War by Other Means

by Robert D Blackwill

  Finally, there are signs that India, for its part, is beginning to turn more toward geoeconomics-led foreign policy. It is in part a function of the leadership style of Prime Minister Modi. Since taking office in May 2014, Modi has consistently cited strengthening India’s underlying economic fundamentals as the country’s surest route to projecting influence and power: “I believe a strong economy is the driver of an effective foreign policy,” as Modi put it in an October 2013 speech.228 Modi may intend a turn toward geoeconomics in the broadest sense (as shoring up domestic economic foundations necessary for enhanced power projection).

  But there may be more to it. There are reasons to think that India’s nascent geoeconomic instinct is partly a response to China’s own geoeconomic statecraft.229 New Delhi appreciates that India is in a contest for influence with China over its neighborhood. With the exception of Pakistan, India has enjoyed generally stable ties with its South Asian neighbors. But critics charge that Modi’s predecessors, the previous center-left Congress Party, started to take things for granted, allowing China—which shares a border with four of India’s neighbors—to step into the breach.230

  That appears to be changing under the Modi government. Billed as an upgrade to India’s long-standing “Look East” approach, the country’s new “Act East” policy comes as an effort to remedy any regional vacuum left by the previous government; as local media explain the policy, it aims to strengthen “strategic and economic ties with Southeast Asian countries that would possibly act as a counterweight to the influence of China in the region.”231 Modi has signaled his aim to reset India’s relationship with its neighborhood, evidenced by securing the participation of most South Asian Association for Regional Cooperation leaders, including Pakistani prime minister Nawaz Sharif, at his swearing-in ceremony and by choosing Bhutan, a country actively courted by China, as his first foreign destination after becoming prime minister.232

  In their direct bilateral dealings, India and China may look to economics as a means of anchoring relations amid rising geopolitical struggles. “Modi is well aware that China needs the big Indian market, while India desperately seeks large Chinese investments to build transit and other infrastructure critical to its economic revival,” India expert Niranjan Sarhoo explains. “Acrimony over borders and geopolitical rivalry in the region notwithstanding, trade will be the centerpiece of India’s policy toward China.”233 At minimum, China’s heavy-handed geoeconomic tactics seem to be coloring New Delhi’s decision making. There had been expectations Modi would pick Tokyo for his first trip, “but such a choice could have upset China,” according to Indian press reports.234

  Finally, India’s priority on improved economic ties with the United States and its allies in the region offers further circumstantial evidence of a more concerted geoeconomic tone from New Delhi, driven at least in part by concerns over China. “The prime minister is an unabashed pioneer of trade and economic diplomacy. As chief minister of Gujarat, he made several trips to China, Japan, and South Korea, cultivating a personal rapport with leaders like Japanese Prime Minister Shinzo Abe. Modi plans to expand his Gujarat template to all of India. He will seek trade routes to deepen relations with big powers that matter to India’s economic revival and geopolitical rise.”235

  Indeed, the first-ever reference to the South China Sea in a joint Indian-U.S. statement came during Modi’s September 2014 trip to Washington, a fact that “has riled Beijing, and revived the latter’s fears about the world’s two largest democracies acting in concert on a larger China containment strategy.”236 Modi’s joint statement with President Obama pledged cooperation on plans to integrate the subcontinent with the markets of East Asia through an “Indo-Pacific Economic Corridor”—a proposal unmistakably similar to China’s own plans for a maritime silk road linking the Pacific and Indian Oceans. For India, which appears wary of China’s plans for the Indian Ocean, “the Indo-Pacific Economic Corridor could be the first step towards building its own maritime silk road.”237

  ENLISTING Pakistan in a grand hedge to slow India’s rise as a regional rival, single-handedly propping up the Kim regime in North Korea, intensifying maritime disputes with six of ASEAN’s ten member states—it seems clear that China employs geoeconomics as a tool of first resort in pursuing a broad range of foreign policy aims across Asia. But where China’s brand of geoeconomics has proven effective, what do these cases tell us about why it has succeeded? What do other, less successful cases say about why those attempts fell short? In Chapter 5, we turn to exactly these questions.

