From the Forecast: “If the U.S. is unable to shape East Asia to its liking, preoccupied as it is with its domestic problems, then something will have to replace it as the center of gravity. That something will be the coming conflict between China and Japan … For the first time in centuries, Beijing and Tokyo are both strong – just not quite strong enough to dominate the other. Competition between them is therefore inevitable. In fact, it would have happened sooner had not the U.S. alliance structure after World War II been created to maintain the status quo in the region … now the U.S. is pulling back, looking to see what the return on investment is for the relationships it has put so much into. For the first time since 1945, Japan must consider the possibility that living under the U.S. security umbrella is not enough to guarantee Japanese interests.”
Update: It’s been nearly two months since we checked in on one of our headline forecasts of 2018. And the intervening weeks have been wildly inconsistent – essentially, a microcosm of the year – and the trend line reflects this ambivalence.
From a security perspective, Japan and China are competing. High-level Japanese officials have been hosting and paying visits to equally high-level officials from potential partners such as Malaysia, India and Sri Lanka. In early September, Japan accused China of “escalating” military actions around the disputed Diaoyu/Senkaku islands in the East China Sea. China frequently sails patrol boats and even an occasional warship or submarine in the East China Sea, so it’s not clear what Japan believed constituted an escalation. But whatever happened, Japan doesn’t seem interested in letting it slide. On Sept. 17, the Defense Ministry announced it had dispatched a submarine and three destroyers to the South China Sea for anti-submarine military drills. Just like that, a freedom-of-navigation operation turned into a freedom-to-conduct-anti-submarine-warfare operation.
From an economic perspective, Japan and China are cooperating – more so than we thought they would. That’s because they have an awful lot in common. They’re both major trading partners with the U.S. that have been adversely affected by U.S. protectionism. (China, of course, has borne the brunt of the new policies, but Japan has hardly gone unscathed, and it appears as though it will soon fall under further scrutiny.) Both are major trading partners in their own right and as such have been trying to broaden their bilateral economic relationship. Both are major oil importers, so both have an interest in keeping sea lanes open and keeping trade relationships with the Middle East as stable as possible.
This explains why Japan asked China to lift food import bans and, more important, why Japanese Prime Minister Shinzo Abe and Chinese President Xi Jinping seemed so friendly at the Eastern Economic Forum in Vladivostok at the end of last week. Abe will likely soon come to Beijing (most reports suggest he will visit in October, the first time since 2011 that a Japanese leader has gone there), and no doubt the reporting on the summit will be glowing, nothing short of a “new phase” of Sino-Japanese relations. Just remember that when Xi and Abe were shaking hands, Abe knew a Japanese submarine was already en route to an area where China is particularly sensitive to outsider challenges. There is perhaps no better explanation for the overall trajectory of the relationship than that, and no better example of a Japanese propensity to deal with contradiction.
From the Forecast: “The main issue between the U.S. and Russia – Ukraine – has been solved, or at least set aside. The conflict there is frozen, and neither side has the appetite to change that. But to move forward, the U.S. would have to ease sanctions on Russia, and part of that process depends on Congress. Given the ongoing investigation into Russian interference in the U.S. presidential election, it is very unlikely that sanctions will be reduced, which appears to leave U.S.-Russian relations suspended for now.”
Update: When Donald Trump became president of the United States, he was eager to patch up relations with Russia – just like his three predecessors had been. But relations haven’t gotten better. If anything, they’ve gotten worse. And major developments in Ukraine and the Middle East hardly herald their imminent improvement.
Outside these regions, there have been smaller indications that things are deteriorating. Sure, Trump and Russian President Vladimir Putin met in Helsinki, but that hasn’t led to any reduction in U.S. or EU sanctions against Russia. Even Germany, which among all Western nations is perhaps the most amenable to cooperating with Russia, has balked at lifting sanctions, at least as long as the stalemate continues in eastern Ukraine. On Sept. 12, Trump signed an executive order declaring Russia’s interference in U.S. elections a “national emergency” and authorizing sanctions on Russian companies, institutions and individuals. The U.S. Congress is working on still more sanctions against Russia.
The most obvious sign of degraded U.S.-Russia relations, though, came earlier this month, when the U.S. special envoy to Ukraine told The Guardian that Washington was prepared to help Ukraine build up its navy and air force. Here’s some perspective: Around this time last year, we were trying to decode the special envoy’s visits and statements to determine if a formal resolution, or at least recognition of the frozen conflict between Ukraine and its eastern separatists, would come to fruition. This year, the same special envoy is saying the U.S. will do more than simply supply anti-tank missiles – it will make sure Ukraine can defend itself from Russia. Considering Russian aggression in the Sea of Azov and the Black Sea, the decimated Ukrainian navy will take all the help it can get.
The corollary of this forecast was that Russia would be willing to compromise on certain issues to get the sanctions lifted. Russia has indeed been open to a certain level of compromise but has not been willing to go far enough. And while higher oil prices have helped Russia somewhat, the sanctions and the strength of the U.S. dollar have also hurt Russia’s economy. Russia recently used an assassination in Donetsk as pretense to say that a “Normandy format” meeting on Ukraine would be inappropriate, and even in the Middle East, where U.S. and Russian interests generally align in the fight against jihadists, the two sides have not been able to enhance coordination any more than before.
There are glimmers of cooperation – the most notable of which is Russia’s increased oil production as the U.S. pushes Iran sanctions – but overall, the relationship is a bit colder than we expected at this point. Not that we expected it to be particularly warm. We expected it to go unchanged and for sanctions to stay in place. Instead, things have deteriorated, and new sanctions have been applied. There’s still a few months yet to go in 2018, but it’s possible we weren’t pessimistic enough.