Sunday, 8 March 2015

The South China Sea & Asia's Defense Boom

http://s1.reutersmedia.net/resources/r/?m=02&d=20140509&t=2&i=895513122&w=580&fh=&fw=&ll=&pl=&r=CBREA48120Q00

The unresolved status of various islands, shoals and atolls combined with tantalizing hints of immense hydrocarbon and fisheries wealth has prompted a “Scramble for Africa-esque” race among countries bordering the South China Sea. A web of overlapping territorial claims, has resulted in increased tensions and defense spending in the region. Despite these tensions, large scale conflict remains unlikely while opportunities for lucrative arms contracts abound.

While the Sino-Japanese dispute over the Diaoyu/Senkaku islands to the north has garnered the most media attention as of late, this second and arguably more important series of disputes in the South China Sea demands greater attention. The heightened tensions in the region are in large part driven by the increased presence and capabilities of the Chinese Navy (PLAN). Increasing Chinese assertiveness has sparked a regional arms race; as well as a global shift in American military focus, with former Secretary of Defense Leon Panetta announcing in 2012 that by 2020 Washington will have shifted the majority of its naval assets to the Pacific.

This shift – America's so called “Pivot to Asia” – is evidenced by last month's announcement that four littoral combat ships (LCS) will be stationed in Singapore by 2018. The U.S is planning to construct 52 LCS in coming years, a clear indication of its Asian focus. LCS are at home in the shallow waters of the South China Sea and operate well close to coast lines, islands, reefs and other (littoral) waters. Moreover, the U.S has many major allies in the Pacific, notably Japan, South Korea, Australia, New Zealand, Philippines and Thailand. All of these nations enjoy “major non-NATO ally” status – a prestigious title which denotes strategic value and concomitant sustained American engagement.


Many of these allies and other states in the region are concerned about China's extensive claims over the South China Sea and Beijing's attendant naval ambitions. According to National People's Congress spokesman Fu Ying, “the recommended growth rate for national defense in the draft 2015 budget report is about ten percent.” Such goals have led to 170% increase in Chinese defense spending between 2004 and 2013, with 2013 military expenditure estimated at $188 billion. It is important to note that despite this increase China only spends 1.5% of GDP on its armed forces, far below the global average of 2.6% and America's 3.8% allotment.

Nevertheless, such increases pose serious threats to smaller nations, who in turn have opted to ramp up defense spending. For instance, Indonesia has announced plans to re-organize its military command into multi-branch regional reaction forces. Jakarta stated it is focusing its military towards the west of the country (i.e. towards disputed waters), arguing that this new arrangement will allow for rapid responses to incursions. Similar plans are under way in the Philippines and Vietnam. The increased defense outlays of said countries are primarily directed towards China, with the aim to prevent unilateral Chinese seizures of disputed territory. Smaller countries are also determined to counter Beijing in order not to be shut out of the region and be forced to languish within sight of their respective coasts.

While heightened international tensions are fueling military procurement, large scale conflicts remain a distant possibility. Whereas small skirmishes and standoffs are certainly possible (and have already occurred) no party wishes to significantly destabilize the region, since all nations in the area rely on adjacent “sea lines of communication” (SLOC). Consequently any upset that hampers shipping will greatly impede all countries, and this realization dampens potential aggression. Regional players are increasing their spending in order to have the means to assert their sovereignty, secure SLOC access, and prevent the rise of an antagonistic, regional gate-keeper. While China bristles at American naval hegemony and seeks regional power to secure its own interests, it too benefits from the status quo and as such cannot afford to upend the balance.

SLOC in the Asia-Pacific Region
Image Credit: c-level.us.com


Currently all Pacific nations free-ride off of the Pax America which polices the high seas. Smaller nations seek to maintain the status quo by supporting the United States; whose stewardship of the seas has allowed for the free movement of shipping. In an effort to boost the capabilities of these smaller nations, the United States (alongside Japan which has gifted three upgraded patrol ships to Vietnam) has donated various coast guard vessels to the Philippines, as well as five ships to Vietnam. These donations are part of larger efforts by the U.S to engage with both countries, both of whom are very wary of China.

Donations aside, the upswing in regional procurement offers many opportunities for weapon exporters to benefit from the Asia-Pacific's economic growth and defense wants. The United States already sells existing air frames such as the F-16 to various countries in the area. In addition Australia, Japan and South Korea have already placed orders for the F-35 platform (72, 47 and 40 respectively). Moreover, Japan is planning on purchasing another 2-4 Aegis equipped missile cruisers from the U.S, while Vietnam has recently taken delivery of its fifth of six Kilo class submarines purchased from Russia in a $2 billion deal.

