United States
Author: Graham Allison
Source: nationalinterest.org

Defying the long-held convictions of Western analysts, and against huge structural differences, Beijing and Moscow are drawing closer together to meet what each sees as the "American threat."

THE YEAR before he died in 2017, one of America's leading twentieth-century strategic thinkers, Zbigniew Brzezinski, sounded an alarm. In analyzing threats to American security, "the most dangerous scenario," he warned, would be "a grand coalition of China and Russia…united not by ideology but by complementary grievances." This coalition "would be reminiscent in scale and scope of the challenge once posed by the Sino-Soviet bloc, though this time China would likely be the leader and Russia the follower."

Few observers heard his admonition then. Even fewer today recognize how rapidly this grand alignment of the aggrieved has been moving from the realm of the hypothetical toward what could soon become a geostrategic fact. Defying the long-held convictions of Western analysts, and against huge structural differences, Beijing and Moscow are drawing closer together to meet what each sees as the "American threat."

For two proud nations with long memories, their convergence also serves as a kind of cosmic revenge on the diplomatic maneuver Richard Nixon and Henry Kissinger orchestrated a half century ago.

When Nixon became president (in 1969), he and his National Security Advisor Kissinger sought to establish a relationship with Communist China to widen the divide between it and the Soviet Union, which they rightly regarded as the preeminent—indeed, existential—threat.

Even as they watched communists pursue "wars of national liberation" around the globe, Nixon and Kissinger embraced George F. Kennan's strategic insight about containment: that nationalism would prove a sturdier pillar than communism. They also recognized that the crack in the Eastern Bloc between the Soviet Union and its junior Chinese partner could be widened by deft U.S. diplomacy at the expense of the Soviets.

We know how the story turned out—so it is difficult to appreciate how radical this thought was in 1969, though Nixon had noted a year earlier in an essay in Foreign Affairs , "There is no place on this small planet for a billion of its potentially most able people to live in angry isolation." Had Nixon asked his government's interagency process to consider the possibility of the United States establishing a relationship with Mao's Communist China, this option would doubtless have been rejected as not just unrealistic, but unsound. So instead, in a cloak of invisibility worthy of Harry Potter, Nixon sent Kissinger to Beijing for a series of meetings so secret that even his secretaries of state and defense were unaware of them. Ultimately, this led to Nixon's historic visit in 1972 to China, recognition of Beijing (rather than Taipei) as its capital, and the creation of an uneasy but selectively cooperative relationship that contributed to the ultimate defeat of the Evil Empire.

The Nixon-Kissinger gambit is now known as "playing the China card." Today we should be asking: is Xi Jinping's China "playing the Russia card?"

THAT THOUGHT seems to strike many Washington strategists as outlandish. Secretary of Defense James Mattis repeatedly emphasizes Moscow and Beijing's "natural non-convergence of interest." And the differences in national interests, values and culture are stark. As Russian strategists think about the longer run, they must view China's rise with consternation. Today's map draws a line between Russia and China that leaves a large swath of what was in earlier centuries Chinese on the Russian side of the divide. That border has repeatedly seen violent clashes, the last in 1969.

Given these structural realities, the prospects for a Chinese-Russian alliance in the longer run are undoubtedly grim. But political leaders live in the here and now. Denied opportunities in the West, what alternative do Russians have but to turn East? Moreover, while history deals the hands, human beings play the cards, even sometimes practicing a quaint art known in earlier eras as diplomacy. The confluence of China's strategic foresight and exquisite diplomacy, on the one hand, and U.S. and Western European clumsiness, on the other, has produced an increasingly thick and consequential alignment between two geopolitical rivals, Russia and China.

In international relations, an elementary proposition states: "the enemy of my enemy is a friend." The balance of power—military, economic, intelligence, diplomatic—between rivals is critical. To the extent that China persuades Russia to sit on its side of the see-saw, this adds to China's heft, a nuclear superpower alongside an economic superpower.

American presidents since Bill Clinton have not only neglected the formation of this grievance coalition; unintentionally but undeniably, they have nurtured it. Russia emerged from the collapse of the Soviet Union in 1991 with a leader eager to "bury Communism," as Boris Yeltsin put it, and join the West. The story of how we reached the depth of enmity today is a long one, strewn with mistakes by all parties. The Clinton administration's decision in 1996 to expand NATO toward Russia's borders, Kennan observed, was the "most fateful error of American policy in the entire post-cold-war era." He predicted that the consequence would be a Russia that "would likely look elsewhere for guarantees of a secure and hopeful future for themselves."

Vladimir Putin and Xi have watched the U.S.-led war in the Balkans (including the "accidental" bombing of China's embassy in Belgrade in 1999), Western-supported "color revolutions" topple governments in Georgia and then Ukraine, and even Secretary of State Hillary Clinton encourage street protests in 2011 against Russia's parliamentary elections. Putin would not have to suffer from paranoia to imagine that the United States was seeking to overthrow him.

As U.S. pressure on Russia grew with sanctions after Russia's annexation of Crimea and a diplomatic effort to "isolate" Russia, China opened its arms. At every point the United States and Western Europeans imposed pain, China has offered comfort. Particularly when the United States has attempted to "diss" Putin personally, Xi has found ways to demonstrate profound respect. Consider what has actually happened in Sino-Russian relations along seven dimensions: threat perceptions, relationship between leaders, official designation of the other, military and intelligence cooperation, economic entanglement, diplomatic coordination and elites' orientation.

WHEN RUSSIAN or Chinese national security leaders think about current threats, the specter they see is the United States of America. They believe the United States is not only challenging their interests in Eastern Europe or the South China Sea, but is actively seeking to undermine their authoritarian regimes. Indeed, Putin and Xi reportedly compare notes about the ways Washington is working to weaken each leader's control within his own society and even topple him.

In contrast with Barack Obama's disdain towards Putin and Donald Trump's charge that China is "raping America," Xi has persuaded Putin that they are "best buddies." To which capital did Xi take his first trip after becoming president? Moscow. Which foreign leader gets to speak immediately after Xi at every international meeting China hosts? Putin. As Putin noted earlier this year, the only leader in the world with whom he had ever celebrated his birthday is Xi. In awarding Putin China's "Medal of Friendship," Xi called the Russian president his "best, most intimate friend."

Official U.S. national security documents designate Russia and China America's "strategic competitors," "strategic adversaries" and even "enemies." Increasingly, they are discussed in the same sentence, as if they were twins. According to the Trump National Security Strategy: "China and Russia challenge American power, influence, and interests, attempting to erode American security and prosperity." Both are accused of conducting major "influence operations" against the United States and interfering in U.S. elections.

By contrast, Chinese and Russian national security documents call their relationship a "comprehensive strategic partnership." According to Xi, this is "the world's most important bilateral relationship, and is the best relationship between large countries." China's ambassador to Russia, Li Hui, says "China and Russia are together now like lips and teeth." The words used by Russia's Foreign Ministry are "comprehensive, equal, and trust-based partnership and strategic cooperation." Even alpha male Putin has found an artful way to recognize publicly Russia's junior role in this partnership, saying "the main struggle, which is now underway, is that for global leadership and we are not going to contest China on this."

Most American experts discount Sino-Russian military cooperation. Commenting on this year's unprecedented military exercise in which 3,000 Chinese soldiers joined 300,000 Russians in practicing scenarios for conflict with NATOin Eastern Europe, Secretary of Defense Mattis said: "I see little in the long term that aligns Russia and China."

HE SHOULD look more carefully. What has emerged is what a former senior Russian national security official described to me as a "functional military alliance." Russian and Chinese generals' staffs now have candid, detailed discussions about the threat U.S. nuclear modernization and missile defenses pose to each of their strategic deterrents. For decades, in selling arms to China, Russia was careful to withhold its most advanced technologies. No longer. In recent years it has not only sold China its most advanced air defense systems, the S-400s, but has actively engaged with China in joint r&d on rockets engines—and UAVs. Joint military exercises by their navies in the Mediterranean Sea in 2015, the South China Sea in 2016 and the Baltic Sea in 2017 compare favorably with U.S.-Indian military exercises. As a Chinese colleague observed candidly, if the United States found itself in a conflict with China in the South China Sea, what should it expect Putin might do in the Baltics?

