Can Philippines, Taiwan, Japan and South Korea Join Forces Against China?
An Overview
In the geopolitical theater of the East and South China Sea, a chronicle of escalating tensions and geopolitical complexities is unfolding, shaped by historical disputes, military posturing, and the specter of a rising China’s military might. From the early clashes in 1988 to the contemporary challenges in 2023, the maritime disputes have evolved. We’ll discuss the anxieties surrounding China’s rise, the formidable capabilities of littoral states such as Japan, Taiwan, South Korea, and the Philippines, and the geostrategic implications of China’s ambitious Blue Navy Project. Against this backdrop, the prospect of a Joint Defense Agreement among the Philippines, Taiwan, Japan, and South Korea emerges, offering a range of scenarios from a defense pact to joint cooperation mechanism. If you want to understand the whole picture, we will recommend you to give your ample time. So, let us explore this issue holistically.
Chronology of Key Events and Escalating Tensions
The history of disputes between China and its neighboring countries in the South China Sea and the East China Sea is marked by a series of significant events. In 1982, the United Nations Conference on the Law of the Sea (UNCLOS) was established, outlining the rights and responsibilities of nations in their use of surrounding waters.
One of the earliest armed conflicts occurred in 1988, when China and Vietnam clashed on the Johnson Reef, resulting in the sinking of three Vietnamese ships. This marked a turning point in the region’s geopolitical landscape. China’s assertiveness continued in 1992 with the passage of the Law on the Territorial Sea subsequently, thereby laying claim to the entire South China Sea based on historical rights dating back to the Han dynasty.
Tensions escalated further in 1996 during the Mischief Reef incident, where Chinese naval vessels engaged in a battle with a Philippine navy gunboat. The following years witnessed diplomatic efforts, such as the 2002 ASEAN-China Declaration on the Conduct of Parties in the South China Sea, aimed at easing tensions and establishing guidelines for conflict resolution.
The East China Sea also became a focal point of contention. In 2012, Japan and China signed a Joint Energy Development Agreement, but disputes over the Chunxiao/Shirakaba field and the Senkaku/Diaoyu Islands persisted. In the southern domain, the Philippines opted for international arbitration under UNCLOS to address maritime disputes, culminating in a pivotal 2016 ruling that contested China’s claims in the South China Sea.
Subsequent years have witnessed a surge in militarization and confrontations within the region. China’s establishment of an Air Defense Identification Zone in the East China Sea in 2013, coupled with the deployment of missiles to the Paracel Islands in 2016, elicited concerns regarding regional stability. The year 2018 saw heightened tensions when a U.S. warship patrolled in proximity to islands constructed by China in the South China Sea, provoking a strong reaction from the Chinese authorities.
In 2023, tensions continued to escalate. The Philippines welcomed an expanded U.S. military presence through joint defense agreements, drawing objections from China. In addition to this, China’s release of an updated territorial map, including a “ten-dash line,” has sparked protests from ASEAN members, as well as from India, Japan, and Taiwan.
Anxiety Surrounding the Rise of Dragon
The anxiety surrounding the rise of China, often referred to as the “Dragon in the East,” is multifaceted and prominently observed in the East and South China Sea regions. This apprehension is rooted in several factors, including China’s assertive territorial claims, military build-up, and expansive maritime activities, which have led to heightened geopolitical tensions. One prominent concept that adds a theoretical perspective to this unease is the “Thucydides Trap,” a term coined by renowned political scientist, Graham Allison. The proposition posits that a burgeoning power, exemplified by China, and an established dominant force, such as the United States, are prone to conflict owing to the former’s challenge to the prevailing order. Lee Kuan Yew, the revered founding figure of Singapore, articulated in a 2013 interview that “The challenge for the United States is to manage China’s rise in a way that avoids war. This is a very difficult task, because China is not going to accept a status quo where it is subordinate to the United States.” He further emphasized the necessity for smaller countries in the region to be astute and formulate strategies to address the potential of conflict. Lee asserted, “Small countries need to be smart and have a plan in place for how to deal with the rise of China. They need to diversify their economies and build strong relationships with both the United States and China.” The prevailing unease surrounding China’s ascendance in the East and South China Sea is understandable. The Thucydides Trap is a useful framework for understanding the current situation in the East and South China Sea. The theory suggests that the United States and China are on a collision course due to their rivalry. This poses a significant challenge for both countries, as well as for smaller countries in the region.
Capabilities of the littoral states of the East & South China Sea
- Japan
Japan stands out as the most militarily powerful littoral state in the Far East, with a formidable military force known as the Japan Self-Defense Force (JSDF). The JSDF, particularly its Maritime Self-Defense Force, commands attention with more than 150 ships, including advanced destroyers, frigates, submarines, and aircraft carriers. The Air Self-Defense Force (ASDF) complements this prowess with a fleet of more than 500 aircrafts, featuring top-of-the-line fighter jets like the F-35A Lightning II. Japan’s Ground Self-Defense Force (GSDF) safeguards the nation’s land territory, and is equipped with modern tanks, armored vehicles, and artillery. With a military budget of totaling 6.8 trillion yen or $52 billion. The Japan’s defense force role extends beyond deterrence, as seen in its engagement in freedom of navigation operations (FONOPs) challenging China’s maritime claims, joint exercises with regional partners like the United States, the Philippines, and Vietnam, and collaborative efforts to enhance maritime domain awareness in the region.
