October 18,2024

Business Risks Posed by Climate Change: From a Japanese Perspective

Have you recently felt that extreme weather events such as heavy rain and intense heat occur more frequently? In fact, the number of severe weather-related disasters, including floods, storms, droughts, and heat waves, has nearly quintupled over the 50 years between the 1970s and the 2010s. The economic damage caused by these events has expanded approximately eightfold over the same period (WMO, 2021). One factor related to the occurrence of extreme weather is climate change driven by global warming. As you may know, global warming refers to the rise in the Earth’s average temperature. According to the Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report, the Earth’s average temperature by the 2010s (the average from 2011 to 2020) had increased by 1.1°C compared with the 19th century, and global warming is now approaching nearly 1.5°C (IPCCa, 2022). This represents a temperature change that humanity has not experienced in at least the last 2,000 years. The rise in temperature is due to the massive combustion of fossil fuels (coal, oil, and natural gas) since industrialization in the 20th century, which has rapidly increased the concentration of greenhouse gases, such as carbon dioxide, in the atmosphere. These increased levels of carbon dioxide act like a film around a greenhouse, trapping more of the sun’s heat energy on the Earth’s surface, leading to a rise in temperature. However, a mere increase of 1.1°C or 1.5°C in temperature may not sound like much to many people. Nevertheless, even this small increase in average temperature has triggered various changes on Earth, such as altering wind and ocean currents, increasing the amount of water vapor in the atmosphere, raising sea temperatures and levels, and melting ice in the Arctic and Antarctic. These changes interact with one another and have a significant impact on the global climate. Currently, countries around the world are working toward achieving carbon neutrality by 2050, with the aim of reducing net carbon dioxide emissions to zero. However, even with these efforts, global warming is unlikely to halt. According to the latest predictions compiled by the IPCC, even if carbon neutrality is achieved by 2050, it is highly likely that global warming will exceed 1.5°C by 2040. Moreover, even if the current reduction targets set by various countries are steadily implemented, carbon neutrality by 2050 is unlikely. In fact, the reality suggests that global warming could reach 2°C by around 2050 (IPCC, 2023). How, then, could this seemingly small rise in global temperatures of 1.5°C or 2°C lead to severe disasters in society? How might this impact business? In this study, we examine the risks on Japanese business posed by climate change-induced weather disasters and social disruptions, focusing on specific issues, such as damage from heavy rainfall and flooding, reduced labor productivity due to heatwaves, and the effects of drought and water shortages on agriculture and related sectors. 1. Damages Caused by Heavy Rainfall and Flooding (1) Risks for Heavy Rainfall and Flooding First, global warming increases the risk for heavy rainfall and flooding. This is because, as the temperature increases, the amount of vapor contained in the atmosphere increases (for every 1°C rise in temperature, the saturated water vapor amount increases by approximately 7%), leading to higher volumes of rainfall. According to the IPCC Sixth Assessment Report, extreme rainfall events that would have occurred once every 10 years without human-induced climate change are predicted to increase by 1.7 times with 2°C of warming (IPCCa, 2022). In Japan, the Japan Meteorological Agency predicts that with 2°C of warming, the frequency of heavy rainfall events with daily precipitation of over 100 millimeters will increase by approximately 1.2 times, and those with over 200 millimeters will increase by approximately 1.5 times compared with the late 20th century average (1980–1999) (Ministry of Education, Culture, Sports, Science and Technology and Japan Meteorological Agency, 2020). Heavy rainfall and short-term intense rainfall also increase the risk for flooding. This is because rivers may swell rapidly, causing them to overflow their banks (fluvial flooding), or rainwater may accumulate in one area, leading to local flooding (pluvial flooding). (2) Impact on Business The specific impacts of heavy rainfall and flooding on businesses vary greatly depending on the industry, business model, location of facilities, and position within the supply chain, making it difficult to generalize. However, one notable example is the 2011 flooding of the Chao Phraya River basin in Thailand, which had significant repercussions for the Japanese economy. This flood inundated seven industrial estates, including the Rojana Industrial Park in Ayutthaya Province, which is home to many Japanese companies. Consequently, hundreds of Japanese firms, including Toyota, Nissan, Honda, Nikon, TDK, and Toray, were affected. As such, the impact of the floods was immense. According to World Bank estimates, economic losses in Thailand amounted to approximately ¥3.6 trillion, and the disruption extended beyond Thailand, affecting global supply chains as well (World Bank, 2011). This event was one of the factors contributing to Japan recording its first trade deficit in 31 years since 1980. Climate change is expected to increase the damage caused by severe floods, abnormal rainfall, and typhoons. Naturally, there is a risk for such weather disasters causing significant damage in Japan. Moreover, given Japan’s strong economic ties with neighboring Asian countries, any major natural disaster in the region could have a ripple effect on the Japanese economy. 2. Labor Productivity Drop Due to Extreme Heat and Heatwaves (1) Risks for Extreme Heat and Heatwaves The term “global warming” also evokes risks associated with extremely high temperatures, such as heatwaves and heat-related illnesses. Indeed, as noted earlier, there has been a noticeable increase in the impact of heatwaves worldwide in recent years. According to the IPCC Sixth Assessment Report, extreme heat events that occurred approximately once every ten years in the late 19th century are now occurring with a frequency that is 2.8 times greater due to a 1°C increase in global temperatures. As temperatures rise further, these events are projected to occur 4.1 times more frequently with a 1.5°C increase and 5.6 times more frequently with a 2°C increase. Additionally, even extreme heat events that occurred about once every 50 years in the late 19th century are now occurring with a frequency 4.8 times greater because of the current 1°C increase, and this frequency is expected to rise to 8.6 times with a 1.5°C increase and to 13.9 times with a 2°C increase (IPCC, 2022a). (2) Impact on Business Because of such extreme heat, heatstroke-related deaths are becoming increasingly common worldwide. In Japan, the summer of 2023 was the hottest since records began in 1898, with 104 people dying from heatstroke between July and September (Japan Meteorological Agency, 2024). For those in professions that require outdoor work or working indoors without air conditioning, the intensifying heat presents a life-threatening issue. If global warming continues at its current pace, it is predicted that by 2050, global labor productivity could decrease by as much as 20% (Dunne et al., 2013). For instance, in Japan, more than half of the prefectures and designated cities have already marked days with temperatures above 35°C as non-working days for public works projects. As a result, project timelines have been extended, increasing overall costs. Moreover, the 2019 amendment to the Construction Business Act prohibits setting excessively short project deadlines without considering non-working days due to extreme heat. This practice is also spreading to private sector projects. As the number of extreme heat days from May to October is expected to increase nationwide, the project timelines are anticipated to lengthen even further. 3. Impact on Agriculture, Hydroelectric Power Generation, and Water Transportation Due to Droughts and Water Shortage (1) Risks for Droughts and Water Shortage As global warming progresses, some areas will experience more severe droughts. The mechanism behind this is that, as the temperature rises, the atmosphere can hold more water vapor, leading to heavier localized rainfall. However, this also increases the number of dry and sunny days. According to the IPCC Sixth Assessment Report, droughts affecting agriculture and ecosystems in arid regions have already increased by 1.7 times compared with the late 19th century because of a 1°C rise in global temperatures. With 2°C of warming, severe droughts will occur 2.4 times more frequently (IPCC, 2022a). In particular, rainfall is expected to decrease in mid-latitude or subtropical dry regions as the world warms, including the Mediterranean coastlines of Europe and Africa, Florida, and California in the U.S., southwestern Australia, southern and western Africa, and southwestern South America. This will increase the likelihood of drought throughout the year in these areas. Additionally, global warming is expected to reduce snowfall worldwide, meaning that rivers dependent on snowmelt may experience up to a 20% reduction in water flow usable for irrigation under 2°C of warming (IPCC, 2022b). In the longer term, up to 31% of the world’s glaciers could disappear, further decreasing the water flow in rivers sourced from glacial melt. This poses significant risks for regions dependent on these rivers, such as China, Southeast Asia, and India, where the Yellow River, Yangtze River, Mekong River, Indus River, and Ganges River flow from Himalayan glaciers (ibid). (2) Impact on Business A decrease in river flow raises concerns about disruptions to agriculture, hydroelectric power generation, water transportation, and drinking water supply. In agriculture, water shortages combined with rising temperatures and more severe weather events are expected to negatively impact various aspects of farming. This includes soil degradation, a decline in pollinators, such as insects, and an increase in pests and diseases. In regions such as Russia, where the current average annual temperature is below 10°C, a 2°C rise in temperature may actually increase crop yields (the amount of harvest per unit area). However, in areas where the average annual temperature exceeds 20°C such as Southern Japan, even a slight increase in temperature could result in significant reductions in crop yields (IPCC, 2022b). Although technological improvements have led to annual increases in crop yields of approximately 1–2% in recent years, this growth has slowed down because of climate change. According to the IPCC Sixth Assessment Report, global crop yields are projected to decline over the next decade by 2.3% for maize, 3.3% for soybeans, 0.7% for rice, and 1.3% for wheat (ibid). Of particular concern is the increasing risk for simultaneous crop failures for major grains due to global warming. For example, the probability of simultaneous global maize crop failures, which was around 6% in the early 21st century (2001–2010), is expected to rise to 40% with 1.5°C of warming and to 54% with 2°C of warming (ibid). 4. Conclusion As outlined above, even a 1.5°C or 2°C increase in global temperatures significantly heightens the risks for extreme weather events such as heatwaves, droughts, and intense rainfall, which in turn can lead to water shortages, food insecurity, health crises, and even conflict, posing severe threats to human society. The effects of climate change are not limited to industries that are dependent on natural resources, such as agriculture, forestry, and fisheries. It also affects a wide range of industries by damaging infrastructure and reducing labor productivity. Furthermore, disruptions in distant developing countries can propagate through supply chains, causing economic turmoil globally. These risks are not issues in the distant future; they are already becoming apparent and are expected to worsen within the next 5–10 years. So, what can we do? Naturally, it is imperative to make every effort to reduce greenhouse gas emissions and achieve carbon neutrality as quickly as possible to mitigate global warming. However, as mentioned at the outset, even if carbon neutrality is achieved by 2050, the effects of global warming will continue for most of our lifetimes. Moreover, the likelihood of achieving global carbon neutrality by 2050 is low. Realistically, the planet is likely to surpass 1.5°C of warming within the next few years, with temperatures approaching 2°C by 2050. So, what should we do? The only way is to adapt to this new climate reality. Individuals and businesses alike must anticipate the risks that intensifying weather disasters and societal disruptions from climate change will pose to their lives and operations. It is crucial to develop strategies that will minimize these adverse impacts and build resilience. References Dunne, J. P., Stouffer, R. J., & John, J. G. Reductions in labour capacity from heat stress under climate warming. Nature Climate Change, 2013, 3(6), 563–566. IPCC “Sixth Assessment Report The Working Group 1”. 2022a. IPCC “Sixth Assessment Report The Working Group 2”. 2022b. IPCC. Nationally determined contributions under the Paris Agreement. Synthesis report by the secretariat. 2023. WMO. Atlas of Mortality and Economic Loss from Weather, Climate and Water Extremes (1970–2019). 2021. Japan Meteorological Agency. “Major Weather Extremes and Disasters in the World in 2023 (Reiwa 5)”. 2024. World Bank. “The World Bank Supports Thailand’s Post-Floods Recovery Effort”. 2011. Ministry of Education, Culture, Sports, Science and Technology, and Japan Meteorological Agency. “Climate Change in Japan 2020”. 2020. (This is an English translation of a commentary written by SEKIYAMA Takashi, Professor at Kyoto University, which originally appeared on the JFIR website in Japanese on October 7, 2024.)

