INTERNATIONAL POLITICAL ECONOMY OF ENERGY IN THE ARCTIC – ROBERT. B. WILLOWS

Image: Annie Spratt (Unsplash)

Much focus has been on the environmental consequences that global climate change has brought to the Arctic, both on the melting of glacial ice and the effects on the ecology. The declining extent of sea ice has renewed attention to shipment routes from countries within and outside of the Arctic. Limited infrastructure, unpredictable weather and high environmental and safety regulatory burdens as stipulated by the International maritime organisation pose difficulties to shippers in the transportation system of the arctic. Search and rescue along with law enforcement remain limited due to extreme remoteness and harsh climate conditions. No Arctic nation has reached their 200 nautical mile Exclusive Economic Zone (EEZ) limit in resource extraction because of the high expenses associated with it. International interest in the Arctic includes scientific research and continues to be such, especially around Svalbard and shipping routes that China are conducting through their Belt and Road Initiative (BRI).

A good place to begin understanding energy in general is by distinguishing the diversity of energy sources in the world, these includes much more than just oil. Oil is often discussed more than any other energy source. A easy categorisation is to distinguish between primary and secondary fuels, where primary fuels are resources such as oil, gas, coal and renewables such as solar photovoltaics (PV), onshore and offshore wind and biofuels. Secondary fuels are produced from primary sources such as petrol and electricity. Fossil fuels continue to dominate the worlds energy supply with up to 32% of the worlds energy consumption. Coal is estimated at 27%, gas at 22%, biomass 10% and electricity at 9% . The production of crude oil and gas continue to grow with the main producers remaining; Saudi Arabia, the United States of America (USA), Iran and Russia. The forecast is that the demand for gas will continue to grow, which is partly caused by campaigns targeting the removal of coal as a means of energy production and the switching of coal powered electricity generation facilities to gas and renewables. Globally the demand for energy is growing, notably this is connected to economic growth in developing countries such as China, India and South Africa. Moreover demand in the USA, Japan and Europe has decreased, as a result of energy efficiency polices. There will be increased pressure on states to reduce pollution and invest in cleaner energy as a result of rising demands. Many countries resort to demand side policies with no enthusiasm, unfortunately. 

Large scale resource extractions remain a key feature of the formal market-based economy of the Arctic. The extraction of these resources rely on companies outside of the Arctic and more often than not, these extractions harm the environment and remain unrewarding to the locals. The dependence of local economies on external markets can explain the lack of benefits. Another distinct feature is the traditional based economy, such as subsistence fishing which is one of many activities affected by increasing activity in the Arctic.

The economic potential due to climate change has renewed Russia’s focus the Northern Sea Route (NSR) and resource extraction. Russia has always known the importance of the NSR regarding economic security, its military operations as well as its unique global position. This is evident in its policies to drive successful development of the region, with regional challenges shaping its development. The first Arctic specific policies highlighted resources for internal use, exporting, promoting peace and security, preservation of the ecosystem and the use of the NSR as the nationwide transport infrastructure as part of Russia’s modernisation plan. The year 2013 yielded a state program which highlighted socio-economic development, science and technology, environmental security, international cooperation and military security. Ultimately, creating support zones as a way to develop the Arctic Zone of the Russian Federation (AZRF) and the NSR. Many of these state programs lack in the development of local socio-economic circumstances. Post 2014 brought about Russia’s’ annexation of Crimea and heightened its role in the Syrian conflict resulting in sanctions from the west and exclusion of sharing western technology for resource extraction. Continued friction between Russia and the west encouraged them to look at eastern countries for investment which gained interest from China. The NSR is a major cog in Russia’s Arctic foreign policy with increased international attention to the route requiring an updated military infrastructure to protect the region.

Despite China having their own oil resources, rapid growth has placed concerns on its future energy security. The first project within the Polar Silk Road conducted in the Arctic is the Yamal Light Natural Gas (LNG) project, that has the potential to export gas to China. The activities of China in the Arctic, is comparatively small to their involvement in other parts of the world. The recent drop in oil prices brought about by the COVID-19 pandemic is making oil extraction from the Arctic fields too expensive to profit from. The uncertainty of China’s exact interests in the Arctic makes observers nervous. Additionally, China is looking at the Arctic for new shipping routes particularly the NSR. 

The main forum that is used for negotiation in the Arctic is the Arctic council. This council is comprised of eight member states, six permanent participants representing indigenous Arctic people and lastly observers, of which non-Arctic states and international organisations are included. Arctic states play a key role in shaping policy in the region, they oversee regulations and standards for safe resource extractions by industries and provide a framework for assessment measures including environmental and social issues. Sub-national governments shape oil and gas policy in their territories. Native corporations manage oil and gas profits, this is transferred from the state to the natives, this forms part of the Alaska Native Claims Settlement Act (ANSCA). Prominent to Canada, co-management boards oversee and review environmental impacts of all projects that may influence the environment in their territory, these boards are established through regional land claim agreements. NGOs (Non-Governmental Organisations) tend to be effective in pushing for regulations and raising public awareness of Arctic energy developments. They work directly with community members to organise resistance against extraction projects and promote small scale renewable energy projects in the Arctic. Essentially these forums are used to address environmental and social issues that arise from companies who fail to take into account the negative impacts of their projects, be it environmentally, socially or economically for indigenous communities.  

A study conducted in many emerging economies has concluded that nuclear energy, while being the most expensive to develop and invest in, provides a positive impact in reducing CO2 emissions. While renewable energy provides greater economic growth, it still has a negative impact on CO2 emissions for a multitude of reasons. Knowing this, there is a need for more viable options for sustainable and environmentally friendly energy in the Arctic. The need for robust policies to mitigate environmental and social risk while enhancing the benefits for communities and the environment in the Arctic is vital to its sustainability. The past decade’s policy discussion in the Arctic has been centred around ensuring research and development that benefit the regions indigenous people. The fact that many northern economies across the Arctic are still dependent on oil and gas development is an issue that needs addressing especially with the rapid pace of climate change. 

Robert Willows is a Political Science and International Studies student at the University of Pretoria. International relations interests him and he wishes to further his studies on this subject, especially in security and economic policy.

BIOPIRACY – SELYCIA CURWEN

Image: RR Medicinals (Unsplash)

We’re all familiar with piracy; the unauthorised use or production of works such as movies, music, and software. What many of us are not familiar with is biopiracy. As the name suggests, biopiracy is the use of indigenous knowledge for profit without permission and with little or no compensation or recognition. Bioprospecting is the search for biological or chemical resources for commercialisation. This has more ethical considerations wherein profits are recorded and returned to local communities, conservation efforts and/or the development of infrastructure which benefits the local population. Biopiracy occurs most often at the disadvantage of lesser developed, low and middle-income countries/communities, thus, furthering inequalities. The Convention on Biodiversity (CBD), therefore, serves to ensure Access and Benefit Sharing (ABS) as one of its three objectives. In 2014, the Nagoya Protocol entered into force as a supplementary agreement to the CBD which provides the legal framework specifically to do with ABS where Prior Informed Consent (PIC) and Mutually Agreed Terms (MAT) of access are mandatory. Neither the CBD nor the Nagoya Protocol are without fault; considering the incoherence between policies, legislation, patents, and intellectual property rights, to name a few. This article will proceed to demonstrate just how much of an impact biopiracy has and can have on a local level, environmental implications, and economic potential.

