[Dr. Sunil Chacko - Guest Columnist]
Also published in the Sunday Guardian
Also published in the Sunday Guardian
Tokyo: The Indo-Pacific is fast becoming both the centre of world economic gravity as well as the locus of Great Power confrontations. Indo-Pacific encompasses major economies and military powers, the US, China, Japan, India, Russia, and rising countries with significantly large modern militaries Korea, Indonesia, Australia, Vietnam, Thailand, Taiwan, and Singapore, among others. Most, though not all, are maritime democracies. There are a plethora of unresolved territorial issues from the past, while the sophistication and lethality of weapons of mass-destruction have been exponentially rising. The countries of the Indo-Pacific have multiples of the armaments needed to blow up the entire planet.
ATLANTIC CHARTER
The Atlantic Charter started off as a press release of a secret August 1941 meeting between US President Franklin D. Roosevelt (FDR) and British Prime Minister Winston S. Churchill to discuss the then-intensifying World War II, held in the quiet Placentia Bay off the coast of Newfoundland, Canada. Later, the document even became regarded as a profound declaration for human freedom and the wellspring of the United Nations. The meeting was the idea of Churchill, at the time losing ground rapidly in both Europe to the Germans, and in Asia to the Japanese, and Churchill provided the first draft. Indeed, it was Churchill’s desperation that propelled him to undertake the dangerous trans-Atlantic ship journey for that first formal meeting with FDR, braving the risk of being torpedoed by prowling German submarines. However, Roosevelt refused military commitments at the meeting, and did not regard the joint statement to be anything akin to a treaty that he would have had to submit for ratification to the US Senate. Further, then-US Under-Secretary of State Sumner Welles confirmed that there had been no prior communications on the document — therefore, five drafts and multiple discussions were needed August 9-12 to agree on the wording of the broad principles to guide policies following the end of the War and the achievement of peace. The final joint declaration issued on August 14 comprised of eight points, including a call to enable to “traverse the high seas and oceans without hindrance” and “abandonment of the use of force” and also “disarmament of nations that threaten aggression outside their frontiers.” It was Churchill who started referring to it as the “Atlantic Charter” on August 24, thereby elevating it post-event — at the time, the US was neutral in the War. It had been Churchill’s primary goal in attending the Atlantic Conference “to get the Americans into the war.” That goal was accomplished four months later when the Japanese attacked Pearl Harbor, Hawaii, amid miscommunication, misinformation, disinformation, and controversy even today.
SANCTIONS AND WAR
Pre-World War II history offers us many lessons on how a Third World War, that will almost certainly occur in the Indo-Pacific, might be prevented. Then, there was certainly a militarist element in Japanese leadership. As an example, a Japanese Colonel returning from a stealth fact-finding trip to the US in August 1941, the same month as when the Atlantic Charter was created, reported to the Imperial Army’s Chief of General Staff that the US had 20 times the steel production of Japan, five times Japan’s capacity to produce aircraft, and ten times overall war production potential. Rather than the information engendering circumspection, the Colonel was fired and his report was burned.
After Japan’s 1905 decisive victory over Russia, the US grew concerned that Japan would obstruct free trade with China and the “Open Door” independence policy that the US favored for China. Therefore, President Theodore Roosevelt asked the US Navy for a plan to confront Japan, even 35 years before Pearl Harbor. The result was the War Plan Orange (Japan was code-named Orange) designed by Admirals George Dewey and Alfred Thayer Mahan, who as young officers decades before had enforced in the American Civil War, the Union’s “Anaconda Plan” against the Confederacy. It was a siege strategy designed to strangle the island nation – of metals, fuel, and even finance. The plan envisaged complete commercial isolation leading to impoverishment and exhaustion and in the end economic ruin. While these severe sanctions were applied against Japan in the 1930s, military-dominated regimes replaced internationalist governments in Tokyo in the run-up to the Pearl Harbor attack on December 7, 1941. Leading pre-War figures like Admiral Isoroku Yamamoto, who had spent several years in the US as a student and Naval Attaché, voiced doubts whether the US’ overall fighting capabilities were vulnerable to a preemptive strike. Historical documents show within the Japanese establishment deep divisions between the Imperial Navy and civilian authorities and a flurry of telegrams during international negotiations with multiple bureaucratic confabulations, but strikingly without any coherent strategy showing profound comprehension of the thinking of the US’ and European colonialists’ side.
