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27 July 2022

With Grant Wyeth

China and AUKUS

China is seeking to place pressure on Australia’s AUKUS agreement with the United States and the United Kingdom, claiming that it breaches international law. The agreement, signed in November 2021, entitles Australia to procure a fleet of nuclear-powered submarines – of either American or British design – and utilises a loophole in the Non-Proliferation of Nuclear Weapons Treaty that allows the transfer of material for non-explosive military use.  

A new joint report – A Dangerous Conspiracy: The Nuclear Proliferation Risk of the Nuclear-powered Submarines Collaboration in the Context of AUKUS – by two Communist Party–aligned think tanks claims that the agreement would constitute an “illegal transfer of weapons-grade nuclear material” to a non-nuclear state, and that this is a “blatant act of nuclear proliferation”. The report also states that the agreement is a precursor to Australia acquiring nuclear weapons itself.

While the assertion that Australia will become a nuclear weapons state is the usual overblown rhetoric expected from organisations attached to the Chinese Communist Party, the report does make a more substantive argument about the precedent that the AUKUS deal may set. Australia will undoubtedly bind itself to the strictest non-proliferation standards, but exploiting the loophole in the non-proliferation treaty may encourage other countries to do so in a less stringent manner.

A nuclear state like Russia can no longer be trusted to adhere to any international rules and obligations, including those concerning nuclear material. So, by seeking defensive mechanisms to enhance regional security in response to China’s dramatic military build-up, Australia might unwittingly be destabilising the international environment.

Jokowi’s power play

The Indonesian president, Joko “Jokowi” Widodo, will this week visit the three north-east Asian economic powerhouses – China, Japan and South Korea – to try to attract greater investment into Indonesia. Jokowi will be looking for ways to leverage Indonesia’s resource wealth and harness the emerging technology competition between the three countries to fuel Indonesia’s own development.

Indonesia is currently the world’s largest nickel producing country and it holds the largest nickel reserves. This presents an enormous opportunity as nickel is an essential element of lithium-ion batteries that are used in consumer electronics and electric vehicles. Currently the production of lithium-ion batteries is dominated by Chinese, South Korean and Japanese companies, yet Indonesia has plans to not just supply raw materials to these companies, but also to become a major battery manufacturer.

To do so, Jakarta requires the assistance of those very same companies it has been supplying. In June this year, South Korean company LG began building two new nickel processing plants in Central Java, while it has also partnered with Hyundai to build an ​​electric vehicle battery plant in West Java. Jokowi’s objective this week is to convince more north-east Asian companies to shift their battery manufacturing to his country, while the long-term strategy is to build the necessary knowledge for Indonesia to become a technology innovator itself.

Japan’s defence plan

Last week, Japan released its annual defence white paper, identifying Russia, China and North Korea as the biggest threats to its national security. The paper paints a grim picture of world affairs, saying the international community is currently facing “its greatest trial since World War II” and that “a large grey cloud hangs over the path towards world peace and security”. Although an annual report, this white paper highlights many of the themes that are likely to be adopted in Japan’s new national security strategy, currently being developed by Fumio Kishida’s government.

Notably, the white paper includes a new section on Russia’s invasion of Ukraine. Although Japan has its own territorial dispute with Russia, the more pressing concern for Tokyo is the lessons Beijing may learn from the invasion. The white paper states that “if Russia’s aggression is tolerated, it may give the wrong impression that unilateral changes in the status quo are allowed in other regions, including Asia”. Naming Taiwan directly, the white paper warns that Japan “must pay close attention to the situation, with an even greater sense of vigilance”.

To promote this vigilance, the paper not only called for reinforcing Japan’s security partnerships – including that with Australia – but also for increasing the country’s defence spending. It highlighted that Japan has the lowest ratio of defence spending to GDP in the G7, comparing it to other wealthy countries like Australia and South Korea. Potentially laying the groundwork for a dramatic increase in expenditure, the paper noted that NATO members have committed to spending 2 per cent of GDP on defence. Matching this would make Japan the second-largest defence spender after the United States and China.