In their diplomacy, Russia and China mirror the relationship between the two leaders. On major international issues, they coordinate their positions. For example, when voting in the United Nations Security Council, they agree 98 percent of the time. Russia has backed every Chinese veto since 2007. The two have worked together to create and strengthen new organizations to rival traditional American-led international organizations, including the Shanghai Cooperation Organization and BRICs. For a Russian who wants to visit China, getting a visa takes one day; to visit the United States it takes them three hundred days to obtain a visa application interview.

Economically, Russia is slowly but surely pivoting east. China has displaced the United States and Germany as Moscow's number one trading partner. Today, China is the top buyer of Russian crude oil. A decade ago, all gas pipelines in Russia flowed west. With the completion of the Power of Siberia pipeline in 2019, China will become the second largest market for Russian gas, just behind Germany.

When U.S.-led Western sanctions excluded Russia from American-dominated dollar-denominated markets, its relationship with China has allowed it to continue to buy and sell. In the current U.S. push to prevent Iran selling oil to the world, Russia is trading goods for Iranian oil and then selling it on to international markets, including China.

Meanwhile, Russian elites continue to look west. They are predominantly European in their culture, history, religion and dreams. Wealthy Russians buy second (and third) homes in London, New York and on the French Riviera. They speak English and travel to Paris, New York or London to shop. Many have children who live in the West.

Cultural change is hard, and slow. But oligarchs who now find themselves the targets of sanctions that prevent them doing business in the United States are exploring alternatives. And some of Russia's leading thinkers are changing their tune. The Honorary Chairman of Russia's Council on Foreign and Defense Policy Sergey Karaganov maintains that "the 'westernizer' today is a thing of the past. Those looking forward to the future most show interest in the East." Surveys this year show that 69 percent of Russians hold a negative view of the United States, while the same percentage of Russians hold a positive view of China. When asked "who their enemies are," two-thirds of Russians point to the United States, ranking it as Russia's greatest foe. Only two percent of Russians view China as their enemy.

Grievance is a powerful motivator; respect can have a powerful magnetic pull. In Putin's mind, the greatest geopolitical catastrophe of the twentieth century was the break-up of the Soviet Union. Who was responsible for that break-up? In Xi's mind, China's "century of humiliation" only ended once the Communist Party defeated the Nationalist Party in a bloody civil war. Which country supported those nationalists, and continues to arm their island fortress of Taiwan? Against the backdrop of this history, as we reflect on what the United States is now doing, we should ask whether Brzezinski's warning about the "most dangerous scenario" could soon become a fact.

Graham T. Allison is the Douglas Dillon Professor of Government at the Harvard Kennedy School. He is the former director of Harvard's Belfer Center and the author of Destined for War: Can America and China Escape Thucydides's Trap?

Russia
Source: www.mid.ru

On December 17, the UN General Assembly adopted, by majority vote, the Russian-proposed resolution on Countering the Use of Information and Communications Technologies for Criminal Purposes. The resolution was supported by 94 member states with 59 voting against and 33 abstaining.

The key aim of our initiative is to launch a broad transparent political discussion on combating information crime and to search for and create responses to one of today's most pressing challenges. The resolution is aimed at promoting a global consensus and working out concrete and practical approaches to countering cyber crime in the absence of effective international legal instruments.

These concepts met with wide support in the international community. The resolution was co-authored by 36 countries, including all our BRICS, SCO and CSTO partners. The majority of the developing counties in Asia, Africa and Latin America favoured adoption.

During the vote, the United States and European Union countries vividly demonstrated that they do not intend to bring up the problem of fighting cyber crime for discussion at the UN. Their strategic goal is to maintain the current state of affairs in the international information space, which suits them and which is aimed at maintaining digital inequality between various members of the international community.

Indicatively, it is Russia that, against the backdrop of regular groundless accusations of cyber aggression hurled against it, is pushing forward a constructive and open dialogue on combating cyber crime. We believe that the first ever separate resolution on this problem, adopted within the framework of the UN General Assembly, will make it possible to overcome some negative trends in this sphere for the international community. We hope for maximum productive and relevant dialogue within the UN framework.

United Kingdom
Author: Omid Shokri Kalehsar
Source: www.alaraby.co.uk

The countries of the BRICS grouping, except for Russia, are broadly categorised as developing countries or emerging economies.

Due to their rapid growth and the influential pull of their markets - making up half the world's population - these countries, Brazil, Russia, India, China and South Africa, have emerged as major global players in recent years.

These states are united in their concern for reforms to be made to the world financial system to increase stability, and calls are being made to re-evaluate the prominence of the dollar, given the heavy debt the United States finds itself in.

BRICS have largely drawn focus on such economic and trade issues, but with increased power, signs are emerging that these countries desire a role in a panoply of broader political affairs and global conflicts including those concerning Palestine, Yemen, Afghanistan, Syria, Korea and Iran.

Despite broadly similar concerns vis-à-vis American economic and political might, Iran's basis for relations with BRICS varies according to each country. It pays to highlight where these concerns coalesce and where they depart regarding each member:


China

The stability of the global oil market lies in the hands of major importing countries, including China. Any bout of economic crisis or political insecurity experienced by oil exporting countries has a direct impact on China's energy security and economic growth. Thus, political and economic stability has always been strongly supported by Beijing.

China is not happy with American supremacy over energy resources and energy transmission routes in the Middle East and Chinese officials fear that in the event of any conflict between the two countries, the United States has the power to cut off China's supplies in one fell swoop.

Iran hopes that, in the absence of European co-operation due to sanctions, Chinese and Russian companies will have the gumption - rather more disentangled from the reach of the United States as they are - to continue to invest in the Iranian oil and gas industry. However, it should be noted that during the previous sanctions, Chinese companies left Iran's oil and gas industry as a precaution due to the consequences that violating sanctions may have had on other global investments and projects. It is likely that the Chinese government will reduce oil imports and stall investments in Iran so as not to antagonise the United States There is no guarantee that these companies will now invest in Iran's energy industry after this second series of sanctions.

China's state-owned and privately owned enterprises have always been steered by the Chinese government in terms of deals with supplier nations, with the desired result being further political influence and more affordable oil and gas products. It is likely that the Chinese government will reduce oil imports and stall investments in Iran so as not to antagonise the United States. Thus, the relationship between China and Iran has a chance of blossoming provided the right international settings are achieved vis-à-vis Iran's relationship with the West. Omid Shokri@ushukrik


Russia

Russian companies are ready to participate in the energy industry of Iran.

Last year, contracts for the development of Aban and Persia Fields were signed with Russia's Zarobzhanga. Similarly, negotiations between Iranian authorities and Lukoil have seen recent movement in the past month over development of the Bangestan Reservoir, Mansouri Square, and Water Taymour Oil Field.

Considering current developments in the energy market and the reinstatement of US sanctions, attracting foreign capital and technology to the Iranian energy industry will be understandably harder to achieve. Realising the goals of Iran's Sixth Development Plan and Vision Document depends on foreign investment, which requires a reduction of political risk in the country - even in the case of Russian companies.

A change of attitude in foreign policy and an attempt to eliminate tension with neighbouring countries would mark a step toward attracting foreign investors, but despite political ties and gestures in solidarity with Iran, Russia in fact benefits greatly from the sanctions regime, given it is one of the world's largest producers of petroleum and gas.


India

In recent months, the US has increased its oil exports to India, and has signed a twenty-year contract to export LNG to the world's largest democracy. Iraq and Saudi Arabia are also seeking to increase their share of the Indian market. Saudi Arabia, as a US ally, is struggling to reduce Iran's role in the Indian energy market. If Iran wants to maintain its share in India and use the facilities of Indian companies in the oil fields, especially in the common area with Saudi Arabia, Iran needs an active energy diplomacy in the region.

