The Geopolitics of America’s Pivot to the Pacific

Andrew Neil is a leading BBC politics host (the Tony Jones of Britain but with a conservative bent) and former editor of The Sunday Times who fell out spectacularly with Rupert Murdoch, founder of Sky News UK. Neil is currently publisher of the Spectator, presenter of This Week with ex-Conservative minister Michael Portillo and Alan Johnson. Neil also presents the weekly one-on-one political interview program Straight Talk with Andrew Neil on the BBC News Channel. On a visit to Sydney for The Australian Spectator, Andrew Neil addressed The Sydney Institute on Tuesday 22 April 2014 to give a European outsider’s view of the new US focus on the Pacific. The paper which follows is an edited transcript of that address.

THE GEOPOLITICS OF AMERICA’S PIVOT TO THE PACIFIC

ANDREW NEIL

Well, thank you ladies and gentleman and thanks to the Institute for inviting me here tonight. It’s a privilege to be here For those of you who follow the BBC closely back in Britain, you will realise I am one of the few available BBC presenters not currently under investigation by the police, which is why I’m able to be in Australia tonight.

I’m slightly apprehensive because the last time I spoke in Sydney, which I think was about five years ago, at the end of my speech a woman came up to me and said, “Mr Neil your speech was absolutely superfluous.” I said thank you very much. And she said, “Tell me, is it going to be published?” And I, being a smart-arse journalist said, “Yes but probably posthumously.” To which she replied, “I can hardly wait.” I hope to do just a little bit better tonight.

Tonight, I’ll stand back from the day-to-day politics, particularly from where I come from because they get more and more bizarre. I want to speak tonight about the geopolitics of America’s pivot to the Pacific. In doing so, I don’t have the impudence to come here and tell you what it means for the Pacific Region. That is your region. What I’m going to talk about is what it means for the Middle East and for Europe, two regions closer to my particular home.

Last year, the United States surpassed Russia as the world’s leading energy producer. This year it will overtake Saudi Arabia as the world’s largest producer of crude oil. When President Barack Obama entered the White House in January 2009, the US imported 11 million barrels of oil a day, much of it from the Middle East. By the time Mr Obama leaves the White House in 2016, the United States will import zero per cent of its oil from the Middle East. Zero per cent. By 2020, the US will be effectively energy independent. Early in the next decade, the United States, Canada and Mexico combined will produce more hydrocarbons than the whole of the Middle East combined.

This has come about in the States because of the fracking revolution, which is producing vast quantities of natural gas and tight oil. It is turning the United States into a major exporter of energy, first of LNG or liquid natural gas, but soon of oil too. It is going to Asia and to Europe. Aerospace used to be America’s biggest export, now it is energy. Last year, energy accounted for $133 billion of American exports. In the process, it has revolutionised American industry because US gas prices are now a third of what they are in Europe and a fifth to a sixth of what they are in Japan.

So, industries which America once thought that it had lost forever – chemicals, plastics, iron, aluminium, steel, metals, glass – are now are returning to production in America, in rude health. In the States they call it the homecoming. Dow Chemicals, the biggest petrochemical company in the world, is closing its operations in the European Union, in the United Kingdom and in Japan and is investing $30 billion in new ethylene production in Texas to take advantage of the cheap energy. I was filming a couple of years ago in the East Ohio Valley; it used to be the crucible of the steel industry in the United States. It had seen no investment for 50 years until three years ago when a £3 billion pound new steel plant was built to build pipelines. It was built by a French company that hasn’t invested in steel in France for 30 years. This is the homecoming. The combination of cheap energy, of cheap and productive Labour and of the US genius for technological innovation means it is always a mistake, even in the twenty-first century, to write off the United States.

My purpose tonight is not to talk about this new American industrial revolution, though it does contribute to a new sense of confidence and of twenty-first century possibilities in the United States. What I want to talk about tonight are two profound geopolitical consequences that are following from this energy revolution. The first is the perceptible disengagement of the United States from the Middle East and from Europe. From the Middle East, because if you don’t need the oil and gas then the region just doesn’t matter so much in harsh realpolitik. And in Europe because it is no longer the fulcrum of the Cold War or of geopolitical events and has very little to offer the United States as it pivots to the Pacific. That is the second profound consequence that is underway – the reinforcement of the geopolitical shift that would have happened anyway but it is giving it extra impetus, the pivot of the United States to the Pacific.

