Warwick Powell discusses how US wars against Iran and Russia are reshaping East Asia and strengthening China
Glenn Diesen interviews Warwick Powell, adjunct professor at Queensland University of Technology and senior fellow at the Taihe Institute in China.
Summary
Warwick Powell, adjunct professor at Queensland University of Technology and senior fellow at the Taihe Institute, examines the strategic consequences for East Asia of US military engagements against Iran and Russia. Powell argues that the wars have exposed the limits of American power projection, undermined the credibility of US security guarantees across the Asia-Pacific, and accelerated structural shifts toward Chinese economic and technological dominance. Powell contends that China is emerging from these conflicts relatively unscathed due to its energy diversification, industrial scale, and deepening integration with Southeast Asian economies. Powell also addresses Japan's remilitarization, India's strategic ambivalence, the reignited Australian public debate over AUKUS (including a people's commission of inquiry spearheaded by former federal Labor minister Peter Garrett), Pete Hegseth's significant acknowledgment at the Shangri-La Dialogue that the US no longer seeks sole hegemony in Asia, and the opportunity — and risk — of bloc politics reshaping the regional order.
Key Takeaways
FULL TRANSCRIPT
Energy shocks and the immediate regional impact of the Iran war
Glenn Diesen: Welcome back. We are joined again by Warwick Powell, an adjunct professor at Queensland University of Technology and also a senior fellow at the Taihe Institute in China. Thank you for coming back on the program. I've been looking forward to speaking to you about what is happening in East Asia these days, because the war in Iran appears to be heating up yet again, and most of the focus tends to be on how it reshapes the Middle East and also how it impacts the West. But how do you see this influencing East Asia?
Warwick Powell: It's certainly influencing East Asia in ways that I think are, in a sense, longer-term and more structural. Obviously, the impacts on the flow of oil are having an immediate effect, particularly on the economies of Southeast Asia, as well as places like Australia, which are increasingly and incredibly dependent upon the crude flows from the Middle East and the distilled fuels that are manufactured from that.
The regional economies — and we could walk through them almost one by one — by and large have been significantly exposed to the curtailment of oil flows and have had to adjust. They've adjusted in a couple of ways. One is, of course, reaching out to Russia. Indonesia and Malaysia have done so, and indeed Japan has too, in relation to securing their ongoing position with the Sakhalin 2 project. The benefit of doing that, of course, is that oil from the Urals is of a similar chemical composition and type to the oil that comes from the Middle East, which is particularly suited for the manufacture of things like diesel, which underpins most modern industrial economies. Singapore has officially refused to take oil from Russia, so it has had to find some other workarounds. So firstly, we are seeing some effects on regional oil and liquid fuel markets.
The second thing, of course, is the impact on the fertilizer and petrochemicals markets, which are already disrupting various industries in the region. The Japanese naphtha market and the industries dependent on that are already experiencing considerable constraints, and all industries are now compelled to reach out to supplies in China for alternative supply options.
I think one of the longer-term issues, Glenn, is that these energy shocks ultimately don't just end one day and then you go back to the status quo ante. The likely implications are, I think, manifold. Firstly, we've already seen at a consumer level increased interest and demand for electrified transportation — EVs from China, not to put too fine a point on it. Chinese EV exports into Southeast Asia and indeed into Australia itself have increased dramatically in the course of the last hundred days. We're also seeing an increased interest in the capacity of a broad range of energy technologies that can assist countries to become less exposed to these kinds of risks going forward. That really goes to the heart of energy sovereignty, and Chinese clean energy technologies are central to that story.
Those energy, petrochemical, and fertilizer issues are having a dramatic impact both short-term and long-term. The other dimension is what you'd call the military, defense, or narrowly defined security dimension. It's quite obvious now that the United States' forward projection structure — the architecture of its power projection globally, based on a network of bases in allied countries — is actually no longer defendable. We've seen the destruction of, or sufficient damage to, many bases in the Persian Gulf to warrant the Americans pulling back. Whether or not they go back in to repair those, or indeed are welcome back in, is going to be another issue that we'll need to come back to when the dust, hopefully sooner rather than later, settles.