Tensions in relations with neighbouring countries and the resolution of problems with the United States are the only way to preserve regional energy markets, including in India.

Indian private companies have good experience and enough financial resources to attract the Iranian market. The problem is that a legal framework is needed to attract foreign investment, as well as an effective and rapid decision-making process, and political stability - especially in the international context.

In recent years, Iran-India relations have warmed in addition to energy sectors in the transit areas, and the Chabahar port of Iran has become a bridge to the markets of Afghanistan and Central Asia, providing India with an exceptional opportunity to bring forward its trade relations.

This issue is important given India's growing competition with China to gain more influence in the region's markets for New Delhi, and India, with a rational decision to deal with US regional policy, can make more of its opportunities.

The port of Chabahar is of special importance for the countries of Iran, India, Afghanistan, Pakistan and, generally, Central Asia, and facilitates trade and access to these countries. Chabahar has a strategic importance for India, at the point of connecting this emerging economic power to its target markets in the countries of Central Asia, and onwards with Eastern Europe and the Caucasus.

India, of course, can also use Pakistani ports to connect its markets in Central Asia and the Caucasus, but Chabahar is both more politically and economically reliable than Pakistan's ports. Therefore, the geopolitical and geostrategic significance of the Chabahar port has led India to invest heavily in developing and managing this free trade area and to cooperate with Iran in this regard.


South Africa

Over the past decade, the Iranian government has been trying to make more of a political impact on the African continent. The number of trips between high-ranking Iranian and African leaders has increased dramatically over the years, but it does not seem that in practice the development of Iranian relations with Africa will be lucrative for Tehran either economically or politically. South African companies are keen on cooperating with Iran and have a good platform in the area of joint investments However, in response to the changing global conditions Iran finds itself subjected to, the country is attempting to find new allies. South African companies are keen on cooperating with Iran and have a good platform in the area of joint investments - one of which includes oil producing units.

South Africa and other regional powers have become important actors in the economic and political arena with economic growth and political and international activities that can achieve positive achievements such as playing and expanding South-South cooperation.


Brazil

US sanctions on Tehran have particular meaning for Brazil, which sells Iran 90 percent of its agricultural imports. Iran will find it difficult to finance Brazilian imports with the onset of sanctions. Banking transactions will be difficult. Most Brazilian banks have not agreed to trade directly with Iran, as its deals with the United States have a greater impact on Brazilia's economy, and so have attempted to circumvent sanctions with a European model and is dealing with Middle Eastern banks.

Iran is Brazil's primary trading partner in the Middle East, with a trade volume of $2.6 billion - mostly helped by the foothold the country provides to the 600 million people in the surrounding markets, including Central Asia, the Caucasus, Iraq and Afghanistan.


Almost allies

Despite their dynamic differences and sometimes clashing economic and political interests, the BRICS group represents a powerful axis in the global economy, with an independent and capable banking system providing more integrated cooperation with a sub-tier of developing countries.

However, all are struggling to balance rapid growth with economic stability. India is currently under severe pressure to make economic reforms, while the issues facing Brazil, Russia, and South Africa relate more to growth itself. China, despite its mature economy, is struggling with growing debt and the complication of "shadow banking" and "surplus capacity".

BRICS are united in their negative views of the US sanctions against Iran, with Indian officials warning that the move would only increase global oil prices and may lead to shortages in supply. So far, with the new sanctions entering their second month, oil prices have risen by about 20 percent, leading many BRICS officials to begin seeking ways around the sanctions regime.

The South African Minister of Commerce has stated that while the country would go along with sanctions imposed by the Security Council, unilateral US-imposed sanctions would be against Pretoria's interests. A major issue pertaining to the BRICS is their relative remoteness and the lack of recognition of each other's capabilities, leading to, and a result of, a lack of coordination despite active joint meetings between business officials, cooperatives, and NGOs.

Despite the lack of coherence, and differences in the internal political and economic context of each of these countries, given their political, economic and demographic status, they are naturally set to become one of the world's most powerful intergovernmental institutions, and can even challenge the political and economic domination of old institutions.

In this respect, BRICS is the best example of the "emergence of others" against the West; a position that surely has the potential to provide opportunities for Iran. China and India will continue to buy Iranian oil, but even they, along with other BRICS members, remain diplomatically unable to fully ignore US demands.


Omid Shokri Kalehsar is a Washington-based senior energy security analyst.

His primary research interests are in the field of energy diplomacy, US energy policy, the geopolitics of energy, Iran-Russia relations and Iran-Turkey relations.

United Kingdom
Author: Jeremy Weltman
Source: www.euromoney.com


Investor risk is at its lowest than at any time this decade, as countries in the region exhibit improving fiscal metrics thanks to grade-one economic conditions – but will they last?

Several countries in Central and Eastern Europe were among the star performers in Euromoney's country risk survey in 2018, spurring the region's unweighted average risk score to reach its highest since the turmoil in 2008-2010, caused by the collapse of global banks and the sovereign debt crisis.

The higher score is pointing not only to a region that is safer than Asia, Latin America or the largest emerging markets (EMs) – the Brics and Mints – but also to one where the gap over rivals is increasing. The difference in average scores between CEE and Asia has jumped from 5.4 to 7.9 points during the past five years, with the differential to LatAm widening from 4.8 to 8.9, according to preliminary data from the latest, fourth-quarter survey; final results are due out in early January.

The region's risk metrics, compiled from scores provided regularly by a range of risk experts assessing the economic, political and structural situation in each country, have greatly improved.

In 2010, the Brics were considered a safer portfolio option than CEE countries, with slower growth rates, and were at risk of contagion from the banking sector's instability and the sovereign debt problems damaging Western Europe.

The tables have turned, with CEE countries thriving on ultra-loose monetary policies and strong global trade conditions, as well as supporting their own development by utilizing EU structural funds to co-finance infrastructure projects.

As in other regions, there are disparate trends, with Hungary, Poland and Romania suffering a little from heightened domestic political risks, as populist tendencies to reject asylum plans and meddle with legal systems and media independence create conflicts with EU partners.

Turkey is a weak link. It is one of only a small number of countries in the region extending longer-term downward trends, after the attack on the lira, and subsequent sharp rise in interest rates slowing economic growth.

Sliding below Romania, the country is now 60th in the global rankings.

Spectacular

In others, however, economic performance has been nothing short of spectacular, supporting improved risk-factor ratings for GDP growth, employment/unemployment and government finances.

This year has seen year-on-year growth rates exceed 3%, 4% or even 5% in the Baltic states, in Romania and in the 'illiberal right-wing' countries – Poland, Hungary, Slovakia, Bulgaria – growing sometimes twice as fast as the EU average, notably because tightening labour markets, strong real-wage growth and low borrowing costs have fuelled domestic demand.

"This is no meagre feat," says M Nicolas Firzli, one of ECR's survey contributors, director-general of the World Pensions Forum (WPF) and adviser to the World Bank Global Infrastructure Facility.

Invariably, economic growth rates will slow down, although the slide from 3.2% in 2018 to 2.6% in 2019 foreseen by the European Bank for Reconstruction and Development (EBRD) is exaggerated by Turkey's travails, which will have limited spill-over effects to other countries in the region.

To pragmatist voters and business leaders from Budapest to Bucharest, the well-rehearsed George Soros-cum-EU Commission argument that these 'closed societies will necessarily fail in the long term' sounds increasingly hollow - M Nicolas Firzli, World Pensions Forum

Tighter financing conditions for EMs, trade conflicts and higher oil prices are key risk factors for the year ahead, along with high corporate debt, geopolitical risks and a no-deal Brexit.

Economic conditions will not be as propitious as they have been these past few years, warn economists at Erste Bank, taking part in Euromoney's survey.

Juraj Kotian, Erste's head of CEE macro research, sees "a hard Brexit and the build-up of new trade barriers as the biggest risk factor for CEE growth in 2019".

He quantifies this risk as a 0.4% to 0.9% hit to output in the event of a hard Brexit, and up to 0.7% for a reciprocal rise in tariffs between the EU and US, dampening CEE exports and investments.