Taiwan
Taiwan with its modern and well-equipped Armed Forces (ROCAF) holds a considerable say in the region. With a military budget of $19.4 billion in 2023 and a robust force including 169,000 active personnel, 1.66 million reserves, 474 aircraft, 1,200 tanks, and 110 warships, Taiwanese navy, is a force to reckon with, boasting more than 110 ships, advanced destroyers, frigates, submarines, and fast attack aircrafts. Armed with cutting-edge weaponry such as anti-ship missiles, torpedoes, and anti-submarine warfare systems, the ROCN plays a pivotal role in Taiwan’s maritime defense. The Air Force further solidifies Taiwan’s military might, featuring a fleet of over 400 aircrafts, including F-16 Fighting Falcons and F-CK-1 Chingkuo jets. Taiwan’s military include the HsiungFeng-III anti-ship missiles and ongoing development of hypersonic weapons. Taiwan collaborates cordially with regional partners, like the United States, Japan, and Australia to bolster its maritime security.
South Korea
South Korea, is a powerful littoral state in the East China Sea arena, and maintains a formidable military through the Republic of Korea Armed Forces (ROKAF). Boasting the largest and most capable navy (ROKN) with more than 160 advanced ships and a well-equipped Air Force featuring a fleet of 600 aircraft, including cutting-edge fighter jets. The growing Army further fortifies defense on land with a force exceeding 618,000 troops and modern weaponry. A defense budget of $43.1 billion for 2023, showcases South Korea’s commitment to staying ahead of evolving security challenges.
South Korea has strategically allocated resources for initiatives like the KF-21 Boramae fighter jet and plans for Lockheed Martin’s F-35A and F-35B aircrafts. The nation’s pursuit of industrial self-sufficiency aligns with its dedication to technological advancements, positioning South Korea as a key player in shaping the region’s security landscape.
The Philippines
The Philippines is restructuring its military modernization plan to enhance territorial and coastal defense in response to escalating tensions with China. The recent collision between Chinese ships and a Philippine military supply vessel underscores the urgency. General Romeo Brawner, the Philippine Army Chief of Staff, highlights the shift’s focus on safeguarding territories. The updated Horizon 3 modernization plan includes multirole fighter jets, radars, frigates, missile systems, helicopters, and the nation’s first submarine fleet. Despite budget constraints, the Philippine government has proposed a core 2024 defense budget of 4.1 billion dollars.
The Geostrategic Framework for China’s Blue Navy Project
In the historical context of maritime strategy, Alfred Thayer Mahan’s influential work, “The Influence of Sea Power upon History,” laid the foundation for the Sea Power Theory in 1890’s. Often referred to as the ‘Clausewitz of The Sea,’ Mahan categorized nations into those communicatively dependent on land and those reliant on the sea. His theory, encompassing six key elements, explored the maritime strength of a nation based on factors such as physical conformation, territorial extent, population size, character of the people, and government. Mahan emphasized the role of physical features, citing England and France pre-Napoleonic wars as examples. England’s geographic advantages led to a maritime focus for resources, while France, rich in resources, leaned more towards internal production.
In April 2023, China’s naval capabilities took center stage as a carrier battle group, led by the Shandong, conducted simulated air strikes near Taiwan, showcasing its expanding naval prowess. With the upcoming introduction of the third aircraft carrier, the Fujian, equipped with catapults for extended-range fighter missions, China is committed to project its power beyond the East and South China sea. Alongside advanced warships like the Fujian, the Chaganhu, a Type 901 underway replenishment ship, exemplifies the importance of logistical support in sustaining maritime operations far from coastal bases.
China’s ascent from a green-water navy to one with blue-water ambitions is evident in its development of over 340 warships, reflecting a desire for global maritime influence. Spanning three decades, China’s naval transformation has made it the largest navy in East Asia. The Department of Defense reports an expected growth of China’s navy from around 340 platforms to 400 ships by 2025 and 440 ships by 2030. China’s objectives include addressing potential conflicts with Taiwan, controlling its near-seas regions, securing commercial sea lines, challenging U.S. influence in the Western Pacific, and asserting itself as a global power with anti-access, area-denial (A2/AD) capabilities.
China’s pursuit of port access, illustrated by endeavors like the construction of a naval base in Cambodia, aligns with its broader strategy to establish a more expansive global footprint. As part of initiatives like the Belt and Road, China’s expanding naval presence, including facilities in Argentina and Cuba, raises concerns about geopolitical implications of China’s moves. Despite official denials, strategic initiatives analyzed by the Foundation for Defense of Democracies suggest China’s growing determination to secure additional naval outposts globally.
The United States Island Chain Containment Strategy?
The island chain strategy, initially conceptualized by American statesman, John Foster Dulles, in 1951 during the Korean War, proposed a strategic containment plan surrounding the Soviet Union and China with naval bases in the West Pacific. While it did not take center stage during the Cold War, the concept remains pivotal in the geopolitical landscape, drawing significant attention from both American and Chinese analysts. For the United States, the island chain strategy is integral to its military force projection in the Far East. Conversely, for China, the concept is a cornerstone of its maritime security, with concerns about potential encirclement by U.S. armed forces. The island chain strategy encompasses three chains: the First Island Chain, acting as a historical defense line against the Soviet Union during the Cold War include countries like South Korea, Japan, Taiwan, and the Philippines; the Second Island Chain, serving as a strategic defense line for the United States extends far beyond the first island chain in to the Pacific Ocean, and the Third Island Chain, extending across the Pacific Ocean toward Oceania. Beyond these three chains, the Fourth Island Chain, including locations like Lakshadweep and the Maldives, aims to disrupt key waypoints like the Gwadar Port and Hambantota, while the Fifth Island Chain spans from the Gulf of Aden to South Africa, encircling the Chinese naval base at Doraleh, Djibouti.
