Chinese President to skip G-20 meeting

Who shows up where can be very revealing 

According to Bloomberg, for the first time since he took power, Chinese President Xi Jinping will skip a Group of 20 summit. Instead, China is sending Premier Li Qiang to the event hosted by India’s Prime Minister Narendra Modi. That’s a clear signal of the relative value he places on the G-20 — set up with US backing in the late 1990s — versus the newly expanding BRICS grouping. 

Xi just made one of his rare 2023 overseas visits last month, to attend the BRICS summit in South Africa, where he successfully pressed for its expansion to include commodity powerhouses including Saudi Arabia, Argentina and the United Arab Emirates.

The new BRICS-11 will account for a major share of key global inputs, according to calculations by Center for Strategic and International Studies researchers Gracelin Baskaran and Ben Cahill: a) 42% of the world’s oil supply, b072% percent of rare earth minerals- with three of the five nations with the largest reserves, c) 75% of the world’s manganese, d) 50% of global graphite and e) 28% of nickel

“It is quite possible that a more coordinated approach” toward export restrictions to the rest of the world could now develop among the BRICS-11, the CSIS analysts wrote.

In the energy field, the group features both major oil and gas producers as well as two of the largest importers, in China and India.

Therefore, there is an incentive for members to set up mechanisms to trade commodities outside the reach of the G-7 financial sector, Baskaran and Cahill wrote.

Ex-Treasury Secretary Lawrence Summers — who was in government when the G-20 began — says the enlarged BRICS is a symptom of the US abdicating global leadership in the cause of economic nationalism. Whereas Washington once championed free-trade deals, now its focus is on import restrictions and a buy American bias, he says.

Whenever anybody says they care about producers, not low prices for consumers, they are adopting a negative sum, ‘all-against-all’ vision of international economic policy that invites challenges to the post-WWII vision the US once championed, says Summers, a paid contributor to Bloomberg Television.

The BRICS-11 has its own challenges. Bloomberg’s geo-economics team, led by Jennifer Welch, cautions that the dollar is unlikely to be dethroned by any push by the group to use alternatives.

India-China border tensions, part of the backdrop to Xi’s skipping the G-20, are a bar to BRICS-11 coordination. President Joe Biden, who will be showing up in New Delhi this week, has every incentive to keep Modi aloof from China. Treasury Secretary Janet Yellen’s attendance marks her fourth visit to India in 10 months, highlighting the US focus on that relationship.

Biden and Xi will both be no-shows at the Asean summit of Southeast Asian nations and key trading partners in Jakarta, Indonesia, this week, a missed chance for both.

Japan’s Prime Minister Fumio Kishida will be — a great opportunity for this key US ally to show support for the region in the wake of a provocative Chinese map that sowed acrimony there.

And to share a stage with regional counterparts as China tries to isolate Japan over its discharge of treated wastewater from wrecked Fukushima reactors into the Pacific.

 

Palm oil glut to impact producing countries

According to Nikkei Asia, weak prices for palm oil are pushing Indonesia and Malaysia - two of the world's biggest producers to boost domestic use through developing jet fuels and expanding biodiesel programs.

Widely used in Indonesia for cooking oil and applications such as personal care and cleaning products, palm oil is an important sector in Southeast Asia's largest economy with the industry employing millions of workers. Indonesia is the world's largest exporter and it is the country's top export commodity, apart from coal. Palm oil is similarly important in neighboring Malaysia, the world's second-largest producer and exporter.

The benchmark crude palm oil (CPO) price in Malaysia ranged from 3,500 ringgit (US$755) to 4,200 ringgit per ton between January and June. That is compared to the all-time high in April 2022 of almost 7,000 ringgit per ton, following the launch of Russia's invasion of Ukraine, which sent prices of all edible oils skyrocketing. That run-up in prices for palm oil, traditionally the cheapest among vegetable oils, was a continuation of one caused by pandemic-related disruptions since late 2020.

"Elevated inventories in India and mainland China, an expected increase in global soybean production through the 2023-24 season, and the upcoming September-October period of peak palm fruit yields - all point to downward pressure on prices through the remainder of 2023, BMI, a research unit of Fitch Group, said in an August 15, 2023 note.

"Through the medium term, it remains our view that average annual palm oil prices will continue to ease."

