Posts from csis.org
An Open Alliance for Digital TradeThis commentary is part of the Strategic Trade series supported by the Atlas Network. Like the last great power rivalry, the emergent competition between the United States and China is a competition between two different economic systems, and two very different political ideologies. This time, much of the competition will play out in digital space and over rules to govern our digital world. Just as the allies gathered at Bretton Woods in 1944 to chart a path for the post-war global economy, governments are now negotiating at the World Trade Organization (WTO), the Organisation for Economic Co-operation and Development, and other forums on policies, standards, and guidelines for the digital economy and digital trade. Who writes these rules—and whether they favor an open, liberal digital economy or one that is top-down, closed, and government-controlled—will have an outsized impact on power and governance in the twenty-first century. Digital trade is, first and foremost, about the movement of data across borders. It’s a cloud computing company storing and processing data for a foreign client; it’s a farmer getting insight into environmental conditions and agricultural markets through artificial-intelligence-driven data analytics services; it’s an aircraft engine producing data streams that are shot around the world and back again to identify necessary maintenance before anything breaks down. The economic value of these data flows is immense. In 2016, the consulting firm McKinsey found that cross-border data flows already generated more value for the global economy than trade in goods. That value continues to grow, and the importance of international rules to govern that trade has grown commensurately. The United States has used its recent trade negotiations to promote an open global digital economy in which data can flow freely. The United States participated in the Trans-Pacific Partnership negotiations that broke new ground on digital trade, and the United States-Mexico-Canada Agreement and the U.S.-Japan Digital Trade Agreement include rules guaranteeing that firms can move data freely across borders and prohibiting mandates to store or process data on local servers. In contrast with the Trump administration’s broader trade policy, which has rejected multilateralism and pumped the brakes on seven decades of liberalization, the United States continues to prioritize rules promoting the free flow of data in digital trade negotiations at the WTO and elsewhere. China’s approach to digital trade reflects its own vision for the global digital economy, emphasizing its “cyber sovereignty.” In WTO digital trade negotiations, China promotes a regime that empowers governments to restrict data flows, filter the internet, and block foreign digital services. This approach protects its domestic system: China’s Great Firewall prohibits many foreign firms from reaching Chinese customers, and its cybersecurity law restricts the outbound transfer of wide range of data and requires the local storage of all “important” information. Such measures would violate U.S.-style rules on digital trade, so China advocates for weaker alternatives—or none at all. China’s advocacy for a closed approach to digital trade is also part of a strategic effort to build a coalition of countries with separate, sovereign internets characterized by greater government control over information and data. The growth of this bloc validates China’s domestic approach and enhances its global influence. What is more, where this strategy succeeds, Chinese firms are well-positioned to compete. One of the competitive advantages of Chinese internet companies is that they have grown up in a restrictive, state-centric economy. Censorship and control are the default settings for these firms, and they are primed to succeed under similarly restrictive systems. Where its firms flourish, the Chinese government can leverage its control over domestic companies to facilitate surveillance, propaganda, and disinformation campaigns that boost its strategic interests. The alternative is a digital environment that defaults toward free commerce, the free exchange of ideas, and the free flow of data. Openness, of course, comes with its own challenges. An unconstrained information environment can be fertile ground for disinformation, and unconditional data flows can put privacy at risk. To address such challenges, the United States should regulate its domestic digital economy more assertively in the coming years. Following its allies abroad and domestic public opinion, the U.S. Congress is inching toward national privacy legislation; a new law should constrain the transfer of sensitive personal data to jurisdictions that lack the transparency, accountability, and due process necessary to guarantee privacy. Similarly, the United States has, in narrow cases, limited the free flow of data for national security reasons. But such constraints should remain narrow and exceptional, and the United States should address these challenges without adopting authoritarian methods of censorship, control, and discrimination. Even with discrete conditions for the free flow of data, the overwhelming interest of the United States will continue to lie in advancing digital trade rules that reject China’s top-down vision for the internet. An authoritarian approach that controls speech and limits political activity isn’t just bad for U.S. exports and anathema to democratic values, it also creates very real barriers to coordinating internationally and responding to the global threats that face the world today—such as a global pandemic. An open information ecosystem, on the other hand, does not just benefit U.S. exporters and consumers: it is essential to democratic institutions and the success of democratic governments in competition with China. Trade is just one area in which this competition will play out, but it is an important one. Having concluded high-standard digital trade rules with Canada, Mexico, and Japan, the United States should focus on working with its largest trading partner: the European Union. Digital trade has been a stumbling block in transatlantic negotiations, and the European Union’s recent emphasis on bolstering its own “technological sovereignty” has lent unhelpful rhetorical support for Beijing’s far more restrictive model of data governance. For its part, the United States’ continued failure to enact a federal privacy law is an obstacle to bridging the substantive divide. But with shared democratic values and a commitment to market-based economics, the United States and Europe each have much to gain from finding consensus on rules that promote an open global digital economy. A shared approach would present a democratic alternative to China’s approach and a clear model for the many other governments that are weighing their options. Given the centrality of the digital economy to politics, power, and life, building this coalition of support for free digital trade will be central to building a democratic bloc that can compete effectively in the twenty-first century. The alternative—continued transatlantic divergence on digital trade—only opens the door wider for authoritarian approaches to prevail, and for China’s relative strength to grow. Sam duPont is deputy director of GMF Digital at the German Marshall Fund of the United States. Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s). © 2020 by the Center for Strategic and International Studies. All rights reserved.
4
China Initiative ConferenceRSVPs will be re-confirmed via email from the Technology Policy team. Credentialed members of the press will receive instructions as part of a separate confirmation issued by the Office of External Relations. For more information, contact wcrumpler@csis.org. In November 2018, the Department of Justice unveiled the China Initiative, which was established to fulfill the Department’s strategic priority of confronting national security threats presented by the People’s Republic of China, with a particular emphasis placed on the policies and practices that seek to challenge U.S. technological and scientific leadership. This half-day event brings together high-level officials from the U.S. government, private industry and academia, to discuss the most timely and relevant issues regarding the Department of Justice’s efforts to counter this economic malfeasance. Agenda 8:00 am — Welcome by James Lewis, CSIS, and John Demers, Assistant Attorney General for National Security 8:05 am — Opening remarks by Christopher Wray, FBI Director 8:25 am — Threat Briefing by William Evanina, Director of the National Counterintelligence and Security Center 8:45 am — China case overview Adam Hickey, Deputy Assistant Attorney General John Brown, Assistant Director, Counterintelligence Division, FBI 9:05 am — U.S. Attorney Panel – “The China Initiative” Moderated by Brian Benczkowski, Assistant Attorney General for the Criminal Division Jay Town, U.S. Attorney for the Northern District of Alabama Andrew Lelling, U.S. Attorney for the District of Massachusetts Richard Donoghue, U.S. Attorney for the Eastern District of New York Erin Nealy Cox, U.S. Attorney for the Northern District of Texas 9:45 am — Break 10:00 am — Keynote address by William Barr, U.S. Attorney General 10:30 am — Industry Experience Panel Moderated by Aruna Viswanatha, Wall Street Journal Justice Department Correspondent William Zarit, The Cohen Group Jeremie Waterman, President, China Center, Vice President, Greater China, U.S. Chamber of Commerce John Neuffer, President and CEO, Semiconductor Industry Association John Carlin, Former Assistant Attorney General for National Security 11:20 am — Academic Experience Panel Moderated by Jude Blanchette, Freeman Chair in China Studies, CSIS Dr. Doug Girod, Chancellor of Kansas University Dr. Greg Fenves, President of the University of Texas at Austin Dr. Mary Sue Coleman, President of the Association of American Universities Dr. Michael Lauer, Deputy Director for Extramural Research at NIH 12:10 pm — Closing remarks by John Demers, Assistant Attorney General for National Security This event is made possible through general support to CSIS.
HIV/AIDS in the United States: The Road to 2030On February 5, 2019, President Trump announced in his State of the Union address the launch of an ambitious campaign, “Ending the HIV Epidemic: A Plan for the United States”, which will aim to end the HIV epidemic in the United States by 2030. Plans are actively in development to accelerate diagnosis, treatment, and prevention—including a dramatic increase in the use of pre-exposure prophylaxis (PreP) —in 48 counties, rural communities in 7 states that have a disproportionate occurrence of HIV, Washington, D.C., and San Juan, Puerto Rico. Together, these areas account for more than half of all new HIV diagnoses in 2016 and 2017. A budget request for year 1 in the amount of $291 million has gone forward to Congress, and the operational kick-off for programs is set for early 2020. Please join the CSIS Global Health Policy Center for a discussion with the two main architects of this strategy—Dr. Anthony S. Fauci, Director of the National Institute of Allergy and Infectious Diseases, at the National Institutes of Health and Dr. Robert R. Redfield, Director of the U.S. Centers for Disease Control and Prevention. Dr. Fauci and Dr. Redfield will describe how this strategy first came to fruition and share the details of this 10-year plan, including expectations around financing and coordination, outreach to marginalized communities, and addressing a variety of implementation challenges. This event will feature opening remarks by Sara M. Allinder, CSIS Global Health Policy Center Executive Director and Senior Fellow, and presentations from Dr. Fauci and Dr. Redfield, followed by a conversation moderated by J. Stephen Morrison, Senior Vice President and Director of the CSIS Global Health Policy Center. This event is made possible by the general support to CSIS.