This would have happened whoever was in power, it is part of the shifts that are taking place on our planet. But it has happened more quickly under Barack Obama. He was born in Hawaii, he went to school in Indonesia, he is the first ever President of the United States to have no blood and no historic ties to Europe. He is the living definition of a Pacific President. But it would have happened anyway and will continue to happen even when Obama departs the White House. In her valedictory essay in Foreign Affairs magazine, when she stepped down as Secretary of State, Hilary Clinton said “The future of the twenty-first century will be decided in East Asia and the United States will be at the centre of the action.” These are the words of the ex-Secretary of State and, as we stand here at this moment, the person most likely to be the next President of the United States.

So the US moves to position itself for what it thinks will be the central geopolitical struggle of the twenty-first century between a rising China and an America that is used to dominating the Pacific. Indeed, for a long while after the Second World War the Pacific was its own private lake. The dominance of the US Navy after the demise of Japan in 1945 allowed Asia to prosper and grow through a period of overall regional peace, not unlike the way the United States was able to prosper in the nineteenth century under the protection of the Royal Navy which controlled the Atlantic. East Asia has been able to grow because the US Navy provided that peace and the free sea lanes and certainly rule based laws that allowed commerce in East Asia to prosper as well.

Proof of this pivot is sometimes contested even in this part of the world, but it seems to me to be very much underway. The United States has already begun an historic shift in naval deployment. For every year since the end of the Second World War, the US Navy, bigger than about the next ten navies combined, has been deployed 50 per cent in the Pacific and 50 per cent in the Atlantic. Starting last year, the US has begun a deployment in which, by 2020, it will be 60 per cent in the Pacific and 40 per cent in the Atlantic. My own view is that it will go further than that. US Marines now train with the Australian Navy just outside Darwin; there is talk of a new US naval base for nuclear submarines in Western Australia – that of course is for you to decide.

Pentagon budget cuts, announced only a few months ago, still allow for naval enhancements in the Pacific to counter the growing power of the Chinese Navy. And, of course, it is the Navy that the Chinese are investing in more than anything else because they wish to push the Americans back from the near China Sea and the South China sea. They’re developing a powerful navy to do that. But the United States has continued to invest to counter that – six new P-8s, the most sophisticated warships in the world, were recently deployed by the Pentagon to the region. There are war games going on spanning 22 countries, hundreds of US military exercises are held in this region every year. And with the United States presence comes economic power. We see attempt to get free trade agreements with the US encompassing not just Australia, which has been part of the negotiations, but every Asian country bar China, including Japan. If Congress allows it, this will involve 40 per cent of world trade and 40 per cent of GDP. That is the pivot to the Pacific and I believe it will gather momentum.

What are the consequences of this for the other key parts of the world? Let me begin with the disengagement from the Middle East because this has the most serious consequences of all. Let me take you back to July and August of 2013. The “dog days” of a Washington DC summer when most people have already gone to Martha’s Vineyard. In these two months, every Saturday morning a group of senior aides to Barack Obama met in the White House under the auspices of Susan Rice the president’s then new national security advisor. Their task was to plot a new US future for the Middle East and to set the US on a new course. Their deliberations, which were done in secret and got no publicity. These were then largely unveiled by the President in his speech to the United Nations that September.

In his speech, Obama gave his Middle East priorities. First was to try and do some kind of nuclear deal with Iran; secondly to continue to try and get some sort of peace deal between Israel and the Palestinians; and thirdly to mitigate and contain the strife in Syria. None of this is very surprising, except perhaps the effort to try and get a nuclear deal with Iran. But, everywhere else, the United States in the Middle East would take a back seat. In Egypt, in particular, in regard to the Arab Spring, nothing was said about the spread of democracy and it was specifically not designated as a core interest. The unstated, overall aim, which had come out of Ms Rice’s deliberations, was to avoid having the Middle East ever again swallow up the United States’ foreign policy agenda or its military budget as presidents before it had done. It scaled back not just the freedom agenda of George Bush II, which by that time had become pretty discredited, but even the more expansive Obama agenda, which he had outlined in his speech in Cairo not long after he became President.

