s decline to Germany’s crisis to geopolitical risks everywhere to a toss-up US election that’s screening nerves everyday. Put in the IMF’s instructions about a US$ 100 trillion people loan timebomb.

Amazingly, Washington may become hosting this week’s following most powerful economic gathering. Moscow, home of the BRICS countries ‘ yearly mountain, will host the more enthralling event.

Some experts predicted that the gathering that gathered Brazil, Russia, India, and South Africa would end up being a show just a few decades ago. In 2001, then-Goldman Sachs scholar Jim O’Neill coined the BRIC acronym. In 2010, the four original users added South Africa.

In the decades since, the BRICS seemed to reduce forward thrust. In a 2019 review, Standard &amp, Poor’s said the union had lost importance. &nbsp, Around that same day, O’Neill himself took some photos at his design.

O’Neill recently wrote that” the divergent long-term financial direction of the five states weakens the scientific value of viewing the BRICS as a clear economic grouping.” Based on the obvious debacle of the Portuguese and Soviet economies in the current century since 2011, where both have plainly performed significantly under-perform compared to what the 2050 scenario route laid out, I have often joked that I should have called the acronym “IC”&nbsp.

However, the BRICS have since recovered some of their momentum and are now adding five more people. This year, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates may join the slide.

Mariel Ferragamo, an scientist at the Council on Foreign Relations, information that” the addition of Egypt and Ethiopia will intensify voices from the African continent. Egypt even had close business ties with China and India, and social ties&nbsp, with Russia”.

As a fresh BRICS part, &nbsp, Egypt” seeks to&nbsp, get more investment&nbsp, and increase its damaged economy”, Ferragamo information. ” China has long courted Ethiopia, the third-biggest business in sub-Saharan Africa, with&nbsp, billions of dollars of investment&nbsp, to make the region a hub of its Belt and Road Initiative. The addition of Saudi Arabia and the UAE would send in the&nbsp, two biggest economies&nbsp, in the Muslim world and the next and eighth major oil producers internationally”.

The schedule of this growth dovetails with a major BRICS plan: de-dollarization.

The BRICS announced plans to create a “multilateral online lawsuit and pay system” called BRICS Bridge in February, which “would help bridge the gap between the financial markets of BRICS member countries and promote joint trade.”

According to reports, the gathering this week will use a new strategy to make efforts to replace the US dollar more quickly. Udith Sikand, an analyst at Gavekal Dragonomics, notes that one idea is for a gold-backed BRICS monetary unit.

According to Sikand, it seems unlikely that any single currency could get past this compulsion to completely replace the US dollar’s central role.

However, it is possible that a wide range of currencies could collectively chip away at their outsized role in an increasingly multipolar world. The logical consequence of a change would be that while the dollar is still important to global trade and capital flows, its ability to serve as a safe haven in stressful times would be diminished as investors weigh up their options among a myriad of alternatives.

And for that, the West needs to understand how much it makes things easier for the BRICS. After all, the Bretton Woods gang’s messing up their individual economies and, consequently, the global system contributes to this opening for the Global South countries.

Take the US, which is rife with political chaos at a time when the nation’s debt is over$ 35 trillion. The risks posed by the upcoming&nbsp, November 5 election alone have credit rating companies on edge, particularly Moody’s Investors Service, which is the last to assign Washington a AAA grade.

Germany is flatlining, highlighting headwinds bearing down on the broader continent. As Germany’s Economy Ministry puts it, “economic weakness likely continued in the second half of 2024, before growth momentum gradually increases again next year”, adding that “technical recession” risks abound.

The European Central Bank’s decision last week to slash rates for the third time this year can be seen as a sign of the level of concern.

This increase in the rate of rate cuts is justified, according to Michael Krautzberger, global chief investment officer at Allianz Global Investors, because the combination of sub-trend euro growth and target inflation supports a much less restrictive monetary policy than is currently the case.

Krautzberger adds that” there are some hopes that recent Chinese policy support will help trade-sensitive markets like Germany, but we doubt that will be sufficient to offset the region’s weak domestic demand picture.” There is also a chance that trade disputes will return to the policy agenda after the upcoming US elections in November, adding to the risk of negative growth.

Making matters worse, according to the US and China’s public debt levels are projected to reach$ 100 trillion this year, in large part due to the country’s borrowing patterns.