Lessons from the G7 on Why We Need A New Era of Climate DiplomacyAs the leaders of the world’s most developed economies met in France for the G7 summit, iconic youth leader, Greta Thunberg, sailed across the ocean to attend a youth climate summit for the global movement she started only a year ago. And while Donald Trump left an empty leaders chair at the G7’s climate meeting, thousands of miles away in either direction, the Amazon rain forest burned and one of the world’s fastest-growing and most populous developing countries announced it would relocate its sinking capital city. While Larry Kudlow, economic adviser to President Trump, castigated the G7 for focusing on “politically correct bromides” rather than a future of growth and prosperity, the UN secretary general called on the G7 leaders to adopt even stronger measures to deal with climate change—commensurate with a 1.5 degree Celsius temperature rise target. French president Macron, seeking to avoid the counterproductive outcomes of the last several G7 meetings, chose not to issue a joint statement on climate change due to lack of agreement. Instead, the group pledged $20 million to fight the fires in the Amazon, a move that now looks to be rejected by the president of Brazil as an act of colonialism. What a mess. The G7 has historically played an important role in climate change diplomacy, which is important because climate change is a global challenge requiring global solutions. This year marked 40 years since the leaders first agreed on the need to develop alternative energy and halt carbon emissions at the G7 summit in Tokyo in 1979. As the impacts of climate change become more pronounced, and our failure to address both the causes and consequences becomes more evident, so do our diplomatic and multilateral shortcomings. In 2019, the hottest year on record, the economic toll of global environmental disasters continues to grow, with the United States already experiencing six disasters costing in excess of a billion dollars—equal to the annual average since 1980. In most cases, it’s safe to assume that those who lost homes, businesses, or infrastructure, were only partially compensated for their loss and much of the infrastructure that was rebuilt was probably not done in a way to make it more resilient to future disasters—if it was rebuilt at all. This means that on a country-by-country basis, the impacts of a changing climate are getting harder to manage, just as our systems of global governance are being challenged on all sides. The great irony of this moment is that neither economics nor technology stands in the way of making progress on this issue—it’s our politics. On the one hand, right-wing nationalist leaders see the solutions to climate change as a threat to economic growth and impacts of climate change (particularly migration) as a threat to sovereignty and national identity. On the other hand, for left-wing populist movements, climate change is an existential threat. They see the solutions to climate change as a way to unseat dominant corporate interest, which could also serve as a platform to remedy persistent and structural inequality and advance social justice. At the highest levels of government, this political moment is making it harder to move forward on this issue just as the impacts are becoming more evident and the pathways to deploy technological solutions become clearer. The dialogue is moving further away from the realities of progress being made within countries and across industries, and as such, it is unable to catalyze further action. A dose of honesty and humility in these discussions could help unlock new areas of collaboration that cross the political divides. First, President Trump and Mr. Kudlow would do well to remember that GDP growth following a massive tax cut is not an economic revelation nor does it de facto equal a healthy society on the pathway to long-term prosperity. The broader global economic discourse post-economic crisis has been about creating more sustainable and inclusive economic growth over longer time horizons and turning away from short-term market performance measures. Climate change is not a niche issue anymore; it is a clear threat to those long-term growth prospects. In 2017, the United States alone saw $306.2 billion in damages from natural disasters—a record, but still just a fraction of the $1.7 trillion in cumulative damages since 1980 as these events become more common. Looking forward, research suggests climate change could reduce global economic output by anywhere from 7 to more than 20 percent by 2100. One study estimates that 3.7 degrees of warming could lead to as much as $551 trillion in damages by the end of the century. The Trump administration would do well to participate in conversations about more sustainable and inclusive growth—not only for future global climate but also for U.S. economic competitiveness over the long run. Investing in climate-resilient infrastructure would be a good start, yet the White House’s repeated attempts at an “infrastructure week” have become something of a running joke in Washington D.C. Second, it is hard for the world to move to a more aggressive 1.5 degree Celsius target when leaders have not delivered on their promises thus far. There are very real and substantive reasons for wanting to adopt those targets. The difference between just 1.5 degree Celsius and 2 degree Celsius of warming has been estimated at 153 million more premature deaths from air pollution by the end of the century—40 percent of which would occur by 2060. But the credibility of the global community suffers when past pledges go unmet and new, more ambitious ones are put in their place. The most glaring failed promise is, of course, the 2015 Paris Agreement, where only two countries have made commitments commensurate with its goals (Morocco and the Gambia) and several countries’ emissions are growing faster than before pledges were made. On the G7 pledges, the plan to completely end subsidies by 2025 looks highly unlikely, as countries bicker over definitions and cling to inefficient public spending. The International Monetary Fund estimates that when environmental damages are taken into account, G7 countries spend over $1 trillion annually on post-tax subsidies to fossil fuels, or roughly 3 percent of their collective GDP. The United States alone spends $649 billion, and less than a third of the environmental damages are due to climate change—most still come from localized air pollution from coal-fired power plants. While the jury is still out on just how effective eliminating fossil fuel subsidies would be for emissions reductions, some studies have put the direct impact as low as a 5 percent reduction in emissions by 2100. Serious action on subsidies would send a powerful signal to investors that can’t be captured in these models. Perhaps more importantly, G7 countries need to show progress on their most high-profile goal if they are to sustain their position of leadership and agenda-setting. Finally, Macron’s decision to side-step issuing communiques on issues that are confrontational made sense in the context of this meeting, but this is not an adequate long-term strategy, particularly if Trump wins another term. Macron’s instincts to lead on this issue have been apparent for much of his administration; but rather than focusing on many things at once, he would be smart to prioritize two specific areas where the global architecture is set to shift: security and trade. The elephant in the room is that the United States is renegotiating its role as an economic and security force in the world. Regardless of the Trump administration’s tactics, priorities, or execution, this is likely to be true of future administrations as well. On the national security front, where the impacts will be great, and the ability of the global community to respond can be easily overwhelmed, this conversation needs to be prioritized at the highest levels of government. Quite simply, more natural disasters and fewer natural resources is a potent mix for weakening governance, civil conflicts, and refugee crises. A June 2019 study, published in Nature, notes that “intensifying climate change is estimated to increase future risks of conflict,” with the risks increasing more than five times current levels if the Earth reaches four degrees of warming. Existing conflicts, such as those in Darfur and Syria, have already been linked to the changing climate and the scramble for dwindling resources—especially water. Even renewed tensions between Pakistan and India in Kashmir are being linked to climate change and its impact on water security. As natural disasters increase in number, conflicts increase in likelihood and resources become more scarce, the number of climate refugees will grow. The UN International Organization for Migration estimates there could be as many as 200 million climate refugees in total by 2050, and their high-end estimate is 1 billion—nearly 20 million disaster-displaced refugees in 2017 alone. Not only does this lead to genuine humanitarian crises internally, but growing refugee numbers have contributed to significant political instability across the European Union and the United States. The current crisis at the U.S.-Mexico border has also been linked to climate change as droughts, floods, landslides, and hurricanes have threatened the livelihoods of subsistence farmers in the Central American region. Serious questions about how we will prepare for these issues must be addressed. The global trade architecture is also shifting and is likely to be the next venue for a new round of carrot and stick-related conversations about climate change. So far, international forums like the G7 have been rocked by a chaotic U.S.-China trade war, and the World Trade Organization’s credibility is threatened by the Trump administration’s short-sighted decision to block all appointments to its Appellate Court. As such, these institutions are unprepared for the growing number of countries setting a carbon price and border-adjustment fees, as well as growing subsidies worldwide for clean or green technologies that put trade protectionism and climate action at odds with one another. Macron’s announcement that France may block an EU trade deal with Brazil if they do not deal with runaway fires in the Amazon is an inkling of where climate change could take the trade agenda in the future. What’s more, growing social movements calling to leave fossil fuels in the ground or phase out specific fuel sources, like coal, are also likely prompt a series of international disputes over the future of fossil fuel resources. More direct and potentially disruptive options, such as governments directly purchasing high-carbon content reserves, international agreements for the progressive closure of coal mines, or implementing export-licensing regimes on fossil fuels, akin to the safeguards on uranium, may well also become the topics of future G7/G20 meetings. While some of these ideas have merit, others would threaten energy security and economic development. Climate change is a complex issue requiring a global response. Our political moment has changed, and so too should our approach to climate diplomacy. This will require heightened ambition coupled with genuine action. It also necessitates reframing familiar issues, such as trade and security, through the lens of climate change. Finally, instead of bypassing difficult issues, forums like the G7 should be venues for finding new areas of compromise. Moreover, this new era needs to start now. Global prosperity and security might just depend on it. Sarah Ladislaw is senior vice president and director and senior fellow of the Energy and National Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Lachlan Carey is an intern with the CSIS Energy and National Security Program. Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s). © 2019 by the Center for Strategic and International Studies. All rights reserved.
