TURKEY'S REGIONAL POWER AMBITIONS

Ever since his Justice and Development Party (AKP) became Turkey’s dominant political force in 2002, for Erdogan, elevating the public role of Islam has been more than a slogan. Erdogan sees himself as a global Islamic leader. Since he came to power, Erdogan, in a building spree, has reportedly built 17,000 mosques (one fifth of Turkey’s total). The largest is located in Camlica, the Asian shore of Istanbul. Erdogan is ceaselessly active in diplomatizing his religion. The biggest mosque in Balkans is located in Albania. The largest in West Africa in Ghana, the largest in Central Asia in Kyrgystan, the largest mosque in Europe at  Strasbourg. He is planning to open Turkish schools in France.

Erdogan has empowered Turkey’s Directorate of Religious Affairs (Diyanet whose budget is the size of twelve other ministries combined. This is the religious network with which Erdogan spreads his influence in European affairs. In Germany, Turkey controls 900 mosques out of a total of 2400. The Islamic centres not only serve members of Turkish diaspora, but also stop them from assimilating into German society. Erdogan called assimilation of migrants in Europe “ a crime against humanity” and wants them to remain part of Turkey and Ummah, the global Muslim community. Through four million Turkish Muslims in Germany and vast communities in the Netherlands, France, Austria and beyond, Erdogan does indeed have enormous influence in Europe. Mosques, migrants and military are now Erdogans new weapons in his threat against the West.

Turkey now is the 17^th largest economy in the world, it has an army and military capability that is probably the best in Europe. Erdogan has placed Turkey’s military – once a bastion of Turkish nationalism and secularism- under his political authority. Erdogan is the head of NATO’s second largest army; and conducts espionage activities across Europe through a network of mosques, associations and cultural centres. By keeping migrants in Turkish refugee camps, he controls immigration to Europe.  While Europe is pacifist and refuses to invest in its own security and support NATO’s budget, Turkey is belligerent.

Hagia Sophia  Reconversion:

On 10 July, President Erdogan issued a decree reconverting the Hagia Sophia Museum to a mosque, thus realizing a long cherished dream of conservative currents in Turkish Society. Originally built as a cathedral by the Romans, the Hagia Sophia functioned as Istanbul’s main mosque throughout the Ottoman era. Its reconversion into a museum in 1934 was  one of a series of moves intended to distance Kemal Ataturk’s new secular republic from the Islamic heritage of the defunct Ottoman Empire. Reconversion is considered a significant achievement for the conservative side and settling of scores with the early secular republic. Erdogan has gained politically by treating this issue as an identity battle between conservatives and secularists. Hagia Sophia controversy is a tactical move as an attempt by Erdogan to divert attention from economic problems, unemployment (24.6%) and reverse its declining support.

Turkey’s aggressive foreign policy:

Turkish President Recep Erdogan has made unprecedented moves which possess threat to regional and global stability by destabilizing 1) Eastern Mediterranean and North Africa 2) South Caucasus 3) Yemen 4) India and Saudi Arabia

1)      Eastern Mediterranean and North Africa:

After Turkey’s exclusion from Israel-Cyprus-Greece undersea gas pipeline project, Erdogan turned to oil rich Libya to secure his own source of cheap foreign energy for Turkey. Turkey and Libya’s Government of National Accord (GNA) signed a maritime agreement in November 2019 to establish an Exclusive Economic Zone to legitimize Turkey’s claims to offshore gas and oil in the Eastern Mediterranean. The deal creates a sea corridor between the two nations, which cuts through a zone claimed by Greece and Egypt, who are collaborating on gas drilling and transportation in the area, and reigniting an ongoing territorial dispute between Turkey and a conglomerate of Eastern Mediterranean countries.

Turkey in recent months along with GNA, reversed a 14 month assault on Tripoli by LNA General Khalifa Haftar, backed by Saudi Arabia, Egypt, Russia and United Arab Emirates. Turkey and Qatar back GNA. While Erdogan supports the GNA for ideological and geopolitical reasons, there is also an economic rationale, as Turkey is keen to assert its gas exploration rights in the Eastern Mediterranean and also offers Erdogan a chance to flex his neo-Ottomanist ideology.

Turkeys efforts can push war torn Libya into second wave of migration into Europe and that would trigger adverse geo-political and geo-economic tensions across European Union and Middle East. More than 48,000 refugees and 6,35,000 migrants have been packed into overcrowded detention centres across Libya. Another 1.3 million Libyans are in dire need of humanitarian assistance.