SEKIYAMA Takashi

July 26,2024

Australia Steps Up to Play a Bigger Role in Regional Defence

Since at least the mid-2010s Canberra has fully embraced the “Indo-Pacific” concept as an organising principle for its foreign and security policy as well as its defence strategy.[1]The Indo-Pacific region is the epicentre of power rivalries and defined by strategic competition. Canberra has joined the US, Japan, and others in its recognition of a “deteriorating security environment”. This environment its characterised by huge increases in military spending around the region, principally by China, and a combustible mix territorial disputes, historical grievances, and an absence of consensus on managing regional security through multilateral organisations. In this context, the Australian government, like its allies and partners, has stepped up its strategic ambitions and defence capabilities in order to preserve the regional “Rules-based order”. A plethora of strategic policy documents have been released by the Australian government over the past couple of years that lend substance to these ambitions. Chief amongst these are: the 2023 Defence Strategic Review, the 2024 National Defence Strategy and accompanying 2024 Integrated Investment Program, and the 2024 Independent Analysis of Navy’s Surface Combatant Fleet.[2] Meanwhile, the centrepiece of Australian (maritime) defence strategy – AUKUS (Australia-UK-US) defence-technological partnership – has continued to evolve.[3] Space restrictions in a Commentary format preclude and in-depth analysis of all these documents and their associated debates. Instead, I highlight here some of the most important takeaways as they relate to Australia’s augmented defence aspirations. The 2023 Defence Strategic Review previewed much of the substance of the subsequent 2024 National Defence Strategy (the first time Australia has issued such a White Paper). Together they essentially paint a grim picture of the strategic outlook in the Indo-Pacific and advocate that Australia as a nation must respond by levering “all elements of national power” (very similar to Japan’s 2022 National Security Strategy which speaks of tapping the country’s “comprehensive national power”).[4] The “National Defence Concept” is designed both to project power outwards into the region in tandem with allies and partners, whilst making Australian territory itself a “hard target” through an accompanying defence through “denial” posture (similar to China’s Anti-Access/Area-Denial: A2/AD). Australia aims at a phased program to create a “Future Integrated Force” – similar to Japan’s “Multi-Domain Defense Force” – capable of cross-domain (land-sea-air-space-cyber) operations. Defence procurement is focussed on providing the necessary capabilities to establish: A larger and more lethal Navy An Army optimised for littoral operations A highly capable Air Force Strengthened cyber capabilities Integrated space capabilities[5] The procurement implications of these strategic guidance documents are most apparent in the realm of sea power. Given that the Indo-Pacific is primarily a maritime theatre, there is a strong strategic rationale supporting this intention. The most significant initiative is the AUKUS trilateral partnership. The “Optimal Pathway” (announced in March 2023 in San Diego) ultimately aims at the provision of nuclear-powered submarines (Submersible Ship-Nuclear powered or “SSN”) alongside steady integration of American and British submarine capabilities through (rotational) basing in Australia, known as “Pillar I”.[6] But AUKUS also includes Advanced Capabilities collaboration – including (i) underseas capabilities (ii) Quantum technologies (iii) Artificial intelligence and autonomy, (iv) advanced cyber capabilities, (v) Hypersonic and counter-hypersonic capabilities, (vi) electronic warfare, (vii) innovation, and (viii) information sharing.[7] Together the Pillars contribute to “Integrated Deterrence” – the application of all elements of national power across a spectrum and coordination with partners – and strategic competition more generally.[8] Accompanying this augmentation of undersea capabilities and related technological aspects is a planned surge in the “lethality” of the Royal Australian Navy’s surface fleet. The Independent Analysis of Navy’s Surface Combatant Fleet recommends a future establishment of 26 ships including: 3 (upgraded) Hobart-class air warfare destroyers, 6 Hunter-class frigates (built to UK design) 11 new general-purpose frigates (with Japan’s Mogami-class under consideration for acquisition) 6 Large Optionally Crewed Surface Vessels (LOSVs) All of this is designed to enhance the Navy’s “lethality” through enhancing air warfare and strike capabilities.[9] These plans are undoubtedly ambitious and impressive in scale. Yet, prolific strategic commentors in the country have proclaimed their opposition to this new strategic orientation, especially its AUKUS component. First, Sam Roggeveen, Director of the International Security Program at the Lowy Institute thinktank recently published a book calling for a radical revision of the current approach to Australian defence strategy. In The Echidna Strategy: Australia’s Search for Power and Peace, he argues for a more independent national strategy, side-lining the US-Australia alliance, jettisoning AUKUS, and concentrating on a much more locally-circumscribed strategy of “denial”.[10] His proposed defence strategy would entail a combination of missiles, sea-mines, cyber weapons, more limited (littoral) naval capabilities and a steady reinforcement of existing airpower, as opposed to the force projection capabilities outlined by the government above. This is an intriguing notion, but one unlikely to gain traction in policy circles. Second, Professor Emeritus at the Australian National University and former Defence Official, Hugh White – an acknowledged inspiration for Roggeveen – has targeted the AUKUS program with critical scrutiny. In an essay in a special issue of the journal Australian Foreign Affairs, entitled: “Dead in the Water: The AUKUS Delusion” he claims that the project is not only undesirable (as per Roggeveen above) but destined to fail, and thus should be abandoned sooner rather than later.[11] Whites’ arguments, predicated on his widely known earlier writing “The China Choice”, focus on the presumed lack of American staying power in Asia, the unstoppable dominance of China, and the questionable feasibility of the AUKUS submarine project.[12] As always, White is highly persuasive with his logic, but again, the allied governments remain committed to and confident in AUKUS, at least officially. In summary, the forward-leaning strategic and defence posture of Australia will permit it to maintain or even increase its contribution to regional security and the maintenance of the liberal international order. It will also render Australia a more valuable ally of the United States and Strategic Partner to Japan and other like-minded regional states with the same objectives, including its contribution to Integrated Deterrence. While vociferous debates about the wisdom of this approach, and the AUKUS project especially, continue to rumble on in Australia, the new defence posture is being implemented, including the AUKUS program, and this will have major implications for the regional security environment. *Thomas Wilkins is a distinguished research fellow at JFIR and an associate professor at the University of Sydney.　 [1] Wilkins, Thomas. “Reimagining Australia’s regional security for the Indo-Pacific century.”Australia in World Affairs 2016–2020: A Return to Great-Power Rivalry (2024), pp. 147-160. [2] Government of Australia, National Defence: Defence Strategic Review, Department of Defence, Canberra, 2023; Government of Australia, National Defence Strategy, Department of Defence, Canberra, 2024; Integrated Investment Program, Department of Defence, Canberra, 2024; Government of Australia, Independent Analysis of Navy’s Surface Combatant Fleet, Department of Defence, Canberra, 2024. [3] Department of Prime Minister and Cabinet, ‘FACT SHEET: Implementation of the Australia – United Kingdom – United States Partnership (AUKUS)’, Canberra, 2022, https://pmtranscripts.pmc.gov.au/sites/default/files/AUKUS-factsheet.pdf [4] Government of Australia, National Defence Strategy, Department of Defence, Canberra, 2024, p. 5; Government of Japan, National Security Strategy, Ministry of Defense, Tokyo, 2022. [5] Government of Australia, National Defence Strategy, Department of Defence, Canberra, 2024. [6] Government of Australia, ‘AUKUS Nuclear-Powered Submarine Pathway’, Australian Submarine Agency, Canberra, 20024, https://www.asa.gov.au/aukus [7] Department of Prime Minister and Cabinet, ‘FACT SHEET: Implementation of the Australia – United Kingdom – United States Partnership (AUKUS)’, Canberra, 2022, https://pmtranscripts.pmc.gov.au/sites/default/files/AUKUS-factsheet.pdf [8] Pederson, Anna and Michael, Akopian, ‘Sharper: Integrated Deterrence’ CNAS Report, Center of New American Security, Washinton DC, 11 January 2023, https://www.cnas.org/publications/commentary/sharper-integrated-deterrence [9] Government of Australia, Independent Analysis of Navy’s Surface Combatant Fleet, Department of Defence, Canberra, 2024. [10] Roggeveen, Sam. The Echidna Strategy: Australia’s Search for Power and Peace. La Trobe University Press, in conjunction with Black Incorporated, 2023. [11] White, Hugh. “Fatal shores: AUKUS is a grave mistake.” Australian Foreign Affairs 20 (2024): 6-50. [12] White, Hugh. The China choice: Why we should share power. OUP Oxford, 2013.