The inability of the United States to defend those bases has actually sent shockwaves throughout Southeast, East, and North Asia, because the entire United States architecture — the so-called deterrence posture in Asia, or American preponderance, or American hegemony in Asia — has been premised on a network of American military bases dotting the so-called first island chain, from Japan through to the Philippines. If those bases are not defendable, or it's no longer viable to sustain the defense of those bases, then the entire security architecture of the region, coupled with China's expanded military posture and capabilities on the back of forty-odd years of modernization, is really sending shockwaves across the region. Strategic thinkers, defense analysts, and others are really having to rethink just about everything they were taught at school, so to speak.
The limits of American hegemony in a multipolar world
Glenn Diesen: It's interesting what you mentioned about these bases in the Gulf states, because I would link it to a wider phenomenon. After the Cold War, the United States pursued a very hegemonic approach to international security — built into its security strategy — that the US would dominate essentially every corner of the planet, and this would be the source of peace and security. There's no great power rivalry if there's only the US having the final say everywhere. This worked to some extent in the nineties when the US dominated, but the whole point is that as the world becomes more multipolar — obviously the rise of China spearheading this development — the US has to adjust to reality. You can't just pretend the world isn't multipolar, that the US is still a hegemon. Because what happens if the US tries to be everywhere at the same time? If it tries to prioritize everything, it's not prioritizing anything at all.
I think for this reason it would begin to suffer the consequences, and the war in Iran has to some extent demonstrated this. The United States was pumping all these weapons to fight Russia, and then it had to fight Iran — all while trying to pivot to Asia. Then it discovered it doesn't really have all the weapons it needs anymore, especially the interceptor missiles, because they all went to Ukraine. So they began to divert missiles from Europe to the Middle East. When I say Middle East, they obviously prioritized Israel. But this wasn't enough — they also had to get weapons out of places like South Korea, again especially the interceptor missiles. As a result of this failure to prioritize, the Europeans now feel betrayed because America is trying to essentially outsource the whole war to them. In the Middle East, the Gulf states are not very happy because the US has painted a target on them and is now unable to protect them sufficiently. And lastly, in East Asia, where the US was supposed to pivot, frontline states risk becoming a frontline against countries like China. However, in return they were supposed to have guaranteed protection from the United States — that's the benefit of being a frontline state. But what happens now that these countries have put a target on themselves? They can be used as instruments against American rivals, making them a legitimate target for America's adversaries, while at the same time the US can't protect them. How is this impacting the regional security arrangements, or at least the discussions about security? Because I would think the wider lesson here is: perhaps we should be careful before hitching our entire security to a declining hegemon who's willing to use you as a tool — essentially making Ukrainians and Gulf states out of all of us.
Warwick Powell: There are a few dimensions to how regional nation-states are responding, and the responses are a little bit varied. Japan, as we discussed before, has been undergoing a period of remilitarization. This has been going on for really a decade or so, and it has been doing that for both domestic political reasons, but also, I think, from Japan's perspective, reasons related to its own concerns about the ability of the United States to offer that security blanket. Same for South Korea. We know that in South Korea the general population has been quite distrustful of the United States' ability — or willingness even — to deliver protection under the American nuclear umbrella. There have been growing demands in South Korea for the government to progress down the path of nuclearization. Same in Japan, of course. So in North Asia, we're starting to see a fairly active, muscular reaction.
Now, this dovetails quite nicely into a wider American strategy, which is to outsource funding and material responsibility, as well as frontline human bodies and risk, to so-called allied states. There are difficulties for the US when this happens, because as these other states become progressively more powerful in their own right, the United States will come under increasing pressure in terms of its own ability to hold the position. So it's a bit of a balancing act at the moment. Naturally, having tens of thousands of American soldiers based in Japan and in South Korea certainly helps the United States keep those two countries under the thumb, so to speak.
