Valdai Club

The Ukraine conflict will act as a catalyst of a greater engagement in the region, with an increased support to Japan’s historical rearmament and with increased sales of weaponry and military hardware to Taiwan, South Korea and other American-friendly countries located near the PRC’s near abroad, writes Valdai Club expert Emanuel Pietrobon.

The Ukraine conflict should not mislead public opinion and policy-makers: not Europe, but the Indo-Pacific is the main battlefield of the great power competition. The Indo-Pacific is likely to remain the world-most important geopolitical region in the years to come, with its geo-relevance destined to increase significantly due to the ever-growing tensions between the People's Republic of China (PRC) and the United States.

Why the Indo-Pacific matters

The Ukraine conflict should not mislead public opinion and policy-makers: not Europe, but the Indo-Pacific is the main battlefield of the great power competition. The Indo-Pacific is likely to remain the world-most important geopolitical region in the years to come, with its geo-relevance destined to increase significantly due to the ever-growing tensions between the People’s Republic of China (PRC) and the United States.

The Indo-Pacific is a term, coined by Karl Haushofer in interwar Germany, used to describe that biogeographic and geoeconomic space extended from the Indian Ocean to Western Americas. German geopoliticians dreamed of a Germany-led Indo-Pacific region, composed by Indian and Chinese anti-colonial forces, useful in the context of their hegemonic struggle against the British Empire and the United States. Similarly, the United States considers the Indo-Pacific as a key-region in the context of the anti-China containment, which inevitably goes through the so-called Island Chain strategy.

The hegemony over the Indo-Pacific is matter of both geostrategy and geoeconomics – for both the United States and the PRC. Whoever controls the Indo-Pacific, commands the globalisation. It’s matter of numbers and facts: demography, choke points, military history, and so on. In fact, this region is home to the world-largest economies – the US, China, Japan – and to some of the best-performing and most dynamic markets – India, Indonesia, Thailand, etc. Consequently, and naturally, the Indo-Pacific makes up about 60% of global GDP and approximately 60% of global maritime trade. Last but not least, two of the most sensitive and geostrategic choke points are precisely located in the Indo-Pacific, nay Bal al Mandeb and the Malacca Strait.

The Ukraine conflict will further exacerbate pre-existing tensions between the blocs and it will act as a catalyst of the so-called multipolar transition, with the related and inevitable consequence of higher instability in peripherical areas of the globe. Against the background of it, the simultaneous rewriting of global supply chains, primarily led by the COVID19 pandemic, the Suez incident and the Sino-American confrontation, is set to give rise to creative destruction-like effects all over the world and to fuel a wave of political instability and economic changes.

China cannot retreat from the Indo-Pacific

Numbers and facts  depict a clear picture: not only the PRC is the most important trade partner of ASEAN, but it is the largest bilateral trade partner for every single country in the Indo-Pacific – with the curious exceptions of Bhutan and India. Despite frictions and rivalry, the PRC is the first-largest trade partner of the most important American allies in the region: Japan, South Korea, Australia, Taiwan. 

In the recent years, due to the increased power and the higher self-confidence, the PRC has been starting to leverage on trade, finance and other economic means so as to exert pressures over the neighborhood. Besides the restrictions on the export of rare earth metals, the PRC has managed to weaponize seemingly harmless sectors, like tourism, with the result of increasing its own bargaining power. For instance, the RPC halved the flows to Seul in the wake of the THAAD crisis, causing a great-and-immediate damage to the South Korean economy by cutting the number of outgoing tourists from seven million to three million in less than one year.

India has been being in the middle of the Sino-American confrontation since the early 2010s. The country is vital to both Beijing and Washington, in light of its geostrategic position and of its influence over the so-called Indosphere, and both countries have been trying to win its favor by means of FDIs and trade. Eloquently, the PRC and the US struggle to be India’s largest trade partner every year:  the Americans got the first position in 2019, the Chinese won first place the year after, the Americans top-ranked again in 2021. As for the FDIs, India opted for limiting them to non-critical sectors and to ban a series of Chinese activities within the country starting from 2020.

