The World this Week

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CWA # 153, 10 August 2019
The World this Week
J&K Special Status, Afghan Violence, Beijing's Hong Kong Warning, North Korea's Cyber Theft, EU's New Satellite and Yuan Devaluation

  GP Team

This edition looks at the following: revocation of the special status to J&K by the Indian government; continuing violence in Afghanistan despite the talks with the Taliban; warning from Beijing to the protesters in Hong Kong; report of North Korea's cybertheft of 2 billion USD; the launch of second satellite for the European Data Relay System; and the devaluation of currency by China.

Aparupa Bhattacherjee, Seetha Lakshmi Dinesh Iyer, Sourina Bej, Vijay Maidergi, Lakshman Chakravarthy and Harini Madhusudan 
 

J&K: India revokes Kashmir’s special status

What happened?

During this week, on 5 August 2019, the Home Minister of India, Amit Shah had successfully moved a resolution in the Rajya Sabha to introduce a Bill that revokes all provisions of Article 370. President Ram Nath Kovind has approved this bill. Article 370 of the Constitution provided special status to the region of Jammu and Kashmir allowing the separate Constitution, a state flag and also autonomy regarding the internal administration of the State.

Shah also introduced bills to bifurcate the State into Ladakh as a Union Territory without a legislature; and Jammu and Kashmir as a Union Territory with an Assembly. The third bill introduced by him was on the Jammu and Kashmir Reservation (Second Amendment) Bill, 2019.

Following this announcement, there was a massive protest by the Opposition, which led the Rajya Sabha to be immediately adjourned.

 

What is the background?

Addressing the Kashmir issue was one of the crucial electoral agenda for Modi government when he returned to power this year. His previous tenure was marred with the resurgence of violence in Kashmir valley after a period of silence in the valley. Through these resolutions, the Modi government seem to have addressed their electoral promise. This decision was welcomed by a certain section and criticized by others.

Kashmir valley has vehemently opposed this decision; the Kashmiris consider this as betrayal and undemocratic. On the other hand, both Ladakh and Jammu regions have welcomed this decision.

The three regions who were clubbed together to be one state of Jammu and Kashmir are different in several aspects. The recognition as a separate Union territory has been a pending demand from Ladakh for a long time. Hence, they are happy with this decision. The latest move by Delhi also reflects the difference between three regions of J&K.

 

What does it mean?

Firstly, through these resolutions, the BJP has not only lived up to its electoral promise but also asserted its Kashmir position. As well expressed in shah's Statement, “I want to make it very clear once again that J&K is an integral and inseparable part of India. There is absolutely no doubt over it, and there is no legal dispute on this," as said in Lok Sabha. As aforementioned, this has also assisted them to please their vote bank in Jammu and Ladakh region. However, this has made other states and regions, especially Northeast India, wary of this government's next move.

Secondly, although there have been several criticisms regarding this decision domestically, internationally no country except for Pakistan have questioned this move. Russia has supported the government and claimed this decision to be constitutional. In the case of India and Pakistan relation, it has seen a downward steep since the last tenure of this government; this issue has just worsened it further.

Thirdly and most importantly, the impact of this implication in Kashmir Valley will be only be understood after the removal of curfew. The valley is brewing although may seem to be peaceful to many; it could just be the peace of the graveyard.

 

Afghanistan: Violence aggravates amid US-Taliban Peace talks

What happened?

On 07 August 2019, a car bomb reportedly exploded in Kabul killing and injuring more than 140 people. This was part of a series of bomb blasts and suicide attacks in Afghanistan in the recent past. The Taliban insurgents later took responsibility for the suicide attack. Earlier this week, the Taliban had also threatened to interrupt the presidential elections scheduled in September over the question of legitimacy.

The latest attack comes at a time when there were positive reports of progress in peace talks between the US and Taliban in Qatar. Also, the UN had notified that July was the deadliest month since 2017in Afghanistan so far where more than 1,500 civilians were killed and injured.

 

What is the background?

The Taliban-US meeting is the seventh since October in Doha in order to end the 18-year-long war in Afghanistan. While the Americans are trying to strike a peace deal with the Taliban ahead of the 2020 US presidential election and gradually withdraw troops from Afghanistan, the Taliban has repeatedly been creating havoc in parts of the country alongside continuing negotiations.

The latest round was said to focus on four key issues: A guarantee by the Taliban that it will not allow fighters to use Afghanistan to launch attacks outside the country; withdrawal of the US and its allied forces; a permanent ceasefire; and an intra-Afghan dialogue which both parties - Taliban and the government.

The announcement of troop withdrawal by the US towards the end of 2020 came soon after Pakistan Prime Minister’s US visit. This could mean that the Islamic republic might have held a consensus over the issue.

 

What does it mean?

The statements from the United States seem to pose an element of optimism over the success of its peace plan and the eventual withdrawal of American troops. However, there has been a complete absence of any attempts from the US for a ceasefire. This could have been the reason for the Taliban’s continued infliction of terror in the region even when the peace negotiations are in progress. The Trump administration’s rush to reach a consensus before the 2020 US Presidential elections have been a success for the Taliban. This very well goes to explain the latter’s consistent threats on Afghan forces and the recent attack on a vice-presidential candidate in July this year. Persisting terror campaigning could also mean that neighbouring Pakistan has been continuing to sponsor terror and provide a haven to the Taliban insurgents.

