Yassin Fawaz is the CEO of global political risk and business intelligence company the Raddington Group. He is also the publisher of the Raddington Report, a new media brand that helps readers makes sense of the most pressing and complex global issues, from business and politics to security to technology and culture. In this interview, Neil Thompson asks Fawaz for his take on how the United States government and businesses should seek to engage with a rising Asia.
How do you think the United States should engage with China as it emerges onto the global stage with new institutions like the Asian Infrastructure Investment Bank (AIIB) and new policy initiatives like One Belt, One Road (OBOR)?
The emergence of the AIIB reflects China’s adamant resolution not only to play a more central role in the global economy, but also in shaping the very contours of the emerging international orders, forging relevant institutions able to deliver Beijing’s foreign economic policy initiatives, whilst undermining the traditional centrality of Washington-oriented financial organisations such as WTO or IMF. Activated alongside the OBOR initiative (which was established to foster Beijing’s political influence while promoting closer economic integration with its neighboring Asian nations through the creation and implementation of a solid inter-regional infrastructure network) the AIIB not only aims to provide capital to support the OBOR initiative, accelerating the infrastructure improvement in the target regions, but it also provides a preferential channel for big investments of Chinese capital in other countries.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
While a large number of countries, including Washington’s traditional allies such as Great Britain, Canada, Australia, and South Korea, have decided to join the AIIB, Washington remains cautious. China and the United States previously worked together during Obama administration to define a new model of great power relations. Meanwhile the Trump administration’s first executive order confirmed Washington’s withdrawal from the Trans-Pacific Partnership trade pact strongly advocated by the previous administration, which was adamant in cementing U.S. leadership in the Asia-Pacific region. Reinforcing local allies’ trust over Washington’s economic, diplomatic, and security commitment in the region remains the most significant challenge for Trump administration and it is imperative for Washington and its allies not only to expand the network of economic and strategic cooperation in the Asia-Pacific region, but also to attract critical new partners in Central Asia, where the American influence has been sharply eroding.
President Trump has sanctioned a Chinese bank over its dealings with North Korea. Do you think the United States needs to take a more active role in throttling the finances of so-called rogue states? Or will this simply spur the development of infrastructure and networks that bypass America?
Curbing North Korea’s nuclear program and preventing any further acceleration of the acquisition of advanced missile capabilities has been a critical priority of Trump administration since its first days. Despite the endless attempts to discourage Pyongyang from its daunting aspirations for nuclear power status, limited results have been achieved so far. Over the decades, North Korea has enhanced its ability to acquire funds to foster legitimacy within its core elite and support its palace economy. These funds also represent a critical source of hard cash to redirect toward the rogue state’s most immediate strategic priorities such as the nuclear and missile programs which have become the signature issue of Kim Jong-un’s leadership.
In the last few weeks, Washington has launched an extensive operation aiming to freeze several million-dollar assets linked to trading firms and shell companies close to Koryo Bank. These include the notorious Bank of Dandong, considered a primary tool of the regime that is used to fuel capital to its illicit activities, including facilitating millions of dollars transactions for companies involved in procuring ballistic missile technologies for North Korea. Washington strongly urges that additional measures to target North Korea’s financial assets, including barring access to the U.S. financial system for all the Chinese firms that have direct or indirect ties with Pyongyang, be taken. While these measures represent an additional tool to dissuade the recalcitrant hermit kingdom from pursuing its nuclear ambitions, China remains the most fundamental part of the equation. Washington needs to maintain strong pressure on China, to constantly urge a more assertive role by Beijing to force North Korea to comply with the international community’s demands.
Recently, China has stressed its commitment to persecuting all the illicit financial activities performed within its borders, but few results are really expected. It is expected that the Chinese authorities will not conduct extensive investigations and will continue turning a blind eye to the ties of financial firms close to Pyongyang. Beijing is still very concerned with not inflicting a deadly strike to North Korea’s economy that could originate the long-awaited collapse of the regime. That would represent a major security crisis for Beijing right on its border. Therefore, since the unveiling of the North Korea-led Banco Delta Asia in 2007, the U.S. Treasury Department has started to increase its own efforts to target any financial assets belonging to North Korean government companies and entities. Much more depends on U.S. efforts to change the Chinese leadership’s decision to condone Pyongyang’s financial activities. So long as China will not take serious steps to address the issue in compliance with the wishes of the international community, only limited results in curbing the shadow financial activities can be expected.
What are your thoughts for Western firms seeking to engage in Asia today? What advice would you give them?
Asia is an open field of new opportunities. But it is burdened by challenges similar to those daunting the Middle East and Africa: corruption, unstable governments, and rogue states. Thus, proceed with caution, with your political radar always on and your calculations fully buttressed by good intel. Even in some of the more developed Asian economies, relationships and strategic planning count for much more than a government promise or a well-written contract.
Just look at the 1MDB scandal surrounding Malaysia’s Prime Minister Najib Razak right now. Yet despite this huge corruption scandal, the service sector in Malaysia is due to explode as the country replicates Singapore’s success a generation ago and becomes an increasingly important services-exporting economy for the rest of Southeast Asia by 2025, which is itself forecast to be the fastest growing region of the global economy in the next decade. Companies will have to enter the new Asian markets but they should tread carefully at first.