Thomas WILKINS

May 09,2024

China–Cambodia “Diamond Hexagon” Cooperation Framework and Japan

■ China is fortifying its military influence in the South China Sea and CLM The three least economically developed countries of ASEAN, Cambodia, Laos, and Myanmar (CLM), are attracting attention in Japan in the context of “China plus one” and “Thailand plus one”. One of those countries, Cambodia, has a favorable image of Japan. Nevertheless　, having relied heavily on Chinese aid, Cambodia has become increasingly subservient to China, making its pro-China stance clearer than most Southeast Asian countries. About 90% of the investment projects approved by the Cambodian Development Council in 2022 were linked to China. According to the Cambodian Ministry of Economy and Finance (MEF), more than 40% of Cambodia’s $10 billion in external debt is owed to China[1], leaving Cambodia caught in a Chinese “debt trap”[2]. On May 6, 2024, China and Cambodia held “Golden Dragon 2024,” a joint China-Cambodia military exercise in Cambodia from mid to late May to enhance the level of strategic cooperation between the two militaries, according to an announcement by the Chinese Ministry of National Defense. Even with Cambodia’s advocacy of a policy of neutrality and diplomacy in all directions, concerns have arisen about Cambodia’s excessive dependence on China. It has been reported worldwide that Cambodia has signed a secret agreement with China allowing exclusive use of part of the Liam Naval Base. Also, reportedly, China has begun to deploy its warships on a semi-permanent basis as a means of strengthening its military influence in the South China Sea and the CLM[3]. China’s interest in Cambodia extends beyond Cambodia’s geopolitical location; it may also aim to prevent ASEAN from unifying against China’s actions in the South China Sea using the CLM countries as “pawns.” This commentary discusses Cambodia’s deepening “ironclad friendship” with China in the framework of “Diamond Hexagon” cooperation (“钻石六边” 合作架构) and the Chinese presence at the Cambodian port of Liam and the airport at Dara Sakor, 65 kilometers (km) northwest of Liam. Moreover, this commentary will examine Japan’s diplomacy with Cambodia in light of the perceived implications these developments have for the South China Sea and for Japan’s security environment. ■ Proposal for a “Japan Special Zone” by Cambodia, a country that is increasingly “leaning toward China” Cambodia has been expanding its cooperation with China through the “One Belt, One Road” initiative, which serves as a platform for China’s expanding influence, and also through the “Diamond Hexagon” cooperation framework between the two countries. Since the mid-2000s, Chinese aid to Cambodia has expanded rapidly. In 2010, China replaced Japan as Cambodia’s largest bilateral donor. In fact, China accounts for a large share of Cambodia’s aid and foreign direct investment (FDI) . The Cambodian administration is increasingly dependent on China[4]. However, many Chinese real estate companies have pulled out of Sihanoukville in southern Cambodia, leaving behind hundreds of unfinished and unused buildings and plunging the country into a “debt trap.” Under these circumstances, Cambodia has proposed to Japan, the U.K., India, Malaysia, Thailand, and other countries a special economic zone concept based on bilateral cooperation, intended to promote FDI in Cambodia. Cambodia’s prime minister was replaced by hereditary succession in August 2023 for the first time in 38 years, with Hun Manet succeeding Hun Sen. On December 18, 2023, during Prime Minister Hun Manet’s visit to Japan to attend the Japan-ASEAN 50th Anniversary Commemorative Summit, Japan’s Prime Minister Fumio Kishida met with him and expressed a desire to strengthen relations in the security field through personnel exchanges, port calls, and other forms of unit-to-unit exchanges. The two prime ministers agreed to establish a defense vice-ministerial meeting in addition to the foreign vice-ministerial meeting held for the first time in November of the same year, to advance cooperation in the security field. Additionally proposed was the establishment of a special economic zone specifically for Japanese companies. Japan needs to develop its policy toward Cambodia by considering this special economic zone proposal not only from the perspective of bilateral business relations between Cambodia and Japan but also from the geopolitical context of the Indo-Pacific region. ■ The “Diamond Hexagon” Cooperation Framework between China and Cambodia In 2023, which marked the 65th anniversary of the establishment of diplomatic relations between China and Cambodia, the two countries celebrated the “China–Cambodia Friendship Year.” During this period, then-Prime Minister of Cambodia, Hun Sen, made an official visit to China during February 9–11 (accompanied by his eldest and third sons). Both prime ministers reaffirmed the close ties between their nations and issued a joint statement pledging to advance the “Comprehensive Strategic Cooperative Partnership” between Cambodia and China and to collaborate in building a community of shared destiny. They agreed to enhance bilateral cooperation through the framework of “One Position, Six Cooperation Areas, and Two Corridors.[5]“ “One Position” refers to the “ironclad friendship” described in the joint statement[6], which declares that ” irrespective of how the international situation changes, China and Cambodia will deepen their unwavering friendship, engage in mutually beneficial practical cooperation, and promote the building of a community with a shared future.” This expression represents the stance that both countries will adopt in their efforts to construct a “China-Cambodia Community of Shared Destiny” in the “New Era.[7]“ “Six Areas of Cooperation” refers to collaboration in the fields of politics, manufacturing, agriculture, energy, security, and cultural exchanges under the framework called the “Diamond Hexagon Cooperation.” The “hexagon” signifies a six-sided shape, representing these six areas. The “diamond” symbolizes a clear message from Hun Sen to Xi Jinping, conveying that “the Cambodian people are always firmly connected with the Chinese people.” “Two Corridors” refers to the “Industrial Development Corridor” developed around Sihanoukville Province and the “Fish and Rice Corridor” in the Tonle Sap Lake region. Xi Jinping assured Hun Sen that China would encourage more Chinese companies to invest in Cambodia to build the “Industrial Development Corridor” and to promote the Sihanoukville Special Economic Zone (SSEZ). The “Fish and Rice Corridor” involves the creation of a modern agricultural system for fish and rice around the lake, a joint initiative agreed upon by both countries to foster agricultural cooperation. Iron is highly durable against impact ; and diamond has a high hardness. The “ironclad friendship” designated as “One Position” and the “Diamond Hexagon” designated as the “Six Areas of Cooperation” form the foundation for building the “China-Cambodia Community of Shared Destiny” in the “New Era.” （However, diamonds are also vulnerable to forces exerted from certain directions, can crack upon impact, and can lose their luster because of oil.) ■ Deep-draft pier capable of accommodating aircraft carriers and Chinese ships In the years since the U.S.-funded facilities at Liam Naval Base in southwestern Cambodia were demolished and replaced by Chinese-funded projects, the U.S. State Department and Pentagon have frequently issued warnings that they have “serious concerns” and that they are closely watching China’s plans for exclusive control of a portion of Liam Naval Base. If a facility for both military and civilian use were built at Liam Port, located near Sihanoukville Airport, and were turned into a Chinese base, the Chinese Navy would have a geopolitical foothold in the South China Sea, the Malacca Strait, the Lombok Strait, Thailand, and Vietnam. At the Port of Liam, which is reportedly about to be “renovated,” a new facility with a pier reported to have “a draft deep sufficient to accommodate the Chinese aircraft carrier Fujian[8]” is already under construction. The first foreign vessels to access it in early December 2023 involved at least two vessels of the Chinese People’s Liberation Army (escort corvettes “Wenshan” and “Bazhong”). The Russian Navy’s submarine destroyer “Admiral Panteleyev”, which had docked in Cambodia on November 27, docked at the port of Sihanoukville, approximately 20 km away from there. The Japanese Maritime Self-Defense Force naval destroyer “Suzunami” and training ship “Shimakaze”, which docked on February 22, 2024, also docked at the port of Sihanoukville. Cambodian Defense Minister TEA Seiha, along with her father and predecessor TEA Banh[9] posted on social media that they “visited the base, which is currently under construction with Beijing’s assistance,” and “inspected the infrastructure construction that is actively underway according to the plan.” “Chinese vessels provided onboard and in port training to Cambodian naval personnel,” and “will bring the navy’s capabilities to a higher level.