Second, if the US succeeds to strike a deal with the Taliban, this would pave the way for subsequent talks between the Taliban and the Afghan government over the country’s political future as promised. The deal might also let the Taliban go slow on its concerned threat to disrupt the September 2019 Presidential polls while giving enough time for negotiations with the Afghan government.

 

Hong Kong: China issues a strong warning

What happened?

The Hong Kong protest assumed a robust political significance with China issuing a strong warning to the protesters, saying their attempts “to play with fire will only backfire”. Until now the silence of the mainland Chinese administration was only watched for but when on 7 August, Yang Guang, a spokesperson for the Hong Kong and Macau Affairs Office (HKMAO), said "radical demonstrations" have pushed Hong Kong "to the verge of a very dangerous situation", it is a warning that the silence is now wearing thin.

He warned the protesters not to "mistake restraint for weakness". Since the beginning of this week, a call for a general strike has caused severe disruption with more than 200 flights cancelled.

 

What is the background?

The protest in Hong Kong is now in its ninth consecutive week. The agitation which started with a demand for an independent inquiry into alleged police brutality and the complete withdrawal of a controversial extradition bill has now widened its demand to seek the resignation of Hong Kong's leader Carrie Lam and freedom and protection from mainland Chinese authorities. The demonstrations have led to violent clashes with police. The protests are seen as a challenge to Beijing's authority in Honk Kong.

 

What does it mean?

The strong warning could imply several possible Chinese interventions. Firstly, it is essential to note that Guang’s voice in support of Lam and warning on the serious impact of the protest on Hong Kong’s economy is the second briefing in two weeks. Thus, strongly indicating Beijing's waning patience. The tone and remarks by the state media are getting harsher by the week extending support to the Hong Kong’s police and authorities. Since then the protests have also expanded and seen more violent clashes with police, culminating into a rally and continued strike in the international airport.

Secondly, even though a possible military intervention has been anticipated, China has only limited itself in conducting police drills for example as Guang’s warning came by more than 10,000 mainland police officers gathered for antiriot drills in Shenzhen just across the border from Hong Kong. Police with riot shields practised on mock protesters—firing tear gas, blocking blows from improvised weapons and extinguishing flaming wheelbarrows. The messages are getting stronger, but Hong Kong may not walk the Tiananmen square memory because protest has come in the backdrop of an escalating trade conflict with the international world, including Trump and Taiwan, watching to see if China mishandles itself.

Thirdly, the protests have appeared mainly leaderless and unpredictable, involving "flash mob" style civil disobedience and voting through social media apps. This has made it impossible for PLA to arrest anyone group or leader to throttle the movement. Thus PLS is limited to only stationing its troops and not interfere in the local issues.

Lastly, the other implications of the protest have been on the economy and connectivity. More than 200 flights into and out of the city have been cancelled as the airport workers joined the strike. Besides, the state-run tabloid Global Times has come out strongly on the multinationals saying that if they do not appear in support of Beijing over the Hong Kong protests, they will suffer business consequences.

 

North Korea: Cyber theft of  $ 2 billion

What happened?

According to a classified UN report, published by a few leading news agencies that had access to it, North Korean cyber actors were successful in stealing $ 2 billion by using a sophisticated cyber-attack on leading banks, stock and cryptocurrency exchanges.

News reports also mention, quoting the UN report, that the acts were carried out to fund the ‘weapons programme’ of North Korea.

 

What is the background?

It is not for the first time that such a cyber attack has taken place from North Korea. Cyber operations are considered to be a cost-effective way to maintain parallel military operations. There were reports before linking North Korea to the following: South Korean cyberattack in 2013; SWIFT banking hack in 2015; Bangladesh bank robbery in 2016; and WannaCry ransomware attack in 2017.

Growing threats to its existence from the US and its allies have made North Korea to pursue different strategies. It believes that the only way to keep the US and its allies at bay is to exhibit military strength and its readiness. In the recent past, North Korea has successfully demonstrated its capability in building missiles with varying ranges. The UN sanctions have not deterred it from reckless behaviour. North Korea’s increasing apprehension over the engagement of South Korea and Japan with the US has led it to take aggressive steps.

 

What does it mean?

 In a country where ‘free will’ does not exist it shouldn’t be a surprise to know that these cyber actors operated under the directions of the Reconnaissance General Bureau, a North Korean Intelligence Agency, which manages clandestine operations for the state.

By doing so, North Korea has opened a window of opportunity for other countries that are heavily sanctioned by the UN to generate income, which is not traceable. Little engagement with the world has done no good for North Korea’s economy. While it has no means to feed its people, it has embarked upon the journey of defending its sovereignty. The money that has been stolen from the financial institutions and cryptocurrency exchanges can be used for various illegal activities in an international arena. Also, the UN sanctions committee on North Korea has brought to light that such an amount can be used to fund the development of WMD and much more conventional weaponry. Following such actions in the long term would lead to the destabilisation of the Korean Peninsula. Subsequently, repercussions would be felt across the globe.

