Shadow Government

U.S. Grand Strategy in Asia: Some No's and Some Don't Knows

I have been in Hakone, Japan with a distinguished group of Japanese and American historians, plus a few Shadow Government ne'er-do-wells. Our assignment was to think about Japan's strategic choices, given the shifting geopolitical winds and, in particular, to think about what an historical perspective might offer to current policymakers.

Perhaps I can provoke the other Shadow participants into sharing their Hakone reflections by posting my own, which I admit are not as inspiring as a view of Mount Fuji (though given the clouds that obscured our view, they might be just as fleeting).

My remarks consisted of four "no's" and three "we don't knows." First, the no's:

1. There is no viable hedge against a rising China without a strong Japan.

A decade ago, the U.S. might have hoped that India would emerge as our strongest Asian partner in the medium-to-long-run. That looks less and less likely, at least for the medium run. Indeed, in recent years Japan has shown more of the fortitude and strategic thinking that we hoped to see in India.

2. There is no viable strategy for a new Japan without a strong U.S. alliance.

There is no plausible way Japan can emerge as a regional, let alone a global, leader without a close alliance with one of the Asian leading powers -- either the United States or China -- and something like détente with the other. In the past, some U.S. strategists worried that Japan might ally with China, leaving the United States the odd man out. That doesn't look plausible now, but there's a third possible, if remote, scenario that would be a nightmare for Japan: poisonous relations with both China and the United States. I do not think there is a viable path forward for Japan under those circumstances: Japan cannot afford to alienate both China and the United States.

3. There is not much likelihood of a close 21st partnership with Japan if Japanese society is still arguing about 20th century disputes.

This is where Japanese Prime Minister Shinzo Abe's decision to visit the controversial Yasukuni shrine is so puzzling. He seems to well understand the strategic implications of so many of the geopolitical dynamics in the Asian theater -- importantly, he seems to realize that Japan's emergence depends on an ever-closer partnership with the United States. But he and his advisors seem to think that they can have this partnership while also relitigating the way the world understands 20th century history. This is not a realistic posture. So long as Japan holds on to an idiosyncratic view of the past, it hands a powerful weapon to countries that might wish to keep Japan in its place. It is a paradox, but nonetheless true: the more Japan seeks in a misbegotten way to restore honor in the 20th century, the more it moves further away from a rightful place of honor in the 21st century. The more it chafes at how other countries remember the past, the more Japan is chained to that past.

Japanese policymakers can lament this, but they cannot wish it away. I reminded my Japanese friends of the old American proverb: you may not think you are in a fight with your wife, but if your wife thinks she is in a fight with you, you are in a fight with your wife. Similarly, you may think you're simply adding perspective and historical nuance to old disputes, but if your Asian partners think you are reviving them, then you are reviving them.

4. Democratization is no panacea; if Japan cannot resolve diplomatic relations with democratic South Korea, it will not be able to resolve diplomatic relations with a democratic China.

Japanese strategists are right that it is in the long-term interests of the region for China to democratize. However, this will not solve all of the problems that mar Sino-Japanese relations, and may even make some, like the islands dispute where national sentiment runs hot, even worse. Japan's relations with South Korea have been more complicated precisely because South Korea has become more democratic over the past several decades. Similarly, if China's government were more responsive to populist pressure on foreign policy, it would be even more problematic for Japan.

And then three things I do not know:

1. Is Russia an Asian power, or will it become one? Does Russia factor into Asian grand strategy considerations or is it in terminal decline?

The historical pattern is that Russia has repeatedly disappointed other powers in Asia. It has never fulfilled the stabilizing or balancing role others hoped it would. What if Putin's Ukraine adventure is a harbinger of an even more troubling chapter in Russia's Asia saga? What if they go beyond disappointing to something more disturbing?

2. Would more power temper China's adventurism? Or encourage it?

Asian security experts have gamed out every possible scenario involving Chinese adventures in Asia. But if China becomes as powerful as some scenarios have it, they will have global responsibilities and interests and temptations that we have not anticipated and few security experts have plumbed. How would a China preoccupied with Middle East troubles, Central Asian troubles, and so on, behave in Asia?