[10]” These arrangements and activities demonstrates the People’s Liberation Army Navy’s deep military involvement in Cambodia. The military and political implications of the port of Liam will be clarified by satellite imagery reports from the United States and other Western countries that will be monitoring the frequency of access by Chinese naval vessels and their port calls against other navies and naval forces over the next several years. In addition, the U.S., Japan, and the rest of the world should devote to how the Dara Sakor Airport, which was built in Koh Kong Province as part of the “One Belt, One Road” project, will be used. It is noteworthy that the airport was scheduled to become operational in early 2021. However, because of the COVID pandemic and other factors, it was postponed repeatedly. As of May 9, 2024, the date of this report’s drafting, the airport had not yet opened. The Dara Sakor development project dates back to 2008 when UDG, based in Tianjin, China, signed a 99-year lease agreement with the Cambodian government to build an international airport, deep-sea port, industrial park, and luxury resort facilities in a special economic zone. The Dara Sakor project by UDG is expected to construct a multipurpose facility complex that uses approximately 20% of the coastal area of Cambodia, but the “development” is skewed toward the airport and the deepwater port. Reportedly, plans also exist for a 3,300-meter (m) runway at Dara Sakor Airport, as well as additional runways of 3,800 meters and 3,200 meters. The U.S. Department of Defense has repeatedly expressed concern over the past several years that the Dara Sakor Airport can potentially serve as a dual-use military and civilian airfield for China. A runway of that length would allow for takeoffs and landings by H6 bombers and Y-20 large transport aircraft. Comparing the expected volume of people and goods traffic at Dara Sakor with that of Japanese airports raises doubts about the intended use of Dara Sakor Airport. Narita Airport in Japan has a 4,000-meter Runway A and a 2,500-meter Runway B. The amplification plan, to be completed by March 31, 2029, with the aim of increasing annual arrival and departure capacity to 500,000 flights, calls for the extension of Runway B from 2,500m to 3,500m, along with the construction of a new 3,500m long Runway C, and a total of 7,471m of new and improved taxiways. Using the figures for Narita Airport as a reference, can the length and function of the runway be considered reasonable, given the scale of Cambodia’s economy and tourism industry, and given the arrival and departure capacity of the Dara Sakor Airport? For security of the Indo-Pacific, Japan’s government and public opinion should also be vigilant about China’s intended use of the important geopolitical chokepoint from the port of Liam to Dara Sakor. ■ Questioning Japan’s Development Cooperation with “China-oriented Cambodia” For many years, Japanese diplomacy has been devoted to promotion of peace and prosperity in the international community. Japan has worked to boost the development of developing countries through official development assistance (ODA) and other forms of development cooperation. In this context, Japan’s “Outline of Development Cooperation” has been designed to contribute actively to ensuring peace, stability, and prosperity in the international community, while adhering to the principle of avoiding the use of development cooperation for military purposes or for promoting international conflict. Cambodia has deepened its relations with China in the security sphere. In the event of conflict in the South China Sea or Taiwan, significant risk exists that Liam and Dara Sakor and other key infrastructure might be used by the Chinese military. Japan’s development assistance to Cambodia is not involved directly in military applications at this time. However, careful consideration of the relations forming along with development projects by China will be increasingly necessary when formulating development assistance from Japan to Cambodia. The percentage of the elderly population among Japan’s total population reached a record high of 29.1% in 2023. Moreover, the percentage of the population aged 75 and older reached a record high of 16.1%. Japan’s Japan’s financial circumstances have become increasingly strained. Especially given that context, foreign aid must contribute more than ever to Japan’s national interests, particularly peace and security in the Indo-Pacific region. Japan’s diplomacy with Cambodia in the Indo-Pacific at a time of intensifying competition for spheres of influence between the U.S., China, and Russia should be conducted with specific scrutiny of the development of the “diamond hexagon” relationship between China and Cambodia. (Originally published on May 9, 2024) [1] “Chinese warships leave Cambodia’s Ream naval base,” Radio Free Asia, January 16, 2024 [https://www.rfa.org/english/news/china/chinese-ships-in-cambodia-01162024060348.html. Last accessed May 8, 2024. All URLs mentioned below were last accessed on May 8, 2024. [2] The term “debt trap” refers to a situation in which a country that has received international aid and is struggling to repay its debts is pressured by the creditor country in terms of policies or diplomacy, leading to scenarios in which the creditor country confiscates the infrastructure built with the loans or demands military cooperation. [3] Providing military bases to foreign countries violates Article 53 of the Cambodian Constitution. Therefore, the Cambodian government completely denies any “stationing of Chinese troops” or “leasing to the Chinese military.” [4] For instance, according to the Ministry of Foreign Affairs’ “Basic Data on the Kingdom of Cambodia,” the main aid donors and their support amounts (estimated values for 2020, in million US dollars) were China (421.6), Japan (336.5), ADB (283.1), World Bank (140.8), EU (90.3), South Korea (58.0), and the United States (43.9) [https://www.mofa.go.jp/mofaj/area/cambodia/data.html#section2]. According to the IMF’s Direction of Trade Statistics for 2021, Cambodia’s trade included the following: China – exports $1.51 billion US dollars (8.6% of total exports), imports $9.68 billion (33.6% of total imports); Japan–exports $1.09 billion (6.2% of total exports), imports $0.64 billion (2.2% of total imports); United States –exports $7.49 billion (42.7% of total exports), imports$0.34 billion (1.2% of total imports); ASEAN–exports $1.18 billion (6.7% of total exports), imports $12.92 billion (44.8% of total imports). The United States has a notable presence in exports, whereas China dominates imports. [5] 中华人民共和国外交部「中华人民共和国和柬埔寨王国关于构建新时代中柬命运共同体的联合声明（全文）」February 11, 2023 [https://www.mfa.gov.cn/web/gjhdq_676201/gj_676203/yz_676205/1206_676572/xgxw_676578/202302/t20230211_11023942.shtml]. [6] Op. cit. [7] In an extremely long speech at the 19th National Congress of the Communist Party of China (the so-called “Party Congress,” held once every five years) in October 2017. Xi Jinping stated, “The time has come for China to take the center stage in the world,” and “This means that China has become a great power in the world,” signifying an era where China is positioned at the center of the international order. It does not merely mean a new era. [8] “Fujian” is China’s third most advanced aircraft carrier, launched in Shanghai in June 2022. It was previously reported that “Jiangsu” was a strong candidate, but in an expanded meeting of the Central Military Commission held in early June of the same year, it was reported that Xi Jinping, Chairman of the Central Military Commission, proposed the name “Fujian.” [9] Despite having passed on his position to his son, he still maintains a strong influence in military affairs. [10] “Chinese warships dock at Cambodia’s Ream naval base for ‘training’,” December 5, 2023, Radio Free Asia, [https://www.rfa.org/english/news/cambodia/china-cambodia-ream-12052023042209.html]. This work was supported by JSPS KAKENHI Grant Number JP24K04762

