The third week of March 2015 was routine. There was the usual fighting and killings in Ukraine, Syria, Libya, Tunisia, Afghanistan, Iraq, Nigeria, Sudan, Somalia, Yemen, Pakistan, Philippines, Egypt to name the more glaring ones. Most of them legacies of US and Western involvements in their attempts to instil democracy, human rights and the whole litany of noble objectives.
Benjamin Netanyahu got re-elected on false promises and misrepresentation of his Likud party’s intentions. And volte-face within 3 days. Says a great deal about the integrity and honesty of candidates in democratic elections. This would have been the highlight for the week until…
until the equivalent of a 9 Richter scale earthquake took place; an event that will eventually be recorded in history as the turning point in the tussle between the US and China for pole position in world race for the new Numero Uno.
It was a simple, straight forward rather short announcement by UK that it will be joining the Asian Infrastructure Investment Bank (AIIB) as a founding member. It got immediately scolded by the US for its “constant accommodation” of Beijing’s request. Harsh words among “special friends”!
It shook the US-centric status quo in international relations and world finance like the equivalent of a nuclear bomb.
The following days, Germany, France, Italy, Luxemburg and Switzerland make similar announcements of joining the AIIB. Australia, South Korea should be announcing similar decision soon. Even Japan is split about not joining AIIB; after all it is the mainstay of the Asian Development Bank (ADB). Indonesia, under its new president Jokowi, signed up soon after his inauguration.
Joining an infrastructure bank should not have been such a difficult and complicated process. The subscribers to the bank are willing to lend and risk their monies and the borrowers are willing to borrow. Simple?
What turn the formation of AIIB so complicated was the US’s strong opposition and intense lobbying amongst its so-called Allies and Special Friends to what is essentially a Chinese effort to challenge the present international architecture to make it more equitable and representative.
Since the signing of MOU (memorendum of understanding) in Beijing in October 2014, and even before that, the US has lobbied intensely and feverishly amongst its so-called Allies in Asia and Europe against joining AIIB. There were even threats of repercussions if they disobey. John Kerry personally called Tony Abbot of Australia to “steer clear” of it.
Understandably Japan, South Korea, Indonesia and Australia stayed away from the MOU signing ceremony in Beijing. But Russia, India, Singapore, Malaysia, Thailand, even Philippines, all-in 21 countries, attended and signed. Since then 32, and counting, countries have agreed to be founding members on 31st March 2015 in Beijing.
Seen in this light, the announcement by UK was like the crack in the dam that turned into a gush and finally a total collapse.
Of course to save face and justify their ‘disobedience’ of the Master, all cited that they are joining the AIIB so as to ensure that it would maintain the highest standards of practice and transparency.
As if the World Bank and IMF practices that! If you really want to understand how they operate a good start could be to read John Perkin’s best seller “Confessions of an Economic Hit-Man” for the full low-down and sordid details of how the US exploited and manipulated these organizations to its own advantage. The CIA just added some blood to make it more colourful.
The World Bank and IMF, creatures of the 1944 Bretton Woods Conference and Agreement had served their purposes, and had fossilised and ossified to an extent that they are no longer able to meet the demands of the fast expanding Asian infrastructure needs, estimated to be between US$800 billions to US$1 trillion over the next 10 years!
Since 2010, the emerging countries attempts at reforming the WB and IMF to better reflect the realignment in the world in the last two decades lay still-born and dead on the floor of the US Congress.
Besides the AIIB, China has also proposed the BRICS Bank with US$100 billion in capital but had to reduce it to US$50 billion at the request of the other members. There is also a US$40 billion fund for the “Silk Route Belt ad Road” projects.
The formal signing of the formation of the AIIB will be on 31st March 2015 in Beijing. By then we will know which country will know how their bread will be buttered. Most probably all the relevant countries will be there. With the likely exception of the US and maybe Japan.
In international banking US$50 billion is not much. But since the US turn the whole episode into “my way or the highway”, once too many a times you may add, the so-called Allies have shown the US that it no longer has the power, economically or politically, to dictate to them anymore. Their wholesale exodus is most ‘significant’. Gideon Rachman of The Financial Times called the US attempts to obstruct the AIIB as an “economic debacle”. Nobel Laureate Paul Krugman said “hell, get the funds going.”
There will definitely be adverse and negative repercussions for the US Pivot/Rebalancing to Asia and the Trans-Pacific Partnership. Both clearly are attempts to frustrate and prevent the rise of China. Many of the same countries are involved in both. They are going to take the cue from this disastrous episode.
Kishore Mahbubani, Dean of the Lee Kuan Yew School of Public Policy of National University of Singapore, encapsulate it best when he said that the exodus, in the face of strong US opposition, is epochal – “the beginning of the End of the American Century and the start of the Asian Century”.
In the face of such humiliating defeat, compliments of its own allies and special friends, will Obama now do a ‘ Netanyahu’ and change tact? We should know shortly.
Interesting and exciting times ahead.