Likely Scenarios of Joint Defense Agreement between the Philippines, Taiwan, Japan, and South Korea
Maritime Security Coalition
Against the backdrop of escalating tensions in the East and especially the South China Sea, a plausible scenario involves the Philippines, Taiwan, Japan, and South Korea entering a Joint Defense Agreement with a primary focus on maritime security. This coalition, driven by shared concerns over China’s assertive territorial claims, envisions collaborative efforts encompassing intelligence-sharing, joint military exercises, and coordinated actions to uphold freedom of navigation. Leveraging Japan’s advanced maritime capabilities, Taiwan’s strategic location, South Korea’s robust military, and the Philippines’ commitment to defense enhancement, this coalition could aim to act as a deterrent against potential aggressive actions by the Chinese.
More comprehensive Joint Defense Agreement that includes mutual defense
This scenario will be more ambitious and provocative, as it would commit the four countries to defending each other in the event of an attack. This would require joint military planning and training, as well as mutual assistance in the event of war. This scenario is less likely than the first one, as it would be more likely to trigger a negative reaction from China. However, it is still possible, especially if China continues to take aggressive actions in the region.
Strategic Cybersecurity and Technological Collaboration
Recognizing the evolving landscape of modern warfare and the growing importance of cyber and space capabilities, another plausible scenario entails a Joint Defense Agreement focusing on strategic cybersecurity and technological collaboration among the Philippines, Taiwan, Japan, and South Korea. With Japan’s proficiency in cyber warfare, Taiwan’s technological prowess, South Korea’s innovation commitment, and the strategic position of the Philippines, this alliance could extend beyond defense to include joint research and development initiatives, ensuring the participating nations stay ahead in the technological arms race.
A bilateral Joint Defense Agreement between the Philippines and Taiwan, with Japan and South Korea as observers
This scenario would be a compromised scenario, as it would allow the Philippines and Taiwan to cooperate on defense without directly provoking China. Japan and South Korea could still provide support to the Philippines and Taiwan as observers, such as by providing intelligence and logistical assistance. This scenario is also possible, especially if the Philippines and Taiwan feel that they need to take additional steps to deter China from taking aggressive actions against them.
End Note
In the tumultuous East and South China Sea, escalating tensions marked by historical disputes and China’s military rise set the stage for complexity. Littoral states like Japan, Taiwan, South Korea, and the Philippines boasts formidable military capabilities amid rising anxieties about China’s ascent, encapsulated by the Thucydides Trap. China’s expansive Blue Navy Project and the evolving island chain containment strategy add layers to the intricate scenario. Discussions of a Joint Defense Agreement among regional actors unfold against this backdrop, offering varied scenarios from maritime security coalitions to comprehensive mutual defense pacts.
Analysis
Malaysia to Investigate Leaked Classified Chinese Note on South China Sea Dispute
![Malaysia to Investigate Leaked Classified Chinese Note on South China Sea Dispute](https://thepacificreports.com/wp-content/uploads/2024/09/Malaysia-to-Investigate-Leaked-Classified-Chinese-Note-on-South-China-Sea-Dispute.jpeg)
Malaysia’s Ministry of Foreign Affairs has launched an internal probe into the leak of a classified diplomatic note sent by China concerning oil exploration activities in the South China Sea. The move follows an article published by the Philippine Daily Inquirer on August 29, which detailed the contents of the confidential communication. The Malaysian government expressed grave concern over the breach, as the document constitutes an official communication channel between Beijing and Kuala Lumpur.
Background
In February 2024, China sent a classified diplomatic note to Malaysia, expressing concerns over Malaysia’s oil and gas exploration activities in the South China Sea. This note was leaked by the Philippine Daily Inquirer on August 29, 2024, drawing attention to ongoing regional tensions. The focus of China’s concern was Malaysia’s exploration near the Luconia Shoals, an area situated roughly 100 kilometers off the Malaysian state of Sarawak. While Malaysia asserts its rights to this region, China claims the area under its controversial nine-dash line, which covers nearly the entire South China Sea.
The diplomatic note highlights China’s longstanding claim over the South China Sea and highlights Beijing’s opposition to Malaysia’s exploration activities. According to the document, these activities infringe upon China’s territorial claims, and the note urges Malaysia to halt its operations immediately. This is not the first time such concerns have been raised, but the leak has brought the issue into sharper focus, putting additional strain on the diplomatic relations between the two nations.
Malaysia’s response to the leak has been swift. The country’s Foreign Ministry has initiated a police investigation into how the document was made public and launched an internal probe. Malaysia’s stance remains firm, with officials emphasizing that the country will continue to protect its sovereignty and pursue its interests in its maritime areas, in accordance with international law, specifically the United Nations Convention on the Law of the Sea (UNCLOS).
Malaysian Prime Minister Anwar Ibrahim further reinforced this position, stating that Malaysia will persist with its oil and gas exploration in the South China Sea despite the concerns raised by China. This development reflects the broader regional dynamics, as Malaysia, along with the Philippines, Vietnam, and Taiwan, all have overlapping claims in the South China Sea, making the area a significant flashpoint for international relations.