MIFUNE Emi

May 07,2024

Growing Interest in Climate Security in Japan

What is “climate security?” “Climate security” refers to the protection of countries and societies from conflicts and riots caused by climate change. Climate change-induced environmental changes such as extreme weather events, natural disasters, and sea level rise, or countermeasures such as decarbonization, energy transition, and geoengineering can sometimes lead, through complex causal processes, to insurgency, ethnic conflict, civil war, and even interstate conflict. Especially countries that are highly dependent on agriculture, underdeveloped, or have low governance capabilities are vulnerable to the effects of climate change and are therefore at greater risk for conflicts and riots caused by climate change. (Sekiyama, 2022a) Japan’s relatively high adaptive capacity to the effects of climate change and the absence of domestic sources of conflict, such as violent ethnic confrontations, make it difficult to imagine climate change causing civil war or large-scale anti-government riots in Japan. However, Japan could also be exposed to conflict with neighboring countries or a deterioration in domestic security due to (1) intensifying conflicts over territorial rights and exclusive economic zones in the surrounding seas, (2) an increase in climate migrants from Asia-Pacific countries, and (3) economic stagnation due to damage to supply chains and local markets, particularly in Asian countries. (Sekiyama, 2022b) Security risks emerging along with climate change These climate security risks will become apparent in the future, along with the effects of climate change. At the same time, the risk of conflict and riots due to climate change is contentious and unclear. Even if conflicts materialize due to climate change, it would not occur today or tomorrow. Unfortunately, however, climate change is becoming a reality. According to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC), which summarizes the latest scientific findings on climate change, the global average temperature has already increased by about 1.1 degrees Celsius compared to the late 19th century, and the increase in annual precipitation and mean sea level have also accelerated. Abnormal weather events such as droughts, heat waves, and torrential rains, which have become increasingly severe around the world in recent years, have also been linked to climate change. (IPCC, 2021) The effects of climate change will become even more apparent in the future. The world is now striving to achieve carbon neutrality by 2050, but even if this is achieved, the global average temperature in the middle of this century (2041~2060) will be 1.2°C to 2.0°C higher than in the late 19th century. If carbon neutrality is not achieved and greenhouse gas growth continues at current levels until the middle of this century, average temperatures are expected to rise 1.6°C to 2.5°C. (ibid) Heat waves, which occurred only once every 50 years in the 19th century, are 13.9 times more likely to occur when the average temperature increases by a mere 2 °C. Similarly, severe droughts, which occurred only once every 10 years in the 19th century, are 2.4 times more likely to occur in a world where average temperatures have increased by 2°C. (ibid) Climate security risks become increasingly plausible with these climate change consequences. While this is not a matter of today or tomorrow, climate change may threaten social peace and stability in amplified ways as a “threat multiplier,” and may be irreversible once the gears have been set in motion. In view of the precautionary principle, which is a fundamental principle of environmental policy, acknowledging the existence of climate security risks now and taking proactive steps to avoid them is not a foolish proposition. Discussions that have taken place in the international community The threat of conflict and insurgency posed by extreme weather events and natural disasters associated with climate change has caught the attention of not only environmentalists but also security experts around the world. For instance, since 2007, the UN Security Council has repeatedly discussed the security implications of issues such as climate change, resource, energy, and water depletion, and ecological change. The EU, in its document on Common Foreign and Security Policy, also recognizes that climate change, natural disasters, and environmental degradation have far-reaching effects on the resilience of communities and the ecosystems on which life depends, and have led to numerous conflicts around the world. Not only government agencies, but also many institutions such as the University of Toronto in Canada, Stanford University in the United States, the Oslo International Peace Research Institute in Norway, the Stockholm International Peace Research Institute in Sweden, and the Nanyang Technological University in Singapore have actively pursued research on climate security. Japan Lags Behind in the Global Debate In contrast, the concept of climate security was rarely discussed in Japan, with very limited exceptions, until the 2020s. In fact, in the beginning, Japan was not lagging behind the global trend and began to discuss climate security. The Sub-Committee on International Climate Change Strategy in the Global Environment Committee began discussing climate security as early as February 2007 and compiled a “Report on Climate Security” in May (Ministry of the Environment, 2007). This was around the same time that the UN Security Council first discussed the issue of climate change as noted above, so this was not a late development from an international perspective. In Japan, however, policy discussions on climate security have not continued since then. For example, a review of environmental white papers from FY 2007 to FY 2019 shows no mention of environmental security or climate security. Similarly, a word search of the Defense White Paper from FY1970 to FY2019 shows no mention of environmental security or climate security. Perhaps reflecting the lack of such policy interest, climate security has not been the focus of much attention in academic circles in Japan. A keyword search for “climate security” in CiNii Articles, the article index database of the National Institute of Informatics, found a total of only 17 articles for the 20-year period from 2001 to 2021. Compared to the 1,222 results found for “human security,” an approximate concept, the lack of interest in climate security in Japan is striking. Climate security, however, is not an issue of such low importance that Japan can simply ignore it. Every region of the world is likely to face some climate security risks in the future, possibly a combination of risks. That is why Western countries have been promoting research and discussion on climate security. Japan has been late to join this global discussion. Growing Interest in Climate Security in Japan The term “climate security” began to be frequently mentioned in Japan around 2021, when the Nihon Keizai Shimbun and the Asahi Shimbun published a series of columns on the subject in April 2021. Since then, both newspapers have frequently published columns and a series of contributing articles on this topic. The coverage of climate security by these national newspapers has likely made more people aware of this term. In May 2021, the Ministry of Defense also launched a new “Climate Change Task Force” within the ministry. At the end of August of the same year, the 2021 edition of the Defense White Paper devoted a section to the “Impact of Climate Change on the Security Environment and Military,” mentioning climate security for the first time in its history. Needless to say, between 2007 and 2021, it was not as though climate security had not been discussed at all in Japan. In January 2017, for example, the Ministry of Foreign Affairs held a roundtable seminar on “Climate Change and Fragility Implications on International Security”. Similarly, in October 2020, Yasuko Kameyama, Director of the Center for Social and Environmental Systems Research at the National Institute for Environmental Studies, and Keishi Ono, Special Researcher at the National Institute for Defense Studies, published a co-authored paper on climate security theory in Japan in an international academic journal and delivered a press conference titled “What is Climate Security?”. These developments likely also stimulated renewed interest in this topic in Japan. Moreover, the Paris Agreement becoming operational in 2020, paired with the inauguration of President Biden the following year has spurred an international movement to place climate change at the center of the diplomatic security agenda. In addition, the IFRS Foundation, which prepares International Accounting Standards, began to develop a standard for corporate disclosure of climate change risks in 2021, an important event that has heightened interest in climate change issues in Japan. This series of events seems to have triggered a sudden increase in public and private sector interest in the risks of climate change in Japan in 2021. It is well within the realm of possibility that Japan and its neighboring countries will also face compounded climate security risks in the future. Given that climate change can act as a “threat multiplier”, amplifying threats to social peace and stability, and given that once the gears are set in motion, they may be irreversible, Japan should immediately initiate efforts to avert violent uprisings and conflicts that result from climate change. <References> IPCC. (2021). Climate Change 2021: The Physical Science Basis. Contribution of Working Group I to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge University Press, Cambridge, UK. Sekiyama T. (2022a). Climate Security and Its Implications for East Asia. Climate. 10(7), 104. Sekiyama, T. (2022b). Examination of Climate Security Risks Facing Japan [Paper presentation]. RSIS Roundtable on “Climate Security in the Indo-Pacific: Strategic Implications for Defense and Foreign Affairs” held by Centre for Non-Traditional Security Studies, Nanyang Technological University, Singapore, November 2, 2022. 環境省.（2007b）.『気候安全保障（Climate Security）に関する報告』 Ministry of the Environment. (2007b). Report on Climate Security. (This is the English translation of an article which originally appeared on the JFIR website in Japanese on April 12, 2024.)

