In this episode, your resident nerds take a trip down under with their first guest, Michael Hilliard from The Red Line podcast. Together they explore how Australia fits into the complex Indo-pacific region amidst tensions, new and old, with China and the United States.
INTRO
HUNTER:
Welcome back to the show everyone. We’re continuing our swim through the indo pacific southward, to the land down under. We’ll explore Australia’s pivotal role in the Indo-Pacific, and how it’s dealing with the growing tensions in the region. We’re excited to welcome our first guest on the show, Michael Hilliard from the Red Line Podcast. Let’s get into it.
So guys, we know that Australia is an important player in the Indo Pacific. What makes it so significant to the geopolitics in the region ?
RYAN:
Well, Australia is a key player in the Indopacific for a number of reasons.
First, it’s a resource rich continent located in the Indopacific region with a strong army and navy. This means it can project force in the region on a level comparable to other nations in the area, barring the US and China.
But more importantly, Australia isn’t angling to become a major power, which strikes a hard contrast with other regional players like India. Australia is content to maintain its middle power status, making it a valuable ally to any country powerful enough to serve as Australia’s benefactor. The US has served as that benefactor since 1940 by helping secure Australia’s maritime trade routes. In turn, America gained a vital partner in creating a free and open Indopacific.
RAMYA:
Also, Australia is a member of the Quadrilateral Dialogue that we first mentioned in part I of our series on the Indo Pacific, Chaos in Kashmir, which dealt with the China-India border skirmish.
Being a member of the Quad means having many economic and defense treaties with key actors to create a democratic and rule of law based Indopacific — those being the US, Japan, and India.
All this goes to show that Australia is a point of interest when you’re talking about the Indopacific region.
HUNTER:
When we talked about the Quad dialogue last, we spoke of it in terms of its position as an anti-China coalition. How does Australia fit into that equation? Has it ran into problems with China like the other members of the Quad?
RYAN:
Of course, Australia’s current role as ally to the US and member of the Quad has put it at odds with China. Relations have been tense between the two countries for years, with both trading diplomatic barbs on and off.
China conducted a state led cyber attack on political and private sector industries in Australia this June. It’s just the latest in a line of Chinese sponsored cyber attacks against Australia, with one in 2019 hacking into Australian parliament, and another in 2018 which accessed the defense department.
RAMYA:
The most recent attack may have come about because Australia, along with the US, sponsored Taiwan’s bid for WHO observer status. We covered that story when it broke in May in our episode on Taiwan and the WHO, called Soft Power Showdown. But for those who haven’t listened to it, let’s sum it up quickly.
Australia’s sponsoring of Taiwan is an insult to China because it means that Australia could potentially recognize Taiwan as an independent country and not as a renegade province that belongs to China. Even more important is that Australia was one of the countries who called for an independent investigation of the coronavirus outbreak in China, insinuating that China has withheld information about how the outbreak began. As expected, China did not take it well.
RYAN:
So the Australian and Chinese governments are at odds currently, but there is some domestic opposition in Australia. It’s a long held Australian position, but many wealthy businessmen in Australia want their government to back down on China to protect their commercial interests. That’s because China and Australia have a very deep economic connection, which can make things complicated.
HUNTER:
So let me see if I understand. Australia is paired with the US strategically, and that puts it at odds with China. Simple. But once economics gets involved, the situation changes. Why is that?
RAMYA:
Good question. It’s because the Chinese and Australian economies are quite reliant on each other for necessary goods and services.
Australia is the largest supplier of iron and coal in the world, and China is the largest buyer of iron and coal, so it’s a match made in heaven for the two. China also buys oil from Australia. For instance, in 2010, while the Great Recession was still an issue, Australia signed a $54 billion deal to sell liquified natural gas to China. China needs those raw materials to keep its gargantuan economy churning, and Australia has not found a buyer as reliable and wealthy as China.
Shortly after, China began banning and slapping tariffs on imports from Australia — for example, China banned the import of beef, which is a large portion of Australia’s economy. About 35% of Australia’s beef exports go to China. Australia also exports barley to China, which China put an 80% tariff on. Australia subsequently challenged that barley tariff in the World Trade Organization.
RYAN:
So here’s the thing. A week before China instituted the barley tariff, China unfroze barley imports from the United States. So with the US encroaching on Australian trade, and with American foreign policy in chaos, the Australian government is having doubts that America, both with trade policies and its navy, can be the reliable ally it needs to maintain its economy and more importantly, maritime freedom.