Recent Developments
The leaked diplomatic note highlights the sensitive and contentious nature of the territorial disputes in the South China Sea. It also sheds light on the careful balancing act Malaysia is attempting, as it seeks to assert its rights in the region while managing its diplomatic ties with China.
In its statement released on Wednesday, the Ministry of Foreign Affairs confirmed it is conducting an internal investigation and will be filing a police report to further scrutinize the incident. While the ministry refrained from naming the Philippine media outlet or verifying the authenticity of the note, it emphasized the need for swift action to prevent further leaks of classified materials.
Malaysia Urged to Halt All activities in the South China Sea by China
The note in question reportedly urged Malaysia to halt all oil exploration and drilling operations in the Luconia Shoals, a resource-rich area located about 100 kilometers off the coast of Sarawak. According to the Inquirer, China claimed that Malaysia’s activities in the region violated its sovereignty under the controversial nine-dash line. China’s nearest landmass, Hainan Island, is situated approximately 1,300 kilometers from the disputed shoals.
The South China Sea dispute involves competing claims from multiple nations, including Malaysia, the Philippines, Vietnam, and Taiwan. China claims nearly the entire sea based on historical maps, despite a 2016 international arbitration ruling that dismissed the nine-dash line as legally baseless. Malaysia, while sharing strong economic ties with China, has now become entangled in the broader geopolitical tensions over control of these vital waters.
Malaysia’s Ministry of Foreign Affairs reaffirmed its stance on the South China Sea, pledging to defend its sovereignty and interests in accordance with international law, including the United Nations Convention on the Law of the Sea (UNCLOS). The ministry noted that while Malaysia seeks peaceful resolution through dialogue, the country will remain firm in protecting its maritime rights.
Beijing has not commented on the leaked note. However, diplomatic tensions have flared in recent months, with China’s aggressive presence in the South China Sea leading to repeated confrontations, especially with the Philippines. Just this year, multiple stand-offs occurred between Chinese and Philippine coastguards near Second Thomas Shoal.
Prime Minister Anwar Ibrahim has maintained a more diplomatic approach toward Beijing, stressing the importance of balancing national interests with regional stability. However, the leak has raised concerns about Malaysia’s ability to maintain this balancing act amid increasing pressure from China. Anwar has acknowledged China’s concerns over Malaysia’s energy activities but remains open to negotiations on resolving maritime disputes.
This incident marks the second time in recent months that China’s activities in the South China Sea have drawn public attention in Malaysia. Earlier this year, a standoff between Malaysian state oil company Petronas and Chinese vessels occurred near the same contested waters. Chinese survey ships have increasingly patrolled the area, challenging Malaysia’s economic activities within its Exclusive Economic Zone (EEZ).
Despite these challenges, Malaysia’s foreign ministry highlighted that Kuala Lumpur and Beijing have committed to handling the South China Sea dispute diplomatically. Both nations co-chair discussions within the ASEAN framework aimed at reaching a Code of Conduct (COC) for the region, with negotiations expected to finalize in the coming years.
China’s claims over the South China Sea are based on the nine-dash line, a boundary dating back to 1947. However, the Permanent Court of Arbitration in The Hague ruled in 2016 that this claim had no merit under international law, siding with the Philippines. China has disregarded the ruling, continuing to assert its claims through military and diplomatic means.
Malaysia’s role in the dispute is further complicated by its reliance on China as its largest trading partner. Since 2009, bilateral relations between the two nations have strengthened, even as Malaysia faced pressure from the international community to stand firm against Chinese encroachment on its EEZ.
The Luconia Shoals, where the recent conflict has surfaced, are located within Malaysia’s EEZ, recognized by UNCLOS. However, China’s claim extends beyond its geographic proximity, relying on historical maps to justify its territorial ambitions in the South China Sea.
While the dispute escalates, Malaysia’s foreign ministry reiterated that its focus remains on diplomatic engagement. The government has called on all nations involved to respect the principles of peaceful negotiation and avoid any actions that could lead to violence or further escalation in the region.
End Note
The leak of China’s diplomatic note adds complexity to Malaysia’s foreign policy strategy, as it seeks to maintain both economic ties with China and its sovereign rights in the contested waters. Analysts believe that Malaysia’s next steps will be closely watched, both by regional partners and global powers like the United States.
Malaysia remains engaged in ASEAN-led efforts to establish a Code of Conduct for the South China Sea, aimed at reducing tensions and fostering long-term peace.
The investigation into the leak is ongoing, with the Malaysian government prioritizing both national security and diplomatic engagement with China. As tensions persist, Malaysia faces the challenge of navigating its position in a rapidly evolving geopolitical landscape.
Analysis
Can Saudis Survive Without Oil?