Another threat posed by Erdogan’s efforts is to form Turkish proxy state in Libya and legitimize and expand the political cachet of Muslim Brotherhood, one of the largest political organizations in the GNA led Libya. By gifting Muslim Brotherhood a seat of power in Libya, Erdogan will further aggravate region-wide sectarian tensions, exacerbating already fragile socio-political situation in Iraq, Syria and Egypt.

Erdogan is hoping to drag larger entities into conflict by its actions in Libya. Turkey has become NATO’s Achilles heel, threatening to either destroy the world’s strongest military alliance or to draw it into a series of conflicts with no end in sight. Turkey’s pursuit of hegemony in North Africa is driving Libya deeper into conflict, and could trigger a cascade of adverse consequences across EU and Middle East. Erdogan is driving a wedge between Europe and the Middle East.

In a recent development, Greek PM Kyriakos Mitsotakis warned Turkey by deploying naval vessels and air force against continuing its seismic surveying for offshore resources in contested areas of the Eastern Mediterranean. US President Donald Trump and Turkish PM Recep Erdogan in a phone call discussed steps to establish demilitarized zone and possible ways to achieve the withdrawal of all foreign forces and mercenaries from Libya.

2)      South Caucasus:

South Caucasus is the region below the Greater Caucasus mountains that includes Georgia, Azerbaijan and Armenia, contested territories of Nagorna – Karabakh, the uncontested but detached region of Nakhichevan. This is Russia’s backyard.

Azerbaijan and Armenia are embroiled in a dispute over the Nagorna-Karabakh region, which broke away from Azerbaijan in 1991 with the dissolution of Soviet Union. Clashes broke out between the two countries militaries at the border near Armenia’s Tavush and Azerbaian’s Tovuz provinces on 12 July. At least 16 people, including an army general, have been killed in the deadliest fighting in years.

Turkish National Defence Minister Hulusi Akar condemned Armenia for military action and said in a press briefing:

“Armenia will be buried under their own plot, drown in it, and will absolutely pay for what they did”.

“Azerbaijan and Turkey are two countries, one nation, who stand together in language, religion, history, joy, sorrow and pride. This is an attempt that is bigger than what Armenians can handle. They will pay for it”.

Turkey is a close political ally of Azerbaijan, with which it shares cultural ties and provides arms to, and Russia supports Armenia, maintain a complex relationship; they back opposite sides of two long running conflicts in Syria and Libya, while preserving economic ties and working with Iran to secure peace in Syria.

The Russia Turkish rivalry and competition for influence is evident in regions sandwiched between the two countries – Black Sea and South Caucasus. Russia’s 2014 annexation of Crimea has enabled it to expand its naval capability, power projection across Black Sea and shift strategic balance in its favour.

In South Caucasus, Russian and Turkish interest collide. Russia and Turkey back opposing sides of the Armenia-Azerbaijan conflict over Nagorna-Karabakh. Russia has a defence pact with Armenia (though in practice arms both sides) while Turkey has a strategic partnership and mutual support agreement with Azerbaijan. Any escalation over Nagorna -Karabakh will carry some risk of sucking in two regional heavyweights. Their competition adds to the regions’s militarization. Russia’s expanded military footprint in Syria, Armenia, Georgia’s breakaway regions of Abkhazia and South Ossetia and Crimean peninsula fuels Turkish fears of encirclement.

3)      Yemen:

Turkey’s growing presence in Yemen, especially in the restive southern region (coastal areas: Shabwa, Socotra and Al Mukha), is fuelling concerns across the region over security in the Gulf of Aden and Bab al-Mandeb. These concerns are further heightened by reports indicating that Turkey’s agenda in Yemen is being financed and supported by Qatar via Yemini political and tribal figures affiliated with Muslim Brotherhood. Turkey has interests in abetting the Muslim Brotherhood and giving it more power in Yemen. They are thought to be aiming to blackmail the Arab-led coalition by creating a Turkish threat in the country and forming a new coalition that includes both Qatar and Oman.

Turkey’s efforts to increase their presence near the Bab el-Mandeb Strait, through which Gulf Oil is transported before reaching the Suez Canal, will threaten the security of Gulf Arab states. Turkey’s efforts to increase its presence near Bab el Mandeb strait are part of a larger campaign to shore up influence in the southern entrance of the Red Sea. With a military base in Djibouti and repeated efforts to gain a foothold in Somalia and the Sudanese Red Sea island of Suakin, Turkey is working hard to become a force in the Red Sea.