Sanctions alone do not prevent war, rather may accentuate pseudo-nationalist passions leading to war. Indeed, when do sanctions become an assault on the nation’s very existence, a lethal threat to create mass starvation, and a provocation for a “war of self-defence and self-preservation”? What can we learn from the pre-World War II mistakes so as to apply lessons to today to prevent the immense catastrophe that will undoubtedly befall the entire world, orders of magnitude greater than what the coronavirus has wrought, should there be a major conflagration in the Indo-Pacific?
Unlike pre-War Japan, on steel today China is already the world’s largest steel producer – six of the top 10 steel companies in the world are Chinese. Stainless steel is used to make aircraft and defence equipment, surgical instruments, pipelines and gas tankers. Nickel is essential for steel-making, and Indonesia has the world’s largest reserves of nickel. China opened a large steel plant in Indonesia producing 3 million metric tons, and just 2 years later, Indonesia banned exports of Nickel, clearly favoring domestic steel production including by the Chinese steel manufacturer, that had received concessional loans granted based on alignment with Chinese government policy directives, rather than just creditworthiness or other market factors. Further, China is known to provide cash grants, capital and equity infusion, and debt-conversions. China produces 53% of the world’s stainless steel; and produces 7 times more steel than does India that is the world’s No. 2 steel producer. India needs Nickel for its stainless steel industry and may need to compete with China on diplomatic grounds to get access to Indonesian Nickel. If India is allied with Indonesia via the Quad, for instance, chances are that indeed Indonesia might revoke its ban on exports. Thus, there are varied benefits to building coalitions in the Indo-Pacific. If those are not created, and rapidly, most countries will soon be at the economic or military mercy of China, one way or the other.
The Atlantic Charter broadly set the terms of post-War peace, and that peace between the US and USSR held, albeit with proxy fights in the global South. The Atlantic Charter was also one component of Churchill’s strategy to survive the then-raging battles, since the war continued for more than three and a half years after the Atlantic Charter was released to the media. Today, however, we have a far different scenario where there is the urgent need to somehow prevent a war in the Indo-Pacific, which Great Powers appear to be hurtling into.
INDO-PACIFIC CHARTER
Parallel to the Atlantic Charter, a new Indo-Pacific Charter was proposed in early 2020 by India’s first professor of geopolitics, who was appointed by Manipal University in India in 1998. This was designed to shape peace in the post-COVID era that has devastated economies and societies worldwide. Further, a new Charter designed to keep the peace, might just help to deter aggression and mindless belligerence, even during this phase when economic recovery is slow and painful. This Indo-Pacific Charter would include the following elements: 1: No territorial gains to be sought by any major power 2: No creation of artificial territories in the open seas 3: No acquisitions by force or lease of new territories within sovereign nations 4: New global security council 5: Participants will work towards freedom and sovereignty of data 6: Participants will work towards a unified approach to using Artificial Intelligence for the good of humanity 7: Formation of a Space and Biosphere Security Council 8: Participants to work together to promote democracy and participatory government.
QUAD, NAVAL ARMADA, AND MILITARY-INDUSTRIAL COMPLEXES
As far as most Indians are concerned, there is little difference between various nationalities and at the individual level, Chinese and Russians are just as approachable or interactable as Americans or Japanese. However, in the Indo-Pacific when it comes to governments, core adherents to and proponents of an Indo-Pacific Charter would be the Quad: the US, India, Japan, Australia.
In 2007, Japan’s PM Shinzo Abe, then in his first term, spoke in the Indian Parliament and his scholarly advisors inserted in his speech references to the Mughal Prince Dara Shikoh’s book, Confluence of the Two Seas (meaning mixing of waters of the Indian and Pacific Oceans), alluding to the origins of the Indo-Pacific concept from at least year 1655 (and in reality the idea existed from the era of the South Indian Chola dynasty that extended even to Indonesia a thousand years ago).