” Our forecasts point to an unforgiving combination of low growth and high debt – a difficult future”, says IMF managing director&nbsp, Kristalina Georgieva. Governments must work to reduce debt and rebuild buffers in anticipation of the upcoming shock, which may occur sooner than anticipated.

The world financial system is in immediate danger of such unthinkable debt levels. In a recent report, IMF analysts wrote that “higher debt levels and uncertainty surrounding fiscal policy in systemically important countries, such as China and the United States, can lead to significant spillovers in the form of higher borrowing costs and debt-related risks in other economies.”

These spillovers could make monetary policy decisions in both Asia and the world more difficult.

Officials from the Bank of Japan are declaring their intention to keep raising rates in Tokyo. Yet that’s despite data showing renewed weakness in retail sales, exports, industrial production and private machinery orders. and concerns among Ministry of Finance officials that deflationary forces might return in the months to come.

Even though inflation is easing in Japan,” the central bank has made clear that it will raise interest rates”, says Danny Kim, an economist at Moody’s Analytics. ” At best, this will slow growth. At worst, it could trigger a wider economic decline”.

All of this raises the question of whether the world’s leading economies are complacent about potential dangers. &nbsp,

As officials arrive in Washington, there’s considerable relief that the US has n’t experienced the recession that the vast majority of economists predicted. Or that China’s downshift had n’t pushed mainland growth too far below this year’s 5 % target.

However, one might assume that this is the last blip before the storm. The geopolitical path is as dangerous as they can get. Middle East tensions are rising as Russia’s war against Ukraine drags on, aside from the ominous debt milestone that the IMF has flagged. And then there’s the return of the” Trump trade”.

Polls indicate that Kamala Harris and former US President Trump are in a very close race. The betting markets, though, suggest Trump might prevail. If so, Asia could quickly find itself in harm’s way.

Trump’s threat to slap 60 % tariffs on all Chinese goods is just the beginning. Many people predict that a Trump 2.0 administration will impose much higher taxes and trade restrictions, wreaking havoc on Asia in 2025.

Even if Trump loses to Harris, he’s hardly going to accept defeat and move on peacefully. Many people are already concerned that their candidates ‘ supporters may stage a second invasion of the US capital to protest their election defeat. That’s likely to imperil Washington’s credit rating anew and spook investors pushing Wall Street stocks to all-time highs.

The fallout from the Trump-inspired January 6, 2021 insurrection was among the reasons Fitch Ratings revoked its AAA rating on US debt, joining Standard &amp, Poor’s. The question now is whether Moody’s downgrades the US, too.

This uncertainty is influencing the BRICS’ positions. Southwest Asia is also clearly orienting itself toward the BRICS countries. &nbsp, All this is a global game-changer that few in the West saw coming.

Earlier this year, Malaysia detailed its ambitions to join the intergovernmental organization. Thailand and Vietnam are also interested in joining the Association of Southeast Asian Nations, which is a group of nations. In Indonesia, an increasing number of lawmakers are BRICS curious, too.

The involvement of Southeast Asia could have a significant impact on Joe Biden, the president of the United States. Since the Biden era, a regional bulwark has been built to counteract China’s growing influence and attempts to replace the US dollar in trade and finance.

The BRICS phenomenon demonstrates a growing stutter in relations between the US and many ASEAN members. This, at a time when&nbsp, Saudi Arabia&nbsp, is looking to phase out the “petrodollar”. As China, Russia, and Iran square off against old alliances, Riyadh is making more efforts to de-dollarize.

” A gradual democratization of the global financial landscape may be underway, giving way to a world in which more local currencies can be used for international transactions”, says analyst&nbsp, Hung Tran at the Atlantic Council’s Geoeconomics Center.

” In&nbsp, such a world, the dollar would remain prominent but without its outsized clout, complemented by currencies such as the Chinese renminbi, the euro, and the Japanese yen in a way that’s commensurate with the international footprint of their economies”, Tran says.

Tran points out that “in this context, Saudi Arabia’s approach to the petrodollar continues to be a significant harbinger of the financial future as its creation was fifty years ago.”

This week in Moscow, that potential future is on full display. Officials in Washington choose to ignore those plots located 800 kilometers away at their own risk.

Follow William Pesek on X at @WilliamPesek

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Turkey’s BRICS bid a high-stakes hedge against the West – Asia Times

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Turkey has requested to join BRICS, the team of emerging-market markets, in a significant political move that may have profound effects on the global system of alliances, as a sign of its desire to expand its partnerships beyond the West.