The President’s speech raised doubts that the United States would ever again use force in the region. Indeed it raised doubts that the United States would ever again be involved in any military deployment. Why, after the pain of Afghanistan and of Iraq, and if you don’t need what that region has, would you risk the lives of the men, the women and the material of the United States in that region again? It was a push me, pull me phenomenon – push away from the Middle East because it no longer matters so much to the United States, pull to the Pacific because that is where the United States sees its main interests, its main opportunities and its main threats in the twenty-first century. This is a process, legacy issues will continue to draw the United States back into the Middle East even as it tries to escape. The pivot to the Pacific will not be seamless; it will be done badly in some ways, and it will suffer setbacks. It will be quicker in some years and slower in others. But all processes have a direction and this is the direction that the United States has now embarked on.

What are the consequences for the Middle East of this American withdrawal? We’ve seen many of them already. In Libya, when Benghazi was under threat from the forces of Colonel Gaddafi, and we faced a mass slaughter, it was the French and the British that had to do the heavy lifting. The Americans tried not to get involved. In Mali, the French had to go it alone. Indeed, at one stage, because the French lack heavy lift capability the Americans provided some of that heavy lift capability and the Pentagon was going to charge the French for the fuel that it was using, until the White House intervened.

In Egypt, where the United States was once the external dominant influence, it is now regarded in Cairo as a growing irrelevance. The Russians are now seen once again as at least as important, if not more important, than the Americans. In Syria, the President drew a line in the sand and then wished that he hadn’t. He then used the excuse that the British parliament had voted down David Cameron’s efforts to get involved. He said that there would not be any military intervention provided Mr Assad did not use any more chemical weapons which, as a result the de facto American position, is as much as to say, “As long as you don’t use chemical weapons President Assad you can basically do what you want to your people and we won’t intervene.” And that is exactly what is happening in Syria tonight where in huge parts of that country, women are boiling grass for their children and people are dying in their scores.

There are three million refugees in Jordan, Lebanon and in the southern borders of Turkey. The United States has gone from being the most reliable ally to being weak, dithering and unreliable. And these are the politer words I feel I should use tonight. The UAE, Saudi Arabia and the other countries there believe they can no longer count on the United States. And they believe – and this is their single biggest concern of all – that the United States has no interest in containing Iran in the Middle East. If you go to the Gulf States, you will quickly realise that the fear of an expansionary Iran is the single biggest threat that they perceive, and that they currently face. They believe that they will now have to go it alone. Just as Barack Obama agreed to a de-facto deal in Syria, leaving Assad untouched, they believe that he will now do a deal on nuclear with Iran which will leave Iran’s super regional power status untouched.

The Middle East, in my view, is now gripped in its version of the Thirty Years War. But instead of Catholics and Protestants, it is Sunni and Shiite. And this Sunni and Shiite battle is overlayed by a constant battle between secular Islam and Islamists on the other side. That is especially true in what we used to call the Maghreb, now known generally as North Africa. The Sunni/Shiite divide is now what divides Lebanon, with a little bit of Christian grit thrown into the mill. The Sunni Shiite divide is the fundamental cause of the civil war in Syria, the Assads are part of the Alawite clan, the Alawite is a sect of the Shiite. Most of the insurgents against the government are Sunni. The Gulf States, with the exception of Bahrain, large Sunni majorities, are terrified by Iran’s bid for leadership of political Islam because Iran is a Shiite state.

In all these areas, you can see proxy wars being fought out by Sunni and Shiite interests. In Syria, Hezbollah is playing a major military role against the insurgents on behalf of the Assad regime. Hezbollah is a Shiite sect. Iran backs the Alawite clan as their ideological religious soul mates; the Saudis, the Kuwaitis and the Qataris are Sunni nations fighting proxy wars by backing the Sunni rebels in these areas. The fact that the United States is no longer part of any of this means that the Saudis now believe that they are on their own. In Iraq, as well, in which so much blood and treasure was spent, you now see the emergence of a Sunni-Shiite war with a majority Shiite government in Baghdad but with the rest of Iraq increasingly under the control of Sunni insurgents, often controlled by Al Qaeda which is a Sunni terrorist movement.