Together, the Quad represents a formidable blue-water navy armada with tremendous firepower capable of deterring aggression – from nation-states, and even from pirates/terrorists who can use thousands of uninhabited islands as bases for armed robbery, kidnapping, trafficking in weapons/narcotics and other nefarious activities at coastal resorts or on the seas. Some see the Quad as fundamentally a broad geo-political insurance policy against a conflict with China’s armed forces, otherwise known as the People’s Liberation Army (PLA) that has been known to have its own management, industrial and financial structures not entirely under the control of the government or Chinese Communist Party (CCP). That is precisely an issue that has allusions to Japan’s pre-War structures. China has among the largest, oldest and most-diversified military-industrial complexes in the world. Analysts opined that the Chinese defense industrial base today comprises over 20,000 companies with many having factories, research units, trading companies, and academic institutions and at least 3 million workers plus 300,000 engineers and technicians. Its profit is estimated to be over $20 billion. The PLA’s entrepreneurial activities even extend to tourism, pharmaceuticals, entertainment, agriculture and machinery. China produces a full range of military equipment, from small arms to inter-continental ballistic missiles (ICBMs), armored vehicles, fighter aircraft, warships, submarines, and nuclear weapons, but until some years ago, it was regarded as broadly technologically backward in comparison to other major powers, especially in propulsion engines, and systems integration. Today, China is closer to military production self-sufficiency, but still imports jet engines for combat aircraft and surface-to-air missile systems, among others, from Russia. China spends more for defence than any country except the US.
The repeated military encroachments into kilometres of Indian territory as well as hostile naval acts in the South- and East-China Seas by the PLA at critical moments make some analysts allude to the possibility of a “State-within-a-State” concept where the Chinese Communist Party (CCP) and the government of China may not be in total control over the PLA as in the case of democracies where the civilian government is expected to exercise absolute control over the military. The PLA’s industrial and organizational autonomy, despite the CCP’s attempts to curtail the PLA’s financial autonomy, may well be factors in this respect. This makes for an explosive mix somewhat akin to the pre-War Imperial Japanese military-industrial structures, which engaged in industrial activities including ship-building, mining, and arms trading within Japan and in its overseas territories.
The Quad today might be regarded as a minilateral/microlateral rather than multilateral grouping. The US and Japan, unshakable allies since the end of World War II, are both among India’s top investors, and do not raise national security concerns similar to what are raised by China or Russia. Today, as has repeatedly been pointed out also by Prof M.D. Nalapat, because Pakistan is a core member of the China-Russia alliance, there is little room for India in that alliance, with associated compounding risks of India facing a two-front China & Pakistan war, and also it has been proved through multiple actions such as repeatedly blocking India’s accession to various groupings including the UN Security Council and the Nuclear Suppliers Group, that China simply does not want India as competition in Asia or elsewhere.
Meanwhile, President Trump continues to attempt to wean away Russia from its alliance with China by including Russia in a new G10/G11 grouping he is building to virtually replace the now largely irrelevant G7. That effort might have had a chance to succeed had not over 3 years been wasted on a fake allegation that everyone when testifying under oath denied — of alleged collusion between Trump administration officials and Russia, once a mighty power, and now reduced to a mid-level but nimble one, increasingly dependent on China.
Much of naval history was written with an Atlanticist-fixation. On the other hand, in the Indo-Pacific, Chinese Admiral Zheng He’s expedition fleet included 28,000 sailors on 300 ships, the largest vessels were 122 metres long as compared to Christopher Columbus’ first voyage some 70 years later with 90 sailors on 3 ships, the largest of which was only 26 metres long. Korea has its Admiral Yi Sun-Sin who achieved major victories 1592-’98 against Japanese warlord Toyotomi Hideyoshi’s navy using the Geobukseon “turtle ship” with its protective shell-like covering recognized as the first armored ship in the world. Japanese Admiral Togo Heihachiro’s decimation of the Russian fleet in the Battle of Tsushima was naval history’s first decisive sea battle fought by modern steel battleship fleets in which wireless telegraphy (radio) played a critically important role. Admiral Togo destroyed 2/3 of the Russian fleet, and the 1905 May 27-28 Battle is taught in naval colleges even today.