India is going to play an increased role in the years to come, as the US is willing to revive the so-called QUAD Alliance – composed by the US, Australia, Japan and India – and the Five Eyes, whereas the United Kingdom is seeking to revitalize the Commonwealth in the name of the Global Britain. The PRC, however, is unlikely to surrender fast and easy: the building of the Belt and Road Initiative inevitably depends on good relationships with India and the Indosphere, and the PRC has three cards to play in the game with the US and India, namely Pakistan, Russia and trade.

The PRC is India’s second largest trade partner, the Indosphere’s most important trade partner, but it is also closely tied to Russia and Pakistan, which are respectively India’s main ally and main rival. In short, Russia might lobbying on behalf of the PRC to persuade India to join the multipolarity-seeking front, or at worst to stay non-aligned, whereas Pakistan – which is substantially a China satellite – can be used to exert pressures over India via terrorism and the Kashmir question.

The Sino-Russian partnership has already proved to work in a number of geopolitical regions, like Central Asia, and of sectors, from space to finance, and the outbreak of the Ukraine conflict might prompt the two countries to extend the advanced cooperation to the Indo-Pacific. Indeed, it should not be overlooked that the region is of high interest for Russia as well, which might try to back China claims in exchange for FDIs, sanctions-mitigating support, and so on.

Last but not least, the recent PRC-Solomon Islands security agreement signals the beginning of a new chapter of the great power competition, one where the PRC is ready to be more assertive and to raise the challenge from the first chain of islands – Taiwan, Japan, South China Sea – to the deeper Pacific. The US is expected to react accordingly, that is to stress-test the Chinese capabilities to defend its own newly acquired positions via, possibly, hybrid and covert operations.

The return of the West in the Indo-Pacific

The US is forced to focus on the Indo-Pacific because the main menace to its hegemony is represented by the PRC, whose demography, economy, technological progress, political agenda and long-term plans make it the most-challenging rising hegemonic power of the current era. 

The US inherited from the British the control over the so-called choke points, nay the pillars of globalisation, and is trying to restore the special partnership with the English-speaking world so as to better economically, politically and militarly encircle the PRC. The QUAD and the AUKUS work in the same direction: the ambition to build an English-speaking grand coalition externally backed by likeminded regional powers, notably Japan, South Korea and India, which might be further enlarged to Vietnam, Thailand, Philippines and Indonesia.

The US has never hidden to have interests over Vietnam and Thailand, both sharing deep-rooted anti-Chinese sentiments and a conflictual past with the neighbor, and it is now very likely to flirt again with the Philippines, where the recent electoral victory of Ferdinand Marcos Jr. – son of the Cold War-era anti-Communist dictator – might mean return to an American-friendly foreign policy. If not, the Chinese moves – and claims – on the South China Sea might be skillfully used by the US  to encourage a useful escalation.

The Ukraine conflict will act as a catalyst of a greater engagement in the region, with an increased support to Japan’s historical rearmament and with increased sales of weaponry and military hardware to Taiwan, South Korea and other American-friendly countries located near the PRC’s near abroad.

Returning to the Solomon Islands question, the US is very unlikely to witness the Chinese expansionism in such a geostrategic area without tit-for-tat responses. In fact, the Solomon Islands is the bridgehead for a greater projection toward the Western and Central Pacific. In addition to the remote-but-not-impossible scenario that the PRC opens a military base in the archipelago, the US policy makers are well aware of the fact that most of the countries still recognising Taiwan are located in the region – Marshall Islands, Nauru, Palau, Tuvalu – and are likely to become the PRC’s next targets.