4)      India and Saudi Arabia:

India’s bilateral relations with Turkey nosedived to such an extent that PM Narendra Modi had to call off his visit to Turkey in October 2019 due to President Erdogan’s statement and stand on Kashmir in United Nations General Assembly (UNGA) and defence cooperation with Pakistan.

President Erdogan statement at UNGA, September 2019:

“Stability and Prosperity of South Asia cannot be separated from the Kashmir issue”

“One of the problems to which the international community still doesnot devote enough attention is the Kashmir conflict, which awaits a solution for 72 years”.

“In order for the Kashmiri people to look at a safe future together with their Pakistani and Indian neighbours, it is imperative to solve the problem through dialogue and on the basis of justice and equity, and not through collision”.

Turkey is building four anti-submarine corvettes and 30 attack helicopters for Pakistan under total, 2.5 billion deal, which is a matter of concern and national security threat to India. Turkey expects India to back its nuclear ambitions and crack down on institutes of Fateullah Gullen, his rival, who staged the 2016 failed coup to topple Erdogan. Besides, Erdogan wanted a quid pro quo, India should not raise Northern Cyprus in return for Turkey not raising Kashmir on International forums. After India deepened its relations with Saudi Arabia and United Arab Emirates, Pakistan latched on to Turkey. Turkey has become a second home for Pakistan ISI activities.

In February 2020, while addressing joint session of Pakistan’s Parliament, Erdogan raked up article 370 despite India’s objection and announced that Turkey will back Pakistan to come out of the Grey List of the Financial Action Task Force (FATF), an anti-terror financing watchdog. Erdogan said Turkey supports Pakistan’s stand on Kashmir issue and said:

“Our Kashmiri brothers and sisters have suffered from inconveniences for decades and these sufferings have become graver due to unilateral steps taken in recent times, apparently referring to India revoking the special status of Jammu and Kashmir in August last year.”

“Today, the issue of Kashmir is as close to us as it is to you (Pakistanis)”.

“Such a solution (on the basis of justice and fairness) will serve the interests of all parties concerned. Turkey will continue to stand by justice, peace and dialogue in the resolution of the Kashmir issue”.

Turkey is emerging as a hub for anti-India activities, next to Pakistan and funds radical Islamist organisation in Kerala and Kashmir and sponsors all expense trips to Turkey to freshly recruited radicals to reinforce their learnings. Turkey is attempting to influence South Asian Muslims, especially in India, and challenge Saudi Arabia’s dominance in the Islamic world at a global level by drawing a wedge in Organisation of Islamic Co-operation (OIC, 57 members). It plans to offer a conservative Turkey with Ottoman traditions to the Islamic nations to follow and project to be the global protector of Islamic nations.

BRAND CHINA IN CONUNDRUM: HAS INDIA’S MOMENT OF RENAISSANCE ARRIVED?

Background:

Two things define supply chains: Availability and Price. World War II was based on destroying the enemies supply chain: The US crippled Germany’s oil and ball bearings, Germany wanted to break the supply chain from US to UK using submarines, US wanted to cripple Japan’s supply chain to southeast Asia. The country that possessed most of the elements or components to construct the means of war and finished products were not vulnerable to enemy attack until shipped or in combat. US thus had an advantage in World War II.

The Post World War II idea was that free trade, diffused supply chains, securing supply chains, intertwined economies would increase mutual dependence and avert war and that worked to a great extent as there was no world war since 1945. But for this to sustain, supply chain depended on trust that neither side would disrupt the supply chain to seek control over the other. The two largest economies US and China had tensions which led to friction short of war as supply chain was business dependent and a political matter. The two countries were not interested in free trade but advantageous trade. The current global system has massive physical and political complexity and in an event like Covid 19, each one may act differently and undermine the interest of other nations. The supply chains can shift but not quickly.

China’s Image Dented Globally

Apart from trade war and supply chain tensions between US and China, the two are engaged in fierce competing barrages about the origin of outbreak of coronavirus. An increasingly prominent narrative in the US is that not only did the pandemic originate in China, but that China withheld key information for weeks that could have enabled other countries to adopt measures impeding the spread of the deadly virus. China has embarked on a massive campaign/ information war to change the global narrative and perception by controlling public opinion to revive its global image amid the pandemic. China is using “Generosity Politics and Diplomacy” as a tool to change public opinion by sending doctors, PPE’s, Face masks, ventilators, testing kits and tons of other medical equipment to Italy and other countries affected by pandemic. This diplomacy failed as lot of testing kits and other supplies were returned to china as they lacked “Quality”. In China, the pandemic and its disastrous handling in the initial phase of disease control, threatens social and political stability. China’s image of regime’s efficiency and its image has been severely dented in the eyes of the Chinese population and even more seriously, in the eyes of the world. This is emergency for the Chinese regime.