1
Channeling Financial Flows for Urban Water and SanitationDownload the Brief THE ISSUE Providing clean water and sanitation will be one of the greatest global challenges over the next decade due to population growth and urbanization. Today, 785 million people lack access to clean drinking water, and over 2 billion lack access to a toilet.1,2 Additional sources of finance are needed in order to reduce the investment gap for water and sanitation programs. The World Bank estimates that current investment levels will need to at least triple in order to meet Sustainable Development Goal 6, which aims to ensure that people in all countries have access to sustainable water and sanitation.3 Through development agencies like USAID and OPIC, the United States can leverage additional private capital and increase the efficiency of existing water and sanitation programs. Reducing conflicts over water and ensuring stability in developing countries benefits U.S. development, security, and economic interests abroad. INTRODUCTION Gaining access to potable water has been a challenge in developing countries for centuries. According to the Global Risks 2015 report by the World Economic Forum, global water crises are the biggest threat facing the planet over the next decade.4 Globally, 785 million people still lack even basic drinking water services, and at least 2 billion people are using drinking water sources that have been contaminated with feces.5 As a result, 485,000 people die each year from diarrheal diseases related to contaminated drinking water.6 Cities in particular have found it difficult to provide drinking water and sewage systems for their residents, as urban populations skyrocket and groundwater runs dry. According to the World Bank, around 4 billion people live in urban areas, accounting for over 50 percent of the global population.7 Of these urban residents, 500 million live in coastal areas that are subject to flooding and contaminated ground water as a result of saltwater intrusion, which causes increased cases of diarrhea, cholera, and malaria.8,9 There are two competing challenges: (1) the demand for clean drinking water is increasing as the global population soars, and (2) fresh water resources are increasingly scarce. Development programs focused on water, sanitation, and hygiene (WASH) have gradually shifted from rural areas to focus more heavily on urban contexts as well. According to the UN, inequalities in the access and cost of WASH services are most prevalent in urban areas.10 The challenges to delivering potable water and providing adequate sanitation facilities in cities include poor-quality infrastructure, scarce natural resources, pollution, and high cost of transportation. The U.S. Agency for International Development (USAID) found that poor access to sanitation and hygiene costs the global economy approximately $220 billion per year.11 Water sewage system in Monrovia, Liberia. Source: Christopher Metzger, August 2018. Many cities around the world have been forced to support populations with millions more people than ever intended. Originally constructed in 1824, Monrovia, the capital of Liberia, now has to provide public services like clean water, sanitation, and housing for over 1.5 million residents.12 Building new infrastructure for water and sewage systems in cities like Monrovia can be extremely difficult, as many of the existing underground water distribution networks were built using wooden or lead pipes and are difficult to map. Maintenance for some systems has been deferred for years, leading many to be at risk of collapsing in the next few years. In addition, vulnerable groups, such as women, low-income families, and refugees, are more affected by issues related to water and sanitation in urban areas than others. Women are often responsible for collecting water for the household and spend an estimated 200 million hours every day collecting water.13 Lower-income families in urban areas have less access to services and are often forced to pay 10 to 20 times more than their more affluent neighbors for WASH services because the utilities in low-income areas are poorly managed.14 Exacerbating the problem, many of these residents are not included in the official service statistics because they do not pay taxes and their housing arrangements are part of the informal economy.15 Many of the challenges related to clean water and sanitation can be linked to pollution and climate change. Big metropolitan areas are often built over existing water sources and along the coast, allowing trash, chemicals, human water, and saltwater to contaminate groundwater. India is one example of a country where rapid urbanization and demographic changes have contaminated and depleted the country’s natural water systems. According to India’s Central Pollution Control Board, 63 percent of the sewage flowing into rivers in urban areas every day is left untreated.16 As a result, 70 percent of India’s water has become contaminated, and India’s water quality ranked 120 out of 122 countries, according to Niti Aayog, an Indian think-tank.17 Some have even gone as far as to claim that 21 major cities in India will run out of groundwater by 2020, which would affect around 100 million people.18 Dramatic steps need to be taken now in order to protect what groundwater remains for the future. Another place that exemplifies the challenges associated with providing urban water is Jakarta, the capital of Indonesia, which is home to over 10.5 million people.19 Jakarta is sinking faster than any other big city on the planet, mainly due to its citizens digging illegal wells for groundwater due to the scarcity of drinking water.20 The New York Times estimated that about 40 percent of Jakarta was below sea level in 2017, and some of the coastal districts have sunk as much as 14 feet in recent years.21 As a result of the city sinking, infrastructure has suffered: roads have been destroyed, pipelines contaminated, and rivers polluted. Especially in the north of the city, closest to the Java Sea, Jakarta is prone to flooding, which spreads diseases from contaminated groundwater, septic tanks, and improperly disposed sewage. According to the Financial Times, if the current rate of sinking continues, 95 percent of north Jakarta will be underwater by 2050, affecting 1.8 million people.22 Even further, 96 percent of Jakarta’s population does not have a wastewater system, dumping waste and sewage directly into the ground or into septic tanks that contaminate groundwater.23 The situation has grown so bad that President Joko Widodo has decided to move the capital to the East Kalimantan Province on the island of Borneo.24 On April 30, 2019, President Joko Widodo announced, “In Java, the population is 57 percent of the total for Indonesia, or more than 140 million, to the point that the ability to support this, whether in terms of the environment, water or traffic in the future, will no longer be possible so I decided to move outside of Java.”25 Jakarta is sinking faster than any other big city on the planet, mainly due to its citizens digging illegal wells for groundwater due to the scarcity of drinking water. ACTION FOR WATER AND SANITATION ACCESS Despite these challenges, global progress is being made to provide access to clean water and sanitation for everyone. One of the UN’s 17 Sustainable Development Goals (SDGs) is specifically on water: Goal 6 calls nations to “Ensure availability and sustainable management of water and sanitation for all.” SDG sections 6.1 and 6.2 aim to achieve universal and equitable access to safe and affordable drinking water for all, achieve access to adequate and equitable sanitation and hygiene for all, and end open defecation by 2030, paying special attention to the needs of women and girls and those in vulnerable situations.26 Many of the SDGs (especially Goal 9: Industry, Innovation, and Infrastructure; Goal 11: Sustainable Cities and Communities; Goal 13: Climate Action; and Goal 14: Life Below Water) cannot be achieved without also addressing the challenge of clean water and sanitation. In order to achieve the SDGs, countries around the world must further strengthen these efforts to provide sustainable drinking water and sanitation services for their populations. Figure 1: SDG #6: Clean Water and Sanitation Source: Data from “Sustainable Development Goal 6,” United Nations, https://sustainabledevelopment.un.org/sdg6. UN-Water was established in 2003 to help coordinate the water and sanitation programs across 30 UN organizations. UN-Water played an important role in making SDG 6 a priority in the 2030 Agenda for Sustainable Development, the 2015-2030 Sendai Framework for Disaster Risk Reduction, the 2015 Addis Ababa Action Agenda on Financing for Development, and the 2015 Paris Agreement within the UN Convention Framework on Climate Change.27,28,29,30 UN-Water has also raised the profile of water and sanitation issues by celebrating “World Water Day” on March 22 and “World Toilet Day” on November 19 each year. As a result of the SDGs and widespread attention to the problem, the proportion of the people globally using safely managed drinking water services increased from 61 to 71 percent from 2000 to 2017, and the proportion using safely managed sanitation services increased from 28 to 45 percent over the same period.31 However, these numbers do not tell the full story since access to water and sanitation differs greatly by region. For example, only 24 percent of the population of sub-Saharan Africa had access to safe drinking water in 2015, and only 28 percent had basic sanitation facilities that are not shared with other households.32 According to the GLAAS 2019 Report by UN Water and the WHO, 20 countries and territories reported a funding gap of 61 percent between identified needs and available funding to reach national WASH targets.33 In addition to the work done by multilateral organizations, the United States has been a leader on supporting clean water and sanitation in developing countries for years. Figure 2: Number of Individuals Gaining Access by Year Source: Data from USAID’s annual water and development reports: https://www.globalwaters.org/tags/annual-reports. Through the Water for the World Act of 2014 and the Water for the Poor Act of 2005 (Box 1), the United States has prioritized WASH programs, which have been mainly implemented by USAID, the State Department, and the Millennium Challenge Corporation (MCC). In FY 2017, USAID invested $449.6 million in water, sanitation, and hygiene activities in 41 countries.34 From FY 2008 to FY 2017, USAID’s programs helped 42 million people gain access to an improved drinking water service and 27.2 million gain access to improved sanitation service.35 USAID’s level of funding for water and sanitation has remained relatively consistent over the past few years. USAID’s partnerships with the private sector, donors, academia, and host-country governments on WASH programs accounted for over $103 million in 2016.36 This does not include local private capital leveraged through guarantees from USAID’s Development Credit Authority (DCA) or projects like the Philippines’ Water Revolving Fund, the Financial Institutions Reform and Expansion-Debt and Infrastructure (FIRE-D) Project in India, SUWASA in Africa, and WASH-FIN (see below), which have additionally mobilized hundreds of millions of dollars. Other U.S. government efforts include those by the Department of Treasury, which supported, for example, the 2017 local currency municipal bond in Pune, India for 24/7 water service provision.37 Launched in October 2016, the USAID Water, Sanitation, and Hygiene Finance (WASH-FIN) Project aims to close financing gaps and improve governance structures that enable countries to become self-reliant by accessing reliable sources of capital for sustainable, climate resilient water and sanitation infrastructure.38 Implementation of the project is led by Tetra Tech, with support from Open Capital Advisors, Segura Consulting, and Global Credit Rating.39 WASH-FIN works with national governments, development partners, private capital market institutions, service providers, and local governments and community stakeholders in eight countries.40 USAID should continue to support WASH-FIN and look to build on its early success in leveraging additional financing for sustainable water and sanitation solutions. BOX 1: U.S. LEGISLATION ON GLOBAL WATER STRATEGIES Following unanimous consent in both the U.S. House of Representatives and Senate, the Senator Paul Simon Water for the World Act was signed into law on December 19, 2014 under President Barack Obama.41 The law’s two main points are: (1) water and sanitation are critically important resources that impact many aspects of human life, and (2) the United States should be a global leader in helping provide sustainable access to clean water and sanitation for the world’s most vulnerable populations.42 By investing in better water and sanitation services, the United States hopes to decrease the number of child deaths, reduce poverty, and boost the number of girls attending schools.43 More than 75 NGOs and various other faith-based organizations supported this legislation.44 The Water for the World Act requires that the United States produce a Global Water Strategy every five years, starting October 1, 2017 and ending October 1, 2027.45 The 2017 Global Water Strategy laid out a framework for how USAID, the State Department, and development agencies could improve water and sanitation conditions around the world. The objectives include promoting sustainable access to drinking water and sanitation services, encouraging the adoption of key hygiene behaviors, propagating sound management of freshwater resources, reducing