The Quad, aligned with the Indo-Pacific Charter, can provide collective security against aggression, of which there appears to be plenty. But it could well be that passing laws similar to India’s “Enemy Property Act 1968, as Amended” by the US, Japan and Australia may also be a major deterrent to aggressor nations that are also global investors. The Act provides for legal expropriation of all the aggressor nation’s assets in the attacked country. Therefore, thankfully, the aggressor and its own business enterprises have much to contemplate before launching a conventional or nuclear attack. In most countries, the leading businesspeople are firmly guiding policy and nothing bothers them as much as losing their entire investment amidst military adventurism. This is a major change since the 1960s, when few such global investors existed in the then-described “Third World.” Indeed, many wars would not have occurred had such laws been on the books.
Access to trade, investment, immigration, physical and digital infrastructure, as well as a vibrant civil society partnership between the Quad members would be the only way to build long-term support for it. India alone can meet the skilled population deficits of both Japan and Australia, and the US has for many decades been welcoming jobs-creating highly-qualified Indian immigrants. Japan’s population is ageing and declining in numbers, year after year, and India produces more babies, 27 million, every year than Australia’s entire population of 24 million, in other words, making it a “baby superpower”.
TWO CLEAR BLOCS LED BY US AND CHINA
The world is just about to split into two groupings — one led by the US and the other by China, and each grouping is imposing sanctions and tariffs on the other — so India would need to choose and decide fast. While some members of the Quad may be reticent to commit to any military alliance, the reality is that their populations have been actively voting with their feet — around 4 milion Indians and Indian-Americans live and work in the US, exponentially more than Indians in China or Russia. India exports IT products and services of about $136 billion per year, mostly to the US. But what about the Indian government’s position? As in the decades post-Independence, is it planning to continue to sit firmly on the fence? A prominent CEO of one of the world’s large investors once told me — “India was with the Soviet camp during its alleged non-alignment, when the USSR was the major adversary of the US during the Cold War, and after the USSR collapsed India started seeking US investment. It cannot be immediate and automatic that the past is easily forgotten,” he added. Nevertheless, it was the mistake of the West and Japan to build up Communist China to that extent, while at the same time trumpeting democracy and human rights in the rest of the world, when China ironically can threaten its erstwhile sponsors and the entire Indo-Pacific — thus hypocrisy is not a phenomenon restricted to any one country. The US and Japan have realised that mistake and therefore have become wary of repeating the same, and hence are unlikely to favor any country to the extent they did for China.
THE ISLAND DISPUTES ARE ALL ABOUT OIL & GAS, FISHERIES AND PROTECTING SEA-LANES
Each dispute is technically about ownership of an island or two, but the reality is that it is all about the struggle to access oil and gas reserves, fisheries rights and protecting sea-lanes. That is because 30-40% of world trade and 40% of the world’s oil pass through the Straits of Malacca which link the Andaman Sea to the South China Sea, thereby making it perhaps the busiest shipping lane in the world with 120,000 ships passing through the Indian Ocean each year and nearly 70,000 of them pass through the Malacca Strait, and so both piracy and conventional military / geopolitical risks pose potentially catastropic consequences. Further, the Lombok Strait (between Bali and Lombok, connecting the Java Sea and Indian Ocean) and the Sunda Strait (between Java and Sumatra) seem to be the preferred routes for Chinese Navy submarines to enter the Indian Ocean region evading early detection more likely in the Strait of Malacca. Hence, the apparently postponed Indian Naval plan to have survellance systems with the Indonesian Navy (well-disposed to India since co-founding the Non-Aligned Movement in 1955) citing budget constraints appears a case of being penny-wise and pound foolish, since prevention is far superior to military “cures.”
Nevertheless, the Indian Navy is using airstrips built on Andaman and Nicobar Islands by the Imperial Japanese Armed Forces, then allied with Netaji Subhas Chandra Bose and his Indian National Army, to undertake surveillance of the area, remotely. The Andaman and Nicobar islands have the distinction of being the first Indian territory liberated from colonial rule and were administered by Netaji’s Provisional Government of Free India.