Similarly, we've seen in the Philippines the current administration seeking to move quite a lot closer to Washington again, and they've done so for a number of years. It's a difficult situation for them, because at the same time the problems of oil flow from the war in the Persian Gulf have caused significant economic problems in the Philippines, with inflation. The Philippines has actually reached out to China, and China has acceded to Philippines requests for support in terms of supply of oils and other fuels — to a point where Marcos indicated back in the middle to late March this year that the Philippines were interested in re-engaging Beijing around the idea of joint exploration and development of oil resources in the South China Sea.
So the region is in quite a lot of flux. The domestic opposition in the Philippines, just as there is domestic opposition in Japan to the remilitarization, is building up something of a head of steam, because there are growing concerns that not only is the United States in a sense throwing many countries increasingly under the proverbial bus, but that it's actually no longer in the national interest — because the Americans aren't able to offer protection so long as these countries carried some burden.
It's interesting to see how these debates are unfolding. Australia has also seen the re-ignition of a public debate around the question of AUKUS. At the Shangri-La Dialogue a week or so ago, the Australian Defense Minister Pat Conroy announced some changes to the AUKUS deal structure, which has catalyzed a very cynical response from the Australian public, who are increasingly less inclined to buy the entire proposition. To a point — and I know you've spent some time in Australia, Glenn, so you'll appreciate that it takes a fair bit for these sorts of things to happen in this country — a people's commission of inquiry into AUKUS, which I think is actually a first ever, has been initiated by a group spearheaded by former federal Labor minister Peter Garrett, together with some other notable Australians, specifically to investigate the merits and the handling and process of this entire AUKUS deal, on the basis that the parliament itself has singularly failed to do so.
So the debates are starting to unfold. The regional security architecture is in flux, and I think we are going to have to hold on tight and put the seatbelts on as the United States seeks to indirectly, through its proxies and allies, maintain a position in Asia, whilst these allies are thinking through how they can begin to hedge more effectively.
The last thing I'll note — and this is really the capstone, if you will, on the changing context of the thinking — is Pete Hegseth's comments at the Shangri-La Dialogue, where in the keynote speech he talked about the United States seeing itself as playing a role in Asia so as to ensure that no single power can be a regional hegemon. That's remarkable, because in my living memory the United States has always insisted that it is the sole hegemon in Asia and that no one else will be. Pete Hegseth, following on behind Donald Trump's broader posture, is acknowledging that the world has changed and that the United States is no longer in a position to act unilaterally or singularly within the region. You can imagine how much discomfort that brings to those who've built an entire architecture, policy, strategy, and institutional livelihoods around the idea that the Americans would be the dominant player forever. Well, they're not, and the world is as a result changing.
I don't know how this will unfold. I've got some views as to what would be better, but I think there's a long way to go yet before the dust settles in Asia. This is just the beginning of a major reconfiguration.
Frontline states, autonomy, and the risks of bloc politics
Glenn Diesen: Yeah, it's a reconfiguration that's not unique to East Asia. Under the unipolar moment, being a frontline state was often quite attractive — one got a lot of resources and absolute security. But this is my point: when you shift into a multipolar system, it can go both ways. On one hand, if one seeks to balance off a bit and not become a frontline state, then one can prosper if able to hedge between the great powers and diversify ties. But of course there's always the risk that the declining hegemon would essentially use its partners as proxies against its rivals.
As you said, I did live in Australia for about fourteen years, and I remember even speaking with former Prime Minister John Howard, who was making this point that as China continues to rise, Australia shouldn't have to choose between China and the US — essentially, avoid being a frontline state, diversify your ties, don't be forced to pick a side. I was a few days ago in Georgia, and they're essentially trying to do the same thing: we don't have to choose, we can get along with the Russians and Europeans, don't make us into frontline states. This is what Henry Kissinger essentially wrote back in 2014 — for God's sake, don't make Ukraine into a frontline state, don't make it choose, because it will be destroyed.