So the Saudis are moving to a position where they think that they have to act on their own. If Iran gets the bomb, the Saudis will do what they always do when they’re in trouble – they will attempt to buy their way out of trouble. They are currently moving into a position where they could produce a nuclear weapon themselves within months. This is not widely known but I can assure you it is known by both British and American intelligence. Saudi Arabia has the money to do so and it has close and dangerous allies in Pakistan which has the nuclear technology and the missile delivery systems, and of course it needs the money. It is inconceivable that the Shiites can have the bomb and the Sunnis not. The moment it is clear that the Shiite, in the form of Iraq, have the bomb then the Saudis will get their own as well. There is a lot of evidence that the Saudis have helped to bankroll the Pakistan nuclear program precisely for this eventuality. They’ve already been testing the missiles that would allow the bomb to be delivered.

With America gone, there is no one else powerful enough to hold the ring. So the Middle East which, despite American energy independence, will still be a major source of energy for the rest of the world and particularly for the emerging markets in Asia such as India and China, will become like South Asia, like the subcontinent – yet another part of the world dominated by nuclear stand-off. That is the geopolitical danger that is faced by trends that are now underway.

What are the consequences for Europe? Well, America may be energy independent but Europe is still dependant on Russian gas and the Middle East oil. As we have seen during the Ukraine crisis, this is why it’s been very hard to get the Europeans to take serious sanctions against the Kremlin. Yet they are still dependant on US military power, which they know in their heart of hearts cannot last. In 2001, the United States accounted for 63 per cent of NATO defence expenditure. As Europe becomes less and less important to the United States, as the Cold War went back into history, the US share of NATO expenditure rose to 75 per cent. This was also a result of the European Union countries running down their own spending in the wake of the financial crisis that hit the Eurozone and other parts of Europe. Because of that financial crisis, there was a continued need to finance welfare spending.

Europe is no longer crucial to US geopolitical strategy. This at a time when the Pentagon budget itself is being squeezed and there are new interests and threats to deal with in the Pacific region, it seems inconceivable that the US will continue to finance 75 per cent of NATO expenditure. There is despair in Washington over what Europe will do when that happens. In Washington DC, they now speak privately of “the collective military irrelevance of Europe”. Yet it is Europe that will have to fend for itself as the United States pivots to the Pacific. It is hard to think of a worse time for Europe to have to face up to the challenges that it has. When I think of Europe, it reminds me of an interview I once did with Mr Yeltsin when he was President of the Russian Federation. I said to Mr Yeltsin, “In a word, could you sum up the state of the Russian economy.” He looked at me and said, “Good, good.” And I said “Excuse me Mr President, it’s an English expression and you can use more than one word.” He looked at me again and he said, “Not good, not good.”

Which brings me to Europe. There is no public appetite for Europe on the left or on most of the mainstream right for an increase in defence spending. That’s understandable because the continent is overwhelmed by economic problems, the unemployment rate in Spain is 20 per cent, in Greece is 24 per cent in France is 12 per cent in Italy is 14 per cent. The unemployment rate for young people, classified as between 16 and 28, is 58 per cent in Spain, 60 per cent in Greece, 25 per cent in Italy and in France. If you happen to be a young French or Algerian, its 60 per cent. These are huge unemployment problems, Australia has an unemployment rate of just under 6 per cent at the moment, although youth unemployment is higher. But there has been no growth for some time in Europe.

The European Union of the Eurozone has swapped a financial crisis for economic stagnation and it is now on the brink of a deflationary trap. Prices throughout the Club Mediterranean countries, as we called them – by which I mean Portugal, Spain, Italy, Greece, Cyprus – are beginning to fall. Huge parts of Europe are now on the edge of a deflationary trap. Prices are now falling in a number of European countries, and it’s not just confined to the south. In Sweden, one of the most successful European economies, not even part of the Eurozone, prices fell 0.4% in March.

