US strategy of maintaining strategic stability in Southern Asia

According to a report by United States Institute of Peace, over the past decade, long-standing disputes between the nuclear-armed states of Southern Asia have repeatedly veered into deeper hostility and violence. 

These regional developments reflect and reinforce new and significant geopolitical shifts, starting with the global strategic competition between China and the United States.

In Southern Asia, relations between the United States and Pakistan have frayed even as United States-India and China-Pakistan ties have strengthened. The region now faces deepening and more multifaceted polarization. Global competition adds fuel to regional conflict and reduces options for crisis mediation.

This report reviews the challenges posed by changing strategic circumstances in Southern Asia, assesses a range of US policy options, and presents a set of priority recommendations for US policymakers.

China, India and Pakistan have developed nuclear capabilities as one way to deter conflict with more powerful adversaries: the United States, China, and India, respectively. Each of the states in Southern Asia is expanding its nuclear arsenal and investing in related delivery systems. All aspire to field nuclear triads with assured second-strike capabilities, but China, India, and Pakistan are at very different stages in this process.

In making these investments in national security, each state also threatens its less powerful rivals. The result, a ‘cascading security dilemma’, encourages arms racing, disrupts regional strategic stability, and heightens the risk that crises could cross the nuclear threshold.

In addition to general arms race dynamics, the introduction of new munitions, more capable delivery systems, and potentially more risk-acceptant doctrinal shifts tend, on balance, to exacerbate strategic instability in Southern Asia.

Sophisticated missile defense systems; hypersonic and multiple independently targetable reentry vehicle (MIRV) missiles; and tactical, sea-based (surface and submarine), and dual-capable nuclear systems all raise new challenges for crisis management and raise questions about how they might influence the nuclear strategies and doctrines of regional states. 

The potential for conflict between India and Pakistan remains high following the 2019 Pulwama-Balakot crisis. Subsequent diplomacy led to the resumption of a ceasefire along the Line of Control in 2021, but the underlying causes of hostility, including although not limited to the disputed territory of Kashmir, remain.

Moreover, India and Pakistan appear to have drawn lessons from 2019 that increase the likelihood that future crises could escalate in dangerous ways, possibly even to the nuclear threshold.

All told, 2019 showed important shifts in long-standing positions (by India and Pakistan, as well as China and the United States) and a new willingness by all parties to accept greater risk.

Over the past several years, India’s relations with China have also deteriorated markedly. In the summer of 2020, their long-disputed land border saw the most violent clashes in more than four decades. India and China have since pulled forces away from hot conflict but have not found a way back to the pre-2020 status quo.

Both are actively investing in new military capabilities and infrastructure along their inhospitable Himalayan frontier, raising the prospect that future disputes could escalate into even more significant conventional military exchanges.

Nuclear use remains unlikely, but it cannot be ruled out, if only as the unintended consequence of conventional military escalation. India-China border tensions are certain to influence their broader bilateral relationship as well as military investments, both conventional and nuclear.

In addition to worrisome trends in bilateral India-Pakistan and India-China relations, India faces the thorny challenge of managing relations with two hostile neighbors (China and Pakistan) that are increasingly close partners.

Other regional developments, including in Afghanistan, where Taliban rule is likely to create new opportunities for terrorist groups, further threaten strategic stability in Southern Asia.

Ultimately, it is the unpredictable evolution of these dangerous dynamics in combination—India-Pakistan crises, China-India border violence, and resurgent terrorist threats—that should raise concern that inevitable flare-ups could spiral.

The United States has only a limited capacity to influence the behavior of other nuclear-armed states. The overlapping and interconnected rivalries and territorial disputes in Southern Asia further complicate the policy challenge facing Washington.

In particular, US policymakers will need to balance competing strategic priorities as they deepen the strategic partnership with India and deter aggression while taking care to avoid actions that could contribute to a regional arms race, greater instability, or crisis escalation.

That said, the United States has in the past played a significant role in regional crisis prevention and mitigation and continues to have a wide range of policy tools at its disposal.