Local impact

Some have referred to biopiracy as biocolonialism wherein Multinational Corporations (MNCs) often control patents and intellectual property laws. This is often done through gene manipulation which has adverse effects on indigenous people including decreased food security, monocropping, ecological degradation and loss of biodiversity. Traditional knowledge is important for indigenous communities in that it provides food, employment, and therefore an income, as well as a sense of cultural identity and pride. Let’s use a homegrown example. The Alice community in the Eastern Cape is challenging two European patents that make use of two species of wild plant that have traditionally been used to treat respiratory infections and diseases, including Tuberculosis. The Pharmaceutical company with the illegal patents is in contravention to the CBD, as it uses these plants to manufacture a syrup to treat respiratory infections. The Alice community claim that the company stole their indigenous knowledge, exploited their labour to harvest and has driven the plant to near extinction. The community is demanding compensation, that the patents be withdrawn and that the plant be restored and used to the benefit of the community. In 2010, the Alice community won the dispute and the patent was revoked. The company, however, stated it would oppose the ruling. One way to ensure the safeguarding of traditional knowledge and biodiversity is by including the Nagoya Protocol in legislative frameworks as is being done in the Caribbean region. This way, the relevant indigenous persons such as the Amerindians and Rastafarians are fairly compensated and credited for the commercialisation of their traditional knowledge. 

Environmental impact 

Biodiversity within certain environments and of certain countries have now become valuable commodities. Unfortunately, many species of fauna and flora, endemic to those countries, are facing extinction. This is due to some species being routinely removed from their natural habitats, climates and ecosystems. This also then compromises the sustainability of those environments. By this I mean the natural “circle of life” of “food chain” is affected when one or more components of that ecosystem is removed. Some indigenous communities, after becoming aware of the little benefits they receive are voluntarily destroying crops, so that MNCs can’t profit from them. Recent statistics have shown a 70% decline in Asian countries’ traditional crop production. There is little incentive for these communities to preserve their natural resources and biodiversity. 

Economic impact

When it comes to traditional medicine for example, the methods and products used are being increasingly adopted and sold. This sector now has a significant role to play in the economic development of developing countries. The sector will also be of great use at a global scale in disease prevention, self-health care and health promotion in times of financial constraints where it could potentially reduce health-care costs. In the case of South Africa, the third most biologically diverse country in the world, biological richness is one of the main components for economic growth and development. The potential market size of bioprospecting is valued at 2 billion Rand. Employment opportunities are then created when bioprospecting the resources. Sound knowledge of the bioprospecting market sectors and the development of a bioprospecting commercial industry value chain is necessary in order to reap all the benefits including small business development. 

Possible Solutions

The measures to protect indigenous knowledge, practices and biodiversity are still largely ineffective.  This is because there are many inconsistencies with regards to policies, legislation and international law. One suggestion is to create a designated body similar to Fair-Trade International, with the specific function of awarding certification and providing standards and education programs against Biopiracy. This can be done with the help of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). This convention ensures that wild animals’ and plants’ survival aren’t threatened during trade. At the consumer level, it will help consumers make a more conscious decision with their purchases as the products can be labelled as “not biopirated” and ethically sourced. With this transparency, the consumer’s trust in the company and product will grow and in turn will provide the indigenous communities with the compensation and recognition they deserve. At the national level, one way to ensure the safeguarding of traditional knowledge and biodiversity, is by inclusion of the Nagoya Protocol in legislative frameworks as is being done in the Caribbean region. Through these measures the relevant indigenous communities such as the Amerindians and Rastafarians can legally be guaranteed compensation and credit for the commercialisation of their traditional knowledge. 

Biopiracy is not a very common term in one’s everyday vocabulary and knowledge base but it’s time for more attention to be given to it. Local communities rely on their traditional methods and biodiversity for day-to-day functioning; medicine, food, income etc. By exploiting these, a ripple effect is created where individual families are affected and then the economy of that country loses money, thereafter the environment is degraded and extinction of certain species occurs. This also impacts the issue of climate change as all species of flora and fauna have a role to play in the global ecosystem. As was indicated above, the bioprospecting economic and social potential in many countries is immense. It is imperative then that the bioprospecting sector is treated as valuable and sensitive yet, profitable. Furthermore with appropriate measures in place such as legislative inclusion of the Nagoya Protocol and a designated oversight body, the consumer can make informed, ethical and conscious decisions when making purchases. 

Selycia considers herself a jack of all trades, with her interests and abilities widespread. She wants to pursue as many of them as she can in her lifetime. She believes life is not meant to be a straight “normal” line but a beautiful journey of segues. 

ISRAEL’S CONTINUOUS ANNEXATION OF PALESTINIAN LAND AND THE LONG-TERM VESTED INTERESTS OF THE US – TSHEGOFATSO M.P. RAMACHELA

Image: LevarTravel (Unsplash)

The conflict between Israel and Palestine has a long and complex history characterised by violence, disputes over land and issues of legitimacy. This article aims to identify the historical roots of the Israeli-Palestinian conflict, in doing so it will identify the various actors and competing claims involved, as well as other factors which have exacerbated the tensions. This article will also highlight the continued Israeli settlement of Palestinian land as the main source of conflict between the two groups. This conflict is exacerbated by the vested interests of the US (United States of America) in the region which has historically shaped how the conflict plays out in that region.

The Israeli-Palestinian conflict is a consequence of the Balfour Declaration of 1917, in which the British government at the time, issued a decree in support of the establishment of a homeland for Jewish people in Palestine, which was then an Ottoman region. This announcement, however, was vaguely worded and did not explicitly state the formation of a Palestinian nation, rather it delegated land to be occupied by Jewish people in Palestine. The ambiguous formulation of the Balfour Declaration is the root of the current contention and conflict regarding legitimacy between Israel and Palestine, as the two states have feuded over each others claims to the territory. In November 1947, the UNGA (United Nations General Assembly) adopted Resolution 181 which partitioned Palestine into three separate territories consisting of; an Arab state, a Jewish state and an international zone surrounding Jerusalem. In 1948, conflict broke out between Israel and the surrounding Arab states (Arab-Israeli War), resulting in the displacement of over 700 000 Palestinians. Israel prevailed in the war and in the process gained its “independence” and expropriated a third more, of land than what was initially set forth by Resolution 181. In the aftermath, both the populous and geographic size of Palestine decreased. Jordan occupied the West Bank and Egypt acquired control of the Gaza Strip. Almost two decades later a second conflict known as, the Six Days War broke out between Israel, Egypt, Syria and Jordan. Once again Israel prevailed and further expanded its territory to include the Gaza Strip, the West Bank, the Sinai Peninsula and Golan Heights. To ensure long term peace, the UNGA adopted Resolution 242, which put forth that Israel relinquishes its illegally obtained territories and recognise Palestine as a sovereign state. This, however, did not happen and for the years to follow, tensions mounted between Israel and Palestine. Consequently, civil and mass violence erupted following boycotts, protests and clashes between the Israeli Armed Forces and the Palestinian Liberation Organisation, this is what is known as the First Intifada. In an attempt to end the conflict, the Oslo Accords were initiated, set by the UN (United Nations) framework of Resolution 242, to begin the process of peace. Since then, tensions have increased and conflict has persisted, driven primarily by the failure of both sides to recognise the legitimacy of one another. 