SEKIYAMA Takashi

April 03,2024

The “Blue Pacific” and U.S.–China Confrontation

Since the mid 2010s, the Pacific Islands Forum, a regional organization, has been attempting to establish a regional order named the “Blue Pacific,” in Oceania, which has garnered attention as one of the focal points in the ongoing U.S.-China confrontation. The likely background to this is the transformation of the regional order in Oceania due to factors internal and external to the region. In the late 1990s, disagreements over climate change caused a rift between the Pacific Island Countries and Australia and New Zealand, causing the cohesive power of the Pacific Islands Forum, which comprises these countries, to decline. Simultaneously, as the regional order, which had been based on cooperation between the Pacific Island countries, Australia, and New Zealand through the Pacific Islands Forum, was shaken, China approached the former, triggering further changes. China’s efforts to expand its influence in the Pacific Island Countries through economic assistance and military cooperation has made the regional order in Oceania even more fluid. Against this backdrop, the “2050 Strategy for the Blue Pacific Continent,” announced by the Pacific Islands Forum in 2019, asserts that the Pacific Islands are the custodians of the “Blue Pacific Continent.” It aims to promote regional cooperation in the seven areas of political leadership and regionalism, people-centered development, peace and security, resources and economic development, climate change and disasters, ocean and environment, and technology and connectivity. The inclusion of climate change and natural disasters a s well as other claims made by the Pacific Island Countries in the “Blue Pacific” may reflect a heightened diplomatic stance of these countries toward Australia and New Zealand due to China’s approach. Further, for Australia and New Zealand, the “Blue Pacific” seems to have been intended as a means to mend the rift over climate change with the Pacific Island Countries regaining influence in the face of China’s emergence. It could be said that such opportunities for Pacific Island countries made apparent in the “Blue Pacific,” are being extended by further action from China. In April 2022, China signed a security agreement with the Solomon Islands, while in May it attempted to conclude a regional security agreement with ten Pacific Island Countries with which it has diplomatic relations. Whilst the latter attempt was unsuccessful, the United States, Japan, Australia, New Zealand, and the United Kingdom, becoming more wary of Chinese actions, formed the “Partners in the Blue Pacific” in June of the same year, thus clarifying their stance against China through support for the “Blue Pacific” (subsequently, Canada, Germany, and South Korea also joined this group). In September of the same year, the United States held a summit meeting with Pacific Island Countries, adopted the “Declaration on U.S. Pacific Partnership,” and announced the “Pacific Partnership Strategy,” which calls for support for the “Blue Pacific.” China’s efforts to expand its influence have motivated Western assistance to the Pacific Island Countries. Meanwhile, the risks for the Pacific Island Countries should be pointed out. For example, while Western countries have framed the “Blue Pacific” as a strategic part of the “Indo-Pacific” to counter China, a cautious view persists among Pacific Island Countries that they will be drawn into the U.S.-China confrontation. As China attempts to expand its influence and Western countries respond by increasing their support for the “Blue Pacific,” Pacific Island Countries become more likely to get caught in the vortex of U.S.-China confrontation. It is no easy task for the Pacific Island Countries, which lack diplomatic power, to expand their opportunities while distancing themselves from the U.S.-China confrontation.

Yoko Ogashiwa

February 19,2024

Why Has Sanctioning Russia Been Ineffective? An Examination of How to Improve the Sanctions Against Russia