Erste sees tight labour markets limiting growth potential, especially in the Czech Republic and Hungary, but also some positive risk factors as CEE countries have been lagging in terms of drawing down funds available in the EU's current budgeting period.

"From historical experience, we know that the largest payments arrive at the end of the programming period [the current one ends in 2020], and in the subsequent three years," says Kotian. Speeding up EU-funded projects would increase domestic demand.

Optimistic

The WPF's Firzli also argues optimistically that the semi-authoritarian state-capitalist nations constituting the 'core-CEE area' – excluding the Baltics, Belarus and the former Yugoslavia – are comparatively immune to the imminent Brexit chaos in comparison with the sophisticated, export-oriented jurisdictions such as the Netherlands, Belgium, Ireland and Denmark.

That means the impressive macro-trend should continue into 2019, especially since "the region is driven essentially by internal dynamics: ambitious, government-driven infrastructure investment and inward-looking private sector and consumer spending", he says.

The EBRD would seem to agree, predicting central Europe and Baltic states will morph from overheating to solid strength, with growth slowing from 4.3% in 2018 to a respectable 3.5%.

Countries in the region that are EU members, or are aspiring to join, are also perceived to have strong business environments, with trade and financial systems closely integrated into western markets, demonstrating political stability and willingness to reform, despite the reservations among risk experts over corruption and institutional strengths.

The Czech Republic and Slovakia stand out in that regard, with low-risk scores above 70 out of 100, putting both countries close to the top of Euromoney's second of five tiers of sovereign borrowers, slightly ahead of the UK and France, and within the top 20 of the global rankings.

Although these countries have followed the trend in adopting populist rhetoric on immigration, equally they remain pro-business and pro-EU – recognising the advantages of membership in terms of the flow of structural funds and a seat at the bargaining table.

Joining them in the second tier are Slovenia (27th in the survey), Estonia (32nd) and Poland (34th), contrasting with higher-risk, but improving, FYR Macedonia, Albania and Montenegro in tier four, with highest-risk Bosnia-Herzegovina lagging in tier five.

Erste, moreover, expects credit rating upgrades for Croatia, Serbia and Slovenia, with Croatia possibly regaining investment grade, as its ECR score trend has been predicting.

Of course, the good times are unlikely to last indefinitely, given the fact recent financial markets volatility and flattening US yield curve suggest the global economy is facing a slowdown or even possible recession.

Many survey respondents are also keen to reinforce that political risks remain volatile in many CEE countries, with governments losing, or at risk of losing, their majorities in Czech Republic, Romania and Slovakia, for instance.

The cycle is probably past its peak in the region, as in the rest of the world, argued one expert, although each country's specific circumstances will differ, and there are concerns expressed about demographic trends constraining GDP growth potential, which will only get worse over the medium term.

There are certainly challenges, but as Firzli forcibly argues: "To pragmatist voters and business leaders from Budapest to Bucharest, the well-rehearsed George Soros-cum-EU Commission argument that these 'closed societies will necessarily fail in the long term' sounds increasingly hollow.

"This is especially so when you have hordes of masked hooligans rampaging regularly through the streets of Paris, a never-ending 'European migrant crisis', and Italy – the EU's third-largest economy – stuck in perpetual zero-growth mode."

Moreover, the core-CEE area, along with Greece, Macedonia, Russia, the Baltics, Armenia and Georgia, are "well-positioned to profit handsomely from the accelerating Sino-American rivalry fought using sweetheart trade deals, manifold aid, and hundreds of billions of dollars spent annually on building modern maritime and river ports, five-lane-highways, high-speed rails and gigantic logistical platforms connecting Vienna to Vladivostok", says Firzli.

In that respect, it is understandable why CEE may well keep ahead of Asia and LatAm for some time yet.

South Africa
Author: Kaunda Selisho
Source: citizen.co.za

Fraudsters are contacting people using the former mayor's name and are promising access to grant funds worth millions from the Brics bank to explore job opportunities.

There is a fake Patricia de Lille account sending fraudulent messages to people regarding a BRICS bank funding opportunity for their small businesses. Please be alert & note that this is not from me. Ignore any messages if you receive a communication of this nature.

According to a statement drafted and published in March 2016 by De Lille, five separate messages had been reported to her office emanating from the e-mail address patriciadelille@consultant.com, accompanied by the subject line 'BRICS Bank funding'.

"Please note that this e-mail address does not belong to me. It would appear that a fake Facebook profile is being used to solicit contact details. Once the e-mail address is received, an e-mail is sent to said address asking whether the recipient would be able to use grant funds worth £450 000 (R9 739 448) from the BRICS bank to 'explore job opportunities for our citizens'. Once they agree, they are added to a beneficiary list and asked to pay £250 (R5 415) in order to obtain a BRICS non-residential beneficiary form," read the statement.

She lodged a case back in 2016 and was in the process of collecting e-mails from others who had been contacted by the fraudulent account in order to build a case.

There have not yet been any new complaints published on social media in reference to the scam.

United States
Author: Jason Pierson
Source: cacourier.com

China should deepen its economic ties with other members of the BRICS (Brazil, Russia, India, China and South Africa) and continue to open up its financial market to serve as a cushion against rising global uncertainty amid the trade war with the US, Leslie Maasdorp, vice president and chief financial officer of the New Development Bank (NDB), told the Global Times over the weekend.

The BRICS nations have been focused on deepening their collaboration in recent years and as each of them has unique comparative advantages, this cooperation is going to continue, Leslie said, speaking on the sidelines of the 7th Sanya Forum themed "China's Reform and Opening-up in a Changing World" in Sanya, South China's Hainan Province.

The NDB is a multilateral development bank set up by the BRICS group in 2014, with a focus on financing infrastructure development in emerging markets and developing countries.

"There are a lot of ways in which other BRICS countries can collaborate with China. For example, India excels in high-technology. South Africa has a strong commodity-based economy and a strong agriculture industry producing such items as wine, fruit and avocados. China is a potential market for these goods, and South African companies are already looking much more aggressively into China," Leslie said. He is also representing South Africa as the vice president of NDB.

The lender, with its financing focus on clean energy and infrastructure, could also play a role in achieving closer cooperation in such sectors, according to Leslie.

China has been the largest trading partner of South Africa for nine consecutive years, with bilateral trade reaching $39.17 billion in 2017, up 14.8 percent year-on-year, customs figures show. China has been the largest trading partner of Russia for eight consecutive years, and it is also the main trading partner of India and Brazil.

Considering the negative impact of China-US trade friction, Leslie also suggested that China open up more of its financial markets, like financial services, insurance, bonds and asset management to boost the economy and prepare for the next stage of qualitative growth.

"If the Chinese market is open to international competition, [the country] can have more capital inflows to further stimulate growth," he said. He also noted China's shift to a consumption-driven economy, which he said is supported by a large middle class. This bodes well for its economy in the next decade, he added.

Regarding the lender's fundraising plans, Leslie said the NDB has a two-year plan to raise 10 billion yuan ($1.45 billion) in Panda bonds, which are overseas issues denominated in yuan. Issues will start in the first quarter of 2019.

Despite some recent fluctuations in the yuan against the US dollar since trade tensions flared up, the Shanghai-based institution will continue to raise funds in yuan because "we believe China has deep and liquid capital markets," Leslie said.

Currency fluctuations in emerging markets are cyclical and a natural part of the business cycle, he added. "Emerging markets like China have fundamentally been transformed. They're now the largest contributor to global growth, and most of the foreign exchange reserves reside in emerging markets."

The NBD has provided loans to several infrastructure projects in China, including an offshore wind turbine project in East China's Fujian Province.

Russia
Source: valdaiclub.com

The stark realities of the world descending into a vortex of sanctions and protectionism have already given rise to a number of initiatives in the developing world targeting the creation of alternative institutions and integration groupings that would to some degree provide for additional venues for openness and liberalization across the developing world. Some of the key initiatives in this area included the launching of the BRICS+ format by China at the BRICS summit and its further development by South Africa during its chairmanship in BRICS in 2018.

