Geo-Politics

Can Taiwan Fight China?

A Brief

In a groundbreaking turn of events, the 2024 Taiwanese presidential election has resulted in the victory of William Lai Ching-te, securing a historic third consecutive term for the Democratic Progressive Party (DPP). Lai’s compelling win, commanding 40.1% of the vote, demonstrates a substantial mandate. The electoral landscape was dominated by the overarching theme of managing relations with China, underscoring the challenges associated with the ongoing Taiwan Strait tensions. As a seasoned politician and former doctor, William Lai will have to confront the difficult task of navigating the complex superpower rivalry, given China’s persistent territorial claims over Taiwan. Lai’s victory serves as a resounding endorsement of the Taiwanese people’s commitment to democracy, echoing the sentiments of outgoing President Tsai Ing-wen.

The question which we are going to discuss is, whether Taiwan can fight China, is indeed a complex interplay of historical, geopolitical, and military factors. China, led by President Xi Jinping, asserts that the “reunification with Taiwan must be fulfilled.” However, Taiwan, distinct from the Chinese mainland with its own constitution and democratically elected leaders, stands in East Asia as a key player in the “first island chain,” crucial to U.S. foreign policy. The historical roots of the conflict are embedded in Mao Zedong’s communist struggle, with Taiwan’s control shifting between dynasties and nations. Presently, as China seeks to extend beyond the first island chain, Taiwan’s strategic importance is evident, leading to military challenges. Despite Taiwan’s defense capabilities being dwarfed by China, its adoption of “asymmetric warfare” aims to counterbalance the stark military imbalance. While international support for Taiwan grows, diplomatic challenges persist, and economic interdependence, especially in semiconductor production, adds complexity. Let us get into the detail of our question.

Historical Perspective

Taiwan’s story stretches back thousands of years, with indigenous people inhabiting the island for over 6,000 years. Europeans, like the Portuguese and Spanish, began arriving in the 16th century, followed by the Dutch who established a colony in the 17th century. The island first came under full Chinese control in the late 17th century when the Qing dynasty began administering it. Then, in 1895, they gave up the island to Japan after losing the first Sino Japanese war. China took the island again in 1945 after Japan lost World War Two. But a civil war erupted in mainland China between nationalist government forces led by Chiang Kai-shek and Mao Zedong’s Communist Party. “Strategically, with control over Taiwan, China will be able to push beyond the “first island chain, a string of countries that have security agreements with the U.S., including Japan and the Philippines, and into the Pacific.” China could then, in theory, avoid the radar and ships of the U.S. military and their allies. The first island chain provides a ring of defense for the U.S. and its allies. If China has control over Taiwan, that would open up the Western Pacific to Chinese military assets.

Taiwan’s Defense Capabilities: Unmatched to the Military strength of China

Taiwan’s defense capabilities stands in stark contrast to the formidable military strength of China, particularly in the realm of air power. According to Global Firepower, China’s People’s Liberation Army (PLA) boasts an overwhelming advantage, with more than 3,000 military aircraft and nearly 400,000 personnel in its air force. In comparison, Taiwan fields just over 700 military aircraft and approximately 30,000 soldiers in its air force. The significant numerical gap is compounded by China’s status as the world’s largest standing army, with 2 million members and superior air, naval, and firepower capabilities.

Despite the glaring disparities, Taiwan’s strategic approach to counter the threat from China revolves around leveraging asymmetric warfare tactics. The island nation, with a population of 23 million and a military force of 169,000 active service personnel, recognizes its relative vulnerability. Taiwan’s preparedness hinges on its ability to neutralize the gaping asymmetry in air power through the strategic deployment of anti-aircraft missiles. While the PLA may have numerical superiority, Taiwan aims to make any military assault exceptionally challenging, costly, and politically unfavorable for China. This involves deploying mobile, highly-trained forces, leveraging technological advancements like anti-ship missiles, and utilizing the island’s mountainous terrain to inflict heavy casualties on a larger attacker. Taiwan’s dense urban areas and fortified coastlines can create substantial logistical and tactical challenges for an invading force.

The concept of asymmetric warfare adopted by contemporary Taiwan involves unconventional strategies, drawing inspiration from historical precedents where smaller forces successfully resisted superior powers. Such tactics include guerrilla warfare, disrupting supply chains, exploiting weather and terrain, and avoiding direct confrontations. In the face of an existential threat just 180km across the Taiwan Strait. By making an invasion financially and politically untenable, Taiwan aims to dissuade the PLA from pursuing military aggression, emphasizing the complex nature of modern defense strategies beyond numerical parity in military assets. Additionally, Taiwan benefits from potentially supportive international actors, who might impose economic sanctions or offer military assistance.

Moreover, Taipei recently announced an extension to mandatory military service periods from four months to a year and accelerated the development of its indigenous weapons program to boost its combat readiness. But analysts say a recent announcement – one that has perhaps gone less remarked upon in the global media – could prove a game-changer: talks between Taipei and the United States to establish a “contingency stockpile” of munitions on Taiwan’s soil.