RAMYA:
So Australia is in a bind. From a security perspective, Australia recognizes that China is a rising threat to their interests in the long term, but economically, China is one of the biggest reasons for Australia’s current success. Now normally they could rely on their close ally the United States, but in this new and complicated world, that’s no longer a certainty.
HUNTER:
So how is Australia dealing with this new reality? Let’s ask Michael hilliard.
HUNTER:
We here at Geopolitics Rundown are excited to introduce our first guest on the show. Joining us today is the distinguished Michael Hilliard from The Red Line Podcast. Michael Hilliard is a journalist who has reported on countries ranging from Iran, Russia, Ukraine, China, and many others. He has broken front page news a number of times, and has worked with sources ranging from the White House to the Taliban. He is regularly called upon as an informed source and also serves on various committees and councils for the Australian government.
In addition, Michael is also the host of Australia’s largest geopolitics show The Red Line which has gone on to be streamed over 400,000 times in over 90 countries.
While our show brings you the week’s top stories, the Red Line is a deep-dive program reporting each fortnight on one topic shaping the news around the world, ranging from the Libyan civil war, to the Russian hypersonic missile program. Now what I like about their show is their huge roster of heavyweight guests, from top universities, Ambassadors, the CIA, MI6, The White House, and Downing Street. I encourage our listeners to check out their show!
But diving into the episode today, let’s start with Prime Minister Scott Morrison’s new defense budget, which is a 40% increase to 270 billion dollars for ten years. In his press conference on the subject, he mentioned a number of things. He touched on the escalation of tensions throughout the indo pacific, including the india-china border conflict and issues in the S china sea. He also mentioned cyberattacks and cyberespionage by China, an area which has recently been in the news. So my first question for you is, why is Australia making such a massive increase in its defense budget, and why now?
MICHAEL:
So there’s a couple of reasons for that. One of them actually is a little weird domestic reason. So in the last election. Well, it’s very weird. Our liberal government is actually our right wing government. It’s liberal, isn’t libertarian, liberal. They thought they were going to lose this election. So there was a bit of a nastiness put in and they they side into a lot of defense contracts loss last year that would end up hurting the budgets of our left wing government as they expected it to come in this term. So there was a bit of that already bagged in a lot of these deals that we’ve announced now were signed a year and a half ago. But the major reason is the fact that our our doctrine is shifting. We are now… We know we’re in a bit of an odd region and we need to start thinking about, you know, not just defending on our shores, but projecting further up north because we are realizing that we are not in the same position that we once were. We are not. We can’t be as reliant as we were on the Americans because we don’t know if America will keep the hegemon it is. China has just in the last three years, taken a massive doctrinal shift. Now, when you look at the fact that China, just in 2016, didn’t have any bases outside of the Chinese mainland, which Xi Jinping even says in 2015, you know, he goes, that’s an American thing. We don’t do that. And now they have bases in places like Cambodia, Djibouti getting stuff from Pakistan, Tajikistan. The Chinese are expanding quite quickly out. And it’s something to which our defense community is going, “Well, they’re not, I don’t think they’re going to be this benign Asian hegemon.” I think they’re looking at becoming a, you know, a world power. And we need to start thinking about, OK, well, we need to make sure we can, you know, be an important member of this region, as well as make the US arm of their defense in this region.
HUNTER:
Yeah. And that’s something we touched on, listeners, in our last episode on the Indo-Pacific between India and China, is China’s building of bases in the Indian Ocean and in the South China Sea. So, Michael, from your perspective, it sounds like the Australians are seeing the same shift and reacting accordingly. Would you say China is Australia’s biggest strategic rival right now?
MICHAEL:
So I’ll bet a strategic rival is China, yes. But the big one, the huge problem we have is actually geography. That’s the big one. Australia particularly is, you know, we are so reliant on exports and imports, you know, being the, you know, anyone who’s played risk would know that being in the bottom quarter of the map is fantastic because you avoid most of the fights, but it means you’re stuck in the corner. Now, for us, that means that all of our imports, all of our exports have to come via the sea. And that what that means is all of that stuff comes through to massive chokepoints. The first one being Malacca in between Sumatra, Malaysia, which is only, what, two point four case wide? It’s nothing. You know, you can put a couple of guys with anti ship missiles or a few shoulder cannons and you could effectively lock that off very easily. And the other one is the Strait of Lombok in Indonesian waters. If China was to manage to cut off either of those, this country would not be able to fight.