conflicts over shared waters, and strengthening water sector governance, financing, and institutions.46 The 2017 Global Water Strategy states that, “Our vision is a water secure world, where people have sustainable supplies of water of sufficient quantity and quality to meet human, economic, and ecosystems needs while managing risks from floods and droughts.”47 The law built off the success of the Senator Paul Simon Water for the Poor Act of 2005, which had required the secretary of state, in consultation with the USAID administrator, to submit a report every year from 2006 to 2014 updating Congress on the progress made toward tackling water and sanitation issues.48 This law established the provision of safe drinking water, sanitation, and hygiene as a priority for U.S. foreign policy. OPPORTUNITIES FOR FINANCING WATER AND SANITATION The UN General Assembly and the Human Rights Council first recognized the human right to access safe drinking water as part of binding international law in 2010.49 The human right to access sanitation was explicitly recognized as a distinct right by the UN General Assembly in 2015.50 This has led to a debate among international organizations about whether drinking water should be considered free since it is a human right. In 2009, Catarina de Albuquerque, UN special rapporteur at the time, said that water can have a price as long as people are not excluded and encouraged the private sector to have a role.51 Most urban water systems in developing countries fall under the responsibility of national and local governments and lack sustainable financing. Traditional WASH financing comes from a number of sources, including tariffs and fees paid by the WASH users, domestic tax revenues passed from the central or local governments to the WASH sector, and grants from international donors, charitable foundations, and non- governmental organizations interested in supporting the sector.52 Investing in clean water and sanitation offers significant returns for development actors. A report by the WHO found that the benefit-cost ratio was 5.5 and 2.0 for improved sanitation and drinking water, respectively.53 Yet, many cities are dependent on outside development actors to support services, and fee collection remains an issue for many local governments and municipalities. Funding from NGOs and foreign governments is neither sufficient nor sustainable, and efforts should be focused on strengthening developing countries’ capacities to manage and finance their own urban water systems. “A lack of funding and financing is a critical bottleneck to achieving the SDG WASH targets for vulnerable groups.” - Luis Andrés and Ye-rin um of the World Bank54 Traditional methods of development finance will not be enough to achieve universal access to water and sanitation systems. For the first time since 2011, official development assistance for WASH declined in 2017, to $4.9 billion.55 Development partners in the WASH sector have identified a lack of blended finance and an inadequate amount of resources focused on the poorest and most vulnerable groups as the main challenges.56 The World Bank estimates that the annual cost of meeting the first two targets of SDG 6 would require $114 billion each year, which is about three times the current investment levels.57 This number does not include the cost of operating and maintaining the infrastructure over time.58 Development finance institutions (DFIs) can incentivize local private capital through financial institutions and spur domestic and international private companies to invest in water and sanitation systems by reducing the financial risk involved with investments. Blended finance aims to “crowd in” private capital by managing, transferring, or mitigating the risk inherent or perceived in the developing world while also producing a return and creating jobs and growth through investments that would otherwise not exist.59 For large-scale projects, DFIs like the Overseas Private Investment Corporation (OPIC), which will soon become the U.S. International Development Finance Corporation (DFC) and include USAID’s DCA guarantees program, could offer specialized financial products such as loan guarantees, direct lending, and possibly equity for water and sanitation finance, including in local currency. The first USAID partial credit guarantees issued in 1999 were for WASH, and USAID has since provided DCA guarantees to utilities, municipalities, companies, and finance facilities for commercial bank loans and bonds for WASH. These transactions are typically tied to technical support and a bilateral assistance project to ensure bankable investments are developed and the guarantee is utilized. In order to provide these guarantees, OPIC must identify a financial institution with interest and liquidity, after which OPIC backs up the investment. Per project, OPIC can typically guarantee up to $250 million.60 In 2018, OPIC entered into a contract with Befsea Desalination Developments Ghana Limited, a company in Accra, Ghana looking to upgrade their reverse osmosis desalination plant. By desalinating seawater, the plant is able to provide cleaner and more sanitary water for residents around Accra. OPIC agreed to provide $50 million in loans and guarantees for up to 18 years for the project.61 There is also significant demand for loans and financing toward small-scale household solutions to water and sanitation issues, such as water filtration systems. The Bill and Melinda Gates Foundation reports that there is a $12 billion demand for affordable financing that could help 565 million people gain access to quality WASH systems.62 Increasing the amount of financing available to citizens in low- and middle-income countries will allow them to take out loans in order to purchase toilets and water purification systems for their homes. One of the leaders in providing these microfinance solutions is Water.org (Box 2). Through the WaterCredit initiative and WaterEquity platform, Water.org has provided more than 21 million people in Africa, Asia, and Latin America with safe water and sanitation.63 Every dollar invested in WaterCredit creates $59 worth of impact.64 BOX 2: MICROFINANCE SOLUTIONS OFFERED BY WATER.ORG AND WATEREQUITY Water.org has a long history of providing grants for microfinancing institutions to improve water and sanitation systems in households. Originally founded in 2009 by Gary White and Matt Damon, Water.org starts by identifying a region that is in need of microfinancing and carefully selecting local institutions to partner with and help establish water and sanitation loans in their portfolio of offerings.65 Through the WaterCredit initiative, Water.org provides technical assistance, connections, and resources so that these local microfinance partners can provide small and affordable loans that can be used to put a tap or toilet in households.66 WaterEquity was launched in 2017 by Water.org as an independent non-profit focused heavily on investing in microfinancing institutions and mobilizing capital in low- and middle-income countries to end the global water crisis.67 Matt Damon and Gary White were inspired to launch WaterEquity after seeing that the vast number of families in need of $200-300 loans were overwhelming lenders’ capacity.68 These loans could be used to buy a household’s first-ever toilet or install a water catchment systems. In March 2019, WaterEquity officially closed the $50 million WaterCredit Investment Fund 3 (WCIF3), which invests in microfinance institutions, as well as small sanitation-related businesses, in India (45 percent), Cambodia (30 percent), Indonesia (20 percent), and the Philippines (5 percent).69,70 The fund offers high-net- worth investors, financial institutions, and foundations a modest target return of 3.5 percent over its seven- year term and aims to provide 4.6 million people with safe water and sanitation at the same time.71 To be safe, $5 million in first-loss guarantees were set aside in the unlikely scenario that the fund suffers a loss.72 Investors in the fund include OPIC, Bank of America, Conrad N. Hilton, the Skoll Foundation, and Niagara Bottling.73 As of July 2019, WCIF3 had completed seven loans to microfinance institutions, resulting in 60,000 microloans to families living in poverty (93 percent of the borrowers were women).74 The fund also had a significant impact, with 224,100 people gaining access to sanitation and 39,700 people gaining access to water.75 Every dollar invested in WaterCredit creates $59 worth of impact. GOING FORWARD RECOMMENDATIONS FOR U.S. AGENCIES The United States remains a global leader on water and sanitation issues. This does not mean that it is exempt from the challenges of supplying clean drinking water, as seen through the water crisis in Flint, Michigan.76 Many historic cities in the United States suffer from outdated underground water distribution systems and contaminated groundwater. For example, over 80 percent of New Orleans’ 1,500 miles of water pipes were installed at least 80 years ago and are under threat of saltwater intrusion.77 St. Petersburg, Florida is another city where rain and flooding has overwhelmed stormwater systems, forcing the city to pump partially treated sewage into Tampa Bay, Boca Ciega Bay, and the Clam Bayou Nature Preserve.78 Federal, state, and municipal governments should work to build more resilient cities. Increased flooding, growing urban populations, and saltwater intrusion along coastal towns will only exacerbate the challenges to providing sustainable WASH systems in cities. Driven by climate change and unpredictable weather, water and sanitation challenges are becoming more and more difficult to address, and the United States must remain committed to strengthening WASH systems at home and abroad. If the United States limits its engagement to just domestic efforts, WASH systems in cities around the world will deteriorate beyond repair and contribute to increased global instability. Through the Water for the World Act, the United States has demonstrated its commitment to supporting clean water and sanitation services abroad. Increasing access to capital for WASH programs in developing countries saves lives, helps strengthen the resilience of cities, and reduces dependency on donor agencies. Reducing fragility in developing countries also supports U.S. security and economic interests abroad. 1. Mobilize private capital to support increased water and sanitation in cities. In order to address the $114 billion in financing needed, scarce resources from the public sector must leverage private capital to crowd in all available forms of funding and financing.79 Ideally, the private capital mobilized will be from DFIs and capital markets and in local currency. This is more sustainable for practical reasons, as it engages local institutions, and also for financial reasons, as local currency debt is better matched to the revenues of the service providers and does not carry foreign exchange risk. There may be an opportunity to engage further with local pension funds looking for low-risk, long-term investments. DFIs should play a bigger role in crowding in capital for WASH systems. When OPIC transforms into the new DFC, it should use the new investment tools at its disposal to support urban water infrastructure projects. OPIC was a debt investor for the WCIF3 blended finance fund, but through the 2018 BUILD Act, the new DFC will have the capacity to make debt and equity investments—including in local currency—offering a new opportunity to further leverage private-sector financing.80,81 The DFC can benefit from the connection with USAID and the DCA legacy. As the DFC has a mandate to deliver results in the least-developed countries, partnering with bilateral and multilateral DFIs can help alleviate risks and costs. Increasing access to capital for people in low- and middle- income countries will allow households the ability to purchase their first toilets and tap water systems. Microfinancing is another way to expand the amount of private capital available for households to get the loans they desperately need and on favorable terms. DFIs like OPIC should continue to support funds like WaterEquity’s WaterCredit Investment Fund 3 through debt financing and equity investments. Partnering with other DFIs through co-investments also gives a certain level of credibility to investment opportunities because investors know that the U.S. government is supporting the fund. So far, 99 percent of WaterCredit’s cumulative loans have been paid back.82 2. Increase the efficiency and improve the performance of WASH systems. Part of bridging the finance gap should also be to increase the efficiency and performance of existing water and sanitation systems. Building new infrastructure is needed in many instances, but many of the problems that utility providers face are related to management and governance. Service providers struggle with collection or lose money due to non-revenue water from spills or leaks. Strengthening urban water systems should be a part of smart cities initiatives and leverage new technologies when appropriate. Cities’ WASH systems could be greatly improved by access to reliable data and information. Seeing where the leaks are on a map would go a long way to fixing them and preventing them in the future. Technology should be used to map complex underground piped networks and monitor collection points. However, without addressing the governance and enabling environment challenges, no amount of new technologies will be able fix all the problems that systems face. A good example of technology that support water systems is mWater, a free data management platform used by over 40,000 people in 158 countries to map and monitor water and