Geo-Politics
Militarization of the South China sea and its regional and global ramifications
![Militarization of the South China Sea and its global impacts regional and global impacts](https://thepacificreports.com/wp-content/uploads/2023/10/Militarization-of-the-South-China-Sea-and-its-global-impacts-regional-and-global-impacts.jpg)
Militarization of the South China Sea
The South China Sea has drawn the attention of global powers for decades. Given that this region lies at the heart of crucial global trade routes, this attention is unsurprising. Seventy to eighty percent of global trade activities take place via waterways. Of this, sixty percent of maritime shipments traverse through Asia, particularly the South China Sea.
To the east lies the vast Pacific Ocean, while the Indian Ocean, a significant trade hub, is to the south. Rich in hydrocarbon reserves and marine life, the South China Sea’s allure is evident. Estimates suggest that nearly twelve billion barrels of oil and 190 trillion cubic feet of natural gas are beneath its seabed. Add to this the sea’s global trade significance, and it’s clear why it is coveted by many global powers. Statistically, the South China Sea is the primary commercial route for one-third of maritime shipping, representing over three trillion dollars in trade. Underneath its waters, maritime life plays a critical role in the economies and diets of surrounding nations.
Economic Significance of the Sea
In studying regional disputes, one frequently encounters the term “Exclusive Economic Zones” (EEZ). Denoted in nautical miles, a country’s EEZ refers to territories under its legal jurisdiction as per international law. Several nations, including China, Taiwan, the Philippines, Japan, and South Korea, claim EEZs in the South China Sea, leading to overlapping territorial claims.
In 1982, the United Nations Convention on the Law of the Sea established a framework for all marine activities. This allows nations to claim EEZs up to 200 nautical miles from their coastlines. Within these zones, countries have exclusive rights over resources and maritime activities and can even control foreign access.
What Drives the Tensions in the South China Sea?
A primary source of tension in the South China Sea stems from differing adherence to the United Nations Convention on the Law of the Sea. While most countries in the region abide by this convention, China stands out with its unique nine-dashed line doctrine. This assertion, based on a historical claim, challenges the UN convention, intensifying friction among the neighboring countries. Encompassing roughly 80 percent of the South China Sea, this U-shaped line extends about 1800 km from China’s Hainan Island, overlapping with several sovereign territories. Consequently, it infringes upon numerous maritime zones and boundaries established by other nations.
China has further escalated matters by constructing artificial islands, equipping them with air bases, hospitals, administrative structures, and a variety of other facilities. Additionally, radio towers and monitoring stations have been established to oversee the surrounding regions. Despite these developments, China maintains that its infrastructural endeavors are not aimed at militarizing the islands. Notably, the Spratly Islands, Paracel Islands, and Scarborough Shoal are among the key areas with a significant Chinese military footprint.
The Significance of the Spratly Islands
Amidst the vast expanse of the ocean, lies the Spratly Archipelago, an assemblage of more than a hundred diminutive isles and atolls, encircled by bountiful aquatic domains and the potential reservoirs of oil and gas. Diverse nations, including the People’s Republic of China, Taiwan, and the Socialist Republic of Vietnam, assert their absolute sovereignty over this cluster of islands, while Malaysia and the Philippines assert their territorial rights over select portions of this maritime realm. Military contingents hailing from five of these sovereign entities, namely China, Malaysia, the Philippines, Taiwan, and Vietnam, have stationed their forces on approximately 45 of these insular formations. Additionally, Brunei views this area as its exclusive economic zone (EEZ).
Located strategically in the South China Sea, the Spratly Islands hold immense significance. Control over these islands translates to vast EEZs, granting the rights over the embedded resources. While all these nations have established minimal infrastructures on these islands, China’s presence is more pronounced. They’ve expanded several islands by adding sand, resulting in the establishment of three expansive military bases that span 3,000 acres. These bases are on the Fiery Cross, Mischief, and Subi Islands. Although China hasn’t stationed any air jets on these bases yet, the situation can shift in the foreseeable future. Notably, the airstrip on the Fiery Cross spans 3,110 meters over 670 acres. It’s remarkable to consider that this reef, which once had just two visible rocks, now stands as a testament to China’s extensive militarization efforts.
Paracel Islands
The Paracel Islands consist of about 130 small coral islands and reefs, situated approximately 220 miles (350 kilometers) southeast of China’s Hainan Island and roughly 250 miles (400 kilometers) east of central Vietnam. Historically, this region has been a flashpoint for military confrontations between China and Vietnam, with Taiwan also staking a claim. China has established a military base on these islands, notably on Woody Island. This air base is active, housing China’s J11 fighter jets. Almost 1,000 people reside on this island, predominantly Chinese military personnel. Periodic skirmishes in the sea between China and Vietnam have strained their bilateral relations.