BMI forecast an average price of 3,800 ringgit per ton for Bursa Malaysia-listed third-month palm oil futures contracts in 2023, down from the average of 4,910 per ton last year. It also forecast prices will continue to fall, reaching 2,400 ringgit a ton in 2027 -- on par with a five-year pre-COVID pandemic average of close to 2,420 ringgit per ton.

The declines have hurt incomes of major palm oil producers after many enjoyed record profits in 2021 and 2022.

In Malaysia, state-owned conglomerate Sime Darby Plantation reported that second-quarter net profit fell by 54% to 380 million ringgit from the same period in 2022. FGV Holdings, also government linked, saw its plantation sector plunge 97% to 13.76 million ringgit, mainly due to the lower average CPO price compared to the previous year and on top of lower CPO sales and 37% higher CPO production costs.

In Indonesia, net income at top producers Sinar Mas Agro Resources and Technology, Astra Agro Lestari and Salim Ivomas Pratama declined 85%, 54% and 71%, respectively, in the first half of 2023, to 284.3 billion rupiah ($18.7 million), 367.6 billion rupiah and 128.4 billion rupiah.

Political issues also weigh on producers. A European Union regulation on deforestation-free supply chains entered force on June 29, 2023. S&P Global said in August that combined with the EU's renewable energy directive, which limits the use of palm oil for biofuel in EU markets starting in 2030, the new law is "seen as another layer of restrictions by palm oil producing countries."

Indonesia and Malaysia account for about 85% of global palm oil trade while the EU is typically the third largest importer after China and India. Indonesia, Malaysia and the EU have reportedly agreed to form an ad hoc task force to hash out issues related to the implementation of the deforestation regulation.

To deal with the market and political pressures, Jakarta and Kuala Lumpur are seeking new ways to utilize the commodity.

State-owned airline Garuda Indonesia in August announced the start of a static test on a "sustainable aviation fuel," or "bioavtur," on an engine used in its Boeing B737-800 NG fleet, with ground and flight tests to follow. Garuda's bio jet fuel is jointly developed by Indonesian state oil company Pertamina and the Bandung Institute of Technology.

Also last month, Indonesia expanded its mandatory B35 biodiesel program -- produced by Pertamina -- nationwide, after a partial introduction in February. B35 has a higher palm oil content in the diesel mix than the B30 launched in early 2020. Indonesia is next targeting B40 for 2030.

Indonesia is pushing the biodiesel program expansion as palm oil prices have fallen from the record highs. Malaysia is also exploring its own biofuel efforts.

The Malaysian Palm Oil Board and state energy giant Petronas signed an agreement in August to study using cooking oil and palm oil waste as sustainable aviation fuel. In the second phase of the National Energy Transition Roadmap launched late last month, the government included a B30 biodiesel mandate on heavy vehicles by 2030 after rollout by 2025.

Yusuf Rendy Manilet, economist at Indonesian think tank Center of Reform on Economics, sees Indonesia's biofuel policy as ultimately viable. 

"The government's goal is to reduce dependency on imports of oil by leveraging biofuels in order to improve the trade balance," Manilet told Nikkei Asia. "In the long run, with more biofuels becoming available and oil imports reduced ... fuels will become more affordable and lead to improving purchasing power."

BMI said increasing biofuels uptake could pose a "major upside risk" to its price outlook for edible oils overall. "An increase in the rate of diversion of palm oil to the manufacture of blended biofuels -- or, the greater diversion of alternative edible oils, such as soy oil, to biofuels - would tighten the supplies of edible oils for food consumption."

It added that the developing El Nino weather phenomenon, marked by drier and hotter weather in Southeast Asia, poses another major upside risk to its palm oil price outlook over the next 12 to 18 months -- although "much depends on the eventual strength of the El Nino event itself."

BMI said the 2014-16 El Nino, one of the most severe of modern times, led to double-digit annual declines in percentage terms for crop yields in both Malaysia and Indonesia over the 2015-16 season -which resulted in palm oil prices rising by 1,000 ringgit per ton during the period.

India steps up coal use to stop outages

According to a Reuters report, India has stepped up the use of coal to generate electricity in a bid to stop outages caused by lower hydroelectricity output, and as an increase in renewables is struggling to keep pace with record power demand.

It is unusual for India's electricity use to spike in August, when temperatures are lower due to the annual monsoon that runs between June and September. Demand typically peaks in May, when Indians crank up air-conditioners to beat the heat, and industries operate without rain-related disruptions.