So I think a lot of countries are going down this path. But how do you see Japan being able to do this? Because one condition of having more autonomy means, of course, you have to militarize — or rather, not be dependent on an external actor, which you can achieve through diversification. But if Japan is rearming itself, it can go two ways. One, it can use this as a tool for autonomy — it doesn't anymore have to do whatever the US wants, which is probably good for its security, because a declining, destructive hegemon is not someone you want to outsource your foreign policy to. On the other hand, it could also mean that Japan is arming itself to the teeth to be used as a frontline state. I see the same in Europe — I would usually welcome the Europeans building their own military capability so they don't have to outsource their security to the US, which has very different interests. But instead, you get the impression that the Europeans are simply now preparing for war with Russia, essentially to destroy themselves. What direction do you think Japan is going? Is this to assert autonomy as a source of peace, or will they become a militarized hub as an instrument of the United States?
Warwick Powell: It could go either way. This is partly the double-edged sword of where Japan's been going for the best part of the last decade. On the one hand, of course, they're occupied by the Americans and have been a critical ally for the US. But once America's military bases in Japan are no longer viably defendable, it does raise medium-term questions as to whether the architecture itself is going to serve its purposes.
One of the interesting things we'll need to keep a very close eye on is whether or not the Americans slowly reconfigure their frontline exposure themselves. They have very quietly slipped some forces out of Okinawa — this was before the war broke out in Iran earlier this year — where they moved some forces from Okinawa into the Persian Gulf, and from memory some troops were also taken out of Okinawa and relocated to Guam. But I think the hard power question in the end is going to be whether or not the bases are defendable. Recent modeling on the defendability of these bases — given the shortages of the American arsenal, given the nature of Chinese capabilities, and given what we've learned from the war against Iran — would suggest that these bases, and a good proportion of the airplanes stored there, won't last to the end of the first week of any serious conflict.
I think anyone who is serious in this space understands that. And it is doubtful that the Americans will want to expose that capability and infrastructure to the sorts of risks we're talking about. Certainly I don't think the military planners anticipated the debacle that has been the war against Iran and the fact that it has totally exposed American limitations. It's the last thing a hegemon would ever want. Part of being a bully is that you never actually have to act as one — you just need to make sure people are fearful that you could. But recent events suggest that United States capabilities are far less robust and deep than many people had originally expected. And I think you'll see even in American commentary and public debate amongst policymakers and strategic thinkers that some of these realities are dawning inside the Beltway as well — that maybe they really have reached some limits and really need to rethink just about everything.
Pulling out quickly, as you know, is a terrible thing for an American president to have to do, so nothing is going to happen in the short term on that front. But Japan is going to continue its rearmament. Whether it is for its own greater autonomy will depend a little bit on the extent to which the United States can keep them under control. But if the United States is seeking to push the Japanese more to the front line, then the Japanese will reach a point where, notwithstanding American bases in Japan, they will be an American ally with a little bit more room to move.
That's a concern across the region. Not everybody views Japanese remilitarization favorably. Obviously Beijing has expressed its concerns, but there are many people across Southeast Asia who continue to have lingering memories of what happened last time Japan rearmed — the militarization that wreaked havoc across Southeast Asia in the thirties and forties. This is going to make for a very potentially tense period in Asia as a result of all of this.
And as you know, as much as I think Beijing at a certain level would be favorable to pushing the Americans out of Asia, they're also sensible enough to understand that the historic role the Americans have played in Asia is that they've kept Japan under some control. If that disappears over time, the question will come: how do you keep Japan contained?