sanitation sites, conduct surveys, and collaborate with local governments.83 Since being launched, mWater has been used by 40,000 different researchers from NGOs and governments.84 Another example is the innovation hub that USAID has developed in India focused on water and sanitation issues. So far, it has been focused on supporting innovations related to service delivery and technological developments. The hope has been that by encouraging these innovations, there will be a greater number of homegrown solutions to water and sanitation problems in India.85 USAID should build on the success of its past WASH interventions and continue to focus efforts on collecting data surrounding water and sanitation systems and protect the supply and availability of safe drinking water. Special attention should be paid to urban water systems moving forward as more and more people leave rural communities for cities. Lack of reliable performance information often leads to policy decisions which are not based on any sort of hard data and lead to problems with the financial viability of utilities. If data collection and management were improved at the local levels, some of these issues might be resolved.86 3. Invest in domestic resource mobilization and develop municipal bond markets to help finance urban water solutions. USAID Administrator Mark Green has recognized the potential of domestic resource mobilization (DRM) reforms and has made it a central theme of USAID’s new Journey to Self-Reliance framework.87 A part of USAID’s WASH-FIN project is focused on supporting DRM by helping service providers leverage domestic resources and build local capacity to track investment.88 Rwanda’s tax intake as a percentage of GDP has increased by roughly 6 percent over the past 17 years.89 Improving DRM efforts and prioritizing water and sanitation will help local and national governments finance their own drinking water and sanitation services. When DRM systems are strengthened, local governments will be able to finance more water and sanitation systems. An example of this is the USAID Indonesia Urban Water, Sanitation, and Hygiene (IUWASH) Project from 2011-2016 and the IUWASH PLUS Project from 2016-2021, both implemented by DAI. IUWASH brought reliable water supply to more than 3 million people and safely managed sanitation services to more than 230,000 city dwellers.90 Through the IUWASH project, USAID and DAI partnered with Indonesian government agencies (central, provincial, and local), local government-owned water utilities (PDAMs), NGOs, communities, universities, and the private sector.91 If governments in low- and middle-income countries can increase DRM, then governments can begin financing a larger portion of the WASH programs in their urban communities and rely less on the international community. Providing utilities and quality infrastructure for urban populations will remain a challenge for developing country governments. As people migrate from rural contexts to cities, local authorities are under increased pressure to provide sustainable and reliable public services to their constituents, such as water, transportation, sustainable energy, and housing.92 The development of local currency bond markets, especially municipal bonds, can help local governments address numerous challenges to urban economic growth. Yet this will not be an easy endeavor: developing bond markets will require tackling weak WASH institutions and regulations, substandard account-keeping practices, and poor fiscal practices. USAID supported the first municipal bond in India in 1994, and capital market laws and regulations likely require reforms. Recent reforms include allowing foreign portfolio investment, and municipal bonds were recently removed from following corporate bond requirements.93,94 Through the FIRE-D Project in India, USAID was able to provide a loan guarantee system that supported the local municipal bond market.95 The project lasted from 1994 to 2011 and focused more broadly on mobilizing resources and increasing cities’ abilities to finance water and sanitation systems in 16 states in India.96 4. Ensure the sustainable use of water at the supply and at the collection point. As part of the Journey to Self-Reliance framework, all development organizations should be working themselves out of a job and toward a point where communities in low- and middle-income countries no longer need to rely on the international community for assistance. This applies to the WASH sector as well. In order for governments in sub-Saharan Africa or Southeast Asia to house, feed, and provide services for their urban populations, it is critical that they have sustainable access to clean water and sanitation systems. The support from the international community toward achieving SDG 6 is having a tremendous impact in communities around the world, but concerns remain with the long-term sustainability of these newly constructed infrastructure projects. Donor agencies and NGOs should not only fund the initial construction of new WASH systems but also help communities receive the training necessary to maintain the systems over time. Development programs may introduce new ways of collecting groundwater but fail to help communities develop maintenance plans to deal with malfunctions. New technologies like pumps and filtration devices will not have the intended impact if locals cannot maintain the devices or use them properly. The International Institute for Environment and Development (IIED) reported that up to $360 million had been spent on constructing boreholes and wells in Africa that then became useless because they were not maintained or fixed when they broke down; as a result, 50,000 water supply points were not functioning across sub-Saharan Africa in 2009.97 In order to have sustainable financing, some communities should consider charging a small fee for access to water collection points. This money could be used to support drinking water systems even after NGOs and development agencies leave communities. Teaching communities the importance of protecting groundwater and preventing leaks and saltwater intrusion are important ways of improving the sustainability of WASH systems as well. According to the Chicago Council on Global Affairs, groundwater has the highest rate of extraction of any raw material on the planet, and rates of withdrawal are increasing at nearly twice the rate of population growth.98 Strong country ownership and governance reforms are needed in order to achieve SDG 6. CONCLUSION New sources of financing are needed in order to provide clean water and sanitation for citizens around the world. The challenge is particularly acute in cities where population growth and urbanization are stretching resources and deteriorating living conditions. The United States and its development agencies must further leverage private-sector capital for WASH programs and increase the efficiency of existing WASH systems. Unless significant progress is made, water and sanitation will be the greatest global challenge of the next decade. Daniel F. Runde is senior vice president, director of the Project on Prosperity and Development, and holds the William A. Schreyer Chair in Global Analysis at CSIS. Christopher Metzger is a research associate for the Project on Prosperity and Development at CSIS. This brief was made possible by the generous support of Chemonics International. The authors would like to thank Michael Ashford, Chris Holmes, Jeff Goldberg, Ella Lazarte, and Steve Sena for reviewing early drafts of the brief. A special thanks to CSIS research interns Rachel Abrams, Janele Partman, and Steven Weirich for their endless research support. CSIS Briefs are produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s). © 2019 by the Center for Strategic and International Studies. All rights reserved. Please consult the PDF for references.
9
Afghanistan: A War in CrisisDownload the Report The U.S, has announced a potential peace agreement with the Taliban in Afghanistan. Many of the details are still secret or undecided, and the Administration has sent mixed signals about the timing and scale of U.S. force cuts. President Trump announced shortly before reports the U.S. had agreed to the basic structure of a peace deal that he would cut U.S. forces. He described these cuts as follows in an interview on Fox News on 29 August, “we're going down to 8,600 and then we make a determination from there as to what happens. We'll make a determination, but we're going down to 8,600, we're bringing it down. We have it very well controlled. You know, we're not fighting a war over there, we're just policeman over there. We could win that war so fast — if I wanted to kill 10 million people, Brian, which I don't. I'm not looking to kill a big portion of that country. I'm not looking to do that.” On September 2nd, in the middle of new Taliban attacks, the U.S announced a draft peace agreement between the United States and the Taliban that withdraws 5,400 U.S. troops from five bases in Afghanistan within five months – or 135 days – after the deal was signed. U.S. peace envoy Zalmay Khalilzad described the proposed plan in a broadcast on TOLO News as “an agreement with the Taliban in principle” although he cautioned that “it is not final until the president of the United States also agrees to it.” He stated that such a withdrawal would depend on the Taliban meeting the terms of the agreement, ending its ties to Al-Qaida, and provide clear guarantees to support counterterrorism activities. He also made it clear that the Afghan government had been briefed but not given copies of the draft agreement or played a major role in shaping it: “It is our (a U.S.) agreement with the Taliban, not their (the Afghan government) agreement with the Taliban. No reference was made to the fact that Afghanistan planned to hold a Presidential election on September 28 th, what role the Taliban was expected to play in the government in the future, and how the agreement with the Taliban could be reconciled with the results of the Afghan election. Presumably, far more details will become apparent with time, but it is all too clear that any peace agreement will have to be a highly uncertain option, and it is far from clear what guarantees the U.S. will make to secure it, or what levels of military and civil aid it will pledge. Earlier media reports indicated that the Administration was considering a full withdrawal within a year of a ceasefire, but no report has had any official confirmation. It is also unclear that the U.S. has the option of staying in Afghanistan without providing open-ended military and financial support. Much depends on current trends in the war, and the extent to which the Afghan Government or the Taliban are winning control and influence over the country, and a detailed review of the fighting shows that it is the Taliban that is making progress even while the Afghan forces still have major U.S. combat air, U.S. train and assist, and U.S. land combat support from elite force elements. Much depends on the degree to which the Afghan government forces can stand on their own if a peace negotiation leads to the withdrawal of U.S. and Resolute support forces, or if the U.S. makes major further force cuts. At present, it seems doubtful that Afghan force can survive if the Taliban should use the peace process to secure a U.S. withdrawal and then turn on the Afghan government. At the same time, the civil sector is weak and making marginal progress at best. The Afghan government remains weak and divided, the economy and government budget are heavily dependent on outside aid, and efforts to make aid conditional on Afghan performance has so far had only limited success. The end result is that both peace and any open-ended effort to stay are both likely to be bad options, and the U.S. will be forced to choose between them. If the peace process should fail, it is doubtful that Afghan forces can survive without ongoing U.S. combat air support, help from U.S. elite forces, and forward deployed security assistance brigades indefinitely. It is equally uncertain that even if Afghanistan can unite around some future President, that it can survive its gross failures in governance, the rule of law, and economic development without equally indefinite billions of dollars in U.S. civil aid. A detailed analysis of the civil side of the war shows that Afghanistan is still the equivalent of a failed state. Understanding the Trends that Shape a Possible Peace and U.S. Capability to Stay The Burke Chair at CSIS has updated and expanded a report that uses official reports, maps, and graphics to examine Afghan military and civil progress, or the lack of it, in full detail. It draws on official reporting by the Resolute Support Command, the Office of the Secretary of Defense (1225 Report), the Lead Inspector General for Overseas Contingency Operations (LIG-OCO), the Special Inspector General for Afghan Reconstruction (SIGAR), and the United Nations. At the same time, it draws upon a variety of outside sources that raise serious questions about the accuracy of some of this official reporting. The report is entitled Afghanistan: A War in Crisis. It is available on the CSIS web site at https://csis-prod.s3.amazonaws.com/s3fs-public/publication/190904_Progress-Afghanistan.pdf. The key military portions of the report are available as a separate report here. The civil portions are available here. The key sections of the full report include: Anthony H. Cordesman holds the Arleigh A. Burke chair in Strategy at the Center for Strategic and International Studies in Washington, D.C. He has served as a consultant on Afghanistan to the United States Department of Defense and the United States Department of State.