 

Europe:  Space Agency launches satellite enabling real-time Earth observation

What happened?

On Tuesday, 6 August 2019, the European Space Agency (ESA) has launched the second satellite for the European Data Relay System (EDRS), a “SpaceDataHighway” created as a joint venture with the aerospace company Airbus. EDRS-C, the latest satellite joins EDRS-A launched in 2016 to relay the environment- and climate-related data captured by remote sensing satellites in Low Earth Orbit ( LEO) back to the ground stations in Europe in near-real-time.

These satellites use Laser Communication Technology (LCT) to pull data from other satellites at a record-setting speed of 1.8 gigabits per second, making the data ready-to-use just 15 minutes after its acquisition, which previously took few days.

 

What is the background?

Firstly, LEO satellites worldwide face a downlink delay problem wherein they are required to stand in line-of-sight with the ground stations for the acquired data to be downloaded, which happens only for 10 minutes during the 100-minute orbit period, thus creating a 90-minute delay in communication. The EDRS relay satellites quadruple the effective contact time of LEO satellites with the ground stations. This relay system is similar to US’ Tracking and Data Relay System (TRDS) used for conveying information from the Space Shuttle back to the ground stations.

Unlike TRDS, EDRS’ use of LCT creates new standards for rapid communication of large amounts of data from other satellites. This is important because telecom satellites face a bottleneck in transmission speed with their radio-frequency transmission in matching that of optical fibre networks connecting terrestrial devices.

Therefore Europe’s research ministers have decided to fund the 22-member ESA, wanting to see optical technology (of which, Europe is a global leader) play a bigger role in space communication. The previously launched satellites of Copernicus environmental satellite programme in 2014, the EU’s flagship Earth observation programme, was already equipped with laser portals, having EDRS in mind.

 

What does it mean?

The near real-time information becomes essential for accelerating responses to disaster recovery and extreme weather events, helping the first responders take decisions in real-time. Through this programme, Europe’s leadership in optical technologies comes to its advantage, enabling EDRS to offer a paradigm shift in satellite communication technology.

With its Made-in-Germany label, Europe can completely avoid relying on non-EU countries to gather Earth observation data without any time lag. This fits perfectly with safeguarding the pro-climate change policies that the EU upholds despite the opposing trends elsewhere.

With the third node in the EDRS system in place by 2025, the advanced global technological infrastructure gives Europe an upper hand in future negotiations, enabling other countries to partner with it rather than compete to benefit from EDRS services.

 

China: Devaluation of Yuan towards a currency confrontation

What happened?

As a response to the announcement by Trump government to raise tariffs by 10 percent for an additional $300 billion of Chinese exports, Beijing took a political decision to drop the value of Renminbi below 7. This sent shockers across the financial markets around the world. The People's Bank of China set the yuan’s daily reference rate below 7 per dollar for the first time in over a decade. US Treasury officially named China a “Currency Manipulator,” though the naming is mostly symbolic, it opens an opportunity for the US to take this case to the IMF to ‘eliminate any unfair advantage China's currency moves have given the country.’

POBC claims that the purpose of the devaluation is to allow the market to be more instrumental in determining the yuan’s value. The devaluation announcement came with official statements from the PBOC that as a result of this "one-off depreciation," the "yuan's central parity rate will align more closely with the previous day's closing spot rates," which was aimed at “giving markets a greater role in determining the renminbi exchange rate with the goal of enabling deeper currency reform," reported a market analysis platform.

 

What is the background?

Since 2005, China’s currency has appreciated 33% against the U.S. dollar. Previously in August 2015, the People’s Bank of China (PBOC) had surprised the markets with upto three devaluations consecutively of the yuan renminbi or yuan (CNY) which knocked over 3% off its value. After a decade of steady appreciation against the US dollar, investors had become accustomed to the stability and growing strength of the yuan. While a somewhat insignificant change for Forex markets, the drop which amounted to 4% over the subsequent two days has rattled investors.

The second arrangement of “truce” between the two leaders along the sidelines of G20 summits in Argentina and Japan have both failed in a similar way. The trade war has taken various forms over the past months it has moved from export restrictions and tariffs to technology, MNCs and 5G, and it is moving towards the currency.

 

What does it mean?

China’s is using the currency valuation as a double-edged sword which could easily hurt both the US and China economies and simultaneously hurt the world markets to a great extent. However, according to various experts, the drop is technically not strong enough to give China a comparative advantage over the US; but just enough to nudge the US. Also, do exchange rate-cuts make an impact on the trade patterns today, like it did in the past? Not really, the economy is extensively diversified now.

It seems like China chose this option over the choice to ban rare earth’ exports to the US. Since the trade war began, China is also said to have been keeping the value of Renminbi artificially high; this drop could be an attempt to readjust the differences. The immediate effects will be of advantage to the Chinese exporters and will halt the imports to China. Quoting a report from China, “Exchange rate cuts have muted effects on the trade balance in the short term,” it is safe to say that this will correct the imbalances.

 

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