However, the driest August in more than a century has resulted in power generation surging to a record 162.7 billion kilowatt hours (units), a Reuters analysis of data from the federal grid operator Grid India showed.

Coal's share in power output rose to 66.7% in August - the highest for the month in six years, according to a Reuters analysis of government data. Lower rainfall lead to the share of hydro power in overall output plunging to 14.8%, compared with 18.1% in the same period last year.

The government has repeatedly defended the use of coal citing lower per capita emissions compared with richer nations, and rising renewable energy output.

Despite higher demand for coal, power plants have slashed imports by 24% to 17.85 million metric tons during the first four months of the fiscal year ending in March 2024, government data showed, due to a 10.7% increase in production by state-run Coal India.

Lower imports by the world's second largest importer of the polluting fuel behind China have kept global thermal coal prices depressed in recent months.

Analysts and industry officials attribute the higher power use to farmers using more electricity to irrigate fields due to insufficient rain, intermittency of renewables, and increased cooling demand with warmer-than-usual temperatures.

"Given the already stressed supply situation, as poor monsoon in August resulted in high agricultural demand, the sudden fall of wind generation ... has further aggravated the situation," power analytics firm EMA Solutions said in a LinkedIn post on Thursday.

India's peak demand - the maximum capacity required during any time of the day - rose to a record 243.9 gigawatts (GW) on August 31, the Grid India data showed, exceeding available capacity by 7.3 GW.

Electricity supply fell short of demand by 780 million units in August, the data showed, marking the highest shortage since April 2022, when India faced its worst power cuts in six and a half years.

Weather officials expect country-wide rainfall in September to be in line with the long-term average, possibly providing some respite to utility operators.

Coal's share in output rose to 74.2% in the eight months that ended in August, the Grid India data showed, compared with 72.9% in the same period last year and on track for a third consecutive annual increase. The share of hydro fell from 10.9% to 9.2%.

Overall power generation has risen by more than 108 billion units this year, dwarfing an increase of about 16 billion units in renewable generation.

India failed to achieve a target to install 175 GW in renewable energy by 2022, and has since stated that it would try to boost non-fossil capacity - solar and wind energy, nuclear and hydro power, and bio-power - to 500 GW by 2030.

Achieving that target would require over 43 GW more of non-fossil capacity every year, nearly three-times the average non-fossil capacity addition over the last two years to July.

 

Developing countries facing debt problem

According to Reuters, the persistent and damaging debt problems gripping a number of developing nations will be a core topic during the G20 summit in Delhi next month. Following is the recap of economies in the countries currently facing problems:

ZAMBIA

Zambia was the first African country to default during the COVID-19 pandemic and after a long-awaited burst of progress in recent months finally looks to be closing in on a repair plan.

In June, it clinched a US$6.3 billion debt rework deal with the Paris Club creditor nations and its other big bilateral lender China. The details are still being worked on, but the government also hopes to reach a deal in the coming months with the international funds that hold its unpaid sovereign bonds.

The progress has also been cheered as a success for the struggling G20 Common Framework initiative, which was set up during the pandemic to try to streamline debt restructurings but has been hard to make work in practice.

SRI LANKA

Sri Lanka announced a debt overhaul plan at the end of June and has continued to make progress since, albeit not everywhere.

Nearly all holders of its domestic, dollar-denominated Sri Lanka Development Bonds (SLDBs) agreed to exchange their bonds into five new Sri Lankan rupee-dominated notes that will mature between 2025 and 2033.

Another part of the domestic debt plan has faced delays, though, with a key deadline on a Treasury bond exchange delayed three times and now set for Septemer 11, 2023.

Central bank chief Nandalal Weerasinghe has said the country's big foreign creditors such as India and China are awaiting the conclusion of the domestic debt operation before continuing discussions.

He said negotiations will be held in parallel with the first review of its US$2.9 billion International Monetary Fund (IMF) bailout program due from 14-27 September. Failure to complete the domestic debt overhaul by then could result in delays both in terms of IMF disbursements and talks with creditors.

GHANA

Ghana defaulted on most of its external debt at the end of last year. It is the fourth country to seek a rework under the Common Framework and is aiming to reduce its international debt payments by US$10.5 billion over the next three years.