This report systematically assesses a range of options for resolving, mitigating, or better managing regional disputes; enhancing regional strategic stability through deterrence, reassurance, and other diplomatic or technical means; and improving crisis management tools and practices to reduce the likelihood that any specific crisis escalates past the nuclear threshold.

This assessment is not intended to be a one-time effort. As the United States faces new and evolving circumstances, it should continue to develop policies to address the motives, new capabilities, and processes that expose Southern Asia to a significant risk of nuclear war.

To resolve or mitigate core disputes in Southern Asia that threaten regional peace, the United States should continue to pursue diplomatic initiatives to encourage reduced tensions between India and Pakistan. It should also prepare to seize opportunities for tactical progress, for instance, on ways to remove forces from specific points of friction, such as the Siachen Glacier, even if core disputes prove intractable.

The United States should support long-term regional economic development projects to build material incentives and more vocal constituencies favoring regional peace.

Additionally, the United States should look for new diplomatic opportunities to manage India and China’s border dispute, including in US talks with China as well as coordination with US allies and partners to develop new economic and financial tools aimed at deterring Chinese territorial aggression.

The United States should use its ongoing negotiations with the Taliban and economic and financial leverage with Pakistan to reduce threats to regional stability posed by terrorists based in Afghanistan and Pakistan, in particular by naming anti-Indian terrorists as priority US concerns and targets.

To enhance prospects for strategic stability in Southern Asia, the United States should devote renewed attention to nuclear risk reduction measures, starting with the establishment of a dedicated, secure, and redundant India-Pakistan nuclear hotline, supported by bilateral agreements and practices, and should urge both India and China to enter strategic stability talks with each other.

Additionally, the United States should raise the idea of a new transregional forum on regional and global strategic stability that would include an “N-7” (China, France, India, Pakistan, Russia, the United Kingdom, and the United States) to discuss and strengthen stabilizing nuclear norms.

Washington should also deepen its defense cooperation with New Delhi in ways that contribute to India’s capacity for territorial defense and a stabilizing conventional and nuclear deterrent without exacerbating the regional arms race or increasing the likelihood of nuclear crises.

To better manage crises between the nuclear-armed states of Southern Asia, the United States should prepare its policymakers for complex nuclear crisis diplomacy in the region by conducting gaming exercises within the intelligence community; developing a generalized policy playbook for India-Pakistan, India-China, and overlapping India-Pakistan-China crises; and routinely sharing insights from these planning documents with all incoming senior officials in relevant US government agencies, embassies, and bases.

Additionally, Washington should work to improve its indicators and warning for regional crises and prepare to share information publicly and with regional actors to combat disinformation in instances where doing so could prevent or de-escalate a conflict.

It should offer to help New Delhi enhance the resilience of its information and communications channels. It should also coordinate with trusted third parties to better prepare for crisis diplomacy so that they can serve as intermediaries and honest brokers in future crises.

 

International Financial Institutions plan to address food insecurity

Kristalina Georgieva, Managing Director, International Monetary Fund (IMF) has made a statement following the publication of a Joint International Financial Institution (IFI) Plan to Address Food Insecurity.

Russia’s invasion of Ukraine has precipitated serious economic and social consequences around the globe. Among them, many countries are now facing dangerous food shortages and sharply higher prices for food, energy, and fertilizers. 

These pressures occur at a time when countries’ public finances are already stretched from the pandemic and public debt burdens are high. With inflation reaching the highest levels seen in decades, vulnerable households in low- and middle-income countries are most at risk of acute food insecurity. And history has shown that hunger often triggers social unrest and violence.

If we have learned one lesson from the 2007-08 food crisis, it is that the international community needs to take fast and well-coordinated actions to effectively tackle a food crisis, by maintaining open trade, supporting vulnerable households, ensuring sufficient agricultural supply, and addressing financing pressures. I am honored to have been able to work together with the heads of other International Financial Institutions to propose concrete actions. Coordination between us will be critical for the plan to have maximum impact in quickly alleviating food insecurity, especially for the most vulnerable households in the most vulnerable countries.