These innovative approaches to economic integration increasingly point to a more active cooperation among not just the largest economies of the Global South but also the largest regional integration blocks led by BRICS economies. A potential megablock that brings together these regional integration arrangements denoted as BEAMS (BIMSTEC1, EAEU2, AU3, MERCOSUR4, and SCO5 – all on the basis of previous outreach undertakings by BRICS countries) could form the basis for the first megablock of the developing world that would have enough weight to provide a counterweight to other competing megaprojects such as the Trans-Pacific Partnership (TPP) or the Transatlantic Trade and Investment Partnership (TTIP).

Egypt
Source: thebricspost.com

The prospect of accessing a market of 1.2 billion people with a consumer buying power of US$3.3 trillion is the main driver behind the establishment of the African Continental Free Trade Area (AfCFTA) and the South African Minister of Trade and Industry is punting this as a way of boosting growth, not only for South Africa, and not only for the continent, but for the whole world including the BRICS partners.

In an exclusive interview with The BRICS Post, Davies noted that the rest of Africa is already South Africa's second most important trading region after Asia, but he wanted Africa to be the most important in a mutually beneficial way as the continent industrialises on the back of this expanded single market.

"The reason I am here in Cairo and then moving to London, is to promote trade and industry. I had a successful meeting at Sharm El-Sheik at the Africa Forum, and here we had engagements with my fellow African trade ministers on technical issues such as rules of origin. In London I will be once again be promoting our Business Process Outsourcing credentials," Davies said.

For several years now South African businesses such as MTN, Vodacom, Shoprite and Pick n Pay have targeted the rest of Africa as a growth opportunity, as South Africa has grown so slowly since the 2008 Global Financial Crisis.

Cairo hosted the inaugural Intra-African Trade Fair (IATF) from December 11 to 17. More than forty South African business delegations participated in the IATF.

Davies said the Forum and IATF provided an opportunity for South African executives to network with their peers and to explore mutually beneficial partnerships.

"The IATF will provide a platform to promote trade, investment, exchange of market information and opportunities among countries in the continent. Furthermore, this platform has been set up as one that will facilitate the speedy conclusion of business deals between buyers and sellers as well as investors," Davies said.

"South African companies can utilise the platform for business to business exchanges and development of business opportunities as well as an opportunity to create linkages between South Africa and countries in the rest of the continent. In addition, these companies will be able to leverage from Afreximbank and other financial institutions that will share information about their trade finance and trade facilitation interventions that will support intra-African trade," he added.

Davies noted that IATF was an excellent opportunity to position South Africa to grow the export volumes especially into the rest of the continent and to promote the export of goods and services; as well as exposing South African buyers to what the rest of the continent has to offer.

When queried on whether monetary union would follow the free trade agreement, Davies said that would be lot further in the future.

"It has taken more than 50 years since the founding of the Organisation of African Unity in 1963 to get to a continental free trade agreement. Our next step is to create a seamless continental payments system and then with time we can look at a common currency," Davies said.

In 2016, three of South Africa's neighbours were in the Top Ten export destinations with Namibia at fourth position, Botswana fifth and Mozambique tenth. The hope is that soon Zimbabwe could be added to this list as it was in the 1990s.

The United Nations Economic Commission for Africa estimated that full implementation of the AfCFTA could increase intra-African trade by 52 per cent by 2022, compared with trade levels in 2010.

The AfCFTA aims to remove barriers to trade such as tariffs and import quotas, in order to allow the free flow of goods and services, which should reduce prices for consumers and allow factories to exploit the benefits of scale and increased capacity utilisation.

Belgium
Author: Patrick Bond
Source: www.cadtm.org

Johannesburg – This week's hush-hush visit by International Monetary Fund Managing Director Christine Lagarde to Pretoria (between stops in Ghana and Angola) is mysterious. In contrast to last week's IMF press briefing claim – "Madame Lagarde will hold meetings with the authorities, as well as fairly extensive meetings with the private sector, civil society, academia, women leaders, and of course the media" – there's a complete information void here, with no public events scheduled.

An open, frank public discussion about the IMF's regrettable history and current agenda is sorely needed, in a context where a few honest politicians and officials are belatedly struggling to reverse what is termed "state capture" and return stolen funds to the taxpayer. Undoing a decade of looting by former President Jacob Zuma and the Gupta empire (three immigrant brothers plus hundreds of hangers-on) is no small task.

Hence it is perhaps with discomfort that Lagarde will meet one of the main post-Zuma/Gupta leaders, Finance Minister Tito Mboweni, who twice (in 2013 and 2016) tweeted of 'negligence' for gifting $430 million to a tycoon – Adidas founder Bernard Tapie – who donated to her Conservative Party when she was finance minister (in 2017 he was forced to pay back the French state).

Retribution for corruption is indeed in the Pretoria air. Two months ago, Mboweni replaced Nhlanhla Nene, who resigned in disgrace over lying about his secret Gupta meetings. But is Mboweni himself arranging a secret bailout deal, as happened in December 1993 when the IMF granted an infamous $850 million loan – a "Faustian Pact" (according to former Minister of Intelligence Ronnie Kasrils) replete with Washington Consensus promises – to outgoing president FW de Klerk, so as to "instil global financial confidence" in the incoming Mandela government?

After five "junk!" denunciations of South Africa by the three most powerful (albeit suspect) credit ratings agencies over the past 18 months, President Cyril Ramaphosa has tried hard to restore their trust. However, with the giant energy parastatal agency Eskom now trying to dump another $7 billion in debt onto a severely-stressed national Treasury, does Ramaphosa need a financial back-stop from the Bretton Woods Institutions?

Indeed, more to the point, is Eskom's foreign debt again creating havoc, as happened in January with a "pending letter of default from the World Bank" that "could trigger a recall on Eskom's $25 billion debt mountain," as Carol Paton reported in Business Day? (Ramaphosa's urgent meeting with Bank officials in Davos the next day was apparently temporarily soothing.)

Lagarde's opaque visit contrasts with World Bank President Jim Yong Kim's high-profile trip earlier this month, amidst a blaze of Global Citizen anti-poverty populism to 90,000 youth at a Soweto stadium: "I'm telling you, you can't trust anyone over 30 to determine your future!"

Kim also met Ramaphosa to discuss, he tweeted, urban planning and sanitation (neither of which would need US$-denominated Bank loans). He also lectured at the Wits University School of Governance about human capital investment, at one point jovially criticising another ex-lefty, his host, Vice Chancellor Adam Habib, for being a "student of Trotsky."

Ramaphosa: "We're not looking at the IMF. The New Development Bank has a facility…"

Are loans to South Africa from the IMF and World Bank really needed? On the one hand, their leaders are here in the wake of July's Brazil-Russia-India-China-SA Johannesburg summit, which again raised hopes for the BRICS bloc's international financial governance reform agenda.

For example, notwithstanding angry protests by environmental justice activists at its Africa Regional Centre office, the BRICS New Development Bank (NDB) quickly announced loans to three local parastatal agencies. One of these, Eskom's $180 million, had been "in abeyance" since 2016 due to then-CEO Brian Molefe's second thoughts: he opposed the loan's linkage of privatised renewable energy to Eskom's grid (instead, Molefe wanted to take on more nuclear debt, which Mboweni – then an NDB director – had publicly endorsed in 2015, while in Russia at that year's BRICS summit).

The other credits went to Transnet's Siyabonga Gama (fired for Gupta-related corruption a few weeks later) for $200 million to expand the Durban port-petrochemical complex – a project now frozen due to brazen procurement fraud involving a notorious Italian firm (unrelated to the Guptas) – and the Development Bank of Southern Africa for on-lending $300 million to municipalities (assuming there are any creditworthy ones left, able to pay sufficiently high interest rates to justify a hard-currency loan for local infrastructure).

Explained Earthlife Africa protester Makoma Lekalakala, co-winner of the 2018 Goldman Environmental Prize as Africa's leading activist this year, "Both Eskom and Transnet are under scrutiny for corruption and mismanagement. No due diligence was done on the Transnet loan. If this is how the [BRICS] bank operates, we have to brace ourselves for accelerated environmental degradation for the pursuit of profit."