3. Finally, and perhaps most ominously, is "no Japanese nuclear arsenal" a prerequisite for a stable strategy in Asia?

That has been the conventional wisdom for a long time, and I have long-articulated that view. A Japanese nuclear arsenal would be disruptive on so many different dimensions, including Japanese domestic politics, Sino-Japanese politics, and U.S.-South Korean relations, and so on.  However, if you assess, as I do, that the United States could be on track to lose the nonproliferation battle with Iran, then you have to ask the question: is it reasonable to expect that Japan will be forever left out of a club that includes the United States, Britain, France, Russia, China, India, Pakistan, Israel, North Korea, and Iran? Moreover, do you think U.S. nuclear assurances are more credible or less credible in a post-Crimea world? Of course, the path to a Japanese nuclear arsenal is blocked by formidable domestic sources, and none of the Japanese participants thought a Japanese nuclear option was remotely plausible. But the international systemic pressures pushing Japan towards a nuclear capability are the strongest they have been in decades. It would be prudent for strategists to think through this scenario even if it does not seem very likely right now. The past several years have seen many unlikely scenarios come to pass.

A final reflection: I have had the privilege of meeting with Japanese scholars and strategists multiple times over the past 15 years, but on this visit, I was struck by how optimistic my Japanese interlocutors were about Japan's global role and yet how pessimistic they were about the strategic challenges Japan faces. The latter fueled the former. Instead of focusing on what the United States could do better, they were focused on what Japan needed to do. And they seemed to think Japan could and would do it.

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Shadow Government

Approve IMF Quota Reform as Part of Ukraine Rescue Package

A stabilized Ukraine is an important part of resolving the broader geopolitical Ukraine crisis. Ukraine as an economically failed state is not in the U.S. interest and opens the door to further interference from Russia and dangerous political radicalization in Ukraine. The U.S. Congress is at a critical point in creating a rescue package for Ukraine. Congress should support the administration's request for sovereign loan guarantees, and any Ukraine package should include "International Monetary Fund (IMF) quota reform"-- a slight rejiggering of IMF shareholder votes away from Europe to emerging economies and doubling the money available for global crises like Ukraine at no additional cost (assuming an accounting change) to the U.S. taxpayer. IMF quota reform is required for the United States to have the moral authority to lead the coalition of the willing to respond to the Ukraine crisis.

The United States needs to lead the response to the Ukraine crisis because Europe is divided over Ukraine. For the United States to lead, we need IMF quota reform to have the credibility to ride herd on the IMF package. The quota reform will double the "quick money" that is available to Ukraine to $1 billion and double the IMF's stockpile of money for crises to over $700 billion.

As of today, Ukraine has limited hard currency reserves, and they are shrinking. It has a banking crisis and has limited the amounts of money that depositors can withdraw. The country is on the brink of financial collapse and a financial collapse will open it up to further radicalization and instability -- and a weaker Ukraine is an even easier victim for Russia.

Ukraine has been America's ally in the global war on terror, and the United States should return the favor. Ukraine sent over 1,000 troops to Iraq and also participated in several ways in Afghanistan, including sending a small number of troops. Ukraine wants to be a part of the West and wants deeper commercial ties with the West while maintaining good trading relations with Russia (regardless of Crimea, 30 percent of Ukraine's trade is with Russia and that won't end anytime soon). If Ukraine collapses and we stand by while that happens, the collapse will be part of the narrative that Russian President Vladimir Putin "won." A failure to respond strongly to the economic crisis will also earn us the enduring enmity of the people of Ukraine.

The IMF and the West have failed to support allies before when they experienced a financial crisis, and we have paid for years as a result. Twelve years ago, a broadly pro-American government in an unstable country sought support from America and the IMF to deal with an economic and financial crisis. The IMF and the United States decided to pull IMF support because the country had not met certain criteria and because of mixed feelings about supporting a "bailout." As a result, the financial crisis deepened; the democratically elected pro-American government fell in what has been described as a coup; radicalized forces took over; the country defaulted on its debt, devalued its currency, confiscated financial assets in the banking system, broke hundreds of its financial and business agreements, and became a pariah state. This country had sent ships in the Gulf War, but sat out the Afghanistan and Iraq wars, and its leadership worked to sabotage a regional summit in 2005. That same country helped detonate a regional trade agreement valued by the United States. To this day, the country has not entirely returned to the international fold --refusing to pay its debts, confiscating foreign investors' holdings, lying about its inflation statistics, and aligning itself with horrible regional actors. This broken country remains a shadow of its former self. It is the country where the United States enjoys the least public support in its part of the world. In other words, a failed Ukraine could go the way of Argentina.