Will the U.S. be part of the Asia-Pacific Century, or will it retreat into isolationism as other countries catch up to it economically?
The Obama administration was credited for being behind a persistent recalibration of Washington toward the Asia- Pacific region. This effort was aimed at instilling faith in strategic allies such as Japan and South Korea, cultivating critical ties with the ASEAN nations, and opposing the daunting expansion of Beijing’s own version of the Monroe Doctrine in the region. The former administration was in office during a turning point in Asia, when the sagging post-Cold War architecture proved unable to respond to the marked geostrategic changes that have affected the region in the last two decades. The Trump administration now inherits this responsibility at a time of great geopolitical uncertainty.
The orientation of the new Trump administration’s foreign policy toward the region remains ambivalent, with a political vision initially characterized by a fervent isolationism and a revaluation of Washington’s role and commitments to Asia. Yet despite the initial hesitations and opposition toward a wider engagement in Asia, as witnessed by Trump’s decision to inflict a fatal setback on the TPP, plus its inaugural entente with Moscow, the Trump administration has shown determination in upholding the existing alliance system with Japan and South Korea. By reinstating its pledge to support the alliance despite his initial remarks about cutting the U.S. military presence in the region, Trump has shown how committed he is to addressing the North Korean threat in the region.
In the last few months, the Trump administration has made this a top priority, confirming its support for the deployment of the THAAD [missile defense system] and fostering the enhancement of the GSMIA [General Security of Military Information Agreement] between Japan and South Korea. Also, when compared with the previous administration, it has made no criticisms over the Abe administration’s revisionist agenda in Japan. The rising revisionist tendencies that have characterized the Abe administration have sparked alarm elsewhere, but the Trump administration has welcomed a Japanese policy aimed at expanding the military role and the capabilities of Japan within the U.S.-Japanese alliance, though Asia continues to fear a new and more assertive Japanese nation. Despite the Trump administration’s initial decision to pursue a different direction therefore, forging a new and more comprehensive presence in the region certainly remains a priority for the current administration.
By recalibrating Washington’s scope and commitment (initially defined by Obama’s “Pivot to Asia”) and framing a new foreign policy direction much more able to reassess the continuous geopolitical shifts in the Asia region, the U.S. aims to keep abreast of the changing factors in the region. Though the Trump administration has been characterized by non-traditional foreign policy approaches toward other regions, it remains difficult to believe that Washington would be inclined to withdraw from the Asia-Pacific region, especially given the rising regional engagement that has characterized the beginning of his presidency. An American withdrawal not only would further encourage Beijing to claim its heavenly mandate to dominate in Asia, but it would further destabilize the balance of global power and potentially lead to unexpected abrupt strategic shifts of the sort that could seriously jeopardize the world’s precarious security architecture.
How do you see states in regions outside of East Asia and the West interacting with powers like Japan and China? Are countries like Iran and Saudi Arabia already beginning to diversify their business and political arrangements?
From the energy, diplomatic, security, and economic perspectives, the Middle East has increasingly become a strategic area even for countries like China and Japan, which for long a time were considered non-traditional actors in the region. China in particular shares critical ties with countries like Iran or Saudi Arabia that still maintain a centrality for the current Chinese leadership, which is deeply engaged in enhancing China’s great power status and consequently projecting its power in areas considered of primary geostrategic interest to Beijing. The Middle East represents without a doubt the largest global source of oil imports and therefore has a strategic significance for Beijing. China is currently engaged in fostering its presence in the region and on preventing any abrupt shifts that could jeopardize its core interest in energy security for its manufacturing base and growing cities.
Relevant ties with Iran and Saudi Arabia have been at the very cores of Beijing’s energy security strategy, alongside the acquisition of natural gas and access to internal markets. Alongside the expansion of the infrastructure network in the region under the auspices of OBOR, Beijing maintains a strategic partnership with both Iran and Saudi Arabia, despite the different roles and strategic alignments that characterize these two countries in the region. Yet Riyadh remains one of the key allies and the linchpin of Trump administration’s strategy to improve Washington’s own strategic engagement in the region, whilst Iran continues to remain the biggest destabilizing force according to Washington and is seen as a major regional adversary.
China is the fourth major power in the region and while it actively seeks to represent an alternative to the regional economic and security architecture framed by Washington, its rising influence and cooperation have been considered as a valuable tool to prevent any further dramatic shifts that constantly jeopardize the stability of the region. Notably, China refrains from any direct interference in government internal affairs according to the Five Principles of Peaceful Coexistence, which over the years has protected its overseas interests. However, the protection of the security for Chinese citizens working abroad or effectively protecting its access to energy routes has become a serious challenge to Beijing in recent years, as its capabilities and interests have multiplied and its profile has risen internationally. As China’s global power aspirations emerge, many countries including the U.S. have been encouraging Beijing to play a more critical role in improving the Middle East’s stability and this could represent a precedent to work together on promoting the protection of common interests elsewhere as well.