The New Face of Russia’s Relations with Brazil

Defense Minister of Brazil, Celso Amorim, receives his counterpart from Russia, Sergei Shoigu, during bilateral meeting in Brasilia.

Defense Minister of Brazil, Celso Amorim (L), receives his counterpart from Russia, Sergei Shoigu, to bilateral meeting at the Defense Ministry in Brasilia, capital of Brazil, on October 16, 2013. Shoigu’s visit included an attempt to win a $4 billion deal to supply 18 fighter jets.

Journal of Political Risk, Vol. 2, No. 5, May 2014.

By Matthew Michaelides

Abstract

Bilateral trade, high level personal communication, and military-technical relations between Russia and Brazil have all grown significantly over the past decade. Recent weapons sales to Brazil include a $150 million contract for MI-35 helicopters in 2009 and a 2012 deal for seven Ka-62 helicopters. Moreover, the Russian defense ministry has indicated its intention to increase Russian military capacity in Brazil and Latin America more broadly. This paper examines the causes for the increasing depth of Russian-Brazilian military-technical relations and concludes that informal patronage politics play an essential role in understanding Russian actions. A detailed analysis of contemporary Russian-Brazilian relations and existing theoretical perspectives is provided, as well as a thorough examination of recent Russian arms and equipment sales from the informal patronage politics perspective.

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China Response to Hacking Indictment Indicates Rash Leadership and Need to Expand NATO to Asia

 

Russia and China are currently conducting naval  exercises near Shanghai. In 2013, Russia and China conducted similar exercises near Vladivostok. From right, China's Yantai Type-054A missile destroyer, Yancheng Type-054A missile destroyer, Wuhan Type-052B guided missile destroyer and Lanzhou Type-052C air defence missile destroyer take part in the fleet review during the "Joint Sea-2013" Sino-Russian joint naval drills at the Peter the Great Gulf near Vladivostok in Russia on Wednesday, July 10, 2013. A Chinese fleet consisting of seven naval vessels participated in the "Joint Sea-2013" Sino-Russian joint naval drills scheduled for July 5 to 12. The eight-day maneuvers focus on joint maritime air defense, joint escorts and marine search and rescue operations. (Photo By Sheng Jiapeng/Color China Photo/AP Images)

Russia and China are currently conducting naval exercises near Shanghai. In 2013, Russia and China conducted similar exercises near Vladivostok. From right, China’s Yantai Type-054A missile destroyer, Yancheng Type-054A missile destroyer, Wuhan Type-052B guided missile destroyer and Lanzhou Type-052C air defence missile destroyer take part in the fleet review during the “Joint Sea-2013” Sino-Russian joint naval drills at the Peter the Great Gulf near Vladivostok in Russia on Wednesday, July 10, 2013. A Chinese fleet consisting of seven naval vessels participated in the “Joint Sea-2013” Sino-Russian joint naval drills scheduled for July 5 to 12. The eight-day maneuvers focus on joint maritime air defense, joint escorts and marine search and rescue operations. (Photo By Sheng Jiapeng/Color China Photo/AP Images)

Journal of Political Risk, Vol. 2, No. 5, May 2014.

By Anders Corr, Ph.D.

China is using a very blunt and escalatory instrument — threatening general deterioration in military relations — to respond to a limited issue of Chinese individuals stealing trade secrets. On May 20, the United States Justice Department indicted five People’s Liberation Army members for hacking United States commercial data.  The remarkable speed with which China responded the following day, and at the highest level, suggests that commercial hacking is an officially-approved state policy on the part of China. The Chinese threat of reduced military cooperation and thereby deteriorating military relations is clumsy in that the Chinese would look better had they simply launched an investigation of the individuals — an investigation that they could later claim shows the indictment as baseless. The broad Chinese threat of deteriorating military relations invites an increase in US military attention to Asia — exactly what the Chinese should be trying to avoid. The clumsiness of the Chinese response to the indictments indicates a rash Chinese leadership prone to irrational military strategies, with consequent market volatility and political instability. The US and its Asian allies should respond with a measured forward deployment of military forces, and redoubled diplomatic energy towards greater alliance cooperation, including between Asian allies and NATO.

For legal and political reasons, the US will not be able to simply withdraw the indictment. It would increase the perception of an increasingly weak US foreign policy. This will lead Chinese diplomats to retaliate in some manner, further decreasing stability between the US and China. Expect mutual diplomatic retaliation to exert downward pressure on the Yuan (compensated by People’s Bank of China buying of Yuan), as well as downward pressure on Chinese stock indexes, including SHCOMP, CSI-300, Bloomberg China-US 55, and HSCEI. Expect Chinese index losses to increase with every additional diplomatic spat that ensues, and to slowly recover during periods of diplomatic quiet. Continue reading

Shale Gas Race: Political Risk in China, Argentina and Mexico

Journal of Political Risk, Vol. 2, No. 1, January 2014.