Energy Spheres of InfluenceDownload the Report For several decades, energy security has been defined and pursued in a multilateral world with relatively open markets and technology transfer, where energy relations have become increasingly commodified. But that world may soon disappear—energy relationships might become more political, open trade might give way to friction, and great powers might leverage energy relations or energy technology to gain an edge over each other. For decades the United States has promoted a rules-based, multilateral order, supported by shared gains from free trade and deeper economic and political integration within and among countries. Energy security, the ability to secure affordable and reliable supplies of energy, has been widely recognized as common good promoted by this system. As the world’s largest consumer and importer of energy, it was squarely in the United States’ national interest to support this approach through domestic and international energy policy as well as foreign policy. Today, this multilateral order is being challenged. The world is experiencing a new era of competition for greater geographic and economic power driven by the shifting center of gravity of the global economy, the realignment of relationships between and among countries, and rapid technological change. Energy is poised to play an important role in this upheaval and will be affected by these changes. The United States is no longer the largest consumer or importer of energy. Instead, it is now the largest producer of oil and natural gas and will soon be a net exporter of energy. The energy world also is changing rapidly, with renewable energy resources like solar and wind making up the fastest growing and largest source of new supplies and global imperatives like climate change challenging the role of status quo fuels. These changes have heralded a reexamination of the United States’ national interest regarding energy in this changing global system. The United States has important decisions to make about its position in this new environment. Can energy play an influential role in achieving U.S. foreign policy objectives in various regions of renewed geopolitical competition? Is any country or group of countries poised to dominate a given energy market or fuel and might that negatively affect U.S. national security interests? How does this changing global dynamic in which countries are vying for greater geographic and economic spheres of influence affect our approach to global energy security? Will the energy sector become fundamentally more mercantilist, and will the United States be competitive if it does? Greater insight about each of these questions is a prerequisite to the formulation of U.S. foreign and energy policy. So far, the United States has grappled with these questions by pursuing “energy dominance,” a strategy in which energy represents (1) a tool for gaining geopolitical influence in a given region and (2) an area of competitive and strategic economic advantage for the United States. But other global powers, like China and Russia, pose strong competition for this U.S. strategy. Energy features prominently in the economic, foreign, and national security strategies of all three countries but in different ways. And although all three recognize the importance of maintaining affordable and reliable energy supplies for the good of the global economy as well as their own economic well-being, they also recognize the influence of energy in the execution of foreign policy at the global and regional level. The issue for the international energy community is whether the multilateral approach to shared energy security, supported by the promotion of free and integrated markets, is breaking down into regional and economic spheres of influence more mercantile in nature—and if so, how the United States should respond. Shifting Balance of Power Power structures within and among nation-states are shifting. A decade ago, Zbigniew Brzezinski foreshadowed the upheaval as the result of a “global political awakening” in which “for the first time in history almost all of humanity is politically activated, politically conscious and politically interactive” and the result is a “quest for cultural respect and economic opportunity in a world scarred by memories of colonial or imperial domination.”1 Much of this awakening is enabled by technology, which has connected and informed society in ways previously not possible. Today, this struggle is playing out at multiple levels, including the great power politics of nation-states. In 2016, Henry Kissinger spoke about the nature of the changing world order, saying that for the first time in decades: “Practically all the actors in the Middle East, China, Russia, and to a certain extent Europe are facing major strategic decisions. . . . to settle some fundamental directions of their policies. China, about the nature of its place in the world. Russia, about the goals of its confrontations. Europe, about its purpose, through a series of elections. America, about giving a meaning to its current turmoil in the aftermath of the election.”2 The balance of power is shifting, the global order is being renegotiated. The culmination of both has led to an era of intense competition. Within countries, political competition has brought new parties to power. Widespread displeasure over inequality and an unlevel playing field threaten to disrupt the global trading regime and have led to intensified economic competition among firms and strategic economic competition among states. The advent of new technological horizons and the rise of developing countries have sparked new frontiers of competition. Against this backdrop, great powers are looking to expand their reach and refresh their strategies to achieve geostrategic gains. As countries look to expand their spheres of influence, energy can play a role as both a target and tool of that expansion. Although much of the world’s energy development and trade occurs in the sphere of normal commerce, energy infrastructure, investment, and control over resources can also play a role in establishing or challenging the relationships between and among countries. For the first time since the end of the Cold War, there is genuine strategic rivalry among the world’s great powers. China’s rise has created a web of economic and political relationships in all continents. Russia is reasserting itself in places from which it had retreated. The United States is aggressively renegotiating its existing relationships with allies and adversaries. New areas of strategic competition have opened up in resource-rich areas like the Arctic and the emerging economies of Africa. Changing Energy Landscape At the same time, the energy sector is experiencing several important upheavals with the potential to reorder the world’s energy markets. The current energy system predominantly comprises fossil fuels—oil, coal, and natural gas—though in recent years, renewables (wind, solar, and bioenergy) have grown the most (albeit from a lower base). The mix of fuels in the power sector varies among countries, with some now experiencing a high (more than 25 percent) share of renewables in the generation mix. Coal still dominates the power sector and oil has almost entirely been worked out of the mix except for a few countries where it is still used for power generation. Transportation is dominated by oil, but efficiency gains and the declining cost of batteries mean that electric and more efficient vehicles will limit oil use, even though demand for oil for heavy-duty vehicles, shipping, planes, and petrochemicals will remain robust. Nuclear power, once the domain of developed economies in Europe, North America, and Japan, as well as Russia, has experienced a resurgence in China and will grow in parts of the Middle East. Elsewhere nuclear energy has struggled to maintain cost-competitiveness for its existing plants, restart operations in the wake of post-Fukushima security concerns and build new plants on budget and on time. In geopolitical terms, the energy map has changed a great deal as well. Developing economies assumed the largest share of energy demand several years ago and currently make up the majority of total energy demand and nearly all demand growth. China, which has had the largest growth in energy demand each year for the last decade and half and is now the largest energy consumer in the world, has seen a slowdown in energy demand growth in recent years because of moderating economic growth, measures to improve energy efficiency, and structural economic reforms. The United States, once the world’s largest energy consumer, is now the largest producer of oil, natural gas, and hydrocarbon gas liquids. The rapid rise in U.S. oil and gas production, along with other factors, helped bring about a collapse in oil and natural gas prices in 2014, causing financial stress for the world’s oil and gas exporting economies and led to an alliance between OPEC and Russia to manage production to stabilize world oil prices. All of these shifting market and geopolitical dynamics are occurring in the context of important technological and societal change. The rising share of renewable energy means that energy systems not only are becoming more diversified but, in some locations, electric power systems are more distributed, flexible, and responsive, incorporating elements like two-way power flow, demand-response, and distributed storage options. The energy system is gradually becoming more digitally enabled even outside the electric power sector, including digital applications for drilling operations, pipeline functioning and maintenance, refinery optimization, and transportation technologies. From a policy perspective, countries and companies are working to create new strategies to survive and compete in this new market environment while meeting a broader suite of societal goals and commitments. Countries and multilateral organizations have established a number of global and regional priorities, chief among them the United Nations’ Sustainable Development Goals, several of which address the provision of energy services to alleviate energy poverty and to meet other development needs like education, health care, and basic nutrition. Many countries and subnational entities continue to orient their policies and regulations to transitioning to a low-carbon and more resilient future for the purposes of combating and withstanding the effects of climate change. These policies would mean a profound transformation for the world’s energy system if they were realized. U.S. policymaking in this landscape is complicated. There are new players and realignments in traditional fuels, chiefly because of the rise of the United States as the largest producer of both crude oil and natural gas, which has led to closer collaboration between the Organization of the Petroleum Exporting Countries (OPEC) and Russia on oil, and could, in time, produce a similar response in natural gas. But the United States and the West are retreating or failing to lead in other energy sectors—the nuclear industry in a few decades is likely to be decidedly non-Western, while China has doubled down on new technologies, ranging from solar panels to electric vehicles, and likely will become a leader in the products essential for transitioning to a low-carbon world. There is, in short, a realignment in old markets, just as the battle is intensifying in new ones. Energy Spheres of Influence Influence is a multifaceted and often nebulous concept; energy is visible, tangible, and hence often acts as a proxy for influence—because it in fact confers influence or because we assume it does. It was China’s search for resources that first prompted its overseas strategy, commonly known as the “Go Out Policy,” at the turn of the century. Even today, despite a broader set of commercial and strategic interests, energy is a major component of Chinese investment and trade around the world. For Russia, energy is one of two strategic commodities, along with arms, that enable it to court other countries; and it is energy that is providing a foundation for its expansion into the Arctic. Recent years also have seen a significant expansion of Russian state-owned investment in energy projects overseas, particularly through Rosneft. Even for the United States, energy has become part of bilateral relations with allies (The North Atlantic Treaty Organization or NATO, South Korea) and adversaries (Russia, China). Domination is a similarly nebulous concept, but one paramount foreign policy objective for the United States has been to prevent any country or group of countries from dominating an energy market, a fuel, or a region; or to prevent political concessions from whatever market power exists. It was this impulse that led President Jimmy Carter to threaten military force against any adversary looking to dominate the Persian Gulf. It was a similar urge that prompted President Ronald Reagan to impose sanctions on European companies looking to advance Russian gas projects in the early 1980s, or subsequent administrations to support pipeline projects to diversify European gas supplies. Or to promote civilian nuclear power while tightly controlling proliferation since President Eisenhower’s “Atoms for Peace” speech. Today’s energy landscape has changed: the United States is no longer thinking merely in denial terms; it is examining whether it can dominate energy markets. The foreign and energy policy communities have made broad assumptions and assertions about but have not adequately investigated (1) the role energy plays in the contemporary competition for influence among the United States, China, and Russia in specific regions of the world; (2) whether any one country or groups of countries might be able to exert preponderant influence over a specific type of energy or fuel; and (3) the implications for U.S. foreign policy objectives and global energy security. Geopolitical Influence Energy factors into several examples of the contemporary struggle over geopolitical spheres of influence. One very timely example is Venezuela. Over the past 15 years of Venezuela’s political, economic, and social decline, China and Russia have come to own much of its oil resources and debt. Once one of the world’s largest oil producers and ally of the United States, Venezuela is widely considered a criminal state and is the source of the biggest migration crisis in the history of the hemisphere. Although the world oil market has adjusted to the decline of Venezuelan production, a further collapse could directly affect U.S. energy security by interrupting flows of oil from Venezuela to the United States. And yet the Trump administration feels confident enough in U.S. and global supplies of oil to effectively sanction trade in Venezuelan oil to bring about regime change from Nicolás Maduro to the interim president Juan Guaidó. The U.S. government has identified the instability in Venezuela and the presence of foreign powers as threats to U.S. national security, harkening back to the principles of the Monroe Doctrine. Given that energy is the reason for foreign presence in Venezuela, many foreign policy analysts have suggested that energy will be a key to its future. This means the United States will need to forge some sort of resolution with China and Russia over the leadership in Venezuela and over ownership over its oil resources. Another often cited example of geostrategic competition is that for an influential role in the Indo-Pacific. With varying degrees of success, China has sought to expand its sphere of economic and soft power influence through the Belt and Road Initiative (BRI). After the collapse of the Trans-Pacific Partnership (at least the version that included the United States) the United States and its