The BRICS gathering, named after Brazil, Russia, India, China, and South Africa, comprises some of the country’s largest economy. Earlier this year, it welcomed four fresh people: Iran, the United Arab Emirates, Ethiopia and Egypt.

Saudi Arabia has been invited to join, but the formal approach has not yet begun. The BRICS represent a major change in global power relationships, often seen as an alternative to Western-led organizations like the EU, G7, and NATO.

As the center of the world economy shifts away from the West, Ankara’s selection may serve as a strategy to improve ties with non-Western nations, but it also has to do with pursuing more trade with BRICS members.

Turkey’s application was made public prior to the BRICS mountain, which will take place on October 22. Its inclusion in NATO has broader relevance. If accepted, Turkey would be the first NATO part of BRICS.

This does not, however, mean that Turkey is completely rejecting the West. Turkey has strong administrative relations to the West. At most, this walk signals Turkey’s President Recep Tayyip Erdogan’s objective to enhance the government’s freedom in its international relations.

Erdogan stated on September 1 that this action demonstrates Ankara’s desire to “become a powerful, rich, prominent, and powerful state if it strengthens its relations with the East and the West at the same time.”

Turkey’s understanding into the party may be discussed during the forthcoming 16th BRICS conference in Kazan, Russia. Different nations are preparing to meet, along with Malaysia, Thailand, and Azerbaijan.

Between East and West

Turkey’s attempt to balance the East and West is based on its plans since the end of the Cold War, which is in line with its geographic location, which is between Europe and Asia.

This method has been central to Turkey’s complex, at times competing, approach to international relationships and remains essential in an increasingly complex world. All governments have had to reevaluate their international policies as a result of the transition from a multipolar world, which is based on the notion that there are more earth capabilities.

Turkey’s eagerness to meet the BRICS group is unlikely to represent a break from its European allies because of its long-standing commitment to NATO. Turkey’s economic, political, and military ties with Russia and China have grown since 2016, and this trend is evident in its most recent admission to the BRICS team.

There is no pressing reason for the West to be alarmed about Turkey making agreements to Russia or acting independently of NATO, according to some experts in Turkey foreign policy.

Map of the Black Sea region.
Map of the Black Sea place. Stock via The Chat

There are two subsidies driving Turkey’s program. The first is Turkey’s desire to improve its strategic autonomy in international policy, according to Sinan Ulgen, chairman of the Istanbul-based Centre for Economic and Foreign Policy Studies, which basically involves strengthening relations with non-Western power like Russia and China in a bid to compromise the relationship with the West.

The second is the accumulated annoyances over the connection with the West. For instance, the EU was unable to actually make a decision regarding the start of negotiations regarding the revision of its business agreement with Turkey, which dates back to 1996.

Control of the Black Sea

Turkey has been interested in joining the BRICS class since 2018. Putin, during a meeting with Turkish Foreign Minister Hakan Fidan in Moscow in June this year, welcomed Ankara’s curiosity and promised that Moscow” will aid this desire to be together with the states of this alliance]Brics ], to be together, closer, to resolve typical issues”.

Russia has made more efforts to win the help of more nations since the conflict in Ukraine. Turkey’s geopolitical area and its power of the Black Sea straits, a crucial business way for both Ukraine and Russia, are of particular value in this effort.

Turkey has been a key player in the Ukraine conflict, and the Black Sea has allowed Ukraine to remain using the lakes as a result of its association, which has stymied Russia’s efforts to impose full control over the waters.

The Greek Islands ‘ seafaring transportation is governed by the Montreux Convention. The convention makes distinctions between the past and the past, including Russia and Ukraine, while also acknowledging the advantages of the former.

Erdogan stated in March 2022 that the agreement allows Turkey to impose restrictions on the movement of naval vessels belonging to the celebrations at war. Putin may be hoping that he can inspire Turkey to give him more liberty because Turkey is seen as a Brics supporter. Russia’s current inability to control the Black Sea and its cargo ships severely limits its capacity to stifle Ukraine’s business.

Turkey anticipates that becoming a member of the BRICS will strengthen its political position and strengthen its economic sway, particularly in non-western marketplaces. The most important thing is that it uses its political position to influence international affairs and pursue a more balanced and varied foreign policy.