In November 2000 during the Second Intifada, the Prime Minister at the time, Ehud Barak initiated the construction of Israel’s wall, to prevent Palestinians from crossing the boundary. The Israeli West Bank barrier (wall) falls significantly within the West Bank thus essentially consolidating Israel’s territorial expansion and exclusion of Palestinian people. It’s difficult to ignore the striking similarities between the wall in Israel and President of the US, Donald Trump’s plan to construct a wall along the US-Mexico border. For almost 3 decades, people living in and around Europe during the Cold War condemned the existence of the Berlin Wall and fought to bring it down, however, now states build walls often to the detriment of others on the grounds of sovereignty, national security and peace. Recently, Israel’s current Prime Minister, Benjamin Netanyahu announced plans to expand its territory into the West Bank and the Jordan Valley. This expansionist agenda is strongly backed by the US, thus essentially positioning the US as pro-Israel. The US’s support of Israel is not a new development as it pre-dates the Trump administration and its roots can be traced back to the Cold War. During the Cold War, the US provided several anti-Communist states, like Israel, with significant sums of aid. To this day, although no longer driven by the motivations of the Cold War climate, the US still gives Israel billions in foreign aid annually. The aid given to Israel not only serves to strengthen its position in the Middle East but also consolidate its capabilities and entrench its dominance over Palestine. Essentially, Israel serves as a “policeman” of the US in the Middle East as it protects US interests and promotes its agendas. Israel is a beneficiary of sustained US diplomatic support, i.e. the 1980s Israel-Egypt Camp David Accords, that turned out to be a subversive of Arab unity. At the beginning of the year, the Trump administration announced its Middle East peace plan, in which it aimed to negotiate a permanent peace arrangement between Israel and Palestine. What President Trump deemed a “win-win” solution, blatantly appears to favour Israel and disadvantage Palestine. Since the beginning of the Trump administration, it has become increasingly evident that the US is not impartial but rather extremely pro-Israel. Perhaps the most provocative action which not only compounds Israeli-Palestinian tensions but further complicates the issue is Trump’s decision to recognise Jerusalem as the capital of Israel as well as relocate the US embassy to Jerusalem.

One would think that with a history and a nation characterised by notions of anti-Semitism, persecution and mass displacements, it would be Jewish people, specifically the state of Israel that champions the promotion and protection of human rights, as opposed to committing acts which contradict this. The circumstances of Israel and Palestine are rooted in imperial origins and an inconclusive decolonisation process. To this present day, the US maintains strong geopolitical, geostrategic and economic interests in Israel. The sustained US interests in Israel require an in-depth assessment of what the US stands to gain from this relationship. Israel is in fact, a petroleum-producing country, however, it is not the largest producer of oil in the Middle East and thus the motivations of the US-Israel relationship must be questioned. Could this relationship possibly stem from a need to appease Jewish lobbyist groups in the US? Could it be Israel’s ability to combat terrorist organisations like ISIS (Islamic State of Iraq and the Levanth), or simply a ploy by the US to dominate the narratives permeating from the Middle East? As one of the world’s great powers, the US can disseminate knowledge through several channels and potentially control the narrative, this can easily be done with a partner, like Israel in the Middle East. It is uncertain what the future may hold for Palestine, on the one hand, some states favour a one-state solution in which both Palestinians and Israelis unite as one state with equal rights for all. While on the other hand, some prefer a two-state solution in which Palestine exists as an independent and sovereign state as opposed to a territory occupied by Israel’s military. US-Israel unilateralism works to the exclusion of Palestine and to the benefit of Israel. To ensure sustainable peace, a fair, just and amicable solution is necessary. A solution informed by recognition of past injustices, an equitable approach from all players and a guarantee of the respect of sovereignty, legitimacy and human rights. External involvement must be constructive. The people of the Middle East must be able to negotiate and navigate their affairs as well as shape their future according to the interests that serve them.

By Tshegofatso M.P. Ramachela

Tshegofatso Ramachela is a certified paralegal and a final year student at the University of Pretoria, currently completing a degree in International Studies, Political Sciences and History. She is a humanitarian, an intersectional postcolonial feminist and an aspiring international development and peace worker, who hopes to one day be a Doctoral student.

TERRIFYING ENERGY: THE SOURCE OF INSTABILITY IN MOZAMBIQUE – HENRY DILLION-PEENS

Image: Aleksey Malinovski (Unsplash)

The insurgency in Northern Mozambique is a source of instability, not only for the already fragile nation, but it also poses a threat to the whole of Southern African Development Community (SADC). This security threat requires a coordinated and timely response from Mozambique and her allies.

The violence thus far has been largely contained to the Northern Cabo Delgado province of Mozambique and it is estimated that about 700 civilians have been killed and over 250 000 people have lost their homes since 2017. The most recent atrocity is the murder of 52 villagers of Xitaxi in April 2020. In fact, the data provided by the U.S. based Armed Conflict Location and Event Data Project indicates that in the first four months of 2020, incidents of violence in Cabo Delgado had increased by 300% when compared to the same period in 2019.

Unfortunately, violence is not an anomaly for Mozambique. The country suffered during a brutal 16-year civil war, spanning from 1977 to 1992, following Mozambique’s independence from Portugal in 1975. In the aftermath, the Mozambique Liberation Front (FRELIMO) emerged as the dominant political party in Mozambique with the Mozambican National Resistance (RENAMO) continuing to engage the former in open conflict until the latter’s relatively peaceful surrender in August 2019. 

In 2011, a massive gas field containing an estimated 425billion cubic meters of gas was discovered off the coast of Cabo Delgado. The IMF expects that the new gas industry to exceed one hundred billion dollars, with the Mozambiquan government earning over five hundred billion dollars in tax revue from the project over the next 30 years. As such, Mozambique is now home to the three largest liquid natural gas (LNG) projects in Africa, namely: the Rovuma LNG project, worth $30 billion, involving ExxonMobil, ENI and the China National Petroleum Corporation (CNPC); the Mozambique LNG project, worth $20 billion and involving Total; and the Coral FLNG project, involving ENI and ExxonMobil, worth $4.7 billion.

Further, due to the ongoing instability in the country and region, and the inability of the Mozambican government to effectively deal with these issues, these energy companies have enlisted the services of private security companies. The two major presences are those of the Russian Wagner group and the South African based Dyck Advisory Group (DAG). The latter has been instrumental in combatting the insurgency, both through ground support and light helicopter gunship air support, thereby filling the gaps in the limited capacity of the Mozambican government’s ability to effectively protect the assets of the before mentioned energy projects. 

On the other side of the conflict, there are multiple actors to band all the groups under the banner of ISIL/ISIS (Islamic State of Iraq and the Levant) which would oversimplify a complex reality. 

Tina Andrade, Mozambique’s representative for Friedrich Ebert Stiftung (FES) explains that the debate is centred around whether the origins of the violent attacks stem from historical religious tensions, as the majority of citizens in the Cabo Delgado province are historically of the Islamic faith, or whether it is due to the socioeconomic issue that the government has failed to address – especially given the wealth being generated from the fledgling energy sector. 

As such, looking at the argument of religious extremism, there exists the home grown organisation going by the name Ansar al-Sunna, who’s modus operandi includes filmed beheadings and attacking schools and clinics, as these are seen as Western instruments. Ansar al-Sunna’s goal, as declared, was to purify how Islam was practised in Mozambique and to ultimately establish an Islamic Caliphate in the region. Furthermore, it was not until mid-2018 that ISIL/ISIS made itself know in the region through attacking both Mozambican security forces and infrastructure related to the energy sector. From what has been presented, the narrative of “Islamic extremists in Mozambique” does seem to be the logical cause of the problem. 