However, in 2023, China’s defense budget was $230 billion, more than 13 times the size of Taiwan’s spending of $16.89 billion. So, instead of matching ship for ship or plane for plane, Taiwan should embrace an asymmetric warfare model focused on the procurement of smaller weapons – such as portable missiles and mines – that are hard to detect but effective in halting enemy advances.

Another question that arises is how many weapons or missiles Taiwan would need to defend itself against China. Experts said providing a concrete number is difficult because the possible combat scenarios were so varied. In an all-out war, China could fire long-range missiles to destroy Taiwanese infrastructure and military targets before attempting to send its ground troops across the Taiwan Strait.

China’s military power and strategies

China’s military power and strategies are intrinsically tied to safeguarding its sovereignty, security, and development interests while asserting a more significant global role. The People’s Republic of China (PRC) adheres to a defense policy oriented towards active defense, emphasizing the imperative of fortifying the People’s Liberation Army (PLA) into a “world-class” military. This commitment is integral to China’s broader strategy aimed at rejuvenating the PRC into a “great modern socialist country” by the culmination of 2049.

Central to China’s military doctrine is the concept of active defense, indicating a strategic approach focused on protecting its interests and responding to perceived threats rather than pursuing aggressive expansion. The PRC’s leadership underscores the need to bolster the PLA as a cornerstone of this strategy, aiming for global recognition of its military prowess. By aspiring to become a “world-class” military force, China seeks to project strength and influence not only within its immediate region but on the global stage.

China’s emphasis on military modernization aligns with its broader national rejuvenation goals, reflecting aspirations for comprehensive economic, technological, and military advancements. The development of a formidable military is seen as essential to achieving great power status and ensuring the PRC’s influence in global affairs. As China continues to assert its strategic interests, the evolution of its military power and strategies will significantly impact regional and international dynamics, contributing to the ongoing geopolitical shifts in the 21st century.

Support of Taiwan in the Diplomatic Arena

In 2021, international support for Taiwan rose to its highest level since 1971, when Taipei lost its seat at the United Nations to the People’s Republic of China. The United States has been the most prominent major supporter of Taiwan since then, even though it does not formally recognize the island nation as an independent country. Currently, only 15 countries or territories recognize Taiwan and use its preferred name, the Republic of China. These are mostly small countries in Africa, Latin America, the Caribbean or the South Pacific that rely on Taipei for economic assistance.

One of the greatest dangers to international security today is the possibility of a military confrontation between China and Taiwan that leads to a war between China and the United States. Neither Beijing nor Taipei wants a war, but both sides have adopted policies that run an unacceptably high risk of bloodshed over the upcoming years.

Economic Considerations

A military conflict over Taiwan would set the global economy back decades because of the crippling disruption to the supply chain of crucial semiconductors, according to the head of one of the island’s leading makers of microchips. Taiwan makes the world’s most advanced microchips — the brains inside every piece of technology from smartphones and modern cars to artificial intelligence and fighter jets. The island is a microchip fabrication hotbed, producing 60% of the world’s semiconductors — and around 93% of the most advanced ones, according to a 2021 report from the Boston Consulting Group. The U.S., South Korea and China also produce semiconductors, but Taiwan dominates the market, which was worth almost $600 billion last year. Likewise, it is important to note that Taiwan is the world’s 16th largest trading economy, having imported and exported $922 billion in goods and services in 2021 alone.

In recent months, growing tensions in the Taiwan Strait as well as the rapid and coordinated Group of Seven (G7) economic response to Russia’s invasion of Ukraine have raised questions—in G7 capitals and in Beijing alike—over whether similar measures could be imposed on China in a Taiwan crisis. Large-scale sanctions on China would entail massive global costs. As the world’s second-biggest economy—ten times the size of Russia—and the world’s largest trader, China has deep global economic ties that make full-scale sanctions highly costly for all parties. In a maximalist scenario involving sanctions on the largest institutions in China’s banking system, we estimate that at least $3 trillion in trade and financial flows, not including foreign reserve assets, would be put at immediate risk of disruption. This is nearly equivalent to the gross domestic product of the United Kingdom in 2022. Impacts of this scale makes it politically difficult outside of an invasion of Taiwan or wartime scenario.

Deterrence through economic statecraft cannot do the job alone. Economic countermeasures are complementary to, rather than a replacement for, military and diplomatic tools to maintain peace and stability in the Taiwan Strait. Overreliance on economic countermeasures or overconfidence in their short-term impact could lead to policy missteps. Such tools also run the risk of becoming gradually less effective over time as China scales up alternative currency and financial settlement systems.