  CHAPTER FIVE

  Geoeconomic Strength in Beijing and Beyond

  We want the Chinese to leave and the old colonial rulers to return. They exploited our natural resources too, but at least they took good care of us. They built schools, taught us their language and brought us the British civilisation.… [A]t least Western capitalism has a human face; the Chinese are only out to exploit us.

  —ZAMBIAN OPPOSITION LEADER MICHAEL SATA, 2007

  I have come here to thank China for helping Zambia to develop. The Chinese have done tremendous things in Zambia.

  —ZAMBIAN PRESIDENT MICHAEL SATA, 2013

  THE CASES outlined in Chapter 4 focus only on China’s use of geoeconomic tools in its region, but the phenomenon stretches beyond Asia. Since the Norwegian parliament awarded Chinese dissident Liu Xiaobo the Nobel Peace Prize in 2010, Beijing has frozen relations with Oslo, dealt a serious blow to Norway’s share of the Chinese salmon market, and abandoned talks on a bilateral free trade agreement.1 With relations still frosty nearly four years on, Norway began to look for ways to appease Beijing. The Norwegian prime minister refused to meet with the Dalai Lama when he visited Oslo in May 2014, a visit partly intended to celebrate the twenty-fifth anniversary of the latter’s Nobel Peace Prize. “The Dalai Lama has visited Norway roughly a dozen times since receiving the prize in 1989—but things are different now.… We need to focus on our relationship with China,” Norway’s foreign minister, Borge Brende, told reporters on April 2014. Beijing’s message had been received not only in Norway but apparently too in neighboring Denmark, where Prime Minister Helle Thorning-Schmidt similarly declined a meeting with the Dalai Lama the following spring—a stark about-face for a politician who, prior to becoming prime minister, spent years staking out highly public support for the Tibetan leader.2

  High as the domestic political costs were for the Danish and Norwegian leaders in snubbing the Dalai Lama, the economic fallout from such a meeting would likely have been much worse. For those countries that are willing to host the Dalai Lama, one study shows that export levels to China drop by an average 8.1 percent after meetings between a prime minister or monarch and the exiled Tibetan leader, a decrease that takes roughly two years to return to normal.3

  China’s geoeconomic influence has also found its way—to a lesser degree—into multilateral institutions, from the UN General Assembly, to ASEAN, to the IMF. In August 2012, countries that were absent, abstained, or voted against a resolution on the violence in Syria were largely those under China’s geoeconomic sway. (In opposing the measure, China remained true to its long-standing voting solidarity with Russia on the UN Security Council. Russia, a loyal ally of the Assad regime, staunchly opposed the measure; in return, China enjoys Russian support at the United Nations on issues related to North Korea and Taiwan.)4

  Collectively, these cases raise two fundamental questions. First, does geoeconomic pressure work? Much depends, of course, on one’s metric for success, but at least in the case of China, the body of evidence points toward yes: China openly flexes geoeconomic muscle—both positive and negative—and much of the time it succeeds in advancing Chinese geopolitical interests, at least to some degree, on issues of concern to it. This is not to suggest that China’s geoeconomic tactics are always efficient, in either economic or geopolitical terms, or that there are not cases of overreach and backfire. But by exercising this pressure China has managed to deter arms sales to Taipei and t
o steadily reduce the number of countries to recognize Taiwan; it has curtailed the activities of the Dalai Lama; it has deterred countries from political showings of support for human rights issues; it has registered noticeable impacts on votes in the UN and frustrated various Western efforts to pressure North Korea; it has given tactical support to a newly emboldened Russian foreign policy; and, not least, it has challenged the balance of power in Southeast Asia, forcing some countries to alter course in pursuing territorial claims, and placing others on notice.