A correlation, however, does not necessarily mean that there is causality. Therefore, we must look at the other side of the debate, one that focuses on the government’s complicity in the violence and ensuing instability. Jasmine Opperman of the Armed Conflict Location and Event Data Project explains that although it is evident that there are levels of foreign influence and radicalisation, it should not result in a link immediately being established with Islam as the cause of the instability. 

Opperman continues by arguing: “Unless the government starts addressing local dissatisfaction in the short to medium term, we will see violence institutionalised and becoming part of Southern Africa, with regional implications. There is transnational interest, but local factors are by far more pressing”.

She is not alone in this assessment of the situation. University of Witwatersrand School of Governance associate Professor Anthoni van Nieuwkerk argues that “due to only 18% of Mozambique’s population being Islamic, the narrative of  violent Islamic extremism being at the root of the increase in violence in the country appears to be a flawed premise”.

Instead, van Nieuwkerk points to poverty and exclusion from development as being the drivers’ violence and instability. This point is demonstrated by the lack of transfers both in 2019 and 2020, as reported by Evaristo Chilingue, that although there are laws in place which guarantee that 2.75% of the revenues generated by mining and oil extraction must be directed towards improving the lives of those communities where the LNG projects are located. The government has consistently fallen short. In 2019, only 1.2 million Metical of the 83.4 million Metical were transferred in the first 6 months of the year. Further in 2020, although it was promised that half of the 88 million Metical owed to the communities would be transferred in the first half of the year, only 2.4 million Metical (2.8%) has been disbursed. All the while government spending on salaries and wages has soared without any salary increases being declared. 

The question must therefore be asked, what is happening in Mozambique? With an increase in unemployed youths, a clear lack of commitment by the government to back up promises of economic development and a heavy hand by government security forces in dealing with potential terrorists, the anti-government narrative of insurgent and militant organisations serves as a siren song for the disenchanted and downtrodden. This is a tune that could potentially resonate beyond Mozambique and the nations porous borders.

By Henry Dillion-Peens

Henry-Dillon Peens is an honours philosophy, politics, and economics student at the University of Pretoria, with his research focusing on the intersection between technology and intelligence. Henry is one of the permanent writers at The Art of Politics.

DOES FREEDOM OF ASSOCIATION GIVE LEGITIMATE STATES A RIGHT TO EXCLUDE MIGRANTS? – MATTHEW SMYLIE

Image: Humberto Chavez (Unsplash)

In this post I will explore Wellman’s contention that freedom of association gives legitimate states the right to exclude migrants. I first explain Wellman’s argument before challenging whether freedom of association trumps other political rights or freedoms. After concluding that there are circumstances whereby states may not exclude migrants based upon freedom of association, I then employ Pevnick’s concept of ‘associative-ownership’ to explore whether states have the right to exclude at all. I conclude by arguing that freedom of association does give states the right to exclude migrants from both their territory and their community, so long as the freedom to associate trumps other political rights and the individual freedoms of existing citizens.

As a starting point, it can be argued that freedom of association does give legitimate states a right to exclude migrants, a view forwarded by Wellman. From this perspective, we acknowledge that much like individuals and private groups, states made up of a group of citizens have the right to self-determination; conducting their lives free from external interference. An important component of this right to self-determination is freedom of association which also ‘entails the freedom to exclude’ or to disassociate. Therefore, states hold the right and are morally permitted, to freely choose whom they omit and who they exclude.

This right to exclude migrants that states possess is a particularly strong one if we consider Wellman’s counterarguments to possible libertarian or egalitarian objections. Firstly, freedom of association gives legitimate states the right to exclude both voluntary immigrants as well as refugees and asylum seekers. This is because, despite having a duty to help the prosecuted and impoverished, sufficiently wealthy states are not required to open their borders. Instead, these states can choose to ‘export justice’, either by transferring aid to impoverished regions or carrying out political and militarily interventions in states that are failing to protect their citizens. Secondly, the state’s jurisdiction over its territory is more important than the right which each citizen has to invite outsiders onto their private property. This is because the state requires the ability to coerce its people in order to carry out its key functions which include security and enforcement of property rights. States, therefore, have a presumptive right to exclude migrants as they please.

The above argument seems to entail very strong implications, allowing states to exclude whoever they want to, based upon their right to freely associate. However, does this right to freely associate trump all other moral considerations? I argue that it does not. Instead, we should understand the right to freedom of association as one of many political rights; such rights must be weighed up against one another on a case to case basis before we derive any moral conclusions as to whether a state has a right to exclude an individual or not. Therefore, freedom of association does not give states the automatic right to exclude all migrants because in some cases it should give way to a migrant’s moral claims that hold more weight, for instance, the right to be free from discrimination or persecution.

Further, even in a world where everyone is equal and there is no need for immigration to circumvent issues such as persecution and discrimination, the freedom of association argument still does not grant states the unlimited right to exclude migrants. The main example here is the issue of international families. It would appear to be morally wrong and a severe infringement upon an individual’s freedom to prevent a citizen of one nation from moving their foreign-born partners and immediate family members into the state that they reside in; especially as such familial relationships require people to be in close proximity to one another. In this sense, ‘more intimate associations’, such as family or marriages, ‘deserve more deference in determining their members than do less intimate ones’ such as states and political communities. Therefore, the individual’s freedom to associate would suggest that citizens have the right to invite their foreign partners and family members into the state; especially prominent in a world where internet dating allows individuals to meet partners abroad with much greater ease.

These arguments still leave scope for freedom of association to grant legitimate states a right to exclude; in the cases where freedom of association trumps other political rights that would-be migrants may claim. In order to challenge this argument further, it is important to ask two questions: first, whether states have a right to self-determination and, secondly, what exactly states are excluding migrants from- the political community, the territory or both. Here, the work of Pevnick is valuable.

Pevnick argues that when members create and maintain institutions, they earn an ownership claim which gives them the right to determine how the institution is shaped in the future. This ‘associative ownership…applies even to associations that are non-voluntary and intergenerational’, for instance, states. In this sense, the citizens of a political community work together, utilising resources to pay for public goods such as education and infrastructure- their ownership of the institutions gives them the right to decide how they are run. Pevnick, therefore, shows that states as political communities have the right to self-determination; this right morally permits states to exclude migrants whose political claims do not trump the freedom to associate.

Pevnick’s argument grants that states have a type of property right over the nation’s institutions and that these institutions are linked with a particular territory. However, even if we grant that legitimate states have a right to territorial jurisdiction, it is not ‘evident that jurisdiction also requires control over entry to the territory’. This suggests that a state’s right to self-determination allows them to exclude migrants from the political community but not the territory. In this sense, a migrant could live within a territory, separate from the political community and not inflict any injury upon the rights or freedom of existing citizens. The freedom to associate would, therefore, give legitimate states the right to exclude migrants from the political community but not the territory.

However, issues arise with this argument if we consider that a state’s legitimacy and rights to control a territory depends on protecting the rights of all those who are within its territory. In this sense, the state has to grant equal citizenry to all immigrants that settle in its territory, incorporating them into the nation’s institutions and providing them with the same rights and access to services as existing citizens. The states’ right to exclude immigrants from permanently settling within in its territory is, therefore, a ‘necessary extension of the right to exclude them from full membership of the political community.

But whilst it may be the case that states are required to grant all settlers full membership to its political community, the burden on existing citizens must be questioned. Migrants do not demand new forms of protection or services from citizens or the state; they simply demand equal rights and use of existing services. From this perspective, the arrival of migrants will not exclude existing citizens from the benefits of the public goods that the state provides, such as law enforcement and healthcare. This dampens the argument that freedom of association gives states the right to exclude migrants because the people entering the country are likely to impose negligible effects on citizen’s freedom and access to services, especially if these migrants are taxed so as to contribute their fair share.