Working closely with the World Bank and other International Financial Institutions, the IMF will provide policy advice, capacity development assistance, and financial support to catalyze and complement financing from other institutions. The IMF is investing in its monitoring capacity to allow for timely identification of countries with the most pronounced financing pressures, especially fragile and conflict-affected states, which will particularly be affected by food insecurity.

The IMF is working with country authorities on macroeconomic frameworks and policy priorities. A critical area of focus is to assist countries in their efforts to rapidly improve social safety nets to protect vulnerable households from the imminent threat of hunger. Helping members identify ways to safeguard food security without resorting to export restrictions has been another priority. These policy objectives are reflected in the IMF’s program engagement. IMF financial support for Moldova (recently augmented to help address the harmful effects of the war) and Mozambique, for instance, includes a focus on strengthening social safety nets for vulnerable households.

The IMF will also bring to bear its new Resilience and Sustainability Trust, which will provide affordable longer-term financing for countries facing structural challenges, while countries with acute financing needs could access IMF emergency financing, where appropriate. The IMF is intensifying efforts with the World Bank and others to support debt restructurings where needed.”

Background: Following a meeting of International Financial Institutions (IFIs) and global leaders convened by the US Treasury on April 19, 2022, “ Tackling Food Insecurity: the challenges and call to action,” the International Monetary Fund (IMF), the African Development Bank (AfDB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), Inter-American Development Bank (IDB), the World Bank, and the International Fund for Agricultural Development (IFAD) have worked together to formulate a joint action plan to address food insecurity.

According to the plan, the IFIs will pursue actions to step up, surge, and scale their work across six priority goals: 1) support vulnerable people; 2) promote open trade; 3) mitigate fertilizer shortages; 4) support food production now; 5) invest in climate-resilient agriculture for the future; and 6) coordinate for maximum impact.

 

Isn’t United States acts open declaration of war against Russia?

The US Senate voted 86-11 Thursday to approve a US$40 billion Ukraine aid package. This would replenish US stockpiles of weapons transferred to Ukraine, as well as allocate billions of dollars to help the Ukrainian government continue operating and provide humanitarian assistance.

President Biden is expected to immediately sign the legislation, which exceeds his US$33 billion request to Congress.

The House passed the legislation overwhelmingly earlier this month by a vote of 368-57.

The bill would authorize the transfer of American weapons and equipment to Ukraine and provide $9 billion to replenish depleted US weapons stockpiles. It would also provide nearly US$9 billion for continued operations of the Ukrainian government and
US$4 billion in international disaster assistance.

Pentagon Chief Lloyd Austin and Secretary of State Antony Blinken had urged Congress last week to pass the bill by Thursday if the US wanted to continue sending aid to Ukraine at the current pace.

The administration had predicted that the US$100 million leftover in presidential drawdown authority—which allows the Pentagon to send weapons from its own stockpile — would last through the middle of May.

Eleven Republican senators led by Sen. Rand Paul voted against the measure. These were: Marsha Blackburn, John Boozman, Mike Braun, Mike Crapo, Bill Hagerty, Josh Hawley, Mike Lee, Cynthia Lummis, Roger Marshall and Tommy Tuberville.

The Biden administration also announced US$100 million in military assistance to Ukraine on Thursday; moments after the Senate sent a US$40 billion supplemental aid package to the president’s desk.

The equipment will include additional artillery, radars and other equipment to Ukraine, President Biden said in a statement following passage of the Ukraine aid.  

In a separate statement, Secretary of State Antony Blinken said the weapons will be coming from the Pentagon’s existing inventories.

“These weapons and equipment will go directly to the front lines of freedom in Ukraine, and reiterate our strong support for the brave people of Ukraine as they defend their country against Russia’s ongoing aggression,” Biden said.

Thursday’s package is the 10th shipment of weapons to Ukraine under presidential drawdown authority, which allows the Pentagon to dig into its existing stockpiles. It also brings the total military assistance that the U.S. has provided to the country to US$3.9 billion since Russia’s invasion began.