Fisheries are a core of food security and self-sufficiency for island and coastal nations. China alone accounts for about 17% of world marine fish production, about 14 million tons. It is also the top inland aquaculture nation, with India being the No. 2. Japanese seafood consumption, at 53 Kg per annum has been among the highest per capita in the world, and beyond its own fishing fleets and aquaculture, Japan also imports seafood from 123 countries. China’s per capital consumption of around 31 Kg is smaller, but China has over 10 times the Japanese population to feed, hence China also is a major importer. India too is an important fisheries nation with about 13 million tons production of combination of pond aquaculture and wild catch. Naturally, fishing rights can become a cause for tensions as they have around the Russian-seized Japanese islands.
China has already disrupted efforts of Vietnam, the Philippines and Malaysia in their own economic zones to find new deposits of oil and gas, enhance fishing income for their fisherfolk, albeit it is a crowded area, and the 200 nautical miles (nm) economic zone undoubtedly overlaps with the EEZs of other countries. Recently, Taiwan seeing the plethora of unresolvable claims and counterclaims, has been advocating joint development and sharing of resources.
Under the UN Convention on the Law of the Sea (UNCLOS), if it is categorized as an island, the country can claim 12 nm (22 km) radius territorial waters and 200 nm (370 km) exclusive economic zone (EEZ) which gives special rights regarding the exploration and use of marine resources – fisheries and energy production, including wave and wind power. In one case, there is a dispute between two countries on precisely that point – with one claiming that what sticks out of the water during high tide is a “rock” only the size of a twin-bed and hence cannot sustain human habitation or economic life – essential to meet the entire UNCLOS definition of island. That is why countries build structures, including land reclamation projects, to expand possibilities. China has been constructing artificial islands on reefs and low-lying islands and has constructed airports on artificial islands that are even capable of landing fighter jets. Research is underway by Japan, China and others for coral to grow the “island” naturally. Once such “island” is created and territorial waters and EEZ claimed, it threatens the free flow of goods via very busy shipping lanes. Additionally, even small uninhabited islands can count for important psychological victories in geostrategic tussles and can therefore be decoy or tactical battlegrounds where military resources are forced to be expended leaving other flanks vulnerable.
Beyond the national economic zones, China holds 5 contracts with the Jamaica-based International Seabed Authority (ISA), the agency under the UNCLOS on mineral-related activities in the international seabed area totaling 238,000 square kilometres (almost the size of New Zealand) of the deep sea — including one to explore a 10,000 square kilometres area in the Indian Ocean for “polymetallic sulphide ore” that contain nickel, copper, cobalt and manganese, and another contract for 72,745 square kilometres in the Pacific Ocean. India holds two such contracts for exploration in other areas of the Indian Ocean. The metal needs for mobile phones and electric car batteries is driving demand. Seabed exploitation rules were set to be approved by the ISA in July 2020. The UNCLOS came into force in 1994, and while the US Senate refused to ratify it (there has never been the 2/3 majority needed), the US now recognizes UNCLOS as a codification of customary international law.
China is involved in so many territorial disputes as to make one wonder about Chinese diplomacy — there are more disputes in the Indo-Pacific than there are countries, especially because China is involved in multiple disputes, virtually with every country. And that too is intriguing because there are at the very top, erudite intellectuals like Mr. Wang Huning, Politburo Standing Committee Member, known to be the “alternate brain” of President Xi Jinping.
FLASHPOINTS IN THE INDO-PACIFIC
The Spratly Islands have been one scene of conflict, since the Chinese navy engaged in a battle with the Vietnamese navy in 1988 and sank three Vietnamese boats thereby killing 70 sailors. Then in 1995, China occupied Mischief Reef, part of the Spratlys, located within the 200 nm EEZ of the Philippines, and constructed markers on the Reef. In the South China Sea is also the Paracel Islands, where there are territorial disputes. China, Taiwan, Vietnam claim both groups of islands, while Malaysia, the Philippines and Brunei claim part of the Spratlys.
In the East China Sea, there is a dispute between Japan and Korea for the Takeshima Islands that Korea calls as Dokdo, and the Senkaku Islands are claimed by both Japan and China that refers to them as Diaoyu.
These are just some of the innumerable territorial disputes between nations of the Indo-Pacific, and perhaps the most serious potential flashpoint is Taiwan.