![Can Saudis survive without Oil?](https://thepacificreports.com/wp-content/uploads/2024/09/Can-Saudis-survive-without-Oil.jpeg)
“Russia, Iran and Saudi Arabia depend on exporting Oil & Gas. Their economies will collapse if Oil & Gas suddenly give way to Solar & Wind.” (Yuval Noah Harari)
Oil has long been the backbone of Saudi Arabia’s economy and the driving force behind its development. As the world’s largest oil exporter, it’s challenging to envision a Saudi Arabia without oil. However, the country is now on a bold mission to reduce its dependence on oil revenue as the bedrock of its national economy. This push for economic diversification comes in the wake of a decade marked by oil market volatility, which has intensified the economic and political challenges faced by the ruling Al Saud family. Saudi Arabia possesses approximately 17% of the world’s proven petroleum reserves, making it one of the leading net exporters of petroleum and home to the world’s second-largest proven oil reserves. Saudi Aramco, one of the world’s largest integrated energy and chemical companies, operates across three segments: upstream, midstream, and downstream. In 2022, Aramco’s average hydrocarbon production was 13.6 million barrels per day, with crude oil accounting for 11.5 million barrels per day. The company proudly claims to produce the lowest-carbon barrel of oil in the industry and has committed to achieving net-zero emissions by 2050, ahead of the government’s 2060 target. Saudi Arabia continues to invest in cleaner conventional engines, carbon capture, utilization and storage (CCUS), hydrogen, and renewable energy sources. Despite these efforts, Saudi Arabia remains heavily reliant on oil, which contributes 42% to the country’s GDP, 90% of export earnings, and 87% of budget revenue.
Historical Context
(March 3, 1938 CE: Oil discovered in Saudi Arabia)
On March 3, 1938, an American-owned oil well in Dammam, Saudi Arabia, tapped into what would become the world’s largest petroleum reserve. This discovery profoundly transformed Saudi Arabia, the Middle East, and the global landscape—politically, economically, and geographically. Before the discovery, the majority of Saudi Arabians were nomadic, and the nation’s economy largely depended on the tourism industry, driven by religious pilgrimages to Mecca. The company responsible for the discovery, which later became Chevron, set the stage for a seismic shift in the country’s future.
In the wake of the discovery, Saudi engineers developed an extensive infrastructure of ports, refineries, pipelines, and oil wells. Today, oil accounts for 92% of Saudi Arabia’s budget, making the nation one of the world’s leading producers and exporters of petroleum. This wealth from oil has fostered high-level diplomatic relationships with the West, as well as with China, Japan, and Southeast Asia. Some argue that Saudi Arabia’s oil wealth allows it to wield significant influence over international foreign policy decisions, particularly those involving the Middle East.
The kingdom’s demographics have also been reshaped by the oil industry, attracting millions of foreign workers from the Middle East, South Asia, South East Asia and other regions of the world. The first oil discovery site near Dharan is now connected to a vast pipeline network that transports petroleum across the region.
Petrodollar System
Petrodollars refer to the revenues generated from oil exports, denominated in US dollars, and are not a separate currency but rather US dollars accepted by oil-exporting countries in exchange for their oil. In 2020, the global average for daily crude oil exports was around 88.4 million barrels. With an average price of $100 per barrel, this would translate into an annual global supply of petrodollars exceeding $3.2 trillion.
For many members of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC oil and gas exporters like Russia, Qatar, and Norway, petrodollars are a primary source of income and wealth. The term “petrodollar” reflects the common practice of these nations accepting US dollars for crude oil transactions rather than a global trading system or a distinct currency. The US dollar is favored by oil exporters because of its global value in international investments, making it a practical store of value for oil revenues that need to generate returns.
A significant example of petrodollar recycling is the 1974 agreement between the United States and Saudi Arabia, where Saudi petrodollars were invested in U.S. Treasuries. The profits from these investments were later used to finance American arms sales to Saudi Arabia, as well as various development and assistance programs in the country. Today, many oil-exporting nations channel their petrodollars through sovereign wealth funds, investing in stocks, bonds, and other financial products. For example, one such fund holds nearly 1.5% of all publicly traded shares worldwide, with 72% of its investments in equities.
The petrodollar system has been crucial in facilitating smoother international trade by standardizing oil pricing, simplifying transactions, and reducing exchange rate risks for oil-importing nations. This system underpinned the strategic alliance between the United States, Saudi Arabia, and other oil-producing countries—a partnership that has significantly influenced global politics for decades. For oil-exporting nations, petrodollars have provided essential income, enabling reinvestment in infrastructure, drilling, and exploration projects, which in turn boosts oil production and drives technological advancements in the energy sector.
The petrodollar system has reinforced the US dollar’s status as the world’s primary reserve currency, driving global demand for it. Oil-exporting countries typically hold large reserves of US dollars, which they often invest in US government securities, thereby strengthening the US economy. This high demand for US dollars, fueled by oil trade, helps maintain a favorable US trade balance and ensures ample liquidity, making the dollar the most traded currency in the forex market.
However, the future of the petrodollar system is increasingly uncertain due to shifting geopolitical dynamics. On June 9, 2024, Saudi Arabia ended its 50-year petrodollar agreement with the United States, an event widely regarded as the “end of the petrodollar.” This agreement had been the cornerstone of the petrodollar system, and its termination marks a significant shift in the global economic landscape. With the end of this agreement, oil transactions may now be conducted in various currencies, including the yuan, euro, yen, and possibly even virtual currencies like Bitcoin.
These developments reflect a growing desire among nations to diversify economic risks and reduce their reliance on the US dollar. By diminishing the dollar’s dominance, these changes could lead to a more multipolar monetary system, granting countries greater financial independence and potentially creating a more balanced global economic environment. The rise of new economic alliances and the global shift towards sustainable energy alternatives further challenge the traditional oil-US dollar system. The transition to renewable energy could reduce global reliance on oil, thereby diminishing the significance of the US dollar and prompting a reevaluation of the current system.
As global energy and financial systems evolve, the role of the petrodollar is increasingly being questioned. The recent end of the US-Saudi agreement is a clear example of the shifting geopolitical and economic landscape. These changes may result in market volatility and the revaluation of various currencies, presenting both challenges and opportunities for the global economy.