Its progress has been relatively swift compared to the likes of Zambia. The government recently agreed to tackle roughly US$4 billion of its domestic debt via a pension fund debt swap operation and a dollar-denominated bonds exchange.

It has sent a restructuring plan to its official sector - wealthier government - creditors and its finance minister has said he also expects to reach a deal with the country's bondholders by the end of the year.

The funds know it will require them to write off money but hope it could also include a recovery instrument that would mean Ghana pays back more of that money over time if its economy recovers quickly.

PAKISTAN

Pakistan needs upwards of $22 billion to service external debt and pay other bills for fiscal year 2024.

A caretaker administration is in charge until an election that must take place by November. Inflation and interest rates are at historic highs, and it is struggling to rebuild from devastating 2022 floods.

In June 2023, Pakistan reached an 11th-hour deal with the IMF for a US$3 billion bailout, and Saudi Arabia and the UAE followed with US$2 billion and US$1 billion cash infusions.

Reserves, which had fallen to US$3.5 billion, had rebounded to US$7.8 billion by late August. Observers say it could have enough to make it to the elections but there are major questions about how long it will be able to avoid default without huge support.

TUNISIA

The North African nation, reeling from multiple hits since a 2011 revolution, is facing a full-blown economic crisis.

Most debt is internal but foreign loan repayments are due later this year and credit ratings agencies have said Tunisia could default.

President Kais Saied has slammed the terms required to unlock US$1.9 billion from the IMF as diktats that he will not meet.

Saudi Arabia pledged a US$400 million soft loan, and a US$100 million grant, but the tourism-dependent economy continues to grapple with shortages in imported food and medicine. The European Union has offered about US$1.1 billion (one billion euros)in support but that appears to be mostly pegged to the IMF deal or reforms.

EGYPT

Egypt remains another of the big countries seen as at risk of falling into trouble. North Africa's largest economy has around US$100 billion of hard currency - mainly dollar-denominated - debt to pay over the next five years, including a meaty US$3.3 billion bond next year and the government spends over 40% of its revenues just on debt interest payments.

Cairo has a US$3 billion IMF program and has devalued the pound by roughly 50% since February 2022. But a privatization plan is still on the go-slow and last month it veered away from its IMF plan by saying it would keep subsidized electricity prices unchanged until January.

Some of its government bonds are changing hands at half their face value and analysts think a key factor in whether it can get back on track is the amount of support wealthy Gulf nations such as Saudi Arabia provide going forward.

EL SALVADOR

El Salvador has shifted from doom and default to bond market darling, propelled by two surprise debt buybacks and the appointment of a former IMF official as adviser to the finance ministry.

In summer 2022, its 2025 eurobond fell to just under 27 cents on the dollar, weighed down by high debt service costs and worries over its financing plans and fiscal policies.

The same bond traded at 91.50 cents on August 31, and its debt-to-GDP ratio stood at 77% in December 2022, the lowest since 2019, and is forecast to drop another percentage point this year, according to Refinitiv data.

It’s now relatively light debt repayment schedule through 2027, and the sky-high popularity of President Nayib Bukele, has assuaged fears the country could default.

KENYA

The East African nation's public debt stands at nearly 70% of GDP, according to the World Bank, putting it at high risk of debt distress.

President William Ruto's government has moderated spending and proposed a raft of tax hikes, assuaging some concerns of an imminent default.

The African Development Bank is in talks with Kenya over US$80.6 million to help it plug its financing gaps this year, and it is also discussing budgetary support from the World Bank.

But concerns remain; Ruto's political opposition has opposed many of his tax hikes, and protests have forced him to pause some reforms, such as fuel subsidy cuts.

UKRAINE

Ukraine froze debt payments in 2022 in the wake of Russia's invasion. It has said it is likely to decide early next year whether to try to extend that agreement or begin looking at potentially more complex alternatives.

Top institutions estimate the post-war rebuild cost will be at least one trillion euros, and the IMF estimates Ukraine needs $3-$4 billion a month to keep the country running.

If the war with Russia is not won or at least eased to a much lower intensity by next year, its debt restructuring dilemma will also have to factor in the November 2024 US Presidential election and the degree of support it would receive should Donald Trump or another Republican candidate win office.

LEBANON

Lebanon has been in default since 2020 with few signs its problems will be resolved any time some.