But the Bretton Woods Institutions are no better, and just over a year ago, Ramaphosa offered a scathing critique of Washington's bias: "We should not go to the IMF because once we do we are on a downward path, we will be sacrificing our independence in terms of governing our country and sacrificing our sovereignty." He cited the risk of imposed "cuts in social spending" what with anticipated IMF orders to Eskom "to do away with free electricity quotas for the poor and indigent."

Ramaphosa repeatedly denies that the Bretton Woods Institutions will bail out South Africa: "IMF, no, we're not looking at the IMF. The New Development Bank has a facility that could be made available to us. And we are exploring that as well. And we want to do it in a way that does not require a sovereign guarantee." Actually, Ramaphosa probably didn't mean the BRICS NDB, which makes project-specific loans, but instead its $100 billion Contingent Reserve Arrangement (CRA), which offers a $3 billion credit line for South Africa to immediately draw upon, in the event of a balance-of-payments emergency deficit.


BRICS v IMF – or BRICS-IMF?

On the other hand, the BRICS look much less coherent today than in July, because Brazil's new leader Jair Bolsonaro could drop out of the bloc, and at minimum, will more firmly hitch his regime to Donald Trump's. Yet in spite of oft-expressed Sinophobia, Bolsonaro has just grudgingly agreed to continue the rotation of BRICS heads-of-state summit hosting (although this is likely only to occur in Brasilia next November). There will be much Trump-style geopolitical, economic and especially environmental chaos starting on January 1 when he becomes president, such as paving over the Amazon. But compared to November, fewer insiders I talked to on a visit earlier this month (including former Foreign Minister Celso Amorim) fear that Bolsonaro will reduce the bloc to RICS through a "Braxit," the way he just did to the UN Framework Convention on Climate Change summit. (His predecessor Michel Temer had agreed to host it in Brazil late next year, but Chile will now take over.)

The oft-stated contrast between the agendas of BRICS and Washington, as articulated by Zuma's scribe Gayton Mckenzie, for instance, was in any case mainly myth. From 2014, Lagarde has enjoyed the power to co-finance the more desperate of BRICS borrowers (not just SA, but also Brazil and Russia suffer junk status), because the CRA's Articles of Agreement stipulate that if Pretoria (or any other borrower) wants the next $7 billion in BRICS funding within its $10 billion CRA quota range, it must first get an IMF structural adjustment programme.

If Pretoria needs financing to repay increasingly onerous foreign debt tranches in 2019, could this fractured society withstand IMF austerity, given what Business Day already termed 2018's "savage fiscal consolidation"? Radically-reduced funding for basic infrastructure left even a confirmed neoliberal, Johannesburg Mayor Herman Mashaba, crying foul on Treasury's 65% budget cut to the city's housing program last week.

At the global scale, the BRICS financial institutions are not up to the massive bailout requirements necessary if financial meltdowns similar to 1998 and 2008 reappear in coming weeks, for instance due to Britain's anticipated "hard crash" from the European Union on March 29. In even the recent weeks' relatively mild economic turmoil, South Africa's currency was the world's most volatile (out of the 31 most traded). The Rand continues to zigzag in part because of then Finance Minister Malusi Gigaba's February 2018 relaxation of exchange controls on $43 billion worth of local institutional investor funding that can now depart South Africa. (That puts into context the oft-remarked $7 billion exit threat from Citibank's World Government Bond Index once Moody's finally drops the junk axe on the domestic-denominated securities rating.)

However, while we continue to pay close to a 9% hard-currency interest rate on 10-year state bonds (even higher than does Venezuela), there will be willing buyers – until the next world financial melt ratchets rates even higher. And in spite of BRICS babble about IMF reform so as to lessen the load of borrower conditionalities, there have been no changes in economic philosophy under Lagarde. Worse, Africa lost substantial voting power in the last quota restructuring, in 2015, including Nigeria by 41% and South Africa by 21%. The main countries that raised their respective IMF shares were China (35%), Brazil (23%), India (11%) and Russia (8%).


An alternative strategy: repudiation of corrupt bankers

IMF reform that leaves most Africans with less voice is better considered deform, Ramaphosa himself seemed to concede in a speech to the United Nations in September, complaining that the IMF and other multilateral institutions still "need to be reshaped and enhanced so that they may more effectively meet the challenges of the contemporary world and better serve the interests of the poor and marginalised."

Because their interests are not served by either Washington's or the NDB's lending to corrupt parastatal elites, the "poor and marginalised" need another strategy. Just as in the days of the Jubilee 2000 debt-repudiation movement, which was led in South Africa two decades ago by the late poet Dennis Brutus and Anglican Archbishop Njongonkulu Ndungane, it's overdue we talk about, and indeed audit, South Africa's foreign debt.

Including parastatal and private borrowers (for whom the state ensures hard currency is available for repayment), foreign debt stood at $171 billion as of mid-year (up from $25 billion in 1994). That figure, the SA Reserve Bank announced last week, is down nearly 8% from March 2018's $183 billion, but only as a result of "non-residents' net sales of domestic rand-denominated government bonds as well as valuation effects."

The main foreign debtors remain Eskom and Transnet. They have contracted, over the past eight years, South Africa's three largest-ever loans:

• in 2010, $3.75 billion from the World Bank, mainly for the Medupi coal-fired power plant (a deal for which Eskom chairperson Valli Moosa was criticised by the public protector for 'improper' conflict of interests since he sat on the ANC Finance Committee, during the notorious Hitachi corruption of the ruling party);
• in 2013, $5 billion from the China Development Bank, mainly for Transnet's purchase of imported infrastructure inputs, especially for corrupt port-petrochemical expansion in Durban and a coal export rail line to Richards Bay (hundreds of millions of dollars were illicitly directed via China South Rail to the Gupta empire, as well as loan "success fees" from the Chinese loan); and
• in 2016, $5 billion again from the China Development Bank, mainly for Eskom's other coal-fired mega-generator, Kusile, initially arranged by Molefe and renewed at the BRICS Sandton summit last July.

None of these loans can be justified, especially on ecological grounds – since they all rapidly increase the climate debt we South Africans owe both future generations and, more urgently, contemporary African victims of worsening droughts and floods. Moreover, with state procurement corruption costing in the range of 35-40% per contract, according to the lead Treasury official in 2016, there is a strong case for a full debt audit, followed by the demand that the World Bank, China Development Bank, BRICS Bank and other lenders also assume liability.

After all, the Hitachi deal with the ANC's investment wing Chancellor House led the U.S. government to fine the Japanese firm nearly $20 million in 2015 – for Foreign Corrupt Practices Act violations at Eskom – and hence when Public Enterprises Minister Pravin Gordhan (responsible for borrowing the $3.75 billion in 2010) last week blamed Hitachi incompetence for recent load-shedding, that alone should invoke World Bank debt repudiation.

Jim Kim should not only have addressed this largest – and perhaps worst – loan in his institution's history. The Bank's portfolio also includes the largest share in the notorious CPS-Net1 "financial inclusion" strategy to rip off millions of poor South Africans, and a $150 million debt+equity stake in Lonmin which until just before the 2012 Marikana massacre (not long after Kim became president) the Bank was celebrating as a best-case for corporate social responsibility.

Add to all this the new threat of Faustian Pact 2.0 from the ethically-challenged Lagarde. The need for a new Jubilee movement is obvious. All existing anti-corruption initiatives should be pursued forthwith, but our ever lower expectations mean that a genuine 'Ramaphoria' – which if serious would include repudiation of the Gupta and ANC fraudsters' financial facilitators, such as the World Bank, China Development Bank and BRICS Bank – is simply a fantasy. Instead, the meme best describing our current state of governance is, indeed, Ramazupta.

China
Source: europe.chinadaily.com.cn

General Assembly OKs infrastructure bank, development bank, both based in China

The UN General Assembly granted observer status to two development banks, both headquartered in China, on Thursday, a move that experts believe will "promote their cooperation with the UN".