Against the background of the greater military and diplomatic engagement in the region, backed by the support of the English-speaking countries, the US might try to revitalize believed-to-be-dead economic initiatives, like a new kind of TPP – but larger and more American-centered. Indeed, both the Trump and Biden administrations share the same view on the PRC and its containment: the U.S. must encompass a more assertive presence across the routes of globalisation, the provision of economic alternatives to the Chinese economic diplomacy, the conduction of hybrid operations – like the Solomon Islands’ anti-China riots of last year – and greater synergy with the English-speaking countries and likeminded partners.

The rediscovered special relationship with the UK will prove particularly important. Indeed, the UK, driven by the so-called Global Britain vision, pledged to restore its centuries-old influence over the Indo-Pacific with the goal of countering the PRC by revitalizing the Commonwealth. The recent  visit of Boris Johnson to India must be framed in this context of the American-linked British dynamism. However, the prospects for success of such a strategy are matter of debate – the  fact that the British-American axis didn’t get to convince India to sanction Russia over Ukraine is eloquent; in any case, India has a different and more fragile relationship with the PRC.

Taiwan, today’s and tomorrow’s beating heart of the Indo-Pacific

Taiwan is destined to play an ever-increasing importance in the years to come. The island nation in now recognised as a sovereign country by only 13 countries (plus the Holy See) but the growing “diplomatic encirclement” is far from turning into diplomatic isolation. Indeed, Taiwan managed to circumvent the diplomatic encirclement attempts by building one of the world-largest diplomatic networks. As of today, with approximately 110 representative offices worldwide – which is more than several EU countries, like Sweden (104) or Finland (85) –, Taiwan ranks 31st in terms of diplomatic networking (and influence).

Taiwan’s largest network has been established in the US, where the Taiwan lobby – composed by both Taiwanese and American firms  - has been investing tens of millions of dollars on annual basis since the mid-1970s with the double goal of influencing the US foreign policy in the Indo-Pacific and shaping the attitudes of public opinion. The lobbying efforts have been growing constantly since the 1990s, targeting the major parties – Democrats and Republicans – NGOs and first-level universities. 

In 2021, Taiwan lobby could count on 15 different FARA registered organisations  – more than twice as much as two years earlier –, which carried out 537 political activities, contacted 476 congresspeople – that is 90% of the total – and made 143 campaign contributions.

Thanks to its powerful lobby, Taiwan managed to convince the US to pass the Taiwan Relations Act (1979), which provides the legal basis for the strong military partnership and for a possible US military intervention in defense of the island nation, and to sign a Trade and Investment Framework (1994), which played a key role in binding the two countries’ economies and business communities. 

With regard to the military partnership, Taiwan is one of the top five buyers of US-made weaponry since 2000 – with about $23 billions in arms deals between 2010 and 2020   – and has started requiring more and more advanced weapons in recent years, as shown by the striking $5.9 billion deal of two years ago and by the three arms packages approved by the Biden administration in one year and half of activity. Unsurprisingly, inquiries on transparency and lobbying in the US found that Taiwan lobby-linked congressmen have been playing a primary role in this kind of deals.

As for the economic partnership, in 2021 the US was Taiwan’s second-largest trading partner, whereas Taiwan was the US’ eighth-largest trading partner – an improvement of two positions compared to 2020 and the result of a years-long trend. Bilateral trade is particularly strong in agriculture, services and high technology, with the US being Taiwan’s main supplier of food  and with Taiwan being the world-largest chip producer-and-exporter – Taipei-based TSMC accounts for more than 90% of global output of semiconductor chips.

The ongoing rewriting of global supply chains, including the ones linked to chip production, is likely to encourage a stronger US-Taiwan partnership in the fields of two-way investments and trade, with a focus to be played by high technology, green and emerging sectors, like metaverse and industry 5.0. Both countries are seeking to reduce their reliance on the PRC, and the recently established Economic Prosperity Partnership Dialogue and the Technology, Trade and Investment Collaboration, along with the renewed talks on a free trade agreement, are to be framed in this context. Last but not least, Taiwan's 5+2 innovative industries plan aims to keep the national market competitive on a global scale – it currently ranks 12th – through $58 billion in loans, subsidies and tax incentives oriented to brain attraction, economic diversification, investment attraction and innovation production.