The IMF has issued stark warnings, but one bit of progress in the last couple of months has been a proposal by the central bank to lift the long-time peg on the country's local currency,

 

Israel not equipped to handle Iranian funded explosives

According to The Jerusalem Post, Israeli military commandos warned on Sunday morning that the IDF's armored vehicles are not equipped to deal with terror attacks carried out using improvised explosive devices (IED), which are thought to be funded and supplied to the West Bank by Iran.

Following recent use of IEDs in attacks, most notably in a blast near Joseph's Tomb where an IDF officer and three soldiers were wounded last week, the commandos warned that it is clear to all of us where this is going. "It will only get worse."

The commandos lamented the lack of armored vehicles available for operations in the West Bank. "Everybody has seen the explosive terror labs uncovered in the Jenin operation.

"On one hand, we're talking about an increased amount of explosives, a situation which urges caution. On the other, there is an issue with the availability of armored jeeps, this is felt on our way to our targets and by the targets."

IDF denies reports

The IDF Spokesperson's Unit rejected the claims on Sunday, stressing that there is no shortage of armored vehicles.

"The vehicles are under continued maintenance in order to ensure their operational capacity remains at a high level."

The IDF also hit back at accusations that Israeli forces secured Joseph's Tomb by foot last week due to this perceived lack of vehicles, writing that the claim is incorrect.

The Israeli forces were wounded when an explosive device struck their armored vehicle.

Israelis seeking Portuguese nationality

According to The Jerusalem Post, more Israelis applied for Portuguese citizenship than any other foreign group over the past two years, even though few choose to actually live in the country.

The number of Israelis seeking a Portuguese passport through a 2015 law passed for the descendants of Jews expelled during the Inquisition reached 20,975 in 2022, according to statistics from the Portuguese Immigration and Border Service (SEF). 

That exceeded the 18,591 applicants from Brazil, whose population is over 20 times larger than Israel’s and has longstanding cultural ties to Portugal, including a shared language. 

Israelis were also the largest group in 2021 when 21,263 people applied.

The surge of Israeli applicants began after Portugal passed its “Law of Return” in 2015, allowing the descendants of Portuguese Sephardic Jews who were affected by the 16th century to apply for nationality. The Portuguese government has announced plans to end this policy in December 2023, declaring its purpose of reparation to be fulfilled.

The policy was plagued by scandal last year amid allegations of fraud and corruption in the Jewish Community of Porto, one of two Jewish authorities — alongside Lisbon’s community — that was certified to vet applications. In particular, the Porto community came under fire for approving the citizenship of Roman Abramovich, a Russian-Jewish billionaire who made his fortune in Russia’s energy sector and has been called a close ally of Vladimir Putin, although he has denied being part of the Russian president’s inner circle. Abramovich’s naturalization came to light shortly after Russia invaded Ukraine when it became apparent that he could live in Europe and challenge the European sanctions being imposed on Russian oligarchs. His case triggered a criminal probe into Porto’s vetting process, leading to the detainment of community rabbi Daniel Litvak and a bitter rift in Portugal’s Jewish communities.

Portuguese citizenship has a wide-ranging appeal for Israelis, including the freedom of movement that comes with a European Union passport. Portugal has lower taxes and a lower cost of living than Israel, although its income levels are also proportionately lower. Some Israelis are attracted to the more relaxed acceptance rates at public universities in Europe and lower attendance costs for EU nationals. 

There are likely also political motivations. Liberal-leaning Israelis — alarmed by Prime Minister Benjamin Netanyahu’s far-right government and its push to undercut the Israeli Supreme Court’s power and independence — have expressed growing interest in moving abroad. Others are galvanized by the fear and stress that come with living in a country continuously locked in deadly conflict with its neighbors.

Despite their spiking interest in nationality, most of the Israelis who applied have not moved to Portugal. While 60,000 Israelis had Portuguese citizenship in 2022, only 569 were residents, according to SEF data. In comparison, 239,744 Brazilians lived in Portugal last year.

Many citizens of Israel, a country full of citizens who have endured past migrations, may be driven by the desire for a “plan B.” Amikam, an Israeli healthcare professional who did not provide his last name, told The Portugal News that he applied for nationality in 2017 even though he has no plans of emigrating. 

“It’s always good to have a plan B in case things in Israel turn for the worst,” he said.