It is obvious that Turkey wants to keep its ties to the West, but it also needs the freedom to collaborate with another countries. It is very unlikely that this will significantly alter Turkey’s relations to European nations. However, it might produce other NATO members to be concerned about how much they can count on Turkey in the future.

Bulent Gokay is professor of international relationships, Keele University

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Australia donates 49 Abrams tanks to Ukraine – Asia Times

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49 M1A1 Abrams tanks are being given to Ukraine by Australia’s Albanese authorities despite it’s alleged playdown of the payment earlier this year.

The latest Australian package is worth A$ 245 million ( US$ 163 million ). It brings the total American military aid to Ukraine since the full-scale Russian war in 2022 to A$ 1.3 billion, and general American aid to A$ 1.5 billion.

Defense Minister Richard Marles responded to a question about a potential product of the tank in February by saying it was” not on the agenda.”

According to state sources, the donation of the tanks required US authorization because Australia had purchased them from Washington, but there had to have been a procedure.

Pat Conroy, the minister for security sector and capacity delivery, made the announcement in London while he was traveling to Brussels to meet with the NATO defense ministers. In Brussels, Conroy may meet with the Ukraine defence minister.

Australia, New Zealand, Japan and South Korea form the” Indo-Pacific Four” cluster of non-NATO countries attending the meeting.

A small number of the 49 vehicles will need to be repaired before they are delivered because they are nearing the end of their lives. Additionally, they could be used as extra pieces if Ukraine wants them delivered more rapidly. Ukraine may choose which course of action to take.

To facilitate the transition to the M1A2 tank ship, the American military is keeping a small number of the M1A1 Abrams tanks.

Conroy said:” We stand shoulder-to-shoulder with Ukraine in their battle against Russia’s illegal war. The Russian armed forces will benefit from these tanks, which may add firepower and mobility, in addition to the support our partners offer for Ukraine.

Michelle Grattan, is a faculty brother at the University of Canberra.

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Diplomats’ expulsions a serious blow to Canada-India ties – Asia Times

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Canada-India relations have suffered a big setback after American law enforcement authorities accused American agents of participation in “homicides, blackmail, and harsh acts” on American soil.

In reply, Canada expelled six American officials, including High Commissioner Sanjay Kumar Verma.

In a tit-for-tat walk, India expelled six American officials, rejecting Canada’s claims as “preposterous” and politically motivated, especially given the Sikh diaspora’s political value as a vital voting bloc for Justin Trudeau’s Democratic government.

India has consistently refuted the allegations and refused to cooperate with the French investigation, which eventually forced the federal government to produce these allegations community.

Trudeau acknowledged the value of maintaining close ties with India, but criticized India’s deeds that targeted pro-Khalistan officials as “unacceptable.”

However, the relationship between the two nations is likely to continue to be strained without a shared understanding of the pro-Khalistan problem. Both countries continue to approach the situation from necessarily unique viewpoints.

Nijjar’s death consequences

Since Trudeau’s bomb speech in September 2023, when he claimed India was involved in the death of Hardeep Singh Nijjar, a pro-Khalistan head based in Canada, has strained relations between Canada and India.

The Khalistan action is an independent Sikh position in northern India.

A top American envoy was fired as a result of the murder, and bilateral relations were rapidly deteriorating as a result, with India suspending visa services and expelled Canadian diplomats. In response, India later pressed for the return of 41 American diplomats, citing the rule of political parity.

India has long alleged that Canada’s support for the Khalistan activity poses a serious hazard to its territorial integrity and national security.

The Sikh community in Canada, the largest in the world, includes components that have supported the pro-Khalistan reason, fueling India’s problems. Canada, but, emphasizes the right to freedom of expression, including quiet protests, as a main principle of its political principles.

In a related occurrence, the US revealed in November 2023 that it had foiled an admitted American plot to kill a Sikh separatist president in New York. This growth, coupled with Trudeau’s speech in 2023 that there was” reliable information” linking India to Nijjar’s killing, has further substantiated worries over India’s alleged covert activities targeting pro-Khalistan protesters.

India’s corporate calculations

India’s proper value, especially in counterbalancing China’s growing confidence in the Indo-Pacific area, adds difficulty to its political relations.

Given the power imbalance with China, India believes its partnership with the United States is crucial to protecting its objectives. The US, in turn, sees India as a cornerstone of its Indo-Pacific strategy, with initiatives like the Quadrilateral Security Dialogue ( Quad ). It includes the US, India, Japan and Australia and is designed to encourage the place as an “arc of democracy“.