The upside in all of this, if we're talking in somewhat brutal terms, is that the Chinese economy and its industrial power far outweighs anything that the region could muster, whether it's Japan or Australia or whoever. It is ludicrous for any of those countries to think they are in a position to even mount a balancing act — which is why, of course, they're desperate to try and bring the Americans in as well. But just to put it into some context: the Chinese economy represents 60% of the GDP of the region, meaning the ASEAN states plus Japan, Korea, Australia, and New Zealand. 60%. China is the only industrial superpower in the world. Over 30% of manufacturing value added comes from China, and by 2035 that's going to be close to 40%. The idea that other countries can somehow pose a serious military challenge to China is foolhardy and dangerous, and I'd encourage people across the region to actually just realize that. The real issue isn't whether you can muscle up to China. The real issue is how do you live with China being the major power in the region.
China's economic dominance and the limits of US containment strategy
Glenn Diesen: Now, we can draw some parallels again to Europe. After World War Two, one of the achievements of the United States was that it used its heavy military presence in Germany and Japan as nodes in a larger American empire. And yes, as you said, one concern when the US starts to pull away is what happens to these countries then. One should also be careful what one wishes for — if the US leaves Japan to its own devices, will Japan seek nuclear weapons for security? You see something similar now in Europe. No one's really sure where the US is going to be tomorrow in terms of capabilities or intentions, and as a result you now have the German authorities arguing that Germany should become the largest military force in Europe. Not everyone in this part of the world remembers German military power with great fondness. But of course they also put themselves now in the crosshairs of the Russians. Similarly with the Japanese — not everyone remembers Japanese military might with fondness, and the Chinese will of course look at them with a lot more suspicion.
My point is that whenever there's a rapid change to the regional order, you will often see a security competition begin to emerge. The Japanese will be worried about China, China will then become more worried about Japan, and conflict will begin to build. But as you said, what is different in East Asia is the scale of China. There seems to be a very strong imbalance — the Japanese can't really do anything to knock out the Chinese. But how do you see this sustaining itself for the long run? Because many people are pointing out that part of the American objective in Iran is to weaken China — to cut off its energy. How do you see the Chinese economy sustaining itself, compared to its neighboring states, which the US would like to use to balance it?
Warwick Powell: I know that the Americans have for many years talked about different ways in which they could choke China's energy sources, particularly maritime oil transportation. If you argued this twenty-five years ago, you'd say that would have a significant impact on China's economy and its fundamental energy foundations. But the world has changed quite a lot since then.
The energy structure of the Chinese economy is firstly far less dependent on oil, generally speaking, compared to what it once was. China had peak diesel about two years ago, and the aggregate amount of diesel consumed by the Chinese economy has fallen since. That's your first point. The second point is that China has for twenty-odd years been embarking on a major and quite radical transformation of its energy structure through diversifying its energy-generating capabilities, ultimately leading — through breakthroughs in electrification and electricity storage, battery systems, and renewable energy — to a fundamentally different energy base. China, of course, is building more coal-fired power stations and nuclear power stations than anybody else in the world combined. So in that sense, the world is just different, and China is no longer as dependent upon Middle Eastern oil as it was twenty years ago.
The other thing to recall is that in that time the terrestrial transportation networks across Eurasia have improved significantly. Russia and the Central Asian states are now suppliers of oil and gas to China, and those terrestrial transportation networks will be far harder to interdict than choke points such as the Strait of Hormuz. That's not to say that Americans or others might not seek to disrupt those flows through sabotage or other forms of interference. But there's more than one way in which oil and gas flows to China today than there was twenty-five years ago. And of course, global warming has seen the Arctic becoming increasingly viable for more months of the year than ever as a transportation route, and we are going to see that continue to expand.
The other thing to remember — and people often talk about the American grand strategy of becoming the global energy monopoly — is that you just have to look at the numbers. The global energy market is actually far more fragmented than that implies. Because there are many ways in which energy gets moved and there are many new energy technologies, it is always impossible for any single state to actually fulfill that ambition, even if they had it. The area in which the United States actually has the greatest say in terms of global energy markets is LNG. But LNG plays a relatively small part in global energy — it's important in certain contexts, but comparatively small as a proportion of total energy, whether coal, renewable, or oil.