February 24, 2024 marks the third year of the Russo-Ukrainian War that started with the Russian full invasion of Ukraine. As the war reached a stalemate, the return of the territory taken from Ukraine seemed increasingly difficult. The Ukrainian counteroffensive stalled due to delays in military aid from the Western powers and the lack of weakening in Russia’s military might. Although US President Joe Biden’s announcement of “unprecedented sanctions” with great fanfare, sanctions against Russia, designed to freeze its ability to fund the war, have not produced decisive results. This paper overviews the sanctions that have been in place against Russia for the last two years, examines the reasons for their ineffectiveness, and discusses how to improve them. 1. Long-Awaited Secondary Sanctions US military aid to Ukraine is in limbo, and the same can be said for the sanctions against Russia. On December 22, 2023, President Biden announced the implementation of economic sanctions that would close the US financial markets to all financial institutions worldwide engaged in foreign trade with Russia to halt Russia’s procurement of weapons from third countries. With this move, the White House put its might behind the first secondary sanctions related to the Russian war in Ukraine. However, Russia began importing weapons from North Korea, which paid no heed to the US sanctions. Russia has imported military related goods from countries in Central Asia and the Middle East, but shutting out the small financial institutions of those countries, which are the main centers of Russia’s transit trade, was almost completely ineffective. Although the most effective sanctions would be those imposed against financial institutions in China, which expands its trade relationship with Russia, such sanctions are unlikely due to the enormous negative impact they would have on the world economy. Under these circumstances, the effectiveness of the secondary sanctions is being called into question. Given that military aid has stalled due to opposition in US Congress, it has strengthened one’s suspicion that the aim is to make an appeal for “strengthening sanctions,” which can be done on presidential authority alone. In spite of the economic and financial sanctions the United States has imposed, along with the G7 countries and the European Union (EU), the Russian economy has not suffered major damage that would prevent it from continuing to fund the war. Supplies of Russian crude oil to China, India, and Turkey have increased, and although Russian financial institutions have been barred from participation in the Society for Worldwide Interbank Financial Telecommunication (SWIFT), Russian trade has continued due to increases in transactions using currencies other than the US dollar, a phenomenon which began in the early 2010s. Russian assets, including instruments such as foreign currency reserves amounting to 300 billion US dollars have been frozen, and although the ruble experienced a temporary crash, it recovered as a result of intervention by the Central Bank of the Russian Federation. Naturally, the Russian economy has experienced a long-term slump as a result of being cut off from the US economy, which has led Western corporations—which have the most advanced technologies—to pull out of Russia. Nevertheless, largely unaffected energy exports continue to facilitate weapons production. Ukrainian estimates indicate that although Russia produced forty long-range missiles per month two years ago, current production has expanded to 100 missiles per month. They also claim that Russian soldiers’ pay is three times the monthly average. The International Monetary Fund (IMF) announced that the Russian economy grew 2.2 percent in 2023, partially due to wartime demand and predicts that the Russian economy will grow 2.6 percent in 2024. Russian President Vladimir Putin’s statement that “the sanctions against Russia have failed” was not mistaken. 2. The “Third Country Trade Loophole” One of the factors supporting Russia’s war against Ukraine are the military supplies entering the country via transit countries. According to a Ukrainian think tank, 30 percent of the machine parts imported into Russia in 2023 that can be diverted to military use were manufactured in Western countries, including Japan. Another think tank stated that 72 percent of the components used in Russian drones and missiles were manufactured by US corporations. Why do these materials continue to flow into Russia in spite of the trade embargo? The materials are believed to enter Russia via countries such as China, Turkey, the United Arab Emirates (UAE), Kazakhstan, Uzbekistan, and Morocco. A New York Times article based on an analysis of 4,200 communications from Russian corporations reported that telecommunications and reconnaissance equipment, semiconductors, drones, and other types of equipment are being sent from China to Russia via Morocco’s Tanger-Med port. The article indicated that supplies equivalent to 10 million US dollars reach Russia via the Tanger-Med port per year. Moreover, although 27 percent of the semiconductors imported into Russia originated in China (including Hong Kong) prior to the war, since the war started, that figure has sharply increased to 85 percent. It has been reported that, in the past, Russia used semiconductors and other components taken from washing machines and other types of machinery made in Europe and imported via countries such as Kazakhstan for weapons construction. This fact used to be for jokes about the severity of Russia’s situation. However, Russia is now said to be obtaining the most advanced devices—including artificial intelligence semiconductors—manufactured by companies such as Nvidia, Intel, and Google. Presently, two years after the start of the invasion, the entire Ukrainian territory is being brutally attacked by ballistic missiles and drones, and Russia has retained the land it obtained from Ukraine. One of the reasons of Russia’s military strength is its ability to get materials necessary to build weapons. An executive order signed by President Biden on December 22 is to impose sanctions barring financial institutions involved in the export of military supplies to Russia via third countries from US financial markets. Previously, only Russian importers and exporters were sanctioned, but from now on, financial institutions in third countries are also to be targeted. As aforementioned case of Morocco shows, if a Moroccan bank is involved in the transshipment of cargo at Moroccan ports during the exportation of semiconductors from China to Russia, the Moroccan financial institution will be sanctioned and lose the ability to use US dollars. Since many more financial institutions are involved in trade via third countries, the secondary sanction is designed to have numerous other targets and achieve the aim of stopping the targeted type of trade. Secondary sanctions on Iran since 2007 are thought to be a major success, and led to the decision to implement the current secondary sanctions on Russia. According to the US Treasury Department, the military supplies the sanctions are targeting include a wide range of basic components that can be used for everything from advanced equipment compilation to basic weapons production, for example, machinery, machine parts, semiconductor components such as silicon wafers, machinery used in the production of semiconductors, testing equipment, propellants, lubricating oils, optical equipment, navigation-related equipment, and bearings. The drafter of the sanctions, Deputy Secretary of the Treasury Wally Adeyemo, stated that banks will be targeted by these sanctions even if they were unaware of the fact that the money transfers were for the purpose of military supplies bound for Russia. This is severe indeed, because banks are now required to examine the details of each money transfer to determine if the payment is related to items on the abovementioned US Treasury Department list. The US administration is demanding that banks simply abide by the obligation to make appropriate efforts, but from the banks’ perspective, the requirement significantly increases the burden placed on them. Most European and Japanese banks have already withdrawn from all business related to exports bound for Russia, and US government officials have stated that there are no reports of Western banks involved in such exports. 3. Are Sanctions Against China Possible? There are many Chinese banks which are very active in international business. Given that some of Chinese banks are believed to be involved in the exportation of military supplies to Russia, they should be targeted by sanctions. However, US government officials’ comments regarding this issue have been inconsistent. The secondary sanctions that target financial institutions worldwide are the most severe of all US-imposed sanctions. The imposition of such severe sanctions on any bank would be tantamount to a death sentence since most of the world’s trade and investment is conducted using US dollars. The decline of the United States has long been predicted, but the power of the US dollar as a key currency is overwhelming in the financial world. Bur at a press briefing on these sanctions, a US government official stated that the US government would rather not impose them and further stated that it would like banks to conduct their own surveys and cease handling regarding Russian military supplies. There is no mistaking that removing banks in China, the UAE, Turkey, and other countries from the US dollar financial system would have a major effect on the global economy. However, the comment gives a glimpse at the lack of enthusiasm in the United States that the Russian war against Ukraine has repeatedly revealed. Prior to the Russian invasion of Ukraine, America made it clear that “the US military would not be sent” to Ukraine. Subsequent to this declaration, the provision of weapons to Ukraine was also delayed due to “fears that [such a move] would lead to nuclear war.” These facts make the United States’ lack of enthusiasm apparent. In particular, given the endless sources of tension with China, including high tariffs, restrictions on the export of cutting-edge technologies, and the Taiwan issue, the United States would like to keep to a minimum the number of matters being disputed with China. Consequently, if possible, the US would avoid imposing sanctions on Chinese financial institutions, which would negatively impact the global economy. In the past, the United States sanctioned senior members of Chinese communist party in response to its suppression of both the democracy movement in Hong Kong and the human rights of Muslims in the Xinjiang Uyghur Autonomous Region, but so far, America has refrained from imposing full-scale sanctions on Chinese financial institutions. If the world’s second largest economy’s financial institutions were removed from the US dollar system, the enormous shock that would spread throughout the global economy would not be beneficial to US interests. The basis of the current US policy toward China is the so-called “small yard, high fence” approach that targets only advanced technologies, and financial sanctions with a worldwide impact would hardly be “small.” If the US continues to be reluctant to impose secondary sanctions on financial institutions in China and other countries, Biden’s “unprecedented sanctions” will never produce significant results. Russia utilizes the loopholes in trade with third countries, and China plays a key role to facilitate the trade with Russia. The lack of any punishment of China in connection with the Ukraine war shows America’s weakness and Russia’s strength. 