Diversification Efforts
Saudi Vision 2030
“Given the nation’s climatic advantages, the Vision 2030 statement stresses the growth of renewable energy sources, such as solar and wind. Opportunities for Western businesses specializing in solar and wind technology, energy storage solutions, and green construction technologies arise from the target of producing 9.5 gigawatts of renewable energy by 2030. The country is a rich ground for renewable energy projects because of its large, sunny deserts and substantial investment in green energy.” (Rana Maristani)
Saudi Arabia’s Vision 2030 is a comprehensive plan launched on April 25, 2016, aimed at reducing the nation’s dependency on oil and diversifying its economy. Centered around three main themes, the framework outlines specific objectives to be achieved by 2030, including the development of ports, cultural assets, and tourism destinations to leverage Saudi Arabia’s strategic position at the crossroads of the Arab and Islamic worlds. A key element of the plan involves partially privatizing the national oil company, Aramco, and enhancing the resources and influence of the Saudi Public Investment Fund.
For decades, Saudi Arabia’s economic growth has been driven by oil, but this reliance has exposed the nation to the volatility of global crude prices. In the 1990s, while oil prices remained stagnant, government policies encouraging larger families led to a population boom. This growth, combined with a young, highly educated workforce, resulted in rising underemployment and unemployment rates, particularly among the youth.
Vision 2030 seeks to address these challenges by transforming Saudi Arabia’s economy over 15 years. The plan aims to improve the quality of life for citizens through world-class healthcare and education, equipping young people with the skills needed for future jobs. It also focuses on creating a diversified economy, emphasizing trade, tourism, high-tech industries, and a business-friendly environment to attract foreign direct investment and entrepreneurs. Key areas of diversification include cryptocurrency, artificial intelligence, and environmental sustainability.
In a significant milestone, Saudi Arabia’s non-oil sector contributed 50% of the GDP for the first time last year, signaling the success of the ongoing economic transformation. With Vision 2030, the Kingdom plans to inject $3 trillion in foreign investment into its economy, driving further growth and offering new opportunities for multinational companies. As the nation continues its economic revolution, it is well-positioned for a promising future.
“Saudi Arabia is becoming more welcoming to foreign investment as it works to advance living standards, build non-oil sectors, and upgrade infrastructure. The Kingdom has taken the initiative in recent years to improve the investment climate by enacting policies that improve business regulations, providing incentives, and establishing special economic zones that offer advantages like tax breaks and business support services.” (Rana Maristani)
Difficulties and Vulnerabilities
The Kingdom of Saudi Arabia is confronted with various obstacles and weaknesses, chiefly arising from the vagaries of international markets and oil prices. The country urgently has to diversify its economy and lessen its reliance on oil revenue, as this instability in the economy highlights. The country also needs to deal with environmental issues and the global shift to renewable energy sources, which puts further strain on its established economic structure. Given that oil exports account for a sizeable amount of Saudi Arabia’s national income, the country’s economy is greatly impacted by the volatility of oil prices. It is challenging for the nation to keep a solid economic outlook due to the unpredictability of the world oil market. As a result, the kingdom has been actively pursuing measures for economic diversification through its Vision 2030 project, with the goal of fostering the growth of non-oil industries including technology, entertainment, and tourism. The world’s need for oil is predicted to decrease as it moves toward renewable and sustainable energy sources. The adoption of greener technologies and investments in renewable energy projects are imperative in light of this worldwide trend. Saudi Arabia, seeing the need to change with the energy environment, has begun to investigate and invest in solar and wind energy. The main issues facing Saudi Arabia are its dependency on oil for its economy, the instability of the market, and the necessity of embracing environmental sustainability. For the country to have long-term economic stability and growth, these problems must be resolved.
Financial Resilience
After a year of minimal growth in 2023, the Saudi economy is expected to start recovering in 2024, though its success will largely hinge on the government’s oil production policies. The economic downturn in 2023 was exacerbated by the monarchy’s unilateral decision to cut oil output by one million barrels per day from July 2023 through the end of the year to support oil prices. This move led to a self-inflicted economic slump. However, with an anticipated increase in oil production and exports, along with continued expansion in the non-oil sector, real GDP growth is projected to rise by approximately 2% in the latter half of 2024, aligning with historical averages since 2014.
A significant budget deficit is likely to persist, potentially dampening energy and construction projects, particularly with the resurgence of regional conflicts. Despite these challenges, Saudi Arabia is expected to continue investing heavily in large-scale projects.
Saudi Arabia’s reliance on agri-food imports, particularly grain, remains substantial, but the kingdom has managed to find alternatives due to its purchasing power. Inflation is projected to remain around 2%, supported by substantial export earnings, significant reserves that maintain the currency peg with the US dollar, and a rigorous monetary tightening cycle that began in March 2022 alongside the US Federal Reserve.
Oil prices will continue to be a key driver of the economy, providing essential funding for Vision 2030’s long-term objectives. Decisions made by OPEC and its partners, including Russia, Kazakhstan, Azerbaijan, Mexico, and Oman (OPEC+), have struggled to maintain crude oil prices above USD 80 per barrel, a level deemed necessary for most OPEC+ countries to balance their trade and fiscal needs. Attempts to increase production limits have been hindered by renewed geopolitical tensions in the Middle East, benefiting countries not constrained by output limits.