Aegis Class Missile Cruiser
Image Credit: The Washington Times

Following Prime Minister Abe's April 2014 decision to relax arms restrictions, weapons exports could also help boost the moribund Japanese economy. Japan is already a bidder for a $1 billion dollar contract to sell anti-submarine aircraft to the UK. Australia is also in the process of negotiating a major weapons deal with Japan, with Canberra seeking to purchase 10 Soryu class submarines for over A$20 billion (USD $15 billion). Japan is seeking to capitalize on its existing heavy industry and ship-building infrastructure in order to woo Canberra from competitors such as South Korea. Moreover Japan is emphasizing that building said submarines in Australia could see projected costs almost double, a claim refuted by Australian ship builders protesting the Japanese export deal.

Newly Commissioned Soryu class Submarine
Image Credit: Jane's

A plethora of states purchasing weapons does not necessarily constitute good news, yet given the nature of the South China Sea disputes, any military fallout will be in the form of formalized clashes far out to sea. Naval skirmishes do not involve the mass formations and associated mass causalities of land wars. Furthermore naval combat occurs in a virtually civilian free environment thus reducing collateral damage, and in any case excessive violence is unlikely. Lastly, states in the region are purchasing arsenals focused on deterrence, not aggression. The overriding concern for all players is that of free trade, shipping and equitable resource allocation, not the blood drenched specters of imperialism or revanchist ethnic nationalism that accompanied the previous century's naval races.


Originally written for Global Risk Insights

Wednesday, 4 March 2015

Short-Term Risk Assessment: Philippines



Scenario One: Official Philippine United Nations complaint against China

The Philippines has already lodged complaints against China at the UN regarding the two countries territorial disputes. Manila seeks redress and mediation on the issue of South-China Sea disputes via UN organs, specifically the International Tribunal for the Law of the Sea. Current trends indicate a high likelihood that the Philippines will again complain to the UN, citing the United Nations Convention on the Law of the Sea (UNCLOS) to which both China and the Philippines are party to.

Prior efforts by Manila at the international level have been ignored or brushed aside by China, which argues that the matter is strictly bilateral in nature and is to be rectified between Beijing and Manila sans international intervention. While lodging another complaint at the UN will have no drastic effect on the region or relations, the action will of course annoy China. The Philippines may be able to use such a complaint as a rallying point for other ASEAN countries (almost all of whom are also party to UNCLOS) vis-à-vis territorial disputes with Beijing. The Chinese response to another complaint may be to impose trade restrictions or duties on various Filipino products in order to put pressure on Aquino's government.


Scenario Two: China-Philippine Naval Clash in the Scarborough Shoal

There is exists a moderate probability that there will be a renewed clash in the West-Philippine Sea between the Philippines and China over control of Scarborough Shoal inlets. A previous standoff in 2012 saw Philippine and Chinese vessels fight over the detainment of Chinese fishing vessels. The standoff eventually saw Manila's forces back down, with Beijing maintaining de facto control over the area. The Philippine is nursing a keen sense of resentment over the issue, while China has seen its occupation as a success which may prompt it to make further encroachments.

Revanchist notions may fuel Manila's actions in escalating the issue. The Philippines is increasing its naval and aerial assets, purchasing ships and surveillance equipment from the U.S. Similarly, China has sent its aircraft carrier to the region as part of exercises, as well as increased the presence of patrols and troops in the disputed region. President Aquino has made repeated calls for efforts to maintain the countries integrity and vowed to defend Filipino interests and claims in the region, a move which has significant domestic support. Whereas the area comprises only 120 square kilometers of land, the surrounding area comprises 495,000 square kilometers of Manila's Exclusive Economic Zone (EEZ) – fully 38% of the Philippine's total EEZ coverage.

A renewed clash would further increase tensions, and there exists a rather low probability that this could lead to an exchange of fire between the two countries, although deadly force has as of yet not been employed in the dispute. ASEAN (Association of South East Asian Nations) China trade would be adversely affected, as other members become increasingly anti-Chinese due to their own territorial disputes with Beijing. Entanglement with China may very well see an increased U.S. presence in the Philippines, perhaps with U.S. Navy ships engaging in joint exercises with the Philippines in and around the Scarborough Shoal. 


Scenario Three: Renewed Incursion of Sulu Sultanate Supporters into Malaysia

Last year's incursion of Sulu Sultanate supporters into the the Malaysian controlled region of Sabah has increased the profile of the Karim royal family and their struggle to regain control over the region. Filipinos are increasingly aware of the issue, and the cause may be able to draw some support from the increased feelings on territorial claims given the prominence of the Scarborough dispute in the public mind.

Whereas it is unlikely that an operation of the scale of the 2013 Lahad Datu incursion may occur, there is a moderate probability of supporters of the cause conducting one or more small scale actions. Potential acts may include erecting Sulu flags on Malay territory, propaganda dissemination among the population of Sabah or even hit and run attacks on Malay governmental assets. Repercussions from such acts would include a deterioration in Philippine-Malaysia ties, which in turn may weaken ASEAN resolve and unity on issue of trade liberalization and with regards to China.