In two separate resolutions adopted by the assembly, the Asia Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB), initiated by China and the BRICS countries respectively, became observers to the UN's most inclusive body.

"By becoming an observer, we will be able to work more closely" with the UN, said Gerard Sanders, general counsel of the AIIB.

"We will have better and more timely information about what the UN is thinking of the issues of importance to the AIIB, and hopefully we will be able to make some modest contribution to the work of the UN over time," he added.

Initiated by China in 2014, the AIIB is a multilateral development bank with a mission to improve social and economic conditions in Asia. Headquartered in Beijing, it began operations in January 2016 with 57 founding countries and has since grown to 93 approved members worldwide.

Over its two and a half years of operation, the AIIB has reached cooperative arrangements and co-financed development projects with a number of international development organizations, including UN specialized agencies and regional development banks.

Sanders said the bank's charter recognizes the need to work with other institutions that have "a best interest in development", both in terms of forming policy objectives and delivering individual projects.

"To date, we have been focusing very much on financial institutions, but the UN is really the key body that is concerned with development, and so it's important we have an association with them," he said.

The NDB is a multilateral development bank established by the BRICS countries — Brazil, Russia, India, China and South Africa — in 2014.

Headquartered in Shanghai, the NDB mobilizes resources for infrastructure and sustainable development in the BRICS countries and other emerging economies and developing countries, complementing the existing efforts of multilateral and regional financial institutions for global growth and development.

Ma Zhaoxu, China's permanent representative to the UN, believes that through their new status, "the two banks are in a better position to communicate and cooperate with the UN and contribute to achieving the sustainable development goals set by the world organization."

As the country involved in initiating the two banks, China shepherded the submission of the draft resolutions and led the effort toward their adoption.

"The process has demonstrated China's determination and commitment to adhere to multilateralism and implement the 2030 Sustainable Development Agenda of the UN," said Ma.

"There is no doubt that the General Assembly's granting of observer status to AIIB will further enhance its cooperation with entities in the United Nations system and its contribution to implementation of the 2030 Agenda for Sustainable Development in general," Liu Kun, China's minister of finance, wrote in a letter to UN Secretary-General Antonio Guterres in July.

In addition to its 193 member states, the UN General Assembly may grant observer status to an international organization, entity or non-member state, which entitles the entity to participate in the work of the assembly, though with limitations. Currently, there are more than 100 UN observers.

Previously, the Shanghai Cooperation Organization and the International Bamboo and Rattan Organization both headquartered in Beijing, had been granted observer status separately.

China
Source: www.ndb.int

On November 16, 2018, the 17th Meeting of the Board of Directors (Board) of the New Development Bank was held in Shanghai.

The Board approved 4 projects from India and China with loans aggregating to USD 1560 million.

Mumbai Metro Rail Project

The NDB will provide a loan of USD 260 million to the Government of the Republic of India for on-lending to the Government of Maharashtra for the purpose of implementing 3 metro rail lines in the city of Mumbai with an aggregate length of about 58 km. The Project will supplement the existing suburban rail network capacity and will also provide rail-based mass transit facility to areas that are not connected by the existing network. The Project is expected to improve the overall mobility of urban population and further economic growth through better access to markets, workplaces, education, and health facilities.

Guangdong Yangjiang Shapa Offshore Wind Power Project

The NDB will provide a loan of RMB 2 billion to the People's Republic of China for on-lending to the People's Government of Guangdong Province for Guangdong Yudean Yangjiang Shapa Offshore Wind Power Project. The objective of the Project is to finance the construction of an offshore wind farm, to provide clean power supply and improve energy structure of Guangdong Province. The Project will develop 300 MW of offshore wind capacity in Yangjiang's shallow water. It will support the development of offshore wind power industry in Guangdong to ultimately help the province achieve its goals of cleaner energy structure and sustainable economic development.

Jiangxi Gas Jiangxi Gas Transmission System Development Project

The NDB will provide a loan of USD 400 million to the People's Republic of China for on-lending to the People's Government of Jiangxi Province for development of the natural gas transmission system in Jiangxi. The Project will contribute to a significant reduction of harmful emissions, achieving a greener energy mix and promoting sustainable economic development in Jiangxi Province. It is expected to enhance the living quality of local residents and improve overall conditions of the urban environment.

Hohhot New Airport Project

The NDB will provide a loan of RMB 4.2 billion to the People's Republic of China for on-lending to the People's Government of Inner Mongolia for the construction of the new airport in Hohhot. The new airport will be constructed at Qiaoshiying Town in the Horinger County, which is about 40 km away from the city center, with a designed capacity of 28 million passengers and freight traffic of 320,000 tonnes each year. The Project will contribute to meeting the growing demand of the city's air traffic and will ultimately support sustainable economic development of Hohhot and Inner Monglia Autonomous Region.

With the approval of these projects, the Bank's lending commitment to its member countries in 2018 has reached USD 4.8 billion, a 167% increase from 2017, which brings the NDB's total lending volume since its establishment in 2015 to approximately USD 8 billion.

The Board also considered a Policy on Sovereign Guaranteed Projects in Non-Member Countries.

Updates on Project Preparation Fund, Funding Plan, Information Technology Projects Roadmap, and construction of the HQ building were provided to the Board.

The Board discussed its work plan and the forthcoming 4th Annual Meeting of the Board of Governors scheduled to take place in Cape Town, South Africa on March 31 – April 2, 2019.

A meeting of the Audit, Risk and Compliance Committee (ARC) of the Board of Directors took place on 15 November 2018. The ARC considered the Quarterly Audited Financial Statements for NDB for the period ended September 30, 2018, Quarterly Audited Financial Statements for NDB Project Preparation Fund for the period ended September 30, 2018 as well as Risk Reports.

On 15 November 2018, a meeting of the Budget, Human Resources and Compensation Committee of (BHRC) the Board of Directors also was held in Shanghai. The BHRC considered Budget Utilisation Report for CY2018, Proposed Budget for CY2019 and 3-year Budget: CY2019-CY2021. The Committee was briefed on matters pertaining Human Resources, Compensation and other items on its agenda.

Background Information

The NDB was established by Brazil, Russia, India, China and South Africa to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, complementing the existing efforts of multilateral and regional financial institutions for global growth and development. To fulfill its purpose, the NDB will support public or private projects through loans, guarantees, equity participation and other financial instruments. According to the NDB's General Strategy, sustainable infrastructure development is at the core of the Bank's operational strategy for 2017-2021. In August 2018, the NDB received AA+ long-term issuer credit ratings from S&P and Fitch.

India
Author: Abhijit Mukhopadhyay
Source: www.orfonline.org

The standstill agreement reached between the United States and China on 1 December 2018 on the sidelines of the G-20 meetings has brought the much-needed breather for these two countries and the rest of the world. Both the countries agreed not to impose any tariffs for the next 90 days. However, this temporary truce does very little to resolve the deeper trade problems in their relationship and seems to be a more short-term political agreement than a substantive step towards the resolution of the existing problems.

The temporary nature of the agreement has been immediately highlighted when on 4 December 2018 US President Donald Trump tweeted: "I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so… We are right now taking in billions (of dollars) in Tariffs. MAKE AMERICA REACH AGAIN."

Without going into the wrong economics behind it, the intent shown clearly demonstrates the uneasiness of the truce between these two.

Though not much highlighted in the news, in another significant development, India, in its second attempt, secured the World Trade Organization's (WTO) approval to establish a dispute settlement panel to provide ruling on the unilateral duties imposed by the US on the imports of steel and aluminium. India's first request was blocked by the US on 21 November. But when a complainant makes a second request, the panel usually gets automatically established. Switzerland joined India in making the second request against American import duties.

Therefore, existing confrontations on the tariff front are very much going on – involving major players of international trade.