ASEAN losing its composure

Southeast Asia is at a dangerous crossroads. Once regarded as a haven of relative stability and economic progress, today the region is buffeted by escalating geopolitical struggle between the United States and China, state fragmentation in Myanmar and internal political conflicts that are exposing the limits of democratic reform and the dangers of populism.

These issues will be on full display at the annual leaders' summit of the Association of Southeast Asian Nations next week in Jakarta and may well intensify as the group's rotating chairmanship passes afterward from Indonesia to Laos, the bloc's smallest and poorest member.

Civil society and the international community have long looked to ASEAN, which has reliably preserved regional peace for decades, to deal with major challenges.

But the bloc is now deeply divided. On Myanmar, for example, mainland states have put a premium on state integrity and security over political change and reform while more democratic maritime states, led by Indonesia, regard military rule as intolerable.

In an alarming public display of regional dissonance, Thailand recently directly engaged with Myanmar's military junta without informing Indonesia. By playing on such divisions, the junta has avoided complete ostracization.

The region is also divided over the extent to which China poses a threat and whether it should be contained by the United States and its allies.

Laos, Thailand and Cambodia have close ties with Beijing, reflecting proximity or long-standing political alignment. Vietnam views China with deep historical enmity but maintains a dual-track relationship sustained by ties between the two nations' ruling communist parties. Even so, Hanoi has drawn closer to the US.

The Philippines has effectively checked out of ASEAN because officials in Manila believe the group has done nothing to defend the country's maritime claims against Chinese intrusions, noting its failure to support the 2016 arbitral ruling by a court in The Hague affirming Philippine sovereignty over contested areas.

"We might as well be allied with Taiwan, Japan and South Korea," said a former official after the recent confrontation between a Chinese coast guard ship and Philippine vessels attempting to resupply troops on Second Thomas Shoal in the disputed Spratly Islands. Manila has indeed moved closer to the US since Ferdinand Marcos Jr. became president last year.

Compounding such rifts over external issues is a distinct political divide. The rise of democratic reform movements in Indonesia, Malaysia and even Thailand over the last 30 years has led to more frequent changes in national leadership.

As a result, the personal relationships that held ASEAN nations together under more authoritarian regimes have frayed. Some democratic leaders have begun to wonder why they need to spend so much time with tedious ASEAN meetings when their domestic constituents are more interested in social equality and food security than strengthening regional identity.

All this has made Southeast Asia more fragile and isolated than it appears. Great power leaders who once routinely attended regional summits now often skip them. The US and China prefer bilateral engagements during which they can press for alignment. While he will skip this month's ASEAN summit, US President Joe Biden will visit Vietnam right afterward, reportedly to sign a bilateral strategic partnership agreement.

ASEAN has lost its much-touted centrality and is frankly on life support as an autonomous multilateral platform, reflecting to some degree the decline of multilateralism globally.

What can be done to revive effective multilateral cooperation and rescue the region from fracture by competing great powers and division by political dispute?

Civil society has traditionally helped in quiet ways to build and sustain the sinews of connectivity in the region. Networks of academics and think tanks helped promote connections and address sensitivities among governments and offered regional policy ideas.

Many of those veteran scholars are now retired or deceased. The younger generation has not filled the void, in part because the rivalry of the great powers has polarized much of their ranks.

A possible new approach would be to launch a recovery process to help reconnect the 10 ASEAN states. This would involve identifying common challenges rather than relying on outdated institutionalized processes or weak mechanisms to manage conflicts and protect human rights.

There is clearly a need for cross-bloc dialogue about what can be done. A bottom-up approach could offer innovative ideas and help ease the acrimony that has built up over the past few years. Post-pandemic, there is an urgent need for more contact and understanding in a region vastly more challenged than it was even five years ago.

The US and China are locked in an epic, dangerous rivalry that treats Southeast Asia as a battleground, so they will not be of help. But midsized powers and traditional partners such as Australia, the EU and UK could support regional cohesion if they spent less time pushing Western values and seeding animosity toward China, which even if justified, generates further division.

Southeast Asian governments and their leaders could help by speaking with one voice on critical issues and maintaining traditional balancing approaches to great power competition. As things stand today, there is a real chance that the Philippines and China will come to blows over the Second Thomas Shoal.

That would bring the United States and China dangerously close to war. Will ASEAN leaders be able to combine and collaborate to prevent any crisis from escalating? Right now, that looks doubtful.