The equipment includes: eighteen 155 mm howitzers; eighteen tactical vehicles to tow those howitzers as well as eighteen artillery tubes; three AN/TPU 36 counter-artillery radars; and field equipment and spare parts, the Pentagon said. The US has previously provided shipments of this equipment to Ukraine.

Pentagon spokesman John Kirby said the weapons will start to flow “very, very soon.”

“I cannot give you an exact date of when it’s all going to show up in Ukraine, but you can imagine, having seen us do this in the past, that we’re not going to sit on our hands and will start flowing that stuff immediately,” he said.

Blinken and Defense Secretary Lloyd Austin urged Congress last week to advance the supplemental aid bill by Thursday in order to continue sending security assistance at the current pace.

Kirby said the package uses up the remaining US$100 million of the US$3.5 billion in drawdown authority that was passed in March as part of a US$1.5 trillion bill to fund the government through September.

The US$40 billion supplemental, which Biden is expected to sign, includes US$9 billion for the Pentagon to replenish the weapons it sent to Ukraine, exceeding the administration’s request of US$5 billion.

Container players expect more chaotic peak season

According to a survey, forwarders, traders and shippers expect the 2022 container peak season to be even more chaotic than 2021. The Survey found that 51% expect the traditional peak season in the third quarter to be worse in 2022 than in 2021, 26% expect it to be less chaotic and 22% expected about the same level of chaos.

The pandemic disrupted the usual seasonal swings in the container market as factories were closed, lockdowns spread and congestion followed. Faced with another disrupted year, respondents were turning to multiple strategies to get goods to retailers in time for the fourth quarter shopping season.

Container line reliability dropped to 35.8% in 2021 and fell even further in the first quarter of 2022.

Some 37.5% of respondents said they were shipping early in 2022 to ensure volumes, 25% were using alternative shipment routes and 18.8% were contracting long-term slot agreements with carriers.

Despite the difficulties in 2021 and expectation of chaos to come, 62.5% of respondents were still relying on the spot market or had no specific plans to ensure shipments make it to destination in time.

Turning back to the current situation, 58% of respondents said China’s Covid lockdowns had made it “hard to produce/ship as much product as planned.” That feedback adds to growing concerns that the release of lockdowns in China could lead to a surge of exports, further disrupting supply chains to Europe and North America.

“Predicting exactly what will happen in this year’s peak season is harder than normal because there are so many contradictory signs and intangibles,” said Christian Roeloffs, co-Founder and CEO, of Container xChange.

“One big question is whether China is going to sacrifice its zero Covid-19 policy to get trade and its economy moving again. 

“If it does, then there’s every sign that we’ll see a substantial surge as backlogs of exports is shipped. If lockdown rules are relaxed soon and truckers are allowed to get back to work, then those backlogs will be arriving at the same time as peak season orders which could cause a lot of supply chain blockages at ports in Europe and the US where congestion is already widespread.

“However, there are very few indicators so far that President Xi is willing to compromise health policy to boost trade. Indeed, it might not be politically expedient for him to do so with the Communist Party National Congress set for later this year when he is expected to be endorsed for a third term. “

 

European Union needs €210 billion to free itself from Russian energy

According to the European Commission, the Union will have to invest an additional €210 billion (US$220 billion) to free itself from Russian energy imports by 2027. 

The extra investment comprises of €29 billion to adapt the power grid, €10 billion to ensure sufficient LNG and alternative pipeline gas imports, €2 billion for security of alternative oil supplies, €56 billion on energy efficiency and heat pumps, and an extra €113 billion on developing renewable energy sources, almost a quarter of which would be earmarked for key hydrogen infrastructure.

The commission suggests tackling existing bottlenecks at oil supply infrastructure in the region such as the Transalpine, Adria or SPSE pipelines. It also proposes targeted investment on upgrading refineries that are configured to run on Russian Urals crude. The commission made no direct reference to Hungary, which has said it cannot switch to solely using non-Russian crude without up to €750 million of investment in refinery upgrades and pipeline capacity expansion.