So we only have ammunition for about two weeks of fighting here. We don’t have a rubber supply and we haven’t done any synthetic rubber since World War II. And the big one is our oil supply. Our oil reserve is learnedly 16 days. So in 16, if the Chinese were to cut these to a two point four K wide gap at eight point one K gap, if memory serves, this country has no oil in 14 days. It’s a pretty awkward position to be in. And we need to start thinking pretty heavily about making sure that the fight stays in the South China Sea and not in our chokepoints.
HUNTER:
And it’s interesting you say that because in a way, China has the same problem. This is something that we’re looking to discuss on the show is this whole issue with the Strait of Malacca and that it really comes down to who in the region can best project force on the sea. But I wanted to transition into something interesting because you were talking about obviously the importance of trade to Australia. When you look at the economies of both Australia and China, you can see how intertwined they are. China relies on Australia’s oil, iron and coal exports. They bought almost 80 billion worth in 2018 and Australia, if I’m understanding this right, is becoming more dependent on China since it’s a large buyer of Chinese goods. How does the economic relationship between the two countries play into the current tensions?
MICHAEL:
It’s a huge problem for us because China is our hugest economic partner. And increasingly, look, we always look at, you know, we can sell our oil for this price to China or sell it to, let’s say, India. But there’s always gonna be problems and they’re going to be a bit harder to deal with. And the transportation is right there. So we always tend to sell to China and businesses have become reliant. You know, like I remember doing the first I was on the Foreign Policy Council, we were telling about, you know, when COVID was first kicking in. And it was things like, we can build this 20 million dollar machine that digs a hole in the ground, but we can’t build the 20 dollar LED panel that turns it on. And that’s the problem we have with China at the moment. So we have to pick between China, who is our economic partner — if they were to disappear, our economy would take a very, very big hit or our defense partner, the US, where they don’t really do that much trade with us, but they’re going to defend us. And the trouble is, even if we were to pick China, the US could then use the Navy to cut Malacca and Lombok and we’re done anyway. So it wouldn’t matter if we were trading partners with them or not. So we effectively or historically have always sided with whoever has the biggest Navy. And this time that is the U.S..
HUNTER:
I totally understand what you’re saying. And I wanted to touch on something related to that. You mentioned exports to India, but I think that there’s also an increase in ties in a defense context between India and Australia. Australia seems like they’ve been strengthening ties with India. I know Prime Minister Scott Morrison and Narendra Modi had a virtual summit earlier this month on June 4th, and they actually announced some co-operative defense measures between the two countries, including the sharing of their military bases. How does India factor into Australia’s strategic calculations? And what’s the benefit for Australia to turn towards India at this time?
MICHAEL:
Huge. I mean, frankly, we are — you know, it’s almost a new Cold War in Asia. And I say almost because it really is already. But we are stuck in where countries are now deciding which side to go with. You know, they will. Right now, a lot of these countries, guys, are Malaysia, Indonesia, Vietnam. All these guys are taking large donations from China. China is investing quite heavily. And they’re going to have to pick sides at some point. But everyone’s hoping not to because right now they’re all in the same position that they may not like Beijing, they may not have, you know, the want to be in Beijing’s fear, but the money talks louder than anything else. Right now, we need to form a counterbalance to that. We need to form some sort of powerful bloc, enough country like, let’s say, the Philippines particularly, could go “Yeah ok, I think the Americans could actually be a viable ally. They’re not going to abandon us if this war kicks off. I want to be on the right side.”
HUNTER:
I was going to say. And it sounds like that block is in a nascent form, kind of taking shape. I know that there’s the Quad Dialog 2.0 and if you can speak to that and how the quad members and specifically Australia are sort of working to create this nascent block to deter China.
MICHAEL:
So it’s almost a redo. You know, it’s a soft reboot, if you will, of the Cold War. You know, we’ve got one block, which is going to be China. And the other block is obviously the U.S. and then India is going to usually take an anti China position. Australia will always side with the US. Japan is the other one of the quad. So those are the four big guys. So the quad agreement is between Washington, Tokyo, New Delhi and Canberra. But now what’s up for grabs, much like the Cold War, when we were wondering which side African nations would side with and which side European nations would side with ASEAN as the prize. So ASEAN is your, Indonesia, Vietnam, your Thailands and all those other guys. If you’ve had a four dollar bintang beer somewhere, it’s probably in these nations. Those guys are what’s up for grabs. You know, if we can form a good powerful bloc in the quad and invest well in ASEAN and then guys like Vietnam will come to our side and if we can keep Vietnam and those guys strong, we may be to keep China locked into, you know, not expanding south. That’s the plan. If we can try and keep, or win, ASEAN, and keep the quad strong, we can try and form a counterbalance and form another bloc that will side with us over China, because if we don’t, ASEAN will go towards China. And once we’ve lost ASEAN, then effectively it becomes a lot harder. It’s a small investment now because it will cost a lot more to get them back in the future.