Diplomatic Pressure mounts on China

Diplomatic pressure is mounting on China over its management of Pandemic and Foreign Direct Investment (FDI)

1.   US President Donald Trump signed into law the Taiwan Allies International Protection and Enhancement Initiative Act of 2019 on 26 March’20 under which the US government is legitimately seeking to establish a diplomatic presence in Taiwan and help Taiwan  gain participation in International Organisations as well as level up its economic ties with Taiwan.  

2.   At a White House press conference, President Donald Trump criticized china on several fronts and said China should face consequences if it was “knowingly responsible” for the coronavirus pandemic.

3.   German Chancellor Angela Merkel urged China to be as transparent as possible about coronavirus outbreak. She urged for more information about the early days of the outbreak, which originated in Wuhan.

4.   European Commissions Chief Ursula von der Leyen has backed the calls from Australia and the US for an independent investigation into the origin of COVID-19 pandemic and asked China to join the investigation.

5.   Australia is planning to raise the issue of the independent probe over COVID-19 at the World Health Organisation (WHO) meet on 17 May’20 and support Taiwan’s entry into WHO.

6.   Japan has earmarked $ 2.2 billion to assist domestic companies to shift production from China back home or diversify production bases into South East Asia.

7.   White House National Economic Council Director Larry Kudlow said the US should “pay the moving costs” of every American Company that wants out of China.

8.   If US and Japan, the worlds biggest and third biggest economies respectively, move away from China, it will have a huge impact on China’s economy and other countries may follow.

9.   US state of Missouri has filed a law suit against China’s Communist Party (CCP) and other Chinese officials and institutions alleging that during critical weeks of the initial outbreak, the Chinese authorities deceived the public, suppressed crucial information, arrested whistle blowers, denied human to human transmission, destroyed critical medical research, exposed millions to the virus and hoarded Personal Protective Equipment (PPE) causing a global pandemic. China dismissed the lawsuit citing absurdity and violation of sovereignty.

10.  Germany’s largest tabloid newspaper, Bild, sent an itemized bill to China to pay Euro 149 billion.

11.  Alarmed by People’s Bank of China raising its stake from 0.8% to 1.01 % in HDFC Bank, India changed its FDI policy from automatic approval to government approval route for any country which shares land boundary with India.

12.  The European Commission (EC) has singled out the issue of Foreign Direct Investment (FDI) screening as part of the EU’s overall response to COVID-19 and issued guidance to Member States on 25 March 2020 to protect critical European assets and Technology.

Impact of COVID-19 Pandemic on supply chains:

The COVID-19 pandemic feels like a war. People are dying. The medical professionals are on the front lines. Those in police, public distribution system, essential services, public utility services are working overtime to support the effort. People are fighting the pandemic confined in their homes. The pandemic has hit major industries: automobiles, pharmaceuticals, medical equipment and supplies, electronics, hospitality, tourism, consumer goods in an unprecedented scale and speed. This has caused closures of businesses, manufacturing and their supply networks.

As per World Bank, Global Entrepreneurship Monitor (GEM database), Industrial production in China  has fallen by 13.5% in January and February combined, compared with the previous year . This fall is due to various factors including shortage of parts, shortage of labour workers trapped due to shut down, slow recovery of transportation network, emergency regulations and restriction on movement.  Since China is world production hub and at the heart of Global Value Chains (GVC’s), this initial decline in production and trade seen in China will have a strong impact on countries further up and down the supply chain since most of the countries have imposed restrictions on movement to combat the spread of virus.

Global manufacturing Original Equipment Manufacturers (OEM’s) are scrambling to find alternative solutions, including quickly shifting orders to secondary or tertiary suppliers to make up the missed delivery from primary suppliers and moving core business priorities back to their own factories. Since the pandemic epicentre has shifted toward US and Europe, the knock-on effects have begun to multiply. We are in a completely different new era now and globalization as we have known it in the past is over. It is still too early to quantify fully the effects of the supply chain disruptions due to pandemic but there are severe implications for international production networks.