So whilst there are strategic discussions around choking these choke points, the actual nature of global energy, the distribution of its resources, and the capacity of countries to have alternatives today compared to twenty-five years ago just means that even if you had these ambitions, it is always impossible to carry them out. That horse has bolted. The Chinese economy, from an energy point of view, is incredibly well prepared for these kinds of events. And as the decades unfold over the next five and ten years, the extent to which China's economy will be dependent upon crude oil from external sources such as the Middle East will diminish even more.
Of course, China has massive reserves, and it keeps massive reserves — to a point where observers are conceding that known reserves may actually understate the extent of China's reserves altogether. China has reduced its demand on global crude over the course of the last hundred days, and yet economically it hasn't missed a beat, which tells you something about the ability of the economic system to adapt and also the depth of the reserves it actually has.
So I think that horse has bolted, and it's largely fanciful now that people think there's actually a serious capacity for the Americans to execute this kind of containment strategy. I'm not saying the Americans don't have this idea in mind. I'm simply saying that the ability to execute it is countered by reality.
Will China emerge stronger from the wars against Iran and Russia?
Glenn Diesen: So in short, do you think China will come out strengthened as a result of the war — not just against Iran, but against Russia as well?
Warwick Powell: Yeah, I think China will come out reasonably unscathed, and it will do that for a number of reasons. One is obviously its own preparedness for these energy crises. The second is that global demand for Chinese clean energy technologies is growing. We're going to see not only Chinese exports of these technologies and final products like EVs, but I think we are going to see an era of increased Chinese foreign direct investment as these know-hows, capabilities, and fixed capital begin to expand globally and deliver factories, particularly in the Global South — enabling the Global South to manufacture much of its own renewable energy capabilities over time, and to assemble motor vehicles, and eventually also build many of these parts.
China is going to be able to consolidate its supply chains and in many respects consolidate its position in the region itself. In Asia, the other dimension of all these geopolitical insecurities is actually an increasing concentration and integration of the Southeast Asian economies and the Chinese economy. That kind of intertwining becomes very, very difficult to unwind, whether it's at an energetic level, whether it's in the flow of raw commodities or finished products. And of course, now we're starting to see the expansion of payment systems right across Southeast Asia, integrating with Chinese payment systems as well as ASEAN's own payment capabilities — all of which reduces exposure and dependency on American infrastructure and institutions, whether they be the dollar or SWIFT. It will provide regions with the ability ultimately to have a greater say in their own futures, with less need to be as mindful and wary of the Americans as they historically have been.
The caveat is that the Americans do have significant resources to cause many disruptions. They still control a lot of the technical infrastructure in the world. And if there's one resource that the Americans have built and sustained over the course of the last eighty years, it is a very wide network of very well-skilled and trained NGOs and intelligence systems across many countries, which enables them to activate interference actions at a minimum, all the way through to instigating all sorts of quasi-kinetic activities.
India's strategic ambivalence and the challenge of genuine non-alignment
Glenn Diesen: How do you see India falling into place here? My impression of India is that they're always leaning a little bit. On one hand there's the desire to continue essentially its Cold War tradition of non-alignment — if it weds itself too closely to one side, it's going to develop excessive dependence. Again, this is the logic of developing nuclear weapons as well, avoiding becoming another Japan, subordinated to the US. So on one hand it wants to take this position, and in a multipolar world this means it's part of BRICS, it needs to link itself closely with China, Russia, as well as the United States and other large powers. On the other hand, they're also anxious about China — often outright hostility. So there's always this vulnerability that they could lean too heavily into the Indo-Pacific partnership, where they would essentially join a de facto bloc of the United States and thus get captured. How do you see them adjusting here? It's hard to read India at times, to be honest.