However, this is to miss an important point made by Wellman. By accepting new members into the state, the ‘self’ in ‘self-determination’ is altered because these new citizens have a say in how the community is run. This means that ‘a country’s immigration policy affects who will share in controlling the country’s future’. Therefore, as more migrants, who hold different values, are admitted to the state, the original citizens have less and less and less control over how their community is run. This leads to the conclusion that states have a right to associate freely and exclude migrants in order to protect their right to self-determination for the future.

But this point that the right to exclude is required to protect self-determination raises questions. Most importantly, it is not unreasonable to think that a state’s culture and values will transform over time despite the presence of closed borders, with changes in society and new generations making substantial differences to the decisions made by the political community. The right to exclude migrants would, therefore, seem to fall away since the ‘self’ in ‘self-determination’ is likely to be altered regardless. This conclusion does not stand however if we pay attention to the fact that education and socialization results in a ‘good deal of continuity between generations living in the same community’. It would therefore seem important for self-determination that states are able to freely associate and prevent a large influx of migrants to preserve the ‘self’.

In conclusion, freedom of association does not give legitimate states the right to exclude all migrants because the freedom can be trumped by the claims of migrants and the freedom that existing citizens hold to form intimate relations with individuals in other countries. Freedom of association does, however, grant legitimate states the right to exclude migrants whose political claims are not weighty enough since the ability to exclude is crucial to protecting the characteristics of the demos and the state’s ability to self-determine its operations and future course.

By Matthew Smylie

Matthew Smylie holds an MA in International Political Economy from the University of Warwick and a bachelors degree in Politics, Philosophy and Economics from Warwick. He is incredibly passionate about IPE issues.Matthew runs his own website The Political Economist, check it out :https://www.thepoliticaleconomist.co.uk

SOUTH AFRICA’S R70 BILLION IMF LOAN, WHAT DOES IT MEAN? – BRADLEY MAASDORP

Image: JP Valery (Unsplash)

The 2020 COVID- 19 pandemic approached not only one country but our entire world with little to no warning signs. Not many countries have had the opportunity to prepare themselves for the outbreak of the virus. From an economic point of view, most states have suffered severely with the loss of income, jobs and  decresed economic activity.

This article aims to unpack and understand the rationale behind South Africa’s acceptance of an International Monetary Fund (IMF) loan to help cushion the blow of COVID-19 on South Africa’s economy. Furthermore, the article will analyse a few positive and negative influences of the IMF’s R70 billion (US$ 4.3 billion) loan. 

Firstly, one should identify what the role of the international organisation like, the IMF,is. The IMF has a goal of working towards stabilising economies in developing states, monitoring financial and economic policies, securing financial stability and acting as a lender of last resort. Economically, with the outbreak of COVID-19, South Africa is struggling with a high number of job losses, firm closures and increased levels of social hardship. COVID-19 has had negative implications on the cost of daily living conditions for the ordinary South African citizen. In addition to this, the devastating effect of COVID-19 on the economy resulted in millions of workers left without an income. Leading to the IMF’s goal in assisting towards policy actions such as high employment, economic growth and poverty reduction. 

The IMF has approved South Africa’s request for emergency financial support. One can argue that a form of Dependency theory can be identified within the financial support statement. A simple understanding of Dependency theory is that of a relationship between the Global North and the Global South states. In which Global South states often rely on the Global North for assistance in terms of trade or economic aid. The IMF serves as a financial supporting organisation, whereby the Global South depends on financial support, especially during the COVID-19 pandemic, on their economies. South Africa is under financial strain and needed assistance from the IMF. States look to generate funding from internal investments from their domestic market and look for foreign direct investments (FDI). When states struggle to generate this income, they look to organisations like the IMF for assistance. This, in turn, means a state like South Africa gives up some of its sovereignty to an external actor like the IMF in exchange for these loans, as the IMF now has some input in how South Africa’s economic policy can be shaped. Although this loss of sovereignty seems negative, a positive can be taken from these loans whereby it lessens the pressure from the government to fund its debt. A valid question that can be asked: “Is South Africa heading to a debt crisis?”.

In terms of the South African context, there is a problem with the balance of payments. The South African budget deficit is increasing, and the IMF can provide financial support to solve payment difficulties. The IMF’s loan has a role to resolve the problem to finance the deficit. In theory, the IMF’s loan initiative is a step in a positive direction to assist South Africa in its financial crisis. This loan, however, has led to multiple raised eyebrows from economists to political analysts to the ordinary citizen. Tackling any International Political Economy phenomena, one should return to the basic question asked by International Political economist Susan Strange, “Cui Bono”. The IMF’s loan has resulted in many questions such as: “Who is the money going to benefit?”; “In whose hands will the money be placed in?”.This scepticism is justified as the levels of corruption have increased, especially with regard to the looting of the various COVID-19 funds. Corruption affects the legitimacy, equitability and ethical distribution of the IMF loan. One does not want COVID-19 to be a reason for a loan conspiracy which leads to acts of unlawfulness by officials in authoritative positions. If the notion of corruption and the greed for money were to be non- existent in our human language or nature, then the IMF’s loan would 100%, with full confidence be beneficial to support South Africa. In reality, however, we live in a society whereby corruption and greed challenges effective development and economic growth.  

From a political perspective, COVID-19 is a challenging tool to identify how effective the South African government is, in terms of their ability and effectiveness in dealing with such a pandemic. The government has increased pressure to provide for its citizens in terms of health, financial aid and food security. It all boils down to good governance. One should also note that the IMF provides a loan and it is not a donation. South Africa is in debt and has to repay the IMF’s loan. In a positive sense according to Danny Bradlow, the loan interest is approximately 1.1%. This is a loan at a cheaper interest rate and can be repayable if the government ensures that the amount to repay the IMF is budgeted for.

To conclude, this article analysed and critiqued the R70 billion loan provided by the IMF to assist South Africa in their financial and budget deficit problem. If the loan is distributed wisely then it would be effective to support the South African economy in the time of a pandemic. If there is weak governance and corruption then the loan would not be beneficial for South Africa and her people. Whether there will be a ripple effect on the IMF’s, this loan is uncertain. With good governance, ethical and constitutional procedures the IMF’s loan can prevent an economic crisis in South Africa during the COVID-19 pandemic.

By Bradley Maasdorp

Bradley is a 21 year old, 3rd year BPolsci International Relations student at the University of Pretoria. His goal is to educate and enlighten humanity to embrace their critical thought skills. He enjoys writing and believes that through writing and communication one can better understand the construction of the way of life. He attempts not only to look at global circumstances from one perspective but to also use critical thought skills to understand the modern social political complexities. 

HAS CYBERSPACE AND CYBERPOWER CHANGED INTERACTIONS IN INTERNATIONAL AFFAIRS? – KHENSANI SHIBAMBO

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Since the creation of cyberspace there has been an increase in global-scale interactions and dependency due to the relatively low cost and simplicity of interacting in cyberspace, this has benefitted societies, boosted economies, improved military capabilities and online learning etc. Although cyberspace has advantages and provides opportunities, it also hosts a variety of vulnerabilities that can leave non-state actors, states and organisations at a risk of being exploited by those meaning to cause them harm, through practice of cyberpower. Cyberpower has influenced, shaped and affected strategies in the modern world and has enabled a new way to exercise power. This article will try to define what cyberspace and cyberpower is and what makes it a unique domain when compared to other strategic domains (eg. air, land, sea and space). It will also discuss what makes cyberattacks so dangerous, why cybersecurity is so challenging and how these issues impact international affairs and whether it could lead a potential cyberwar. 