INTRA INDO-PACIFIC NEGOTIATIONS
There have been diplomatic efforts to resolve long-standing disputes, diplomatically, which have mostly not succeeded. The outreach that Japan has made to Russia comes foremost in mind. Russia seized four Japanese islands, Kunashiri, Etorofu, Shikotan and Habomai after Japan unconditionally surrendered following the dropping of the nuclear weapons on Hiroshima and Nagasaki. In 1956, then-Japanese Prime Minister Ichiro Hatoyama’s administration negotiated an agreement with USSR for the two smaller islands to be returned to Japan after a peace treaty was signed, but even today no peace treaty has been signed. Meanwhile Japan’s Prime Minister Shinzo Abe has done everything possible to reach an understanding with Russia, providing economic assistance, encouraging Japanese multinational corporations to invest in Russia’s vast oil and gas sector, and even delivering a pet dog to President Putin. But it was all to no avail — making clear that Japan may well have misjudged Russia and Russians, and indeed that Russia has little wiggle room as it is an acknowledged junior partner of China’s that may not favor such rapproachment between Japan and Russia. Other observers point to rising nationalism in Russia and deep-rooted resentment at having lost vast swathes of territory as the USSR collapsed; thus the feeling among Russians that no more territory would leave Russian hands. Further, it is said that armies never forget, and the Russian armed forces would remember being soundly defeated in the 1905 Japan-Russia war — the first time in history that an Asian power had defeated a European one. Since then, Russia has been looking eastwards and can also classify as an Asian nation given the expanding importance of Vladivostok, a major Russian naval base, and the Russian eastern oil and gas fields in Sakhalin.
HONG KONG AND THE END OF “ONE CHINA TWO SYSTEMS”
The original reason the elements of “One China Two Systems” were created in the late 1970s was an attempt to induce Taiwan to voluntarily accede to China. They were thus handy in British-Chinese discussions 1982-’84 over the future of Hong Kong. The Ch’ing Empire ceded Hong Kong Island “in perpetuity” at the end of the First Opium War in 1842 and the Kowloon Peninsula in 1860 after the Second Opium War, but those comprised only 8% of Hong Kong. The New Territories, 92% of Hong Kong, was leased for 99 years by Britain in 1898. Thus, there was pressure to conclude the unequal negotiations before the handover in 1997. As is reportedly common in China, the leadership signs agreements quite freely, not expecting to honour them beyond what is convenient for themselves. This is very unlike India, where frenetic haggling takes place and reaching agreement is difficult, but Indians largely plan to adhere as they are particularly leery of Indian courts that can drain resources if engaged in any litigation, that becomes very prolonged. It is important to make that fundamental difference between China and India widely known. Every country is not the same.
It was Marshal Ye Jianying, a top-ranked associate of Vice Chairman Deng Xiaoping, who designed the elements that became known by the “One China Two Systems (OCTS)” Deng-coined catchy slogan. Deng had to redo multiple past economic mistakes of Chairman Mao, had previously served jail-time before being rehabilitated, and was then the public face of the rapidly changing China and the architect of its astonishing economic rise. China is a unitary state, not a federal structure like the US, Canada and India where the Constitution clearly lays down division of responsibilities. Hence, Hong Kong and Macao (then a Portuguese colony) had to be inserted as “Special Administrative Regions” into China’s 1982 Constitution. The imposition by China of a new national security law in May 2020 signals the end of OCTS because Hong Kong residents can be extradited for alleged offences to the rest of China. The National People’s Congress Standing Committee, and not any Supreme Court, is the only body to which any appeal can be lodged on the overriding of the Basic Law of Hong Kong. Even in 1997, when the changeover from British rule was effected with much fanfare, including hosting the Annual Meeting of the World Bank Group, that legal loophole was in place and visible, and only the gullible assumed that the Sino-British Joint Declaration was foolproof.
FDR, PRE-WAR JAPAN AND MULTIPLE ERRORS IN US-JAPAN STRATEGY
The general perception is that Japan launched an unprovoked attack on Pearl Harbor, as part of its aggressive actions overseas, including taking over much of South-East Asia. But the reality is far more complex and has lessons for today’s entangled web of aggression in the Indo-Pacific and great relevance for the Indo-Pacific Charter.