HUNTER:
And also probably a lot larger of an economic hit if they can’t find alternatives to the powerhouse that is Chinese trade. Right?
MICHAEL:
Of course. I mean, that’s the thing. A lot of these guys, you know, China is where they’re selling this stuff. China’s with it. They’re doing their business, China is the one they’re investing in. And they’re going to go with, you know, you guys, like the Philippines right now. You know, if you go into the Philippines they’re quite long range of China sentiment, but that’s where the money is coming from. And they go, well, I might hate China, but I really need a bridge over this river. OK. Well, maybe maybe China and so bad, we need to really be proving to these guys that we will a) defend them. And again, we lost a lot of credibility in 2012 when we did not win, the Chinese took the Scarborough Shoal from Philippine waters and we did not respond. We lost a lot of credit with our Asian partners and a lot of people went, well, are the Americans going to defend us anymore? Is that where, you know, where do they actually jump in? We need to prove to these guys that, yes, we can jump in. Yes, we will defend and proved to ASEAN who effectively the belles of the ball and we’re trying to win them over that. Our block, the quad block is the one to side with and not Beijing.
HUNTER:
And can you go into, for our listeners that might not be familiar, what ASEAN is? Just quickly.
MICHAEL:
So ASEAN is effectively — it’s a — imagine like a European Union, but nowhere near as, you know, integrated. It’s just a kind of a trade sort of agreement. It’s more sort of a block agreement of guys like Indonesia, Bhutan, Vietnam, Cambodia, Lao, Thailand and Myanmar. It’s effectively in the Philippines sorry. It’s effectively just a bunch of nations who are in Southeast Asia because it is the Association of Southeast Asian Nations that effectively all get conferences together and work out some joint strategies. Now, if we could integrate them more and then make them a stronger bloc against China, right now, China is kind of picking off each of them individually. You know, that might be how to form a nice little counterbalance to China, because obviously, if Thailand is buying more from Vietnam, Cambodia and Myanmar than it needs to buy from China, it may not be as reliant as Chinese money coming in.
HUNTER:
So, Michael, you’ve brought up a lot of interesting points, but I wanted to move into your final take. Michael, what’s one thing that listeners should take away from this episode if they remember nothing else?
MICHAEL:
Geopolitics is not about what you do. It’s about what you have the ability to do. So, you know, we need to make sure that we have the ability to go into a combat or or fight a new type of war no matter what happens. Now, we don’t know if our enemy will be Indonesia, who will become the fourth biggest economy very soon. We don’t know if it’ll be India, who, you know, that could be a nuclear conflict in itself, particularly, with the monsoon moving. We don’t know if China — and China is the most obvious one. It’s the one that everyone points to, particularly with the South China Sea. I mean, we there’s there’s a lot of bubbling in the defense community that, for instance, Trump may, for an easy point, win go and retake some of the South China Sea islands because taking them would be very easy. You need to send four battle groups in there. You’d probably lose 100 Navy SEALs and you could probably take, you know, fire across and you could take a few of these guys out and it’d be a huge domestic win politically for Trump.
Long term, that would be a problem, because we don’t know how bad that that escalates. I don’t think Beijing would hand them over without a fight. You know, we need to prepare for if Trump does that or really or any American administration does that, we need to be ready for that. And right now, our military, as it stands, is not ready for that. We have a military designed mostly to go follow the US into a war in Iraq or peacekeeping in Papua New Guinea, which is very important. So we need to keep doing the peacekeeping and what we do there. But we need to also think about a new war that may be coming with China and what we can do to make sure that when the chips come down and when everything ends, we’re on the right side of this and we can continue to keep some sort of normality after that conflict.
HUNTER:
That’s it for our show today. if you liked this episode, don’t forget to rate and subscribe on iTunes, Spotify, or however you’re listening. If you have any feedback on the show or ideas for future episodes please reach out on our website http://www.geopoliticsrundown.com. As always, thank you for listening, this has been Geopolitics… Rundown.