In the case of Ukraine, a radicalized Ukraine could seek nuclear weapons, reneging on the 1994 Budapest Memorandum, in which the United States and Britain promised to protect Ukraine from attack if it gave up its nukes (in 1994 security guarantees of protection from the United States and Britain were worth something). A radicalized Ukraine might follow the path of autocratic Belarus; a radicalized Ukraine might turn on itself in a civil war; and a radicalized Ukraine could become an appendage of a Greater Russian empire. We cannot allow such an outcome to happen, and an IMF package is part of stabilizing Ukraine.

There are many steps other than an IMF package to stabilize Ukraine, including supporting critical and painful reforms of the energy sector and of Ukraine's leaky and regressive social safety net, along with ensuring the May elections are successful. Barack Obama's administration is asking Congress for the authority to provide sovereign loan guarantees for Ukraine's public debt, and Congress should approve that too. The United States used sovereign loan guarantees in Tunisia and Jordan in the last couple of years, and it should do that again here. In addition, the United States through the U.S. Agency for International Development and the State Department should reallocate (with congressional approval) its pre-crisis approved monies (about $60 million) for Ukraine to focus on the immediate needs of the government coming out of the IMF mission in Ukraine, which will finish before the end of the month. The World Bank, the European Bank for Reconstruction and Development, and the International Finance Corporation will all have roles to play in the months ahead. America has large stakes in these institutions, and the United States has the ability to direct where these institutions put their resources, thanks in part to the global capital increase of the World Bank Group and other multilateral development banks (MDBs) wisely supported by Congress. IMF quota reform is analogous to the MDB capital increases that I have written about here.

In other words, the IMF, like the World Bank and the regional development banks, will remain a force multiplier of American power and influence for the foreseeable future once quota reform is approved.

But the IMF will play the central role in the short-term stabilization of Ukraine because of the price tag of the rescue package (anywhere between $15 billion and $35 billion). There are only a few sources in the world for that amount of money. One of them is the U.S.-controlled IMF. If the IMF reforms are blocked by Congress, then the many developing countries that have agreed to these reforms will conclude they have less voice than the size of their economy deserves and will look elsewhere for funding, including from China, Russia, or a possible future "BRIC Bank" -- all outcomes not in the U.S. interest. The U.S. Congress is not going to come up with anywhere near the $35 billion that Ukraine is asking for and nor is the European Union, so we need the IMF to come up with that money or else countries will seek that kind of money from others.

In the IMF quota reform, the United States gives away less than 0.3 percent of its votes (a 0.4 percentage point drop from 17.7 percent to 17.3 percent); it remains the largest shareholder; it retains its veto; and it doubles the money available for crises. The developed world (read the West) keeps more than 55 percent of the shares -- all this with no additional cost to the U.S. taxpayer. The IMF quota reform will require no allocations of money because of a change in how the IMF outlays are accounted for, and in essence Congress will approve the shifting of monies already approved by the U.S. Congress from one IMF account to another.

The ability to approve IMF quota reform is a test of America's willingness to remain a global superpower in the long term, and in the short term it would be a sign that the country plans to be robust in its response to Russia's provocation. Every country on the IMF board, including all members of the G-20, have already approved IMF quota reform, and the United States is the only embarrassing holdout. How can it lead on Ukraine when it hasn't approved this?

Certainly steps other than an economic assistance package will be needed to respond to Ukraine's broader crisis. These include, in the security realm, reassuring allies by installing missile defense in Poland and the Czech Republic and upping troop exercises and the capabilities of NATO allies near the border with Russia, for starters. On the energy front, America needs to approve the Keystone Pipeline (the Obama administration's intransigence on this is far worse than on approving IMF quota reform), lift the ban on U.S. oil exports, and push Europe to diversify its oil and gas sources away from Russia.

There have been a number of cases where one can criticize the IMF's advice to countries or its response to crises, and there are other cases where its advice was quite helpful (Eastern Europe in the 1990s, Turkey in 2001, and the crisis in Europe since 2011). But for better or worse the International Monetary fund is America's global financial crisis fund. We need a robust economic response to the Ukraine crisis, and the United States cripples its ability to lead in the Ukraine crisis if it does not approve IMF quota reform.

Photo: Alexander KHUDOTEPLY/AFP/Getty Images