  The ability to pass judgment on a country’s level of geoeconomic savvy presupposes another, even more basic question: how does one recognize geoeconomic statecraft when it is occurring? There is no definitive means to inventory cases of geoeconomic pressure, or then to measure whether such cases are on the rise. But at least by recent historical standards, the incidence of such overt geoeconomic efforts by China and by others certainly seems to be growing—threats to shut off gas pipelines in the dead of winter, geopolitical aims candidly aired as factors in the production decisions of major oil producers, investment deals now openly predicated on disavowal of Taiwan, explicit stipulations in aid agreements requiring a leader to step down at the end of his or her term, or prohibitions on purchases from firms in a given third country.5

  When it comes to evaluating a country’s use of geoeconomics, it helps to have clear instances like these. More often, though, evidence of geoeconomic pressure is circumstantial—especially in cases that are coercive in nature. Take, as noted earlier, China’s quarantine of bananas from the Philippines amid escalations of tensions over competing claims to the Scarborough Shoal, or Russia’s ban of Moldovan wine in the run-up to Moldova’s deadline for signing a cooperation agreement with the EU. Compared to open political demands, such coercion is sometimes more difficult to measure.

  Fortunately, limiting this story strictly to these two categories—explicit or circumstantial uses of geoeconomic power—would be too narrow in any case. Like military power, geoeconomic sway can carry a long shadow of influence. It need not be exercised or even brandished to register a desired effect. According to press reports, some energy companies drilling in the disputed South China Sea have publicly admitted to the necessity of partnering with Chinese state-owned energy firms so as not to be harassed.6 The fact that the China Development Bank and Brazil’s BNDES have portfolios larger than the World Bank’s means that these states can wage diplomacy with capital on a scale largely unmatched within the West.7 This influence tends to be subtle—more often correlation patterns than clear causal arrows. But it is nonetheless real.

  At the same time, geoeconomic success is sometimes exaggerated, including with respect to China. There are natural limits and internal tensions running through many of Beijing’s attempts to use geoeconomics to advance geopolitical aims. It is possible that China’s ability to employ such instruments will be increasingly hampered by domestic problems—housing and stock market bubbles, a weak social welfare system, reform of the hukou (household registration) system, government corruption.8 Powerful, protectionist-leaning industries and agencies have added to their domestic political power in recent years, strengthened by absorbing the preponderance of China’s post-financial-crisis stimulus. In China, just as anywhere else, the pursuit of geopolitical objectives and the importance of purely economic interests can clash, and these actors, newly emboldened, seem less willing to be trumped by geopolitical needs. There are regional challenges, too. China’s heavy dealing has sparked a collective desire on the part of Southeast Asian states to achieve a measure of balance by drawing closer to the United States. In China’s case, geoeconomic power, like most other forms of power, may well prove most effective when implied rather than exercised outright.

  Unlike in other areas of statecraft, when sizing up the effectiveness of geoeconomic attempts, there is an odd tendency against assigning partial credit. To be sure, in its bid to escape U.S. and EU sanctions pressure, Russia’s efforts to buy off certain cash-strapped EU countries—the so-called weak links in the U.S.-EU sanctions coalition—may not have succeeded in sinking the sanctions during 2015. But it was hardly as if Russian leaders were, to believe press reports at the time, simply “shoot[ing] themselves in the foot and wast[ing] this money.”9 The Kremlin’s well-timed overtures and outright financial support (to Greece, Cyprus, and Hungary, as some examples) scored important geopolitical victories, raising the costs to U.S. and EU leaders of maintaining the sanctions, puncturing U.S. hopes of imposing even tougher sanctions on Moscow, and ultimately making the daunting task of keeping the eurozone together even tougher, ensuring that Europe’s attention stayed focused inward.

  In any event, simply because countries have a mixed record when it comes to geoeconomics does not necessarily mean they will abandon even the most misguided attempts. This in turn raises a larger point: even where states try to wield geoeconomic power and either partially or fully fail to achieve their aim, the results and collateral damage can carry real, destabilizing consequences in their own right.