Growing security and economic partnerships have resulted from US bipartisan support for bolstering US ties with India, with a growing focus on technology transfer as a key component of this partnership.

During Indian Prime Minister Narendra Modi’s state visit to Washington, DC, in June 2023, President Joe Biden’s administration finalized an agreement for the joint production of General Electric ( GE ) F-414 jet engines.

At present, just four countries — the US, UK, Russia and France — have the capability to produce aircraft vehicles, with China also lacking this innovative technology. The GE F-414 collaboration aims to strengthen US-Indian cooperation in the field of protection and enhance their collective ability to combat China’s advancements in protection technologies.

India likewise plays a key role in Canada’s Indo-Pacific plan, unveiled in 2022. In the standard document outlining the plan, Ottawa described China as a “disruptive energy” and emphasized the need to improve relations with Indo-Pacific countries, especially India.

The strategy highlights” India’s growing strategic, economic, and demographic importance” as key to achieving Canada’s geo-strategic objectives. Canada and India are engaged in negotiations for a Comprehensive Economic Partnership Agreement as part of this strategy. But due to the diplomatic tensions sparked by Canada’s allegations, these negotiations have been suspended.

The West’s disapproval

The Modi government may have figured out how to protect itself from criticism for its handling of pro-Khalistani activists abroad given its strategic value to the West. However, the unequivocal response from both the US and Canada suggests otherwise, with the West making it clear that such actions are unacceptable, regardless of India’s strategic significance.

India will likely continue to deny Canada’s accusations and sever diplomatic ties with the country in a contentious dispute that will affect every aspect of the bilateral relationship.

From Canada’s perspective, Indian actions on Canadian soil represent a blatant violation of sovereignty. Ottawa anticipates India’s cooperation and assurances that such transnational repression wo n’t take place in the future. From India’s point of view, it’s a matter of national security as Canada appeases pro-Khalistan elements.

While the Modi government has generally had success fostering relations with western nations, the Sikh diaspora in Canada has been a significant drag in boosting relations.

The two countries ‘ relationship is likely to continue to be strained despite wider strategic considerations that would otherwise lead to closer ties if there was no common denominator to reconcile these two divergent viewpoints.

Thompson Rivers University’s assistant professor of political science is Saira Bano.

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Nobel economics prize: prosperity needs strong institutions – Asia Times

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Daron Acemoglu, Simon Johnson of the Massachusetts Institute of Technology, and James Robinson of the University of Chicago were awarded this week’s Nobel prize in economics for their research on why there are quite disparate economic levels.

While announcing the prize, Jakob Svensson, the chairman of the economy reward commission, said:” Reducing the big differences in earnings between nations is one of our days ‘ greatest issues”. The economics ‘ “groundbreaking analysis” has “much more fully understood the causes of why countries fail or succeed” than they have realized.

Officially known as the Sveriges Riksbank Prize in Economics Sciences, the award was established some decades after the 1960s ‘ original Nobel Prizes. The academics will share the award and its 11 million kroner ($ 1, 061, 826 ) cash prize.

The Conversation spoke with senior lecturer in finance at Lancaster University in the UK, Renaud Foucart, to reveal their job and why it matters.

What did Daron Acemoglu, Simon Johnson and James Robinson win for?

The three academics won the award primarily for providing corroborating evidence of how a nation’s institutions’ excellent affects its financial wealth.

At first glance, this may seem like reinventing the wheel. The majority of people would agree that a nation that upholds property rights, defrays corruption, and upholds the balance of power will also be more successful in encouraging its members to build wealth and be more effective at redistributing it.

But people following the news in Turkey, Hungary, the US or even the UK, may be aware that not all agrees. In Hungary for example, cases of fraud, corruption, a lack of media diversity, and threats to the liberation of the courts have led to a fierce struggle with the European Union.

Rich countries usually have strong corporations. However, a number of ( wannabe ) leaders are firmly in favor of weakening the rule of law. They do n’t appear to believe in institutions as the source of their prosperity, but rather as a relationship between them and their institutions.

In their see, why does the value of organizations vary across places?

Their research begins with the conditions that, evidently, have not had a direct impact on contemporary economic growth, as of the start of Western imperialism in the 14th century. According to their theory, colonial powers were more interested in cruelly stealing the government’s riches the more wealthy and hostile a place was.