Global shale gas basins, top reserve holders. Source: Reuters, Catherine Trevethan.

Global shale gas basins, top reserve holders. Source: Reuters, Catherine Trevethan.

By Igor Faynzilbert, CFA

As the world continues to embrace cleaner and more efficient sources of energy over the next 25 years, natural gas stands to gain a large market share at the expense of less efficient and more pollutant coal and wood. The United States is currently the biggest winner from hydraulic fracturing and horizontal drilling that allow significantly increased production of shale gas. However, China, Argentina and Mexico are also potential gainers from these new technologies if they manage to overcome political and infrastructure challenges that have considerably slowed development of new gas fields. Continue reading

Election Boycott will Weaken Thailand’s Democrat Party and the PDRC

Journal of Political Risk, Vol. 1, No. 8, December 2013.

By Anders Corr, Ph.D.

Anti-government protesters attend a rally outside Government House on December 9, 2013 in Bangkok, Thailand. Photo credit: Sira Anamwong.

Anti-government protesters attend a rally outside Government House on December 9, 2013 in Bangkok, Thailand. Photo credit: Sira Anamwong.

Thailand’s opposition Democrat Party, as well as the supporting People’s Democratic Reform Committee (PDRC) protest movement, will weaken due to strategic missteps of boycotting elections and attempting to block other parties from registering with Thailand’s electoral commission. It should be obvious that elections and elected position are a potent source of influence for both political parties and social movements. Boycotting elections invariably backfires as a strategy because it increases distance between the challenger who wields the strategy, and the electoral source of influence. Election boycotts led to landslide victories for incumbents in Trinidad and Tobago (1971), Jamaica (1983), Burkina Faso (1991), Ghana (1992), Togo (1993), Ethiopia (1994), Mali (1997), Algeria (1999), Gambia (2002), Guinea(2003), Azerbaijan (2003), Iraq (2005) and Venezuela (2005). The incumbent also won the boycotted 3 April 2006 elections in Thailand. These were later invalidated and followed by a coup, resulting in the instability that continues in Thailand today. As in prior boycotts, expect the incumbent political party, in this case Prime Minister Shinawatra’s Pheu Thai, to take advantage of the challenger’s absence to consolidate the Pheu Thai’s parliamentary majority and public image. Expect increased dissatisfaction among the opposition and military, and resulting political instability.1 Continue reading

Rise of Environmental NGOs in China: Official Ambivalence and Contested Messages

Journal of Political Risk, Vol. 1, No. 8, December 2013.

By Ruge Gao

Figure 1. Registered NGOs (Civil Organizations) in China 1988 to 2009. Data source: Xu Ying and Zhao Litao, 2013.

Figure 1. Registered NGOs (Civil Organizations) in China 1988 to 2009. Data source: Xu Ying and Zhao Litao, 2013.

With China’s impressive economic growth over the past few decades has come an environmental cost that reaches from the countryside to the capital.[1]  While some Chinese economists believe the lack of environmental regulation encourages uninhibited growth, the Chinese State Environmental Protection Agency and State Statistics Bureau have produced statistics that indicate that environmental damages have decreased growth by three percent.[2] Triggered most prominently by the 1998 Yangtze River Floods, the number of Chinese environmental non-governmental organizations (ENGOs) began growing around 2000 and experienced explosive growth within the last decade. According to Chinese Ministry of Civil Affairs statistics,[3] in 2008 China had approximately 212,000 social groups, with 5,330 being of the environmental variety. Many Chinese ENGOs are in the public eye, but must simultaneously satisfy international donors and local government officials in order to survive. Continue reading

Political Risk to Investment in Iran: Sanctions, Inflation, Protectionism, War, Bonyads, and the IRGC

Journal of Political Risk, Vol. 1, No. 7, November 2013.

Figure 1: Foreign Investment in Iran and its Neighboring Countries, March 19, 2012-March 19, 2013. Data Source: The Government of the Islamic Republic of Iran News.

Figure 1: Foreign Investment in Iran and its Neighboring Countries, March 19, 2012-March 19, 2013. Data Source: The Government of the Islamic Republic of Iran News.