Non-Oil Prospects
In 2022, Saudi Arabia’s economy grew faster than any other G20 nation, with overall growth reaching 8.7% and non-oil GDP expanding by 4.8%. The non-oil sector saw its most robust growth since Q3 2021, increasing by 6.2% in Q4 2022. For 2023, the non-oil sector is expected to grow by 4.7%, driven primarily by strong private consumption and significant private sector investments, particularly in construction, retail, wholesale, and transportation. This shift highlights the growing role of the private sector in Saudi Arabia’s evolving economy.
Vision 2030 aims to increase the non-oil GDP share to 50% by 2030 and diversify non-oil exports. Key sectors for focus include finance, insurance, transportation, communication, non-oil manufacturing, and agriculture. In 2023, non-oil revenues surged by 9%, while oil revenues fell by 3% due to declining crude prices. To reduce reliance on oil, the Saudi government has implemented significant budgetary reforms including revenue enhancement, spending rationalization, Treasury Single Account implementation, energy price reforms, fiscal risk assessments, improved budget transparency, and strengthened debt management.
The non-oil sector is seen as a crucial component for managing the increasing number of Saudi nationals entering the labor market each year. It offers greater stability, sustainability, and job creation compared to the volatile oil sector.
Geographical Consequences
The stability of the region and worldwide alliances are greatly impacted by Saudi Arabia’s strategic position in the world oil markets. Being one of the world’s top oil producers, the Kingdom has significant influence over the availability and cost of energy worldwide. Saudi Arabia is able to shape alliances and regional dynamics thanks to its advantageous geopolitical position. The potential of the Kingdom to influence or destabilize the oil markets can have significant ramifications for countries that import and export petroleum products. Global markets closely follow Saudi Arabia’s decisions about the amount of oil produced, as these decisions have the potential to affect global economic conditions. Its position in the Organization of the Petroleum Exporting Countries (OPEC), where it frequently takes the lead in coordinating member states’ production policies, is another example of this power. Saudi Arabia’s energy policy and geopolitical ambitions are closely related on a regional level. Part of the reason for its partnerships with major world powers, especially the US, is shared energy interests. Additionally, the Kingdom can support or oppose different regional actors due to its money and influence, which has an impact on regional stability. Saudi Arabia’s oil interests and the need to preserve its dominant position in the region play a major role in its engagement in crises and diplomatic attempts throughout the Middle East, particularly its attitude on Iran.
Inference
When one considers Saudi Arabia’s transition from an oil-dependent economy to one that is more diverse, one can see that the Kingdom is at a turning point. Although there is uncertainty about the future during this shift, it emphasizes how important it is to be resilient and adaptable. By adopting strategic planning, encouraging innovation, and making a commitment to sustainable development, Saudi Arabia is managing this transition. Even though there are still obstacles to overcome, the Kingdom’s initiatives to lessen its reliance on oil earnings and investigate new business opportunities represent a substantial step in the direction of a more diverse and sustainable future. In essence, Saudi Arabia’s long-term economic growth and stability will depend greatly on its capacity to adjust to these changes. Although the road ahead is difficult, the Kingdom’s proactive strategy presents a viable way forward.
Asia
How Benito Ebuen Air Base in Cebu provides strategic depth to the Philippines?
![How Benito Ebuen Air Base in Cebu provides strategic depth to the Philippines?](https://thepacificreports.com/wp-content/uploads/2024/09/How-Benito-Ebuen-Air-Base-in-Cebu-provides-strategic-depth-to-the-Philippines.jpeg)
From the Soviet Union’s vast geography repelling German forces during World War II to Israel’s control of the Golan Heights providing a defensive advantage, nations have relied on strategic depth to protect their territories throughout history. In the Philippines, Benito Ebuen Air Base on Mactan Island serves a similar purpose, offering the nation a crucial military hub at the heart of the Visayas region. Positioned centrally, this base is more than just a runway; it plays a vital role in the rapid deployment of air assets, enabling the country to respond swiftly to threats and emergencies. As regional challenges evolve, the strategic significance of Benito Ebuen Air Base becomes increasingly apparent, highlighting its essential role in national defense and regional stability. What makes Benito Ebuen Air Base so essential, and how does its location help keep the country safe? Let us explore this vital base and find out.
Overview of Benito Ebuen Air Base
Benito Ebuen Air Base is a pivotal military facility located on Mactan Island in Cebu, established in 1958. It is named in honor of General Benito Ebuen, a distinguished figure in the Philippine Air Force. Over the decades, the base has grown into a key component of the Philippine Air Force’s operations, playing a vital role in air defense and operational readiness. Its evolution reflects the Philippines’ commitment to a modern and capable air force.
The strategic significance of Benito Ebuen Air Base is amplified by its central location in the Visayas region. Situated on Mactan Island, the base is ideally positioned to provide comprehensive coverage and support throughout the central Philippines. This central placement allows for efficient coordination and rapid deployment of air assets across the archipelago. Its location facilitates quicker response times to both regional and national emergencies, enhancing overall defense and operational flexibility.
Historical Background
With its beginnings during the American rule of the Philippines, Benito Ebuen Air Base has a rich past. Founded on Mactan Island, it served as a key location for regional military operations. The base supplied vital air support and logistical support in the defense of the area against Japanese forces during World War II.
A new era began when the base was turned up to Philippines authority after the war. The base has undergone significant renovation and modifications over this time, making it an essential part of the Philippine Air Force. Thanks to these improvements, Benito Ebuen Air Base will continue to be a vital resource for the nation’s operational and air defense requirements.