Japan had seized Manchuria in 1931 by military coup and in 1932 had bombed Chinese cities, and on 7 July 1937 launched an all-out attack on China. On 5 October 1937 in an unsettlingly mysterious parallel to today, FDR delivered his “Quarantine Speech” where he spoke about an epidemic of world lawlessness alluding to Japan’s invasion of China thirteen weeks before. “When an epidemic of physical disease starts to spread, the community approves and joins in a quarantine of the patients in order to protect the health of the community against the spread of the disease…..War is a contagion whether it be declared or undeclared” he stated. He called for quarantining the aggressors. After Japanese bombers sank a US gunboat in China, US Treasury officials provided the President with the legal means, the “Trading with the Enemy Act, Section 5 (b)” that empowered the President to paralyze US dollars owned by foreign nations, whether formally an enemy or otherwise. That gave the US enormous power over Japan as the US dollar was the reserve world currency. At the time, Japan had impeccable credit rating and was even borrowing for industrial development in Manchuria, that was also a source of raw materials, especially minerals, for the motherland. The Great Depression, in the 1930s, and the sharp global economic downturn today, are eerie parallels, and confounding factors as well on cross-border borrowing amidst rising tensions. Since the US public did not want to fight another war after World War I, the US Treasury Department was actively monitoring Japan’s foreign currency and gold reserves, as the yen was not a convertible currency, and seeking to bankrupt Japan expecting that financial ruin would stop the war. Since the 1860s when Japan became a major trading nation, most of its dollar export earnings until the World War were from raw silk exports for fashionable middle-class and wealthy American women’s stylish clothing reaching $363 million in 1929. It is believed that the silk boom in the US financed the Japanese purchase of British warships that Japan used to sink the Russian and Chinese navies in the ensuing decades. Silk cost twenty times the price of cotton and the ankle-length skirts of the era and silk stockings necessitated large quantities of silk. By 1939, however, DuPont had invented nylon synthetic polymer fabric for hosiery, and coupled with the embargo imposed by the US on 26 July 1941, Japan’s silk industry withered away. FDR’s goal was to ensure Japan negotiated for peace, not to destroy the Japanese economy, however, some of his aides like Dean Acheson, then Assistant Secretary of State, indeed sought that end and boasted about it – something we see time and again of bureaucrats’ “overenthusiastic” activities verging on the sadistic. In this case, the same day November 22 that Acheson was boasting via a memo to his boss Secretary of State Cordell Hull about how his relentless dollar freeze was pauperizing Japan, deadly retaliation was being prepared with the sixth Japanese aircraft carrier docking at the Hitokappu Bay on Kurile Islands (then Japanese territory) that four days later set sail for Pearl Harbor.
FDR’s Executive Order froze Japanese assets in the US, import and export, and imposed criminal penalties of $10,000 and 10 years in prison for violation of the Order. FDR felt confident that Japan would not lash out violently against what it regarded as gross injustice, especially as it was only doing what every European nation and indeed the US was up to in Asia, Africa and Latin America. The financial freeze abruptly choked off Japan’s oil supplies. Therefore, contrary to what FDR expected, the Japanese Imperial Navy pressed for a “southern” strategy of attacking Dutch Indonesia to get its oil and British Malaya to control its rubber, and the Imperial Army agreed, and for some years, Japan was able to secure oil and rubber that way.
Likely because Chinese planners of today have studied the past, and can see several steps ahead like chess players, China is already planning to soon release a blockchain-linked crypto-Yuan that will overcome the foreign currency bankruptcy problems faced by Japan in 1941. Other countries will have to play catch-up once the crypto-Yuan is fully functional, and a dollar-freeze will no longer have remotely similar impact on China that it did on pre-War Japan. But might that in turn lead to overconfidence that any type of sanctions can be overcome, with accompanying lashing out — as Japan did?
CONCLUSION
Adoption of an Indo-Pacific Charter is an urgently needed means of ensuring lasting peace, just as the Atlantic Charter prevented a war between the US and the USSR in the many decades of the Cold War.
Dr Sunil Chacko holds degrees in medicine (Kerala), public health (Harvard) and an MBA (Columbia). He was Assistant Director of Harvard University’s Intl. Commission on Health Research, served in the Executive Office of the World Bank Group, and has been a faculty member in the US, Canada, Japan and India.