The investment recommendations presented on Wednesday complement previous proposals from the Commission aimed at cutting EU imports of Russian gas by two-thirds, or over 100 billion cubic meters per year, by the end of 2022. The EU is also trying to hammer out an agreement among member states to phase out Russian oil imports this year, although it faces pushback from Hungary among others.

The €210 billion of additional spending would be on top of investment required to implement the EU's climate and energy policies by 2030. The Commission’s latest recommendations together with the 2030 policies will allow the EU to save some €80 billion on gas imports, €12 billion on oil imports and €1.7 billion on coal imports.

EU officials confirmed that the proposed target for the share of renewables in the bloc's energy mix will increase to 45% by 2030, up from 40% previously. This would bring total renewable energy generation in the EU to 1,236GW by 2030, as compared to 511GW at present. The Commission points to solar panels as key to accelerating out of fossil fuel imports. It is eyeing 300GW of installed solar photovoltaics by 2028, double the present installations.

EU officials also confirmed a proposal for an EU-wide gas price cap. The cap would be a measure of "last resort" in the case of full disruption of Russian gas supplies, a senior official said, adding that it would be combined with curtailment of supply to industry and would require additional legislation.

"A price cap is an emergency measure," European Commission Executive Vice President Frans Timmermans told Argus. "It will be taken when there's massive disruption. But with one measure you can't make cheap out of expensive energy."

 

Pakistan: SBP and IFC join hands to promote Agriculture Finance through Warehouse Receipts Financing

Deputy Governor State Bank of Pakistan (SBP) Ms. Sima Kamil while addressing a two-day specialized training workshop on Electronic Warehouse Receipt Financing (EWRF) for banks observed that the training program will be instrumental to support SBP’s recent initiative to promote EWRF in the country.

Banks will be able to get hands on knowledge about EWRF product development, understanding the risk analysis, price determination mechanism and the international best practices.

She encouraged senior bankers to use the relevant knowledge of EWRF gained during the session and disseminate it in the industry for its smooth implementation.

EWRF is a mechanism whereby farmers can avail financing facility from banks by placing their produce and agricultural commodities. By doing so, farmers can avoid selling their produce on unfavorable prices just to ensure cash flows to meet input requirements of next crop. It will also help in reducing Pakistan’s high post-harvest losses.

Adoption of EWRF by banks and its enhanced uptake will not only facilitate banks to achieve higher levels of agriculture credit disbursement but will also help them enhance credit outreach.

Ms. Kamil noted that agriculture contributes almost a quarter to our GDP and employs half of the labor force. However, she regretted that people associated with agriculture sector face challenges in access to finance and modernize infrastructure that may facilitate them either in storing or timely disposal of their agricultural produce.

She added that SBP took the initiative of EWRF in view of the role of warehousing regime in increasing food security, reducing post-harvest losses and allowing bank financing to farmers against commodities as collateral. She hoped that it will facilitate traders and processors to purchase inputs they need, including seeds, fuel and fertilizers, before and during the harvest, when their seasonal financing needs are significant.

Parallel it will encourage investment in agricultural infrastructure in terms of building new, modern and commercially viable warehousing infrastructure. At outset, 25 banks signed System Usage Agreements (SUAs) with Naymat Collateral Management Company and SBP assigned indicative financing targets to these banks for FY 2021-22 and 2022-23. Now, these banks have started financing against maize crop in various districts of Punjab under the EWRF regime.

The Deputy Governor acknowledged the support extended by IFC in terms of technical assistance to Government of Pakistan and other key stakeholders to make building blocks for EWRF in Pakistan.

She expressed gratitude for IFC team led by its Country Manager for Afghanistan and Pakistan, Zeeshan Ahmed Sheikh and Ms. Nouma who has been coordinating an IFC-collaborated project for the promotion of EWRF in Pakistan. She also encouraged senior bankers to use the relevant knowledge of EWRF and disseminate in the industry for its smooth implementation.