Warwick Powell: Well, I think that's by intent to some extent — it's sort of built into the institutional habits of Indian foreign policy. As you say, it has a long tradition of being non-aligned. And partly being non-aligned means that from one perspective it looks like it wavers from one side to another. But that's partly what non-alignment does.
India, of course, does face some of its own challenges. In large part, those challenges relate to the state of its own economic development and the extent to which it is dependent on engagement with the United States economy for some of that. There is a section of the Indian economic elite that maintains very, very close connections with the US, and let's not forget that countries aren't unitary actors — we also have different vested interests within countries that often have divergent perspectives on how they need to pursue their foreign policy interests. The Indian economic elite does tilt very heavily towards Washington, and there are a lot of historical reasons for that.
The Indian political elite, I think, are in a sense caught in a bind. They have a lot of anxieties about China, and there's a whole bunch of history around that. But at the same time, China's not going anywhere, and they share a land border — so there are some realities that are unavoidable. The real question in the end for India is how it becomes a more autonomous economic actor that is less exposed to the risks of essentially having its livelihood interfered with by one of the great states, particularly the United States.
We've seen during this last hundred days that India does have huge problems when it comes to fertilizer and access to energy. It has significant domestic infrastructure challenges that need to be overcome. It has not really successfully industrialized. In some respects, the economic growth in India is underpinned by the expansion of a services economy, much of which is also tied to the growth of American IT, which has outsourced a lot of the supporting infrastructure and industries to India.
Some of the ambitions articulated by the Modi government from its very early days around Indian industrialization have yet to deliver fruit. And until India can actually establish some kind of serious industrial base of its own, it's always going to be caught between a rock and a hard place.
I'm not here to tell the Indians what they should or shouldn't do, but it seems to me that India, thinking very long term, would be wise to figure out how it can establish a more cordial relationship with China — and China of course has a role to play in that — and understand that being good neighbors is actually in each other's own interest as well as the interest of key sections of their societies. That's going to require political leadership domestically in India that can overcome some of those anxieties and feelings that Indians have towards China, particularly after the war, which by the way is six decades ago now. But I understand that people have memories and feelings about these things. Leadership is needed to in a sense transcend some of these to create a new platform that will enable India to fulfill much of the promise.
You'll remember forty years ago many people talked about India as the next shining light after the Asian tigers. Well, in fact it wasn't the next shining light at all. Forty years on, even though the GDPs back in 1985 or so were roughly the same, China is the one that has expanded and reached a point where its GDP is five to six times larger than India's. So India has a lot of work to do. It does need to become, if it wants to be a genuine non-aligned player within the region, a little bit tougher when it comes to particularly the Americans, and that's a real challenge still for India.
Bloc politics versus inclusive regional architecture
Glenn Diesen: There's always going to be some security competition, so the Indians will always have some legitimate reasons to be concerned about China. But the problem is that once the solution becomes embracing bloc politics, it only intensifies from there on, and the subservience to the US would grow. The Indians could then be seen — for good reasons — as a pawn against the Chinese, which would undermine India even further. So it can often be very attractive and appealing to lean into this kind of bloc politics, but as your former Prime Minister Keating once said, East Asia needs a NATO security architecture like it needs cancer. It really has the possibility and opportunity to pursue something inclusive, where we seek security with each other rather than against each other. But in such a scenario — and I don't like to pick on the Americans, but if you are pursuing hegemony, you depend on alliance systems to make your allies obedient and your adversaries weakened — this divide and rule is not new. So this is a very dangerous time.
Warwick Powell: You're right, and this issue of bloc politics as an attractive short-term reaction is something that needs to be resisted, because there is an opportunity for the Asia-Pacific, including heading into South Asia — so I'm talking about India and Pakistan — to actually create something by themselves, for themselves.