  Consider virtually all of Qatar’s foreign policy in the years following the Arab Spring. As revolution spread around it, Qatar took to spending enormous sums—and accruing a large and curious mix of bedfellows—as its survival strategy. “They like to back winners,” as one Middle Eastern official summarized.10 Qatari officials are forthright about their actions. When asked how much Qatar spent in the Libyan revolution, Qatar’s prime minister answered, “It’s a lot. It cost us a lot.”11

  And yet a survey of Qatar’s largest bets—billions of dollars in support to rebels in Libya and in Syria (often paying rebel salaries); roughly $8 billion in aid to the Morsi regime and Muslim Brotherhood in Egypt; $400 million to Hamas (coming at a crucial time when Hamas began to distance itself from Tehran and Damascus over the conflict in Syria)—reveals that Doha has little to show for its expenditures, at least in terms of its desired outcomes. There was, however, no shortage of unintended, and unhelpful, outcomes. In fact, in a region where consensus is rare, nearly all sides agree that Qatar has had an important hand in destabilizing nearly every trouble spot in the region and in hastening the rise of radical and jihadi factions.12 “The results have ranged from bad to catastrophic in the countries that are the beneficiaries of Qatari aid,” Gulf-based journalist Elizabeth Dickinson summarized.13

  If there is a silver lining, it is that Qatar’s meddling has become a minor rallying point among other GCC countries, which have begun pushing back in unison—pressing their case in Washington and threatening to dismiss Qatar from the GCC membership ranks if Doha does not moderate its spendthrift foreign policy adventurism. In August 2014, neighboring UAE took the matter of Qatari damage control into its own hands and, using U.S.-made jets and operating out of Egypt, began several rounds of airstrikes to roll back Qatari-funded Islamists in Libya.14

  Probably the most damaging of these foibles was the early funding that Qatar, as well as Kuwait (and to a perhaps lesser degree Saudi Arabia), funneled to more extremist factions of Syrian rebels—factions that, after some mergers and acquisitions, would eventually incorporate as the Islamic State of Iraq and al-Sham, or ISIS. Press reports describe how, at the height of the violence in Syria, Qatari-based businessmen would moonlight as remote leaders of entire brigades of Syrian rebels. So constant were the streams of delegations shuttling through Doha to petition the Qatari government for financial support that one could guess at a delegation’s odds of success based simply on which of Doha’s five-star hotels it was staying at. As Elizabeth Dickinson recounts, “The Four Seasons and Ritz-Carlton are old favorites; Hamas leader Khaled Meshaal has stayed at the former, the Syrian opposition at the latter. The W Hotel is a posh newcomer, mostly housing eager European delegations seeking investment or natural gas.”15

  Alarmed by the swift ascent and brutality of ISIS, Qatar did begin to crack down in 2014, although only as a result of strong pressure from others in the Gulf and the West. But it was too late. “Armed with
the loot of half the Iraqi military, [ISIS] doesn’t need its Gulf patrons to buy it sniper rounds anymore,” one commentary put it.16 Counterfactuals are inherently difficult, but the extraordinarily swift rise that ISIS enjoyed and its ability to threaten the entire region and the West almost certainly would not have occurred—certainly not to the extent and in the manner it did—absent the early funding these extremist factions received from Qatar and Kuwait.17

  The unfortunate records of Qatar and Kuwait are only among the most recent, most disastrous lessons in how geoeconomic adventures can sometimes not just fail, but backfire, creating new challenges. The 2013 Cyprus bailout was an episode partly brought about by, and then further complicated by, geoeconomic factors from Russia, even as the EU’s package ultimately prevailed over Moscow’s alleged offer. (Two years later, however, the Kremlin did win access to Cyprus’s largest port for Russian military vessels—reportedly among the concessions Moscow had sought as part of its 2013 bailout overtures—as well as Nicosia’s support against further U.S.-EU sanctions on Russia, in exchange for a $2.5 billion loan on generous financing terms.) Or take the tricky diplomacy facing several of Libya’s African neighbors after Qaddafi’s ouster—compelled by economic coercion from his regime, many of these states had voted against UN or African Union action in the run-up to Qaddafi’s removal, complicating relations with their new Libyan government counterparts later.18

  China, too, has seen attempted shows of geoeconomic power go awry, especially where Beijing has coupled heavy-handed geoeconomics with aggressive naval behavior in the East and South China Seas. The China experience shows that geoeconomics is not a perfect tool (nor, for that matter, are conventional diplomatic or military instruments). But it does not need to be. Whether successful or not, whether tried or merely implied, China’s brand of geoeconomic statecraft produces a substantial coercive overhang that will be an Asian reality for at least the next few decades, potentially causing a number of states to alter their geopolitical course under its weight.