By Reza Yeganehshakib

Despite a tumultuous recent political history that includes revolution, war and sanctions, relations between Iran and the West are improving and Western investors are increasingly interested. But, Iran’s politics cause sanctions, and the economy suffers from inflation. Protectionist laws are on the books, and in some cases economic crimes are punishable by death. Regardless of warming relations with the West, Iran has in the past reneged on its agreements, and war is still a risk with non-Western bordering countries and regional powers. The Iranian Revolutionary Guard Corps (IRGC) has nationalized foreign investments in the recent past, and the politically powerful revolutionary foundations known as Bonyads control large segments of the most lucrative investment sectors. Continue reading

Legal Services Reform in China: Limitations, Policy Perspectives, and Strategies for the Future

Number-Foreign-Law-Firms-in-China-2000-to-2012

Journal of Political Risk, Vol. 1, No. 6, October 2013.

By Julian Yang, Esq.

Précis: Mr. Julian Yang, a practicing lawyer and arbitrator in Beijing, China, describes problems with the Chinese legal system, including bias by courts, corruption, a culture of litigation, and lack of sufficient numbers of lawyers to satisfy market demand. He argues for legal services reform in China, including: 1) allowing foreign lawyers to address Chinese courts, 2) allowing foreign lawyers to practice commercial law, 3) increasing consultation of lawyers in contractual law to avoid litigation, 4) use of arbitration to decrease the quantity of litigation, 5) increasing the rights of Chinese lawyers, such as rights to gather evidence, and 6) increasing the rights of clients, for example the right to freely choose and meet with lawyers without police scrutiny. Mr. Yang argues that these reforms will increase the influence of China abroad, improve legal services in China, and provide a test as to whether greater political reform would be possible without loss of political stability.

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Chinese Political and Economic Influence in the Philippines: Implications for Alliances and the South China Sea Dispute

Journal of Political Risk, Vol. 1, No. 3, July 2013.

By Anders S. Corr, Ph.D., and Priscilla A. Tacujan, Ph.D.

Figure 1: China and Philippines: Military Expenditure and Energy Use, 1989-2011. Shortly after most US forces left the Philippines in 1991-2, Chinese military expenditure and activity in the South China Sea increased dramatically. Data source: Correlates of War Project.

Figure 1: China and Philippines: Military Expenditure and Energy Use, 1989-2011. Shortly after most US forces left the Philippines in 1991-2, Chinese military expenditure and activity in the South China Sea increased dramatically. Data source: Correlates of War Project.

The Philippine government is constitutionally required to craft an independent foreign policy, but it must accelerate cooperation with foreign powers to do so effectively.  China’s growing militarization and energy consumption are fast out-pacing the meager military spending and energy consumption of the Philippines (See Figure 1). This makes China, more so than the Philippines, willing to risk military conflict over disputed energy resources, fishing areas, and transportation routes in the South China Sea.

Since the People Power Revolution of 1986, the Philippines has had a comparatively weak, and sometimes fractious, alliance with the United States, Japan and the Association of South-East Asian Nations (Asean). China, on the other hand, has increased its political influence in the Philippines over the last twenty-five years, through both economic means, and threatening military behavior. China would prefer prolonged bilateral negotiations with the Philippines, as with other small countries, while gradually encroaching on maritime territory. The minor concessions or royalty payments offered by China are in no way commensurate with the energy resources of the South China Sea (also known as the West Philippine Sea). The cheapest approach for China, though one costly in terms of reputation, has been to compromise individual Philippine politicians in exchange for turning a blind eye to encroachments. The belief of China is that such encroachments may cause minor discomfort in Chinese foreign affairs in the short-run, but will eventually be accepted and legitimized as fait accompli. Control over lucrative shipping, fishing, and energy fields will result.

The Philippines could extract far greater ownership rights and royalty payments on the international market by keeping Chinese corruption and military threats at bay. The latter strategy requires political fortitude and strengthened alliance cooperation with the United States, Japan, and Asean. The Philippines can become a leading partner in a developing Asian alliance system[1] geared to contain China and safeguard an UNCLOS determination on the East and South China Seas, but to do this requires safeguards against Chinese influence in Philippine politics. Continue reading

Unfounded Worries of a Sino-Japanese War

Saber-rattling by China over the Senkaku Islands, most recently in the form of locking weapons on a Japanese ship and helicopter, have led some analysts to warn of war between the two East Asian countries. These analysts go further to question whether the US treaty commitment to Japan’s territorial integrity would hold in this case (Wall Street Journal).

Such warnings are overblown. Militarized jostling of this sort is normal for low-intensity territorial disputes. All parties — including China — recognize that war would be counterproductive. China regularly activates media coverage with its mildly belligerent actions in order to bolster and maintain its long-term claim to the islands should the case go to an international court in future. Japan is a key US ally and trading partner. There is no question that were war to occur between China and Japan, the United States would defend its ally.