In that situation, they constructed organizations with no regard for the locals. This led to low-quality organizations, during the colonial time, that continued through democracy and led to poor economic conditions immediately.

All of this is because institutions create the conditions for their own boldness, which is another area to which this week’s laureates contributed.

In comparison, in more pleasant and less established places, colonists did not take resources. Rather, they tried to build riches and settled. Therefore, it was in their ( selfish ) best interest to establish democratic institutions that would benefit residents there.

The scientists then examined historical data to test their thesis. Second, they found a “great turnaround” of wealth. By 1995, the locations that were the most developed and thickly populated in 1500 had become the poorest. Second, they discovered that places where settlers swiftly passed away from disease and were unable to remain were likewise today’s poorer.

An attempt to separate causes and consequences from the imperial foundations of institutions is made. The council would argue that even if the laureates this year did not invent the notion that institutions topic, their input is deserving of the highest distinction.

Some people have suggested that the article simply asserts that “democracy means financial growth.” Is this real?

Never in a pump. For example, their job does not demonstrate how to impose democracy from scratch on a nation with normally dysfunctional institutions will work. There is no justification for a democratic president to not be dishonest.

Corporations are a deal. And this is why it is crucial to preserve all of their characteristics immediately. Even a small portion of the privileges the state provides to people, workers, entrepreneurs, and investors could result in a vicious circle in which people do not feel secure that they will be protected from fraud or eviction. And as a result, there is less happiness and more evidence of authoritarian rule.

There may also be anomalies. China is undoubtedly trying to persuade the public that financial success cannot be achieved without a democratic republic.

Since Deng Xiaoping’s changes in the 1980s, China’s expansion coincides with the introduction of stronger home freedom for businesses and organizations. And, in that sense, it is a text edition of the power of corporations.

However, it is also true that Deng Xiaoping was responsible for the 1989 defense siege of the Tiananmen Square rallies for democracy. China now also possesses a distinctly authoritarian system that is more tolerant than northern democracies.

And China is also much poorer than its political peers, despite being the world’s second-largest business. China is facing significant financial issues of its own, and its GDP per capita is not even a fifth of that of the US.

Basically, according to Acemoglu, Xi Jinping’s increasingly authoritarian government is the reason why China’s economy is “rotting from the head”.

Daron Acemoglu, one of the three researchers to get this week’s Nobel prize in economics. Photo: Vassilis Rebapis / EPA

What current path are political organizations in different parts of the world?

Acemoglu expressed concern that the populace is rejecting political organizations in the US and Europe. And, indeed, some governments do seem to be doubting the importance of protecting their organizations.

They tinker with granting more energy to ideologues who assert that it is possible to succeed without a strict set of regulations that bind the hands of the leaders. I have no idea how much of an impact yesterday’s award will have on them.

However, if there is one thing to get away from the work of the winners this year, it is that people should be wary of using the occasionally stifling rules that support it to replace the baby of economic prosperity.

Renaud Foucart is a senior lecturer in finance at Lancaster University’s Management School.

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Palau election through a China vs Taiwan lens – Asia Times

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The United States isn’t the only country with a big election on November 5. Palau, a tourism-dependent microstate in the north Pacific, will also vote for a new president, Senate and House of Delegates that day.

Why does this election matter? Palau is one of the few remaining countries that has diplomatic relations with Taiwan.

In addition, elections in the Pacific – and the horse-trading to form government that follows – often present a chance for China to steal an ally away from Taiwan in its efforts to further reduce the self-ruling island’s diplomatic space.

For example, there was speculation Tuvalu could flip its allegiance from Taipei to Beijing based on the outcome of January’s election, but the government decided to remain in Taiwan’s camp.

Another Pacific nation, Nauru, did flip from Taiwan to China in January, less than 48 hours after Taiwan’s own presidential election.

I recently visited Palau as part of a research project examining China’s growing extraterritorial reach, and was curious to see if the balance is shifting towards Beijing in the lead-up to this year’s election.

Palau, a nation of 16,000 registered voters, has close ties to the US. It was under US administration after the second world war and recently signed a “Compact of Free Association” with the US. Palau also has a similar presidential system of government, with a president directly elected by the people every four years.

However, there are also some key differences: there are no political parties in Palau, nor is there any replica of the absurd Electoral College voting system.

The archipelago also has extremely polite yard signs (“Please consider[…]”, “Please vote for […]” and “Moving forward together”). Alliances are based more on clan and kinship relations than ideology (although that’s not entirely dissimilar to the US).