regional allies now seek to counter with the Free and Open Indo-Pacific Strategy. Energy plays a role in these agendas, such as the financing and construction of coal-fired power generation units by China and the efforts by the United States and Japan to create natural gas import facilities throughout the region. Implementation varies greatly on both strategic initiatives, as does the line between commercial versus strategic objectives. Whether building energy infrastructure or trade links translate into geopolitical connections remains to be seen. However, an economic (versus military) counterweight to China’s ambitions in the region is of increasing strategic importance to the United States. Relationships throughout the Middle East are shifting as well, with Middle Eastern countries increasingly looking to Asia to secure future markets for their oil. Russia has taken a revanchist stance on the global stage and, through its partnership with OPEC and energy investments in the Middle East, appears to be forging closer, though not uncomplicated, ties with more countries in the region. Energy trade has not been affected by the several country economic embargo against Qatar but trade flows throughout the region have been affected by the renewed U.S. sanctions on Iranian oil exports. The U.S. presence in the region is long and complicated but it seems that alliances in the region are diversifying and energy is playing a big role in communicating and solidifying those shifts. Further north, the Arctic’s natural resources are abundant and more accessible as the Arctic summers are ice-free for longer periods of time. Russia and China have staked aggressive territorial claims in the Arctic and are seeking to expand commercial and military activity in the region. The oil and gas resources in the region remain on the edge of commerciality and yet provide one of the few economic justifications for a greater and sustained presence in the Arctic. Countries with strategic justification will pursue development whereas others driven by purely commercial interests will be farther behind. Finally, energy also provides a foothold for investment in Africa on both the supply and demand side of the market. African economies are believed to hold a great deal of promise for future growth in the global economy and a source of energy supply and demand. The first area of strategic competition is in resources extraction. Several countries in Africa have oil and natural gas resources that have historically and recently attracted attention from international oil and gas companies. Chinese national oil companies also have long operated in Africa—a 2015 working paper by the International Energy Agency pointed out that Africa was the top source of overseas equity oil production for Chinese companies.3 The second area of strategic competition is on the energy demand side of the equation. Soft power influence in Africa through the provision of power generation and other basic infrastructure fits into the strategic architecture of both U.S., Chinese, and to a lesser extent Russian foreign policy. China’s overall Africa strategy has grown in recent years whereas the United States has struggled to catalyze significant investment in the region. It is far from clear that energy determines any of these struggles for influence but at the very least it is a defining feature of the dynamics in each region. Competition in energy plays out much more directly in several of the fuel or technology sectors themselves. Fuel or Technology Spheres of Influence In this rapidly changing landscape, countries also look to exert influence over specific types of energy. One recent example is the resurgent presence and expansion of OPEC in oil markets. OPEC’s ability to influence markets has been called into question for many years and for different reasons.4 Many analysts now argue that cooperation between Russia and Saudi Arabia is essential for OPEC to influence the market and in turn prices.5 Together the two countries produce a fifth of the world’s oil and OPEC+ (a loose organization of 24 oil producing nations led by Saudi Arabia and Russia) accounts for 50 percent of global production. Although Russia has had a patchy history of cooperation, some of its recent actions suggest a greater commitment to market management. Another growing area of strategic competition is in natural gas. The United States historically has been isolated from the global gas market. Insofar as analysts were worried about gas, they either worried about Soviet/Russian gas into Europe or about the prospect that the United States might become vulnerable because of dependence on liquefied natural gas (LNG) imports. In the past ten years, the market for gas has changed—and so has the United States’ position and its priorities. As the gas market continues to change, it is unclear whether the normal presumption about the path toward larger markets with more suppliers and increased trade making gas a more secure fuel will hold true in reality or perception. This question has recently come to the fore as the United States, as a growing gas exporter, talks openly about the economic and foreign policy benefits it hopes to derive from its natural gas exports. Nuclear energy also is an area where one set of dominant players has shifted to another. The United States, France, Japan, and Korea are struggling to build reactors at home and abroad whereas Russia and China are making significant headway. In light of a marginal slowdown in domestic demand, Russia and China are pursuing export opportunities. Moreover, seeing the export of nuclear goods and services as a strategic undertaking, the Russian and Chinese governments are aiding their nuclear industries financially and diplomatically as they approach new and existing markets. Russia already is an established supplier of nuclear power goods and services, with ongoing projects in Bangladesh, Hungary, India, and Turkey. But China appears to be fast emerging as an aspiring leader in the global nuclear commerce after its Thirteenth Five-Year Plan identified advanced nuclear technologies as a key area for development and commercialization. Whether these changes pose a threat to the United States depends on whether you think having a vibrant nuclear industry is important. Many supporters of nuclear energy argue it is a vitally important technology we relinquish at our peril and yet this assertion has done over the years to motivate sufficient domestic support to revitalize the industry. Technologies once on the horizon appear poised to make important penetration into the market. Electric vehicles and batteries are expected to be two new pillars of the future clean energy economy. Many countries around the world from Europe to Asia have established policies and objectives to compete in these markets. China has set a number of strategic technology goals, supported by robust state subsidies. One is to dominate in the development of electric vehicles (EVs), of which it has the largest market and already is the largest producer. Whether China is on track to dominate this sector is still an open question (as is what domination would look like). To date, China has spent a great deal of money and created a large number of car companies. China has shown its willingness to change policies as needed to cultivate a given market and some sort of consolidation in China’s EV production market is likely. Whether China’s EVs can compete outside China is a critical question. China’s progress so far has been strong enough to lead to speculation about potential strategic consequences. For example, if China is, in fact, able to exert market power, what might be the consequences of China’s control? Does this market give China a platform over many of the world’s critical minerals necessary for battery development and the value chain of this important and potentially transformative new technology? In any event, strategic competition from China in EVs has captured the attention of U.S. policymakers in the executive branch and in Congress.6 In truth, China is not the only competitor in this and other important emerging energy technology areas with whom U.S. industry will compete. All of this speculation about competition in regional and technological energy spheres of influence may be overplayed. The academic and policy communities often insinuate connections between energy and foreign policy influence that may or may not exist in practice, or at the very least are difficult to measure. Similarly, notions of energy dominance over a fuel or technology often are vastly overstated or underappreciated. A critical factor to determine the nature of U.S. or any other country’s decisive influence over a fuel or technology is the degree to which the market for that technology or fuel operates in a market environment or if it is dominated by long-term contract structures or state-to-state arrangements. In all of these cases it is important to investigate the ability of any one country or group of countries to influence or dominate an energy sector by controlling the resource base, value chain, or simply through competitive means including those executed through industrial strategy. Indeed, industrial policy, a term that used to be most often preceded by “the U.S. does not have,” is gaining momentum as many lawmakers and private sector participants raise concerns about the United States’ long-term ability to compete across a variety of technologies and industries. Many of these are in the telecommunications realm but EVs, batteries, and nuclear power increasingly are part of this discussion. The Future of Energy Security What does all of this mean for the future of global energy security and U.S. interests relative to those of other countries? There has been little analysis of the future of global energy security across a range of potential geopolitical and energy futures. The Center for Strategic and International Studies (CSIS) conducted its own analysis of the topic in 2014 in light of resurgent U.S. oil and natural gas production but the world has changed a great deal since then, with both energy and geopolitical forces reshaping the landscape far faster than has been envisioned. In 2014, the G7 created an Energy Security Initiative to strengthen, reconstitute, and recast principles for the promotion of energy security. This action was taken in response to Russian aggression in Ukraine and the perceived need to bolster the energy security of Europe but also to refocus international energy policy efforts toward collective threats to energy security. It has not been followed up with any additional multilateral initiatives of similar scope and scale. Instead, the current administration has focused efforts on regional foreign policy strategies such as the Asia EDGE strategy (which seeks to accelerate the development of energy markets in the Asia-Pacific region) and more targeted efforts in relation to European energy security. Although both of these strategies purportedly aim to thwart the impact of non-market-oriented energy and infrastructure projects in Asia and Europe, some foreign governments and companies see these as strategies designed to support the sale of U.S. energy resources, particularly natural gas, in these markets. This view has been supported by the way in which the Trump administration approaches negotiations within the context of its bilateral and multilateral trade agreements, its statements about the global trade agenda, and the actions it has taken on other commodities such as steel and aluminum. On the domestic front, the United States is arguably in a much stronger position with regard to its own energy security. There are more diversified supply sources for the electric power sector, cheaper and greater quantities of domestically sourced natural gas for industrial input and export, and abundant supplies of oil, reducing net import volumes and the negative trade balance associated with it. The United States is not, however, immune to the negative effects of energy supply or demand disruptions, which can put downward pressure on economic growth, affect oil and natural gas prices, and disrupt supply chains in terms of costs and availability for energy-related goods and services. In addition, U.S. energy infrastructure is aging, vulnerable to cyber-attacks and natural disasters, and arguably lacks resilience. Several analyses have examined energy and geopolitics in a low-carbon future and one of the major scenarios is of more geopolitical turbulence. None of these analyses, however, explores how a more mercantilist global energy arrangement would affect specific fuels or how we think about global energy security as a common good today. The predominant approach is bifurcated, with multilateral institutions seeking to incorporate major new energy producers and consumers into the dialogue about shared approaches to energy security while countries compete more aggressively in regional and sectorial domains. Much of the old understanding of energy security emanated from the development of a global oil market whereas the future of energy security may depend much more on the security and reliability of the electric power system and the security of information systems. Competition and the struggle for influence are likely to be hallmarks of the global energy landscape for the future but that does not mean shared interests and principles of energy security have disappeared. These are massive technological and geostrategic considerations that the energy security community has not coherently addressed but it must do so sooner rather than later. Sarah Ladislaw is senior vice president and director and senior fellow with the Energy and National Security Program at the Center for Strategic and International Studies (CSIS), in Washington, D.C. Nikos Tsafos is a senior fellow with the CSIS Energy and National Security Program. This report is made possible by the generous support of the Smith Richardson Foundation. This report is produced by the Center for Strategic and International Studies (CSIS), a private, tax- exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s). © 2019 by the Center for Strategic and International Studies. All rights reserved. 1Zbigniew Brzezinski, “The global political awakening,” New York Times, December 16, 2008, https://www.nytimes.com/2008/12/16/opinion/16iht-YEbrzezinski.1.18730411.html. 2Jeffrey Goldberg, “The Lessons of Henry Kissinger,” Atlantic, December 2016, https://www.theatlantic.com/magazine/archive/2016/12/the-lessons-of-henry-kissinger/505868/. 3International Energy Agency, Update on Overseas Investments by China’s National Oil Companies: Achievements and Challenges since 2011 (Paris: IEA, 2015), https://www.oecd-ilibrary.org/energy/update-on-overseas-investments-by-china-s-national-oil-companies_9789264247505-en. 4Antoine Halff, “OPEC’s policy challenge in the age of shale oil,” Columbia SIPA Center on Global Energy Policy, December 3, 2015, https://energypolicy.columbia.edu/research/commentary/opec-s-policy-challenge-age-shale-oil. 5Bassam Fattouh, “The Evolution and Prospects of Saudi Arabia-Russia Oil Relations: A Saudi Perspective” (presentation, Stockholm, Sweden, October 2018), The Oxford Institute for Energy Studies, October 2018, https://www.oxfordenergy.org/wpcms/wp-content/uploads/2018/10/The-Evolution-and-Prospects-of-Saudi-Arabia-Russia-Oil-Relations-A-Saudi-Perspective.pdf?v=7516fd43adaa. 6Chairman Marco Rubio, Made in China 2025 and the Future of American Industry: Project for Strong Labor Markets and National Development (Washington, DC: U.S. Senate Committee on Small Business & Entrepreneurship, 2019), https://www.rubio.senate.gov/public/_cache/files/d1c6db46-1a68-481a-b96e-356c8100f1b7/3EDECA923DB439A8E884C6229A4C6003.02.12.19-final-sbc-project-mic2025-report.pdf.