US blocking of filling up of WTO AB vacancies

The US, meanwhile, has single-handedly blocked a proposal for filling four vacancies of the WTO's Appellate Body (AB) as the country feels that in the past, the body went beyond its mandate in its rulings. This is another part of the broad American narrative that "the system is rigged against us". AB is a standing body of seven persons that hears appeals from reports/rulings issued by dispute settlement panels at the WTO. The AB reports, once adopted by the Dispute Settlement Body, must be accepted by all the parties involved under the existing rules and procedures governing the settlement of disputes at the WTO.

Due to the US blocking for the past two years, the AB is now reduced to three members from seven. And by December 2019, the AB will get reduced to a single member body when two more members – one from India and the other from the US – retire at the end of their second terms.


India joined the European Union, China, Canada, Norway, New Zealand, Switzerland, Australia, Korea, Iceland, Singapore and Mexico to issue a joint proposal to fill up the vacancies on 26 November. However, using its veto power, the US once again rejected the proposal on 12 December, and called the EU, India and China the "new trilateral" (at WTO), which is trying to "change the rules to authorise and accommodate the very approaches that would make the Appellate Body even less accountable".

This persistent blocking of filling vacancies of the Appellate Body seems to be an American ploy to go back to the pre-1995 GATT (General Agreement on Tariffs and Trade) phase where the rulings of any dispute settlement panel can be negotiated as opposed to the AB's mandatory implementation under the current two-stage dispute settlement system. If that happens, then it will be a telling blow to the credibility of the WTO.

So, trade battles are been fought in different multilateral spheres other than tariff front, and there are enough reasons to be sceptical about the US-China standstill agreement on tariffs.

Worrying trends for economies like India

"Reinvigorating Trade and Inclusive Growth" – a policy paper charting out directions for future international trade reform, published by the World Bank (WB)-International Monetary Fund (IMF)-WTO trio in September 2018 – should be read in the context of these changing winds of international trade. A closer reading of this proposal paper reveals worrying trends for emerging economies like India in near future.

The paper surprisingly does not criticise the unilateral tariff impositions of recent times even once, and instead mentions (only once) in the beginning – "The system of global trade rules that has nurtured unprecedented economic growth across multiple generations face tensions. Though only recently brought to the fore, these tensions are rooted in issues that have been left unresolved for too long. Governments need to promptly address outstanding questions involving, for example, the WTO dispute system and the reach of subsidy disciplines".

This is nothing but a backhand justification given for the American stance of imposing unilateral tariffs.

The WTO secretariat technically cannot be party to such a biased reform proposal of international trade as it does not have any decision-making power. In WTO, all decisions are taken by the member countries only, and the secretariat's duties are "to support various councils and committees, to provide technical assistance, to monitor and analyse developments in world trade, to provide information to public and media, and to organise the ministerial conferences". Ministerial conference is the highest decision-making body in the WTO under the existing framework.

The policy paper further goes on to say that "… reliance on an approach in which all members must agree on all issues risks driving negotiating activity outside the WTO. Agreeing among so many members, each with unique challenges and priorities, has proven difficult". Since inception, a consensus-based multilateralism has been the bedrock of the WTO and is the primary reason behind its immense success in promoting free trade in the past. Not so subtly, this WB-IMF-WTO proposal is challenging that consensus-based approach of trade negotiations here.

The paper then makes an argument to employ a 'plurilateral' and 'flexible' approach in negotiations within the WTO on any issue where consensus does not emerge as "the practice of bundling negotiating issues together in a giant, all-or-nothing trade rounds has become extremely difficult to manage". This is like proposing separate clubs within the WTO, and essentially treating some groups of countries as superior to other groups of countries. It is an absurd idea to sustain in a multilateral forum where all countries are supposed to be treated at par with each other. It is like saying that any country is free to negotiate its own kind of bilateral or plurilateral deals under the WTO umbrella. But, why would countries do that under the WTO when they have the option of doing it outside independently? It looks like a desperate attempt of the WTO to remain relevant in international trade.

In contrast to these arguments, the policy paper then advocates for a universal approach to investment to set "holistic rules critical in a world of regional and global value chains". It also reiterates the necessity to resolve thorny issues like market access in agriculture, distortions in agricultural trade, regulatory cooperation, and e-commerce. While acknowledging the variability of interests on these issues, the paper prescribes 'evolution' and 'modernisation' of rules, policies and practices governing global trade.

If one reads between the lines, then it implies that accommodating different obligations of emerging economies and less developed countries in implementing tariff schedules and service commitments may come under scanner under this 'flexible' approach of trade negotiations in future.


On questions like market access, possibility of future arm-twisting cannot be ruled out either. Countries like India, Brazil and China will get affected adversely in future if this proposed approach is accepted further at the WTO level.

Need for more South-South trade and investment cooperation

This is not good news for the emerging economies, for example the BRICS countries. These countries negotiated hard for deferment of tariff schedules and services commitments in the past to protect their own economic and development interests. Under this proposed "plurilateral flexible" approach those benefits may just disappear.

Going by this trade reform proposal advocated by the WB-IMF-WTO trio, the cost of unilateral tariff imposition, as started by the US, finally would have to be borne by the countries of the world which are growing the fastest – the BRICS countries and the Next Eleven.^[i] It is unlikely that multilateral organisations like the WTO will have the requisite instruments to stop unilateral and arbitrary trade decision making of the US. Economic and political might of the US, on the contrary, is likely to bend these institutions in its favour.

After the 2008 financial crisis, international platforms like G-7 and G-20 crystallised their cooperation in regulating financial markets across the world to provide stability to the international monetary systems.


In contrast, formations like the BRICS evolved through a larger cooperation in international trade negotiations. In other words, trade blocs or formations based on south-south cooperation have larger stakes in the multilateral rules-based WTO. Unfortunately, the WTO does not seem to be a 'saviour' of these countries this time.

As pointed out by British entrepreneur Martin Sorrell, "The fast growing markets – the BRICS and Next Eleven – are the key. The next billion consumers are not going to come from the US or Western Europe – they are coming from Asia, Latin America and Africa". So, all international future games of trade wars will also be revolving around capture of this emerging consumer base.

Now, when multilateralism is in dire straits and immediate future is not looking so good, these countries (BRICS and Next Eleven) urgently need preparation and planning to face more protectionism in international trade. Only larger cooperation among themselves can protect their interests in the new world trade order, which may decisively tilt towards the advanced countries – particularly the USA – in the short run.

(This article is based on a short presentation made by the author at the international seminar "BRICS Economic Agenda: Searching for New Ways of Cooperation and Development" on 4-5 December 2018. It was organised by the Institute for Applied Economic Research (IPEA), Brazil.)

^[i] Next Eleven countries are Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey and Vietnam.

Russia
Source: we.hse.ru

In the beginning of December 2018 4 professors from 2 partner universities – University of Cape Town and University of Campinas – visited HSE and gave several lectures to the students of the Faculty of World Economy and International Affairs and also provided the plenary sessions on the meetings of HSE African Club and HSE Latin American Club.

Dr. Mark Ellyn (UCT) explained to the students the basic principles of IMF and the Growth accounting: How economists think growth occurs, mechanics of growth etc. He also immersed the students to the economic history of South Africa explaining the roots of the dualism of South African economy. Another block of lectures of Dr. Ellyne was dedicated to the Donor Aid and its pros and cons.

Dr. André Biancarelli (Unicamp) in his turn provided the lectures developing countries, global economy and the "currency hierarchy approach". Dr. Biacnarelli shared with the students the Latin American structuralist tradition, and explained them the cornerstones of the contemporary International Monetary and Financial System, explaining why US Dollar is dominant in the currency hierarchy and which other currencies are used on international and domestic levels.

Dr. Bruno de Conti and Dr. Ana Rosa Ribeiro de Mendonça (Unicamp) talked about the current stage of economic and social development of Brazil, explaining the roots of economic, political, social and financial crisis. Both professors gave the perfect overview of what happened in Brazil since the end of the 20th century and how such a the great country is dealing with the plenty of problems nowadays.

All the students were impressed by the information they got during these 3 weeks and we hope that this experience will help them to build their future careers in more diversified way with the help of BRICS NU professors and students exchange.