4. Russia’s Meticulous Preparations President Putin of Russia has worked hard in building a nation that is sufficiently strong to withstand economic sanctions. His long-lasting efforts have clearly paid off. Putin has displayed his antagonism toward the United States and Europe ever since a speech he delivered in 2007, in which he strongly criticized the expansion of the North Atlantic Treaty Organization (NATO). The United States, which believed that Russia had been moving toward a Western-style democratic form of government, was surprised by his hostile statement. Then he moved quickly to take actions. In 2008, Russia invaded Georgia, a country that had been increasingly oriented toward the West. Russia began increasing energy exports to Asia. It built a series of natural gas pipelines to China “Power of Siberia,” and started operations of energy projects “Sakhalin-I” and “Sakhalin-II” as part of its attempts to have close energy ties with Asian countries and distance itself from the United States and Europe. Prior to this, in 2004, Russia’s border demarcation negotiations with China concluded, forming the basis for the current preliminary alliance between the two countries. Russia has compensated for the consequences of its invasion of Ukraine through exports to China, India, and Turkey that replaced the exports to European countries, but the foundation for this move was laid much earlier. In the wake of the Ukraine war, sanctions leveraging access to the US dollar, such as financial sanctions and the recently approved secondary sanctions, have attracted a great deal of attention, but Putin was prepared for such moves. He previously spoke forcefully about “danger of the world economy falling victim to the monopoly of the US dollar,” and in 2018, Russia sold enormous amounts of its US bonds, drastically reducing its currency reserves from 46 percent at the beginning of the year to 23 percent. The total currency reserves remained unchanged, but instead of US dollars, Russia increased its holdings of gold, euros, and renminbi. Moreover, it is estimated more than half of Russia’s US dollar currency reserves in the form of “cash” are held in countries other than the United States. This was used as a method to prevent the currency from being frozen due to US financial sanctions. Russia also rapidly shifted the currency it uses to settle its trade from the US dollar to the euro, renminbi, ruble, and other currencies. In the early 2010s, US dollars were used to settle over 90 percent of Russia’s trade accounts with China, a major trading partner, but in 2020, the use of US dollars was drastically reduced to around 10 percent of exports and 60 percent of imports. Furthermore, the percentage of export accounts with the EU that were settled using US dollars was also reduced from 70 percent to 40 percent, and the percentage used to pay for imports was reduced from just under 30 percent to just under 20 percent. Payments in euro, renminbi, and rubles are on the increase. In November 2014, Russia initiated a global financial messaging system known as the System for Transfer of Financial Messages (SPFS) in opposition to SWIFT. The aim of this move was to create a system that would allow international money transfers that could not be traced by the United States, as America has been monitoring SWIFT ever since the September 11 attacks. Initially, the scale of SPFS was nowhere near that of SWIFT. However, Putin undoubtedly implemented SPFS early on to reduce the effect of decisive sanctions imposed by the United States and Europe to a minimum. Russia is not the only country that made such preparations. China approached BRICS and the Persian Gulf nations for discussions with the offer of settling a variety of trade accounts using the renminbi. In October 2015, China initiated a global financial messaging system for the renminbi known as the Cross-Border Interbank Payment System (CIPS). Although only 20 banks initially utilized this system, that number has increased to 1,300 banks, and its daily volume, which is mainly concentrated in Asia, Africa, and the Middle East, has increased ten-fold to the equivalent of 46 billion US dollars. Although CIPS can hardly be compared to SWIFT, which boasts a daily volume of 5 trillion US dollars, China’s intention to counter US financial sanctions and challenge the US dollar’s hegemony is unmistakable. The issuance of digital renminbi currency is another attempt to avoid US monitoring and sanctions. 5. A Game of Cat and Mouse How will Russia counter the initial announcement of the secondary sanctions? Based on the ways that Russia has previously outmaneuvered sanctions, several possibilities come to mind. For example, beginning in December 2022, the international sale of Russian crude oil for more than 60 US dollars per barrel was prevented due to a price cap adopted by Japan, the United States, and the nations of Europe. Russia has gotten around to avoid the price cap by strengthening ties with other countries. According to the Finnish think tank CREA, in 2023, Russia sold to India two to three times the amount of oil it had sold to that country in the previous year. The same is true for China and Turkey. These countries then refined Russian crude oil and sold the resulting petroleum products to the nations of Europe. In those sales Russian crude oil was often purchased around 70 US dollars or more per barrel, which were violations of the price cap, there were only a few cases in which the violators were detected and charged. Traders in oil business in those countries simply don’t heed the price cap rule. Similarly, Russia will likely continue importing military supplies from third countries through financial institutions with no relation to the United States. Small banks of the third countries are little affected by the United States’ secondary sanctions because they are unlikely to engage in business in America or settle accounts using US dollars. In spite of the variety of sanctions that have been imposed on Russia, including the freezing of its assets, restrictions on its oil exports, being cut off from the advanced technologies and military supplies, and being subjected to financial sanctions, Russia has demonstrated use of a variety of loopholes and minimize any impact. Countries in the “anti-American coalition,” including Iran, North Korea, Venezuela, and China, among others, have learned these techniques from Russia and will use them to blunt the effectiveness of any future US sanctions. These countries are also investing efforts into creating global financial systems that are not dependent on the US dollar to elude US sanctions. This was even discussed at last year’s BRICS summit. Dmitri Trenin, a professor at Russia’s National Research University Higher School of Economics, stated that “For China and Russia, on whom US sanctions have been placed, the most important thing is the creation of a global financial payment system via BRICS that is not dependent upon the US dollar. The United States, which uses the dollar like a weapon against countries that oppose it, will eventually completely demolish its own economic position.” There is a possibility that this will actually come to pass. An effective strategy for expelling Russia from Ukraine would be the provision of support to the Ukrainian army, whose soldiers directly encounter the Russians on the battlefield. However, because public opinion in the United States is focused on domestic issues and the Republican Party is unwilling to cooperate with the Democratic Biden administration, the budget allotted to such support has been exhausted. There is certainly a perception that the secondary sanctions, which are the easier option to implement. Because sanctions require only the president’s signature, but the provision of meaningful support to Ukraine has to be passed in US Congress, which is uncertain. This seems to portend America’s lack of determination to lead the liberal camp and the decline of its hegemony. 6. Making Sanctions Effective We cannot allow the war in Ukraine to end with a Russian victory. Thus, it is necessary to maintain and bolster the sanctions, as well as lasting military support to Ukraine. Below is a list of ways to improve the sanctions’ effectiveness. The first is to avoid creating any further sense of solidarity among the members of the “anti-sanction coalition” that aids Russia. Central to this is stopping China from supporting Russia above and beyond what has already been done by imposing secondary sanctions against Chinese financial institutions. Denying huge Chinese banks access to the US dollar economy will affect the world economy. This can be avoided by focusing on small to mid-sized local institutions. The sanctioning of small and mid-sized institutions would have a sufficient deterrent effect to curtail China’s support of Russia as a whole, including support from major Chinese banks. The next strategy is strengthening sanctions on oil and natural gas, the revenue from which is funding Russia’s war effort. Monitoring and punitive measures associated with the price cap implemented in December 2022 on Russian crude oil trade that limits the price of a barrel of oil to under 60 US dollars have been insufficiently implemented. Import prices must be strictly reported, and a mechanism that will impose sanctions on those who do not abide by the price cap is needed. Additionally, Europe continues to purchase large amounts of natural gas from Russia, and its nations should reduce these purchases. Finally, bolstering monitoring of corporations of G7 and other western countries is necessary. Those corporations and the affiliated companies they established in third countries have to be prevented from exporting weapons-related technologies to Russia. The Foreign Direct Product Rule (FDPR), which prohibits the undesirable secondary use of products, is unique to the United States. Although expanding the targets of the FDPR should be imprudent, when one considers that the war in Ukraine violates international rules in many different senses, the current status of the War in Ukraine is clearly inadequate. Every country should thoroughly investigate whether the technologies it produces are ending up in Russia via third countries and should halt any such flow. References Demarais, Agathe. “Backfire.” Columbia University Press. 2022 McDowell, Daniel. “Bucking the Buck” Oxford University Press. 2023 Sugita, Hiroki. “America’s Sanction Diplomacy.” Iwanami Shinsho. 2020 （This is an English translation of a commentary written by SUGITA Hiroyuki, Columnist, Kyodo News/Specially Appointed Professor, Meiji University, which initially appeared on the JFIR website on January 21, 2024.）

SUGITA Hiroki