We've got some elements that could be worked on towards that end. ASEAN, as you know, is the principal vehicle for regional diplomacy for Southeast Asia. Southeast Asia comprises many relatively small nations, and ASEAN has been a really important way by which they can cohere a perspective and achieve a consensus view on a broad range of issues. Whilst many bloc political perspectives would criticize the way ASEAN goes about doing its thing, if you just take half a step back and reflect on ASEAN's conduct and behavior, you'll actually think that ASEAN has been quietly incredibly successful. It has been able to hold together an incredibly diverse region. Whilst at times it is slow — consensus often is — it has been able to keep a region at relative peace and focus very much on the things that the region itself has common interests around, namely economic development and prosperity. It brokered the world's largest free trade agreement at the time, the Regional Comprehensive Economic Partnership, which was signed about four years ago. And India was actually part of those discussions right up until the moment for signatures.
So India has an opportunity to rethink its economic relationships and the trading arrangements that exist across the region. Whilst I understand the history of protectionism in India, the opportunity to open up trade flows does ultimately create really major opportunities across the entire region. I would encourage ASEAN and India and all of the members of RCEP to reach out to India and engage with them to work through what the issues are that held India back from coming on board.
We also have extensions out of the RCEP dealing with digital trade. We've got Latin American countries expressing interest in joining RCEP, reaching right across the Pacific to build the economic architecture that enables multi-regional and multilateral collaboration. The payments architecture, as I mentioned earlier, is actually well developed — it enables countries to settle trade in national currencies, which is of tremendous benefit. It's cheaper, it's quicker, and it's safer, with less exposure to foreign exchange risks, less exposure to risks of liquidity crises such as happened in the Asian financial crisis period, and ultimately can deliver to the region an architecture that emphasizes economic development as a common objective. It's also one that can bring Japan and Korea to the table.
Now, this requires ASEAN to step up, and this means that Indonesia, in many ways, will be the key player — even more so, in my view, than Singapore. Indonesia is the one state within ASEAN that has the capacity to emerge over the next half-century as the second major state within the region — not a great state like China, for obvious reasons, but certainly rivaling Japan in terms of the heft it brings to the region. That could actually be an important ballast underpinning a multipolar region.
If countries could actually imagine a region built on indivisible security, with ASEAN playing really the pivotal role, and where pressure is brought to bear on countries like China and India and Japan to actually see themselves as part of a great region — I think there are good prospects of that. I think China would find that proposition quite appealing in a broad sense.
And interestingly — and this really touches on the broader Eurasian question — the Shanghai Cooperation Organization offers a model that can easily be extended into Southeast Asia and North Asia, delivering the kind of multilateral, multipolar security that the region could really benefit from. Russia is also a Pacific power, and it would be remiss not to engage the Russians in Asia-Pacific security as well. The SCO offers many learnings, institutionally and from an ethos and behavioral point of view, that can do that. It's a way then of actually countering bloc politics, because bloc politics leads to security competition, which leads to security dilemmas, arms races, and ultimately intensifies suspicions. As suspicions intensify, at some point there's a miscalculation somewhere, and the region is plunged into conflict.
It is avoidable. I look across at Europe and I think to myself: the lessons of non-peace and warfare in Europe really are the ones that Asia should absorb, and absorb quickly. The principal lesson is don't fall into the trap of bloc politics.
Glenn Diesen: Well, in Europe, indivisible security used to be considered a goal — it was common sense, it's what would allow us to transcend bloc politics. Today it's become something controversial, seen with suspicion as possibly some Russian ploy. One should be a little bit careful about taking the lessons of Europe in recent years.
On Indonesia though — this is possibly the most underestimated country in all of East Asia — but we can get to that next time, I guess. So to wrap it up—
Warwick Powell: I spent a little bit of time in Indonesia actually not so long ago, in discussions with folk in the finance industry. And I think Indonesia, as you say, is an underestimated and poorly understood country in terms of the region and its role globally, and it's one that behoves all of us to better understand.