Strategic Importance
Because it is home to important Philippine Air Force units like the 220th Airlift Wing and the 205th Tactical Operations Wing, Benito Ebuen Air Base is very valuable militarily. The base’s involvement in regional security and defense is strengthened by these units, which are essential for carrying out a variety of tasks, from tactical missions to strategic airlift.
The Enhanced Defense Cooperation Agreement (EDCA) between the United States and the Philippines significantly increases the base’s strategic significance. The objective of the April 28, 2014, agreement, which was signed by President Benigno Aquino III, is to enhance security cooperation between the United States and the Philippines by increasing the rotational deployment of US soldiers at specific sites, such as Benito Ebuen Air Base.
Recent events have highlighted how crucial this agreement is. The EDCA’s implementation has accelerated despite early setbacks and difficulties, such as opposition and judicial review, particularly in reaction to China’s forceful moves in the South China Sea. The US and the Philippines expedited their plans in February 2023 to fully implement EDCA, adding four new facilities to the list of places already in place. In addition, the agreement has resulted in the approval of other new projects and increased funding.
Significant turning points in US-Philippine security relations occurred in April 2024. In order to support freedom of navigation, a maritime cooperative activity including the US, Australia, Japan, the Philippines, and the Philippines was carried out in the South China Sea on April 7. The first trilateral summit between the US, Japan, and the Philippines was held on April 11 with the goal of advancing an open and free Indo-Pacific. In addition, the two countries’ continued strategic cooperation in the face of escalating regional tensions served as a highlight of the EDCA’s tenth anniversary.
In essence, the strategic significance of Benito Ebuen Air Base is enhanced by the continuous EDCA relationship, making it not only an essential operational hub but also a crucial component of the larger framework of US-Philippine defense cooperation.
Strategic Depth and Regional Stability
The Philippines benefits greatly from Benito Ebuen Air Base’s strategic position on Mactan Island in Cebu. Its central location within the Visayas allows it to respond quickly to different parts of the archipelago. During emergencies, this centrality is essential because it enables the effective deployment of manpower and resources to impacted areas. Beyond military, the base plays a crucial role in aiding humanitarian and disaster relief efforts. For example, its close proximity makes it easier to mobilize quickly in the event of a disaster, as demonstrated by the recent typhoon emergencies in the area.
The base’s continued expansion and enhancement of its infrastructure serves to emphasize its strategic relevance even more. Under the Enhanced Defense Cooperation Agreement (EDCA), the Philippine government and the US government will continue to improve the base’s amenities in 2024. To handle additional aircraft and equipment, these modifications include enlarging runway capabilities and enhancing logistical support systems. The goal is to guarantee that the facility can efficiently support tasks pertaining to both international cooperation and national defense.
Future plans include for a possible augmentation of the military’s presence at Benito Ebuen Air Base. The infrastructure improvements and strategic adjustments are intended to support a wider variety of military actions. This growth is in line with the Philippines’ overarching plan to improve its defense capabilities and better address threats to regional security.
Current Operations and Facilities
The runways that Benito Ebuen Air Base shares with Mactan-Cebu International Airport (MCIA) are vital to the aviation industry in the area. MCIA managed about 17,000 international aircraft movements in 2023, highlighting the agency’s significance for both military and commercial aviation. The base’s operating flexibility and efficiency are improved by this integration.
The facilities on the site are capable of supporting various military activities. Its infrastructure has been updated recently to support combined missions and modern aircraft. For instance, U.S. Air Force F-22 Raptors performed operations at Benito Ebuen on August 8, 2024, showcasing the base’s capacity to handle high-performance aircraft.
Major enhancements are in progress under the Enhanced Defense Cooperation Agreement (EDCA). Expanding and updating facilities to accommodate bigger and more varied aircraft is the main emphasis of recent improvements, which are in line with strategic objectives to improve operational preparedness and regional security.
In order to guarantee that Benito Ebuen Air Base continues to be a vital asset for the Philippine Air Force and allied operations, future plans call for ongoing upgrading initiatives. The base’s strategic significance in the area is bolstered by its developing infrastructure, which supports its participation in joint exercises and tactical actions.
Geopolitical Context
In order to address security concerns in the Visayas region, Benito Ebuen Air Base is essential. Threats from terrorism and insurgency have been present in the region, and local military units are actively involved in counterterrorism and counterinsurgency activities. Along with its brigades, the Joint Task Force Spear of the Philippine Army’s 3rd Infantry Division fights armed militants and strengthens territorial security. For the region to remain stable and secure, these initiatives are essential. Additional resources and training possibilities are brought about by cooperation with the United States, especially through the Enhanced Defense Cooperation Agreement (EDCA).
Recent EDCA-funded U.S. military exercises and upgrades, for example, have strengthened the defense posture in the region by enhancing the capabilities of sites like Benito Ebuen Air Base.
By forming both domestic and international alliances, these cooperative initiatives highlight the significance of Benito Ebuen Air Base in the larger geopolitical context and promote peace and security in the region.
End point
The Benito Ebuen Air Base, established in 1958 on Mactan Island, is a cornerstone of the Philippines’ military strategy due to its strategic location and critical role in national defense. Over the years, it has evolved into a vital air operations hub, key to both regional security and the nation’s quick reaction and humanitarian aid efforts. As the base undergoes upgrades and expands its capabilities, it will play an even greater role in addressing emerging threats and collaborating with international allies. Its central position in the Visayas not only enhances its strategic importance but also reinforces its contribution to regional stability.
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