Cyberspace is a globally connected domain where information can be created, stored, manipulated, shared and exploited with the use of ICT (information and communications technologies) and EMS (electromagnetic spectrum) by way of interdependent and interconnected networks. Cyberpower is then the process of transforming information into strategic effect and using cyberspace to accomplish the end goals of the strategy. Cyberpower is used to exercise efficient and sustainable influences in society, crises, war, peace and international affairs. What makes cyberspace a unique domain is that at entry level it does not require as many resources and expertise as it is fairly simple to access and use. This allows for multiple actors to participate in cyberspace and exercise cyberpower. Cyberspace is near instantaneous as net-speed is almost as fast as the speed of light which means that news can easily and quickly go viral, for example the viral video showing the physical brawl over presidential age limits involving Ugandan MP’s (Member of Parliament) which erupted in the Ugandan Parliament in 2017. Cyberspace can also be replicated and multiple domains can exist simultaneously as nothing in cyberspace is final unlike land power, for example if the enemy destroys the opponents M1A1 tanks, it will take a while until a replacement tank is ready for deployment. 

What makes cyberspace dangerous is how it is an offensive playground enjoyed by cyber-attackers as defence in cyberspace can be outmatched due to how rapidly cyberattacks evolve and how hackers continue to improve their skills to beat the security defence mechanisms. Cyberpower is also dangerous due to its pervasive nature which allows for cyber-attackers and cyber-users to access information and use it to manipulate and coerce targets. It can also affect and influence multiple domains simultaneously which allows for some actors to do it anonymously and stealthily which is one of its main attractions to many cyberspace users who wish to launch cyberattacks on organisations, governments, companies and people. Cyberpower has been and is still used for surveillance, espionage, exploitation and coercion in international conflict (eg. hacker groups threatening to expose governments). Cyberattacks are dangerous because they vary in types (hacking, malware, zero-day exploit, phishing etc.), purpose (coercion, exploitation), execution (fry servers or alter operation of machines e.g. Stuxnet) and devastation (lose of important/incriminating data or cause machine malfunction). They are also dangerous because they threaten security whether it’s the individual’s personal information (identity and banking details) or company’s/government’s/military’s classified information (defence strategies, company/government involvement in illicit trading) that would leave them in a vulnerable position. These cyberattacks pose a problem to security because, recently it has become more difficult to trace where cyberattacks come from as cyber-attackers continuely improve their prowess and mask their locations by designing the attacks to come from a different location than their true origin, which makes it diffuclt to attribute the attack to a certain individual/group and thus punishment cannot be dealt to perpetrators. These attacks can in the worst-case-scenario lead to a potential cyberwar. 

Cyberwar is a non-violent war that takes place in cyberspace with the use of cyberpower as a strategic instrument that enables global reach and the ability to interfere and create unrest in the social, economic and political spheres. Therefore, cyberspace, cyberpower and cyberwar seemingly undermines boundaries and state sovereignty. For example, Russia undermined the United States’(US) sovereignty by interfering in their 2016 presidential elections with the use of “trolls” and the US together with Israel creating the malware Stuxnet to disrupt a nuclear enrichment plant in Iran. Non-state (forex traders, activists, economists etc.)  and state actors can also cause cyberwars by inciting unrest on social platforms. Posting opposing political opinions, threatening to expose or exposing political agendas and injustices in certain countries to the public, which will have an effect on the country’s social, political and economic (country’s currency will become unstable) spheres. Even though cyberwar is a possibility, it is unlikely to occur due to the globalised world (too many events happening cause cyberattacks to eventually become background noise) and the vulnerability that comes with cyberspace leaves states mutually vulnerable therefore deterrence (by threat of implementing punishment policies) is the best option to avoid miscalculated cyberattacks and unnecessary devastation. 

In conclusion, cyberspace as an offence-orientated domain that has allowed cyberpower to achieve end goals that could either coerce targets into desired outcomes or cause devastation. Cyberpower impacts international affairs in the sense that actors participating in cyberspace practise espionage, economically exploit (manipulate currencies by stirring unrest in a country’s political, social and economic affairs) other nations thereby seemingly undermining state sovereignty as seen with Russia’s involvement in the 2016 US elections. Vulnerability in cyberspace could possibly cause a cyberwar, therefore states and other stakeholders need to develop adequate solutions to manage and control cyberspace and ultimately cyberpower.

By Khensani Shibambo

Khensani is a final year student at University of Pretoria studying a Bachelor of Political Science (International Studies) and is a recipient of the Deutsches Sprachdiplom der Kultusministerkonferenz – A2. She also assisted at the 2020 Dominican Republic embassy’s National Day event. 

NINE-DASH-LINE: CHINA’S VIEW OF THE SOUTH CHINA SEA- RUNGANO SIBANDA

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The South China Sea waters have become a prominent arena of concern in the polarised global economy because of China’s adjudged expansionist schemes that have caught the attention of superpowers, allies and their interests. The maritime territorial dispute between the South East Asian countries that generate between $3.4-$5 billion in international trade per annum appears to, on a surface level be centralised around resource acquisition. Once the blurred lens is adjusted, it is a notable and intricate socio-political and economic dispute that calls for scrutiny on previously accepted demarcations. 

The South China Sea is a vital waterway hub for various activities ranging from trade to aquaculture which the densely populated South-Asian communities are dependent on for its resources and accessibility. The largely biodiverse area provides approximately 10% of the world’s fishing stocks, 40% of global natural gas commerce with over 190 trillion cubic feet present. Nevertheless, it must be noted that the ongoing large-scale extraction and overfishing is exhausting the South China Sea’s once affluent deposits. Each of the states enclosing the sea namely Brunei, Cambodia, China, Indonesia, Malaysia, The Philippines, Singapore, Taiwan, Thailand and Vietnam all have 200-mile exclusive zones giving their state authority, over economic pursuits within that range under the 1982 UNCLOS (United Nations Convention for the Law of the Sea). 

This agreement although rectified by the crucial players has several water features and islands that do not fit neatly into clearly defined areas, resulting in overlapping claims such as the elaborately contested Spratly and Paracel islands. The agreement did not explicitly make provisions for extensive security considerations. Raw materials and fishing rights are the most conflicting issues, even in spaces that have specific jurisdictions because contraction projects are often met with severe backlash, especially from Beijing. These discords are likely to intensify because of environmental degradation due to climate change. Which will worsen food insecurity and aggravate mineral and territorial competition as witnessed through the inter-state actions of erecting national emblems in desired areas to emphasis new and agreed-upon claims. 

Since the 1980s China has expressed interest in the maritime waters that surpasses their allocated 200-mile radius and is prioritised through their emerging hegemonic status calling for between 80-90% of the total 3.9 squared kilometeres. Under the assertion that these are ancient Chinese trade channels that were diluted by Western imperialism. China has advocated for the controversial nine-dash-line as a method to enlarge its geopolitical sphere of influence, which would consequently have a domino effect in its standing in the global arena. This is seen in the unoccupied territory hotspots such as the Spratly and Paracel islands on which China have begun to construct numerous artificial inland structures such as; bases to expand their navy and fulfil aquaculture goals. They have already preoccupied 3200 acres of land for their industrial outposts, whilst searching for and extracting rare metals that would give them a considerable and comparative advantage in the 4th Industrial Revolution. 