In Europe, we have no experience of the deflationary trap. Our whole lives have been spent fighting inflation, as I’m sure as Australia has also done. The problem with a deflationary trap is that if you think prices tomorrow are falling, you do not go and buy that car, you do not go buy that TV set because you know it’s going to be cheaper tomorrow. And when tomorrow comes, you’re told it will be cheaper the next day. That is the deflationary problem that huge parts of Europe are now on the brink of. Add to that the collapse of political leadership in Europe, and by that I mean the end of the Franco-German alliance, which ran Europe ever since the Treaty of Rome in 1957. The Germans and the French called the shots. They would meet before every European summit and decide what was going to happen. And that’s what would happen at the summit.

Berlin and Paris have now gone their separate ways. The whole Franco-German alliance involved the French thinking they were as powerful as the Germans alongside the Germans encouraging everybody to think that the French were as powerful as the Germans because the Germans are terrified of being thought to be too powerful. That conceit can no longer hold. The German economy is growing and is hugely successful while the French economy is struggling to stay with the northern economies but risks slipping into the Club Med economies. We saw in Libya how the French and Germans parted company, in Syria they parted company and in the Ukraine they have parted company as well. The alliance no longer works.

The political mechanism, the political will to do something about the challenges Europe faces, is no longer there. It is likely that United States policy in the years ahead, as it pivots to the Pacific, is going to feel more kindly towards protecting its friends in Asia who are prepared to spend money on their defence than the Europeans who are not only not prepared to spend money on their own defences but actually bring nothing to the table, either diplomatically or militarily in the pivot to the Pacific. US policy will now protect its friends in Asia and not what those particularly in the Republican part of the United States sneer as their free riding Europeans.

US-Asian allies are willing to invest in their own defence indeed Asian military budgets are now overtaking Europe. Since 2008, Asian defence – this excludes China – is $173 billion a year. The European combined defence is $144 billion. Future US leaders are likely to consider US investment in NATO not worth the cost that it’s been. Even when we Europeans do spend money on defence, we rarely spend it wisely. Remember that overall EU defence spending is one per cent of GDP, while the Americans are spending almost 5 per cent of their GDP on defence. Australia spends 1.5 per cent and Tony Abbott has said he’s going to take it to 2 per cent. Only Greece and Britain spend 2 per cent of their GDP on defence – British partly for historic reasons; the Greece because they’re terrified of Turkey which is much more powerful than they are.

But even when we spend it, we spend it unwisely. We have no heavy lift capability worth speaking of, and the Europeans have no capability of projecting force to areas where it would be required to keep the sea lanes open, or to keep the oil flowing or to keep their energy coming in. In Belgium, not a great military power but part of the NATO alliance, 70 per cent of Belgian defence goes on pay and pensions. As one Belgian politician said to me, “It is really a mistake to think that we in Belgium have any military at all; we just have an unusually well armed pension fund.”

In Britain, we are currently building two giant aircraft carriers bigger than any other aircraft carriers in the world except for the JFK Class American aircraft carriers. They will be state-of-the-art aircraft carriers, and they will be formidable. They are capable between them of carrying 72 fighters. They will carry the Joint Strike Fighter plane, the F35, the most formidable fighter plane that has ever been built. It is a low key British aerospace development and probably the last ever manned fighter jet that the world will ever see.

Now this is a force to project and put fear in anybody who gets your way. Except for one problem. Only one aircraft carrier will be available at any one time – one will permanently be in mothballs and the one that will be active will only have 12 joint strike fighters to call on. In other words, despite this massive investment, only a sixth of the investment’s capability will be deployed by the British at any one time. You can see the dilemma, and the potentially catastrophic consequences for the Middle East. You can see the difficulties Europe has of facing this geopolitical pivot of America to the Pacific. At the moment, we are in no position to be able to deal with the consequences in ways in which we should.

It was said of Trotsky that it was a measure of how farseeing he was that none of his predictions had yet come true. If the Institute is kind enough to invite me back again in five years time, I can assure you I will not need the Trotsky defence. What I’m talking about is already underway, and has been – without our politicians realising it – for some time. In my view, it can only gather moment in the years ahead.