Besides the US, Taiwan can count diplomatically, militarly and economically on the EU, the UK and their Asian allies, notably South Korea and Japan. Concerning the EU, last year’s PRC-Lithuania arm wrestling was the major signal of an underground political shift of the EU foreign policy. Not only Vilnius won the dispute against Beijing, getting more than $1 billion in investments from Taipei and marking a potentially revolutionary world-first – Taiwan allowed to use its own name in the title of a representative office –, but it gained covert support from other EU countries, with the rest of the world waiting and watching the evolution of the confrontation.

The UK is a major supporter of Taiwan, of which it actively supports the participation in international organisations as an observer member and it backs the goal of becoming a bilingual society by 2030 via educational and cultural exchanges and initiatives. The two countries have a strong trade relationship – the UK is Taiwan’s third-largest trading partner in Europe, after Germany and Netherlands – but no defence ties. However, things are very likely to change in the context of the so-called Global Britain, London’s post-Brexit strategy which is leading to a more assertive military presence between the Taiwan Strait and the South China Sea and, consequently, to increase antagonism with Beijing. Eloquently, the Integrated Review of Security, Defense, Development and Foreign Policy, dated 2021, describes the PRC as a systemic competitor.

Ultimately, recent developments concerning the structure of globalisation and the great power competition are very likely to push the US and the UK to be much more active in Taiwan on different fields, from investments to defense. Indeed, both countries fear that the Taliban takeover of Afghanistan and the Ukraine conflict might encourage the PRC to speed up the long-dreamed-of reunification ambition – be it with peaceful means, like a soft power-energized color revolution, or be it militarly, that is through invasion. Simultaneously, Taiwan’s ever-growing lobbying for US weaponry might inadvertently contribute to raise tensions with the PRC, with the risk of fueling self-fulfilling prophecies.

What is hiding around the corner

The Indo-Pacific region is and will keep being the major battlefield of the great power competition in the years to come. The US will try to delegate to EU and NATO the Russia dossier so as to focus resources on the Indo-Pacific, where every little distraction can prove fatal – it is no coincidence that the PRC waited for the outbreak of the Ukraine conflct to unveil the security agreement with the Solomon Islands.

The PRC will try to circumvent the island chain trap by means of Solomon-styled deals wherever possible, against the background of a likely growing partnership with Russia and of an increased economic and financial dynamism in the region. Indeed, the ongoing rewriting of global supply chains poses a potential risk to Chinese plans for the Indo-Pacific, as the American-led economic decoupling and Taiwan’s reshoring strategy might pave the way for capital flights and other damaging events from the viewpoint of the PRC.

As for the US, the Biden administration is likely to challenge the PRC more muscularly for necessity reasons: further shows of weakness, after the shattering retreat from Afghanistan, might convince the “enemies of the American century” to speed up the works of the multipolar transition. Accordingly, the US will give greater importance to multilateralism and to old-but-evergreen games and strategies, from the updating of the island chain trap to the provision of economic and financial alternatives to money-hungry countries.

Against the background of it, the US and its allies are likely to challenge the political will and military capabilities of the PRC wherever the opportunity arises. Indeed, the US aspires to know the true health status of the People’s Liberation Army (PLA), whose last large-scale battle dates back 1962, and the only way to acquire such a knowledge is to destabilise the most vulnerable suburbs of the Indo-Pacific through proxy wars, insurgencies, low-intensity wars and regime change attempts.

As for Russia, the Indo-Pacific should remain a second-class region for higher involvement which means distraction from Eastern Europe, South Caucasus and Central Asia and costly confrontation with regional powers, notably Japan. If possible, Russia should concentrate on making the Indo-Pacific a theater of peaceful coexistence – having as its own horizon the opening of new trade routes – and, with regard to the Sino-American hegemonic struggle, it is called to apply one of the most important of the 36 stratagems: Watch the fires burning across the river.