China is fishing in Troubled waters:

As the world combats the COVID-19 pandemic, which has reached over 200 countries, infected 3.4 million people and killed about 2,39,000 people, China continues to intimidate and harass in South China Sea (SCS). China is exploiting ASEAN countries preoccupation with the pandemic in the hope that its actions will provoke little or no reaction, further strengthening its hold in the SCS. China will continue to harass new oil and gas exploration and all fishing activities by its neighbours until it becomes too risky and expensive for Southeast Asian civilians and governments to do anything without china’s approval. Chinese companies are also on a shopping spree to buy strategic stakes or majority control in US and European companies as asset prices fall due to pandemic.

1.   China announced the establishment of “Xisha District” and “Nansha District” in so called “Sansha City” to manage Vietnam’s Paracel and Spratley islands, Macclesfield Bank and surrounding waters.

2.   A Chinese vessel also sank a Vietnamese fishing vessel with eight men on it in the Woody Island, part of Paracel

3.   Chinese survey vessel Haiyang Dizhi 8 was spotted around 158 km off Vietnam’s coast, inside its Exclusive Economic Zone (EEZ). It then followed exploration vessel West Capella belonging to Malaysian state oil company Petronas after entering Malaysia’s EEZ.

4.   There is a report, confirmed by US Assistant Attorney General for National Security John Demers that US hospitals and research labs are being targeted by Chinese cyber cell as china seeks to obtain knowledge of progress in developing a vaccine for COVID-19.

5.   China Overseas Shipping Company, COSCO owns 90% of the only terminal operator in Belgium. COSCO has 51% stake in and managerial control of port terminals in Valencia and Bilbao in Spain. They also have minority stakes in other terminals in Antwerp, Las Palmas and Rotterdam according to December 2019 study by Netherland think tank.

6.  China has threatened to stop importing wine and beef from Australia if the Morrison government continues to push for an inquiry into the origin of the global coronavirus outbreak.

7.   FM Mihaly Varga announced that Hungary and China have signed a loan agreement to finance the construction of railway link between Budapest and Belgrade.

INDIA TO EMERGE AS THE NEW NERVE CENTRE OF SUPPLY CHAIN POST COVID-19

INDIA HAS THE RIGHT COMBINATION OF FACTORS:

1.  Despite being the world’s second most populous country, with more than 1.3 billion people,the extent of impact of Covid-19 is relatively contained if one looks at published numbers in western countries.

2.   Recent criticism on china and trust deficit could result in marked shift in economic flows.

3.  Past 5 years have seen structural reforms such as Insolvency and Bankruptcy Code, GST,relieving banking system of corporate loans.

4.  India is a growing economy, compared to contracting ones in most other countries. IMF predicts India’s growth rate to bounce back to 7.4% in 2021.

5. India can escape recession due to its fewer linkages with global supply chains and dependence on domestic consumption as the primary driver of GDP growth. This should help India retain its position as one of the most attractive FDI destinations in the world.

6.  Indian Meteorological Department has said the monsoon rains this year will be normal. This is excellent news for the Indian economy as almost 60% of the Indian population depends on monsoon for sustenance. Good monsoon is a critical driver of the Indian economy as rural demand accounts for about 45% of the total consumption demand of the Indian economy.

7.   The COVID-19 pandemic is leading to a widespread rejigging of global supply chains. The Shinzo Abe government in Japan has allocated $ 2.2 billion from its $ 1 trillion stimulus package to finance relocation of Japanese factories out of China.

8.  Before COVID-19 pandemic, at the height of trade war with China, President Donald Trump had ordered US companies to move their factories out of China. US giants like Apple, toymaker Hasbro had announced plans to reduce dependence on china supply chain. Apple has already announced that it will invest $ 1 billion along with its partner Foxconn in India.

9.   India’s large domestic market makes it an attractive FDI location as companies can build economies of scale in the local market and then leverage this to export their products around the world.

10.  Manufacturing plants will shift closer to where demand is. The biggest strength of Indian economy is that two-third of the economy is driven by domestic demand. India is one single market of 1.3 billion customers.

11.  Corporate tax lowered for new contract manufacturing companies @ 15% (plus surcharge and cess) which is a good incentive for companies to shift their manufacturing base in India.

12. Massive improvement in the country’s ranking on the World Banks’s Ease of Doing Business Index.

With the right combination of factors in place, Government of Gujarat and Uttar Pradesh are planning to offer incentives to attract manufacturers who are looking to shift base from China. On 30 April PM Modi organized a meeting to deliberate potential reforms to ensure robust and self-reliant defence Industry, reduce dependence on imports and take forward “Make in India” to build indigenous capabilities and laid emphasis on positioning India among the top countries of the world in Defence and Aerospace sector. INDIA’S MOMENT OF RENAISSANCE, INDEED, HAS ARRIVED.