A free extract from “Red Flags” by Sebastian Strangio

“This wave of investment and emigration from China has profoundly altered the physical landscape of northern Laos. In quiet provincial capitals such as Udomxai and Luang Namtha, both of which have stations on the new railway line, Chinese nationals now make up as much as a fifth of the population and the streets are dotted with Chinese-run restaurants, hotels, vehicle repair shops and furniture stores. Prior to the COVID-19 pandemic, Chinese nationals also represented the largest proportion of tourists to Laos, and cars bearing Chinese licence plates had become a common sight on the streets of Luang Prabang, the graceful former royal capital nestled in a verdant bend of the Mekong river. While outbound Chinese tourism remains dammed up for now behind Beijing’s strict “zero COVID” policy, the long-term impact of the Laos–China Railway will be to further this process of economic integration and bind these two neighbours more tightly together than ever before.”CONTINUE READING



Weekly round-up

The US–China strategic competition in the Pacific – something ASEAN needs to watch

“What accounts for China’s bold steps in the Pacific? China plays a long game and these actions would have come in any case at an opportune time in the future. Their present timing may have been influenced by a sense of being thwarted by America’s moves on the Indo-Pacific chessboard like the institutionalisation of the Quad, the formation of AUKUS … the re-arming of Japan, and Washington’s stronger ties with Taiwan.” Daljit Singh,Fulcrum (ISEAS –Yusof Ishak Institute)

Papua division inflames tensions

“The creation of new provinces will lead to the parallel creation of a further eight military district commands (Kodim) in the region, increasing from twenty-two to thirty. Each Kodim consists of around 800 personnel, meaning approximately 6400 additional troops will be stationed in what is already the most heavily militarised area in Indonesia.” Damien Kingsbury,Australian Outlook (AIIA)

How to bridge the capability gap in Australia’s transition to nuclear-powered submarines

“A new conventional class of submarine could be in service for thirty years and hence be an enduring part of the defence force. It might better be referred to as a bridging capability, much like the F/A-18F Super Hornet’s introduction to manage the risks in the capability transition from the F/A-18A/B and F-111 fleets to the F-35A.” Marcus Hellyer & Andrew Nicholls,The Strategist (ASPI)


‘Bongbong’ Marcos tries the balancing act with Beijing and Washington

“Although the new president appears to want Chinese capital to help restore the Philippines’ Covid-hit economy, debt concerns associated with China have stirred public discontent, with protests not uncommon.” Cherry Hitkari,The Interpreter (Lowy Institute)

China’s entrepreneurial capitalism faces a grim future

“The universe of China’s largest companies resembles a maze in which ‘large private owners are deeply connected to the state and large state owners have deep ties with private owners’… The specifics of these connections are vague and assumed to be beneficial to large private companies.” Martin Miszerak,East Asia Forum

New from The Quarterly Essay

Sleepwalk to War

Hugh White

Australia’s Unthinking Alliance with America

In this gripping essay, Hugh White explores Australia’s fateful choice to back America to the hilt and oppose China. What led both sides of politics to align with America so absolutely? Is this a case of sleepwalking to war? What tests might a new government face?

White assesses America’s credibility and commitment, by examining AUKUS, the Quad, Trump and Biden. He discusses what the Ukraine conflict tells us about the future. And he argues that the US can neither contain China nor win a war over Taiwan. So where does this leave our future security and prosperity in Asia? Is there a better way to navigate the disruption caused by China’s rise?

This is a powerful and original essay by Australia’s leading strategic thinker.

“Canberra’s rhetoric helps raise the risk of the worst outcome for Australia: a war between China and America, in which we are likely to be involved. Over the past decade, and without any serious discussion, Australian governments have come to believe that America should go to war with China if necessary to preserve US primacy in Asia, and that Australia should, as a matter of course, go to war with it.”—Hugh White, Sleepwalk to Warread more



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