These military build-ups and missile port developments are brewing tensions in the South China Sea. Those invested in the region because of China’s monopoly on legal naval laws and its encroachment tactics that are difficult for small states to sufficiently challenge even with the backing of a P5 country. China’s diplomatic strategies refute these concerns by merely alluding to the nine-dash-line and stressing vulnerability to foreign aggressive forces in its the East China Sea and the South China Sea. China is believed to be playing both sides of the fence as mediator and conflict instigator in the ASEAN (Association of South East Asian Nations) code of conduct negotiations. They have exacerbated the disputes rather than contributed to their resolution through their foreign policy ambiguity that they defend in line with the UNCLOS. Even though it criticises China’s coercive control in these maritime waters, its equidistance proposition would not address the needs of the parties involved. Aqua life and raw materials are not distinctively distributed along 50-50% lines placing some countries at a geographical disadvantage.

In recent times, China has exploited the world’s preoccupation with the COVID-19 pandemic to broaden its martime strategy by taking pivotal political actions to consolidate maritime intelligence bases. Moreover, not enough attention is paid to the fact that they have undergone several financial aid programmes to improve diplomatic ties with countries like The Philipines. This complicates the nature of the disputes and the mechanisms used to resolve them. It is arguably a part of the greater scheme of things as they aspire to implement an inter-continental belt and road initiative, economically intertwining a vast number of economies with their own country.

The United States of America (USA), despite attempting to take a neutral position in the conflict, has also been a proactive member in its discussions. The USA’s desire to safeguard its interests are ironically weakened by not rectifying UNCLOS. The USA gains over $1.2 trillion annually from this waterway, therefore, aims to maintain unrestricted navigation and free trade. In addition to this, they hope to mitigate disagreements amongst the ASEAN countries through treaties and military assistance because of their international responsibility to facilitate liberal principles and rights. 

Through a structuralist perspective, one can recognise the often overlooked importance of the cultural practices and values that have sustained historical, scientific and knowledge sharing ties that impact a state’s approach to the territorial water conflict. The Malay, for example, prefer a more Nusantara Mandala concept of shared networks and resources which differs from the Chinese definitive boundaries approach. Regardless, ASEAN solidarity and the collective alliance could reshuffle power dynamics as these nations have a joint population of over 625 million people and $3 trillion annual GDP excluding China’s economy. They could bring forth a legally binding framework that is sensitive to the complexity of their problems, for unified cohesive development. Nonetheless, the members of the South China Sea find themselves between a rock and a hard place, because of their unwillingness to end China’s dominance.

In a globalised interdependent economy facing the increasing risk of protectionist policies, the South China Sea conflict is noteworthy as the world’s oceans are slowly becoming the new conflict-prone region. China’s unsettling prospects for the region based on traditional imperial claims will alter the Indo-Pacific merchant zone as they try to link most global value chains to their single economy. Research that is outside the scope of this article, evaluates the in-depth solutions and possible East-West treaties. The oceanic maritime water is a powder keg which Chinese expansionism may ignite.

By Rungano Sibanda

Rungano Sibanda is a final year undergraduate student at the University of Pretoria. She is passionate about highlighting the necessity for diversity whilst challenging the misconception that it breeds conflict in International Relations. 

CRYPTO LEAKS AND THE GEOPOLITICAL IMPLICATIONS ON SWITZERLAND’S NEUTRALITY DOCTRINE AND INTERNATIONAL SECURITY- MATTEO MOSELI

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In 2015, the security and intelligence community was completely shaken to its core with the publishing of The Spy Cables, which were a series of top-secret intelligence documents from various state security and intelligence agencies. These revelations exposed sensitive government secrets and compromised their national security outputs. The recent intelligence leaks in Switzerland have further shaken global intelligence and security networks.

Crypto AG, headquartered in Zug, Switzerland was one world’s leading manufacturers of encryption and cypher devices until its dissolution two years ago. Even though neither the Soviet Union nor China ever purchased Crypto machines, under the cover of Swiss neutrality, more than 100 countries trusted the company to keep the communications of their spies, soldiers and diplomats a secret. Its clients included Iran, South Africa’s Apartheid government, the nuclear rivals India and Pakistan and even the Vatican. Little did they know, that in 1970 the company was secretly bought by the Central Intelligence Agency (CIA) and West-German Intelligence Services (BND). From then on, the company has distributed its machines with pre-built in backdoors through which the United States (US) and its allies could decipher encrypted messages. The revelation of this operation happens in February 2020 by the Washington Post, “ the intelligence coup of the century”, which resulted in a political crisis in Switzerland and beyond. Through the so-called “Operation Rubicon” targets were not limited to the CIA and BND’s fiercest opponents during the Cold War but even included fellow NATO members Spain, Greece and Italy. Furthermore, being able to intercept communication gave the US a strategic advantage during warfare and other high-level political negotiations with other states. Among other achievements, this intelligence surplus allowed the US and its allies to have valuable information during the Iranian 1981 hostage crisis, as well as the 1989 US led invasion of Panama. The ramifications of this intelligence and security compromise have had a significant impact on Swiss foreign policy, raised the question of morality and has spawned further debates about cybersecurity.


There are only a few countries if any in the world that have made neutrality it’s key foreign policy of which, Switzerland is arguably the most famous. These recent developments, however, cast a shadow upon the doctrine of Swiss neutrality, especially in periods such as the Cold War and its status as an internationally recognised neutral diplomatic actor. A key pillar of Swiss foreign relations is its “good office” policy which allows it to “build bridges” where others are prevented from doing so. This is because it does not belong to any political bloc or does not pursue a “hidden agenda”. It can thus, support conflicting parties to negotiate a solution, either through acting as a mediator or by directly supporting negotiations. Specifically, through its embassies from 1961 to 2015, Switzerland represented the US interests in Cuba and since the 1980’s it represents US interests in Iran. Currently, it remains unclear to what extent the Swiss government knew about these CIA and BND foreign intelligence operations. The Swiss government has ordered a parliamentary investigation into these allegations and the report is currently pending. Nevertheless, security and intelligence experts consider that some part of the Swiss government were complicit in these CIA and BND activities and knew about these built-in back doors and could have benefited from this intelligence.

In the aftermath of these allegations, the diplomatic backlash on Switzerland seems to be limited. It remains to be seen how this will impact the country’s neutrality doctrine credibility in the long-term. This is especially the case for opponents of the US, such as Iran or North Korea which in the future might lean on other diplomatic actors for their negotiations and with the US, being Switzerland’s second most important trading partner it will become increasingly difficult to weigh its economic interests against diplomatic ones.

A further point that has to be raised is the question of morality. By actively monitoring communications of foreign governments, the intelligence services were informed about serious human rights violations including assassination plots, ethnic cleansing campaigns and other abuses. Specifically, it has been revealed that the CIA knew about the “Operation Condor” where South American dictatorships established a secret communication network by using Crypto machines on a continent-wide operation against perceived threats to their rules. For example, during the military dictatorship in Argentina, an estimated 30 000 dissidents were captured and brutally killed by being thrown out of military planes alive. This raises the ethical dilemma of whether there exists an obligation to expose these human rights breaches obtained via espionage even if doing so compromises the operation. Critics, therefore, argue that knowledge is a form of participation. It also reinforces the widespread opinion in Latin America that the US did little to prevent human rights abuses. The US does not have a good humanitarian and neutrality reputation as Switzerland does and so, these revelations underpin its controversial historical role in Latin America. Moreover, it very much resembles the non-interventionist stance that China employs today which often overlooks human rights abuses in favour of its diplomatic and economic interests.