China’s Pursuit of Semiconductor IndependenceDownload the Report While China has made immense investments in science and technology, and while these are producing results, it is still dependent on Western technology. This is particularly true for semiconductors. China’s dependence on foreign semiconductors has worried Beijing for decades. China suspects that Western semiconductors contain “backdoors,” intentional vulnerabilities that can be exploited for intelligence and military purposes. In 2016, President Xi Jinping said, “the fact that core technology is controlled by others is our greatest hidden danger.” Vice Premier Ma Kai said at the 2018 National People’s Congress, “We cannot be reliant on foreign chips.”1 China intends to end this dependence, but despite 40 years of investment and espionage, it is unable to make advanced semiconductors. Along the way, there have been embarrassing frauds and expensive failures. Watch Live Event Mistaken Expectations Since 1979, China has used hefty state investments in infrastructure, education, and research, along with technology acquisitions and supportive business policies, to produce incredible economic growth. Western companies were happy to take advantage of the Chinese market and for many it became essential. Expectations that concessions made to China would be only temporary, needed only until it became a market economy, were a serious miscalculation. No one objects to China’s growth and modernization. The problem lies with the means the Chinese government uses to achieve this, including espionage, intellectual property (IP) theft, coercive joint venture requirements, trade barriers, and aggressive mercantilist policies. China Is a Net Tech Importer China remains a net importer of technology. China wants to move “up the value chain” from assembling final products from imported components to creating advanced technology in China itself, but imports of chips and technology will be the norm for many years to come. Today, only 16 percent of the semiconductors used in China are produced in-country, and only half of these are made by Chinese firms. It is dependent on foreign suppliers for advanced chips. China aims to produce 40 percent of the semiconductors it uses by 2020 and 70 percent by 2025. “China 2025” has become a catchphrase for China’s aggressive industrial policy and something of a hobgoblin for policy-makers, but we should not take yet another report by Chinese planners too seriously. China routinely cranks out economic plans; what counts is not the plan but the money. The total planned investment in semiconductors is $118 billion over five years, including $60 billion from provincial and municipal governments (although government investments in China can suffer from politicization and corruption). For comparison, leading Western firms also invest billions annually in research and development (R&D). Intel invests over $13 billion while Samsung and Qualcomm invested over $3 billion each. Huawei spends about $15 billion and ZTE about $1.9 billion. Another Round of Massive Investment in Semiconductors In 2014, China’s State Council set the goal of becoming a global leader in all segments of the semiconductor industry by 2030. “Made in China 2025” reiterated this, but chips are not an easy market to break into, something that has hampered China’s previous efforts. China spent billions of dollars in earlier decades to create a domestic semiconductor industry but with little success. The chief difficulty for Chinese firms is not access to equipment but their lack of experience and “know-how.” This continues to be a problem. China’s pursuit of indigenous industries also runs counter to the trend toward globally integrated supply chains, which are the most efficient in production and innovation. An indigenous industry, even when supported by espionage and subsidies, will remain second-best in a globally integrated innovation system. Despite Western restrictions on technology transfer, there are avenues that China can take to gain semiconductor independence. The first is through drawing technology from Taiwan. Second, China can take advantage of “fabless” semiconductor production, where Chinese firms design chips but the manufacturing processes are handled by specialist companies like the Taiwanese Semiconductor Manufacturing Company (TSMC). Finally, China can try again to build a state-funded, indigenous industry. Chinese companies prefer fabless chip production, while the government-preferred solution of building domestic semiconductor fabrication facilities (fabs) is expensive and risky. China Innovation at Risk The long-standing debate about whether China could become an innovation power appears to be over (with two significant caveats). The first is that successful Chinese innovation is still limited by the country’s relative technological backwardness. The second caveat is that Chinese innovation blossomed in a period of relative political openness. Now that openness is shrinking under Xi Jinping and has been accompanied by greater state economic direction, it is possible that the trend of increasing Chinese innovation will slow or reverse. Market Versus State Both China and the United States have advantages and disadvantages in what is a contest over governance as well as investment and research. The multinational nature of research and innovation complicates any national competition for technological leadership and will create forces that both states will find difficult to control. A globally-oriented U.S. industry may have an advantage over a nationally-focused China. China’s technology sector has vulnerabilities. Centrally-directed economies are less efficient, since government policy supplants market signals on where to invest. Easy access to credit allows inefficient firms to survive, draining resources from more productive activities. Previous rounds of semiconductor investment in China saw new firms (often funded by provincial or municipal governments) close after a few years. This support from the government support means that Chinese companies can continue to operate even when they are unprofitable, inflicting damage on both the Chinese economy and the economies of other nations. Han Yinhe of the Chinese Academy of Sciences calls this “chaotic competition.” China’s government-subsidized expansion will squeeze semiconductor firms in other countries, shrinking their income and numbers and reducing the ability of semiconductor producers to invest in R&D. The overall effect of China’s investments will be to weaken the global industry and slow the pace of semiconductor innovation. The Perils of Techno-Triumphalism Debate is distorted by the Chinese government’s propensity to exaggerate its technological prowess. This is part of the triumphalist narrative about China’s return to the center of the world stage. In reality the story is more nuanced, with China leading in a few areas (such as biotechnology, where Chinese firms face fewer regulatory hurdles) and lagging in many others. Nineteenth century Chinese reformers asked whether it was possible to absorb Western technology without also absorbing Western political ideas. At the risk of tremendous oversimplification, the answer was ultimately no. China’s Communist Party faces a similar problem, but with greatly enhanced tools of social control and surveillance, it expects to avoid a similar fate. How Should the United States Respond? Semiconductors and microelectronics are part of interdependent manufacturing network centered on the Pacific Rim. Disentangling this integrated supply chain, created under more favorable political conditions, will be difficult for the United States, since many U.S. chip companies either have facilities in China or rely on Chinese companies for lower level functions like testing. Interdependence will also hamper China’s efforts to build a national industry, since competitive advantage lies with the internationally distributed supply chains (described by the industry as “horizontal segmentation”). Given past Chinese practice, we can safely assume that if China achieves a dominant position in semiconductors it will use it for intelligence, military, commercial, and political advantage. The most damaging effect of Chinese overinvestment is to undercut research and innovation in semiconductors by reducing the revenue flows to innovative chip companies that fund R&D. Semiconductors are the backbone of the digital economy. The U.S. semiconductor industry and national security are closely linked. The United States will need to engage China to change its mercantilist behavior while simultaneously taking steps to strengthen the U.S. semiconductor industry. Changing Chinese behavior will be difficult but not impossible if the United States and its allies take a consistent approach. In the near term, policy should focus on blunting Chinese investments in production and design technology regulations and increased counterespionage programs. U.S. technological strength can be reinforced by investing more in basic science and government research and taking a more assertive approach to contesting foreign regulations used to gain unfair advantage. 1 Xi Jinping, “Speech at the Work Conference for Cybersecurity and Informatization,” (speech, Beijing, April 2016); Bob Davis and Eva Dou, “China’s Next Target: U.S. Microchip Hegemony,” https://www.wsj.com/articles/chinas-next-target-u-s-microchip-hegemony-1501168303. James Andrew Lewis is a senior vice president at the Center for Strategic and International Studies in Washington, D.C. This report is part of the CSIS China Innovation Policy Series (CIPS) made possible by general support from Japan External Trade Organization, Semiconductor Industry Association, U.S. Chamber of Commerce, Microsoft, General Electric Foundation, and the Smith Richardson Foundation.
Climate Change and Food Security: A Test of U.S. Leadership in a Fragile WorldDownload the Brief THE ISSUE Climate change poses a considerable threat to global food security, with potentially existential economic, political, and social outcomes for humanity. As climate impacts worsen and further stress an already hungry world, the United States should claim the mantle of global leadership in responding to the impacts of climate change, double down on domestic efforts to promote climate-smart agriculture, elevate the issue of climate change and food insecurity in national security circles, and leverage the reorganization of the U.S. Agency for International Development (USAID) to further mainstream climate resilience into U.S. global food security programs. As people around the world increasingly feel the impacts of climate change, the collective call for action grows louder and louder. The effects of climate change on food production—often neglected in favor of stories on melting glaciers, tropical storms, and sea level rise—are receiving more and more mainstream attention. This brief seeks to summarize the relationship between climate change and food insecurity, highlight salient trends and controversies, and comment on U.S. government global policies and programs that tackle this important issue. THE STATE OF GLOBAL FOOD SECURITY The impacts of climate change threaten a complex global food system that is already struggling to meet the needs of a growing and changing population. After great progress over the last decade, the number of chronically hungry people around the world has grown in each of the last three years. Today, 821 million people—one in nine—are undernourished. These people experience a shortage of food each day, while over twice that number face moderate food insecurity and frequently compromise on the quality or quantity of food they consume. At the same time, over 2 billion people around the world are overweight or obese, and over 1 billion suffer from micronutrient deficiency, sometimes referred to as “hidden hunger.” To amend a famous line from author Raj Patel, the world today is “stuff, starved, and hollowed out.”1 The number of hungry and malnourished people worldwide has grown in tandem with a rise in human conflict and forced displacement.2 Slow economic recovery from the 2008 global financial crisis (and food price spikes) and the increasing frequency and magnitude of climate-related extreme events have helped reverse years of progress fighting global hunger.3,4 These combined, interrelated factors have placed unprecedented stress on humanitarian organizations: humanitarian appeals have ballooned to record levels.5 Unsurprisingly, the places most impacted by food insecurity—especially Africa and South Asia—are also those suffering from the most pervasive forms of poverty and environmental vulnerability. CLIMATE CHANGE AND AGRICULTURE