Speaking on the occasion Zeeshan observed that innovative financing models, such as electronic warehouse receipts, are extremely important as they can unlock a massive amount of capital, bolstering the farming sector and, over the long run, supporting job creation and economic growth. He also acknowledged the Government of Japan for supporting the EWR work.

SBP organized the two-day training workshop in line with the EWRF Uptake Action Plan in collaboration with IFC. During the workshop, global experts from IFC and Pakistan shared their knowledge and experiences with senior banking officials regarding different modalities of collateralized commodity financing and EWRF. The program provided a deeper understanding of EWRF to banks that will help them to extend financing to farmers against agricultural commodities as alternate collateral.

This article was originally published in Eurasia Review

United States-Japan at Tokyo Summit to commit to jointly deter China

According to Nikkei Asia, the Japanese and United States governments have begun coordinating on the wording of a joint statement to be released during their summit meeting on Monday in Tokyo. 

The statement will clearly state a policy of cooperation to deter and respond to China's activities in the Indo-Pacific region.

The statement will also outline a policy of keeping Japan under the US nuclear umbrella, and the sharing of security strategies between the two countries. The partners will confirm the launch of the Indo-Pacific Economic Framework (IPEF), led by US and clarify Washington's involvement in Asia.

This will be the first face-to-face meeting between Japan's Prime Minister Fumio Kishida and US President Joe Biden. The two leaders' expected reference to deterring China's hegemonic behavior reflects their concern that Russia's invasion of Ukraine has implications for Asia.

The US is deepening its military commitment to Europe to deal with Russia, and, for the time being, the US will be forced to conduct a three-front strategy -- in Europe, the Middle East and East Asia. Despite the challenges, the US will again stress both domestically and internationally that its top priority is China, which the US believes is its only strategic competitor.

The previous joint statement published last year and delivered by then-Prime Minister Yoshihide Suga and Biden spoke of the importance of peace and stability in the Taiwan Strait for the first time in almost half a century. It also included the phrase ‘the importance of deterrence’ in the region.

This time they will strengthen the wording to include the statement that they will deter China's actions that undermine stability in the region, and if necessary, will cooperate to respond. The statement will also emphasize that they will not allow the status quo to be changed by force, and it will maintain the previous wording regarding the Taiwan Strait.

The two countries will maintain economic sanctions against Russia, which continues its aggression against Ukraine, and will condemn threats to use nuclear weapons. The statement will also again call for the complete denuclearization of North Korea.

The US will clarify its stance on protecting Japan under the nuclear umbrella. The US has been unable to dissuade Russia, which possesses nuclear weapons, from invading Ukraine, and concerns about the effectiveness of nuclear deterrence are spreading. Washington will reaffirm that if Japan is threatened with nuclear weapons, it is willing to defend Japan not only with conventional forces but also with nuclear weapons if necessary. This will be included in the joint statement.

The two countries will also confirm that they plan to share security goals and strategies, specifically, the National Security Strategy to be formulated by the end of the year. They will pledge to strengthen cooperation between the Japan Self-Defense Forces and the US military in areas such as troop operations, joint use of bases, and procurement of equipment, as they prepare for a possible emergency in Taiwan.

Prime Minister Kishida will also discuss with Biden the Japanese government's intended increase in defense spending, which had previously been limited to about 1% of gross domestic product, and its moves to develop a strike capability against enemy bases. That is, the ability to hit missile launch sites and other targets.

Regarding economic strategy, the US will establish a mechanism to deepen its involvement in Asia. The two countries will agree to hold the first economic version of a "2 plus 2" ministerial meeting, with the Japan-US ministerial talks serving as a command post, at an early date. They will also outline their basic policy of creating a stable supply chain for semiconductors among friendly countries and regions.

During his visit to Japan, President Biden will announce the launch of the Indo-Pacific Economic Framework, a new type of economic bloc, which more than 10 countries, including South Korea, Australia, the Philippines and Thailand are, expected to participate in. The US is deeply cautious about rejoining the Trans-Pacific Partnership (TPP) and will first use the IPEF as a forum to establish rules for digital trade and other areas.