Longstanding Conflict with the Philippines
In 2016, the Permanent Court of Arbitration ruled in favor of the Philippines on most of her submissions. The Philippines’ submission came from a violation of the United Nations Convention Law of the Sea when the Chinese tried to reclaim the Scarborough Shoal. The Permanent Court of Arbitration concluded there was “no legal basis for China to claim historic rights” over the nine-dash line since there was no proof that China has traditionally exercised exclusive control over the waters or resources. The panel criticized China’s land reclamation efforts and the creation of artificial islands in the Spratly Islands, claiming that these actions had severely harmed the coral reef environment. Additionally, it stated that Spratly Islands characteristics fall within the United Nations Convention Law of the Sea definition of “rocks” and are not eligible for a 200 nautical mile exclusive economic zone. However, China disregarded this ruling, calling it “ill-founded.” Taiwan did the same and rejected the Permanent Court of Arbitration’s ruling in 2019.
Washington’s Military Alliances
China’s actions in the region have prompted the US to collaborate with several Southeast Asian countries, including the Philippines and Vietnam, to counteract China’s influence. The US alleges that China has fortified the islands with weaponry such as anti-ship and anti-aircraft missiles, laser and jamming systems, and fighter aircraft, posing a considerable threat to neighboring nations. In response, the US has dispatched warships on what it terms “freedom of navigation operations.” The South China Sea is of strategic importance to the US, not only for trade from its western coast to the Indian Ocean and onward to the Middle East but also for military navigation. The US began amplifying its military footprint in the area in 2012, though it abstained from taking a stance in the territorial conflicts until recently. The US has conveyed its commitment to supporting the territorial rights of Southeast Asian countries in the South China Sea.
In the preceding decade, the nation of China has embarked on a trajectory of insular militarization, concurrently enhancing its naval prowess in a concerted effort to fortify its dominion within the South China Sea. This maritime augmentation, accompanied by cutting-edge technological advancements and the deployment of far-reaching missile systems, has elicited grave concerns from both the United States and the Association of Southeast Asian Nations. The substantial escalation of China’s naval capabilities may be construed as a proactive measure, seemingly aimed at preempting prospective challenges to its territorial integrity by the United States, with the overarching goal of sustaining a pivotal strategic advantage.
Air Identification Zone
China’s establishment of an Air Identification Zone mandates any aircraft traversing this area to obtain authorization from the People’s Republic of China. In response, the US has dispatched military aircraft to patrol this zone, aiming to counter China’s militarization and ensure adherence to international norms. This move by the US is perceived as a threat by China, prompting them to assert that the US should recognize their territorial boundaries and refrain from meddling in their affairs. Confrontations between the naval and air forces of both nations have become more frequent, occasionally resulting in tense standoffs.
In unity with the US, ASEAN nations have ramped up their defensive measures. The Philippines, for instance, has permitted the US to establish military bases on its territory and has been conducting joint military exercises with them. Strengthening its defense capabilities, the Philippines has acquired cruise missiles that can be equipped on warships. Similarly, Vietnam has fortified its arsenal with the purchase of Brahmas missiles from India. A bold move was made by the Philippines when they undertook an operation to dismantle a floating barrier set up by the Chinese Coast Guard in the southeastern shoal.
The South China Sea holds significance for all nations in the vicinity, each presenting legal entitlements over it. China remains steadfast in its historical claim, emphasizing the strategic value of the islands. With the US amplifying its presence in the region and forming alliances with nations like the Philippines and Vietnam, the dynamics appear precarious. The potential for conflict escalates as China shows no inclination to abide by the UNCLOS and respect the exclusive economic zones of its neighbors. As each nation seeks to assert its dominance, whether through naval or aerial means, the situation becomes increasingly intricate and volatile.
Why does the South China Sea matter to China?
China’s economic foundation is deeply intertwined with the South China Sea. A significant 60% of its trade navigates these waters, making the region pivotal for China’s economic stability. Through the years, China has strategically employed incremental tactics to strengthen its hold over the area. In today’s world, national security transcends mere territorial boundaries. Hence, exerting dominance over this sea enhances China’s influence over neighboring economies and beyond.
Conclusion:
The South China Sea, pulsating with geopolitical, economic, and strategic significance, has been a focal point of international attention for decades. Positioned as a crucible for global trade, its waters have seen an escalation of territorial disputes, militarization, and diplomatic tensions. Central to many nations, especially China, it represents not just an economic lifeline but also a symbol of national pride and strategic dominance.
China’s assertive actions, combined with its dismissal of international rulings and the establishment of the Air Identification Zone, showcases the nation’s intent to preserve its interests at any cost. Simultaneously, the involvement of the US and its strengthening alliances with Southeast Asian countries underline the broader global implications of the territorial disagreements in the region.
The extensive resource wealth inherent in the South China Sea, coupled with its substantial economic and strategic significance, unequivocally cements its status as a perpetual epicenter within the global stage. With nations in the vicinity and beyond assertively asserting their claims and demonstrating military prowess, the imperative of sustaining open diplomatic avenues for nurturing dialogue and collaboration cannot be overstated. The forthcoming trajectory of the South China Sea transcends mere territorial assertions or military preeminence; it is fundamentally rooted in safeguarding regional equilibrium, cultivating mutual confidence, and upholding the sanctity of international statutes and accords. Only with a collective commitment to peace and collaboration can potential conflicts be averted, ensuring that this vital maritime region remains a hub of global trade and cooperation, rather than a flashpoint of global tensions.
Analysis
Malaysia to Investigate Leaked Classified Chinese Note on South China Sea Dispute
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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?
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“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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