In the recent decade, Crypto AG’s demise slowly started, as it missed the transformation from digital to analogue encryption technologies. Nevertheless, the large amount of data on “Operation Rubicon” that has been released, undoubtedly is of significant historic importance for research in the security and intelligence communities. It will still take time for the full story to be revealed. As the National Security Agency (NSA) revelations by Edward Snowden have shown, the US continues to secretly collect intelligence, even on its closest allies. Furthermore, there now exists a de-facto telecommunications duopoly held by Chinese and the US companies, which allegedly use their national corporations in its foreign policy strategy to gain intelligence. This poses larger challenges for governments and whom they can trust to transmit their sensitive information. The quest for information supremacy will continue into the 4th Industrial Revolution where attacks on hostile governments are increasingly taking place in cyberspace rather than on the battlefields.

By Matteo Moseli

Matteo Moesli holds a BSc from Zurich University and MA International Political Economy from the University of Warwick. He currently works as a Research Associate at Zurich University and previously gained experience as a trainee at the Swiss Federal Department of Foreign Affairs. His research interests focus on topics of geopolitics, international trade and economic development.

CREDIT RATING AGENCIES?WHAT ARE THEY AND WHY DO THE HOLD SO MUCH POWER?-LAURA RUBIDGE

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Credit Rating Agencies (CRA) wield massive amounts of power and influence in the global political economy which allow them to shape the contours of a nations economic trustworthiness for either the betterment or detriment of the state. The recent downgrading of South Africa’s credit rating bears testament to this, with this news sending shockwaves and panic through the government, banking sectors and investors, and in turn further weakening the South Africa’s exchange rate. Little, however, is known about CRA to the ordinary citizen, yet a decision made by these CRA have a dramatic impact on those same citizens. This article aims to clarify the purpose and influence of CRA by discussing several key questions: What is a CRA? Why do they exist? What powers do they have? Are rating agencies still relevant?


What is a Credit Rating Agency?

CRA provide vital technical investment information to investors such political risk calculations and forecasting of exchange rates to name a few. The agencies assign letter grades to security issuers such as companies or countries. The ratings demonstrate how likely a security issuer is to meet their bond and debt obligations. Credit ratings are divided into three categories. The highest ratings are investment-grade ratings, these are the safest investments. The second category is speculative-grade, these investments would carry a higher risk but can yield a higher interest rate due to the increased risk. Any ratings below speculative-grade carry the highest risk of the debt being defaulted. Fitch Ratings, Moody’s Investors Service and Standard & Poor (S&P) are the most dominant CRA which control 95% of the credit rating industry globally. Each of these agencies bases their ratings on different methodologies of analysis and assign slightly different letter grades.


Why do they exist?

The ‘Big Three’ were formed in the early 1900’s. Initially, they were investment research firms who published research papers on various bonds available on the market which investors and fund managers bought. In the 1970’s, globalisation and the raise of economic liberalism which were spreading rapidly, catalysed by the policies adopted by Ronald Raegan and Margaret Thatcher helped institutionalise these institutions. The demand for investments both nationally and internationally grew simultaneously to the demand for CRA. New investors relied on these agencies for guidance and new companies as well as developing states relied on investors for funding. Subsequently, CRA adopted an ‘issuer-pay business model’: the institutions who are rated, pay the agency for the rating which the investors use as guidance for their investment decisions.


What powers do CRA have?

CRA have two main powers. They influence the type of investment a security issuer receives and the interest rate of repayment. Many large pension funds must put most of their money in investment-grade securities instead of speculative-grade securities. The downgrade of South Africa by Moody’s earlier this year meant that, from the opinion of Moody’s investments in South Africa would carry a higher risk, investors who are searching for long-term, low-risk investments such as pension funds, may be discouraged from investing in South Africa. However, investors looking for higher risk-higher reward investments would be attracted to South Africa, based on Moody’s downgrade and may reap the rewards of the higher interest rates associated with the higher risk.


Why does the type of investment and interest rate matter?

Governments raise money primarily from taxation and through government bonds to fund their budget for expenditure to improve the living conditions of its citizens. If the government receives fewer investments, at a higher interest rate, they have less money in their budget. This could lead to higher taxes to substitute the funds lost or a decrease in living conditions. In a developing state like South Africa, investments like these are extremely vital to the overall socio-economic development of the state and thus, the polarity held by CRA hold on the foundations upon which a nation economy could prosper or crumble.


Our CRA still relevant?

CRA have been influential in the global financial system, however, recent examples could demonstrate the diminishing influence of CRA. Fitch and S&P downgraded South Africa to sub-investment grade in 2017, this downgrade was expected to scare investors due to the higher perceived risk that South Africa was less likely to meet its debt obligations than when it was at investment grade. Contrastingly, Foreign Direct Investment (FDI) into South Africa increased by 446% from 2017 to 2018. This demonstrates that either foreign investors have a higher than expected appetite for South Africa’s risky, sub-investment grade investments or investors’ decisions were not influenced greatly by the CRA ratings.

Another recent South African example is the IMF Covid-19 Relief loan. The loan of R70 billion was approved in July 2020 with a mere 1.1% interest rate. This is much lower than the current comparable rate of 7%. Considering the recent downgrade of South Africa’s economy by Moody’s to sub-investment level, the interest rate could be much higher given the extra risks associated with the downgraded rating. According to Danny Bradlow, Professor of International Development Law and African Economic Relations, “investors may see this loan as ‘an expression of the IMF’s support’ and faith in South Africa to repay it, giving investors confidence to invest or maintain their investments in South Africa”. Additionally, in a letter addressed to the IMF, South Africa expressed their intentions to stabilise the country’s finances through cutting government spending and improving the governance of State-Owned Enterprises. The cheap IMF loan and increased investments could aid this endeavour. Furthermore, the stabilisation of South Africa’s finances could alter the CRA assessment of South Africa, possibly leading to an upgraded rating. This example essentially demonstrates that Credit Rating system work backwards. A large loan from the IMF catalyses other investment which could stabilise the economy and lead to a higher rating by the CRA.

Additionally, CRA have been accused of inaccuracy and bias and have come under criticism for contributing to the cause of events such as the Greece debt crisis in 2009 and the mortgage crisis in 2008.
Lastly, CRA issue pay business model creates a clear conflict of interest. This conflict of interest was evident in the 2019 case when the Fitch group were fined €5 132 000 in three European countries for failing to maintain independence and avoiding conflict of interest. Fitch clients in these countries issued ratings on three companies, including Renault. However, it was known that one of their shareholders was also a board member of the rated companies and indirectly owned 20% of shares in each of the Fitch companies.CRA have been institutionalised and have become increasingly influential in the global financial arena since the 1970’s. There have been recent movements from developing countries to reform the current global economic world order, which has proven to disadvantage the states most in need of development. The current system of CRA should be considered within this movement for reform bearing in mind the critiques of CRA for their flawed business model and inaccurate biased ratings, coupled with the recent examples which demonstrate the possible decrease of CRA influence.

By Laura Rubidge

Laura is in her final year of BPolSci International Studies degree at the University of Pretoria and is concurrently completing a level 4 NALP paralegal diploma. She hopes to complete her honors in International Relations in 2021 and pursue a career in the field of Public International Law and Human Rights.