A Public Perspective

Outside Taiwan, a spring 2023 survey conducted by the Pew Research Center revealed that Taiwan enjoys generally favorable perceptions in 24 high and middle income countries. Across these nations, a median of 48% of respondents holds a favorable view of Taiwan, while only a median of 28% express an unfavorable opinion. Among the surveyed countries, Japan stands out as having the most positive attitudes towards Taiwan, with an impressive 82% expressing a favorable view. Additionally, substantial support is observed in South Korea, where about three-quarters of respondents view Taiwan favorably, and in Australia, where seven-in-ten share the same sentiment.

Inside Taiwan, as per survey of Mainland Affairs Council, 76.6% public believe that the Chinese authorities are unfriendly toward the ROC government and the ROC people. As much as 90% of the public disapprove the Chinese Communist Party’s (CCP) “one country, two systems” proposal, oppose the CCP’s military intimidation of Taiwan (90.5%), and disagree with the CCP’s diplomatic suppression towards Taiwan (91.5%). The numbers indicate that Taiwanese mainstream opinion opposes China’s negative actions against Taiwan.

Factors Influencing the Likelihood of Conflict and Future Scenarios

The conventional wisdom in Washington is that China is preparing for an imminent war with the United States in an effort to reunify with Taiwan by force. Chinese President Xi Jinping has instructed the People’s Liberation Army (PLA) to be ready for war by 2027, though CIA Director William Burns has said that such military planning does not mean that China will launch a war by then. Burns added that China may harbor doubts about whether it has the capability to execute the largest amphibious assault, since the D-Day landing in World War II. Nevertheless, during the past years, several top U.S. military officials have assessed that China will invade Taiwan by 2025 or by 2027.

According to Xi’s speeches and Chinese Communist Party (CCP) documents, Beijing sees unification with Taiwan as necessary to fulfill Xi’s “China Dream: the Great Rejuvenation of the Chinese Nation.” The CCP seeks to achieve this goal by 2049, on the 100th anniversary of the People’s Republic of China’s founding. Thus, the CCP views Taiwan as an existential issue, much like, as Russian President Vladimir Putin viewed Ukraine issue.

On the flip side, semi-secret strategies on both sides of the Pacific have generally escaped much notice. The US military commitment to Taiwan cannot remain ambiguous, this country’s economic dependence on that island’s computer-chip production is almost absolute. As the epicenter of a global supply chain, Taiwan manufactures 90 percent of the world’s advanced chips and 65 percent of all semiconductors

Taiwan China Conflict: A Final Straw before a World War III

There are enough conflicts brewing all around the globe already and the catastrophic ramifications of such a confrontation would indeed be the final straw. Taiwan stands out with its geographical importance, but also with its political ambiguity: it is de jure Chinese territory according to the so-called “One China” policy of China’s ruling Chinese Communist Party (CCP). The Chinese government claims sovereignty over Taiwan as an “inalienable part of China.”

Amid the Russian invasion of Ukraine, political uncertainty in Europe and Africa, emerging challenges in Asia, economic turmoil around the globe and while Israeli forces are moving into Gaza, now there exist likely chances that the Chinese and the Americans will be fighting in the Pacific, despite being the fact that both nations are laced with nuclear armament. Chinese and American leaders are realizing that any conflict over Taiwan would perhaps be the final straw before a World War III.

Final thoughts on the prospects of Taiwan resisting China

The election of President William Lai, marked by a historic third term for the Democratic Progressive Party, underscores Taiwan’s commitment to democracy and resistance against external pressures, especially from China. Taiwan’s defense capabilities, while dwarfed by China’s formidable military strength, adopt an asymmetric warfare model to counterbalance the numerical disparity. The island nation’s strategic approach involves leveraging anti-aircraft missiles, guerrilla tactics, and exploiting its mountainous terrain to make any military assault challenging and politically unfavorable for China. Recent initiatives, such as extending mandatory military service and talks with the United States for a munitions stockpile, demonstrate Taiwan’s commitment to bolstering its defense readiness.

The international arena plays a crucial role, with growing support for Taiwan evident in favorable perceptions globally. However, diplomatic challenges persist, as Taiwan’s recognition as an independent state remains limited, and its access to international organizations is constrained. Taiwan’s dominance in semiconductor production makes it a key player in the global supply chain. A military conflict could have severe economic repercussions, disrupting the semiconductor market and setting the global economy back decades.

The likelihood of conflict is influenced by factors such as China’s strategic goals, the U.S. commitment to Taiwan, and the potential catastrophic consequences of a confrontation in the Pacific. The stakes are high, with many experts warning that a conflict over Taiwan could be a catalyst for a broader world war.

In essence, “Can Taiwan Fight China?” involves a multifaceted analysis of historical, geopolitical, military, economic, and public opinion factors. Taiwan’s strategic resilience, coupled with international support, economic significance, and the broader global context, shapes the complex dynamics surrounding the island’s ability to navigate the challenges posed by an assertive China.

Analysis

Malaysia to Investigate Leaked Classified Chinese Note on South China Sea Dispute

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.

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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?

“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.

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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?

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.

Table of Contents

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.