This year’s presidential race is between the “two juniors”: the incumbent, Surangel Whipps Junior, and the challenger, Tommy Remengensau Junior. If either man were facing a different opponent, he would win easily. Nearly all of Palau’s political insiders deem this contest too close to call.

Palau President Surangel Whipps Junior speaking at the United Nations in September. Photo: Sarah Yenesel / EPA via The Conversation

Whipps has been in office since 2021. Accompanied by his beloved father, a former president of the Senate and speaker of the House in Palau, he is expected to door-knock each household at least four times.

Remengensau isn’t a political newbie, either. He’s been president for 16 of Palau’s 30 years as an independent state. In the comments section of the YouTube live feed of a recent presidential debate, one person asked, “you’ve had four terms, how many more do you need?”

Whipps copped flak for his tax policy, but the comments and the debate itself reached Canadian levels of politeness. As the debate wound up, the rivals embraced warmly – befitting their closeness (they are actually brothers-in-law) and their lack of discernible ideological differences.

YouTube video

[embedded content]

2024 Palau presidential debate.

A ‘pro-Beijing’ candidate in the race?

However, there is one issue that has the potential to drive a wedge between the two candidates: the China–Taiwan rivalry.

In a recent article for the Australian Strategic Policy Institute (ASPI), Remengensau was described as a “pro-Beijing” candidate who might be inclined to switch Palau’s diplomatic relations to Beijing, cheered on by the “China-sympathetic” national newspaper, Tia Belau.

Remengensau’s reaction to the ASPI piece was genuine fury, and aside from a few fly-in lobbyists from the US, no one in the country has taken the characterization seriously. Yes, he is less pro-US than Whipps, reciting the “friends to all, enemies to none” mantra beloved by Pacific leaders in the debate. But that’s some distance from being “pro-Beijing.”

Other outside commentators have also weighed in with similar viewpoints. Recent pieces by right-wing think tanks, the Heritage Foundation and the Federation for the Defence of Democracies, have pushed a similar line that every Pacific nation is just “one election away from a [People’s Republic of China]-proxy assuming power and dismantling democracy.”

Concerns of Chinese influence

The basis for both allegations in the ASPI piece is a fascinating investigation by the Organized Crime and Corruption Reporting Project (OCCRP).

The story detailed an influence attempt led by a local businessman from China, Hunter Tian, to set up a media conglomerate in Palau with the owner of the newspaper Tia Belau, a man named Moses Uludong. (I played a small part in the investigation.)

The proposed conglomerate had eyebrow-raising links to China’s secret police and military. But Covid killed the deal, and today, the newspaper runs press releases from Taiwan’s embassy without changing a word.

Palau’s media is also ranked as the most free in the Pacific, and Tia Belau is a central part of this healthy media ecosystem.

Uludong is a pragmatic businessman who’s no simple cheerleader for Beijing, explaining to OCCRP’s journalists last year:

The Chinese, they have a way of doing business. They are really not open.

This doesn’t mean Chinese operations in Palau will stop, though. Representatives of the Chinese government like Tian, who is the president of the Palau Overseas Chinese Federation and has impressive family links to the People’s Liberation Army, will keep trying to influence Palau’s elites and media.

Evidence uncovered by Palau’s media suggests some of their elites are vulnerable to capture. In recent months, the immigration chief stepped down for using his position “for private gain or profit”, while the speaker of the House of Delegates was ordered to pay US$3.5 million for a tax violation, in part due to an irregular lease to a Chinese national.

Chinese triads are also now involved in scam compounds and drug trafficking in Palau, which has done little to burnish China’s image among Palauans.

Playing into China’s hands

So, can we expect a dramatic Palau diplomatic flip after November’s election? Not anytime soon.

But labeling respected leaders and media outlets as “pro-Beijing” with no basis, and fabricating a Manichean struggle in a nation where there’s plenty of goodwill for the US, won’t cause China’s boosters in Palau to lose sleep.

Egging on US agencies to “do something” to counter Chinese influence in the Pacific, such as a poorly thought-out influence operation run by the Pentagon in the Philippines during the pandemic, will just play into Beijing’s hands. In the Pacific, secrets don’t stay secret for long.

And if you call someone “pro-China” for long enough, one day you might get your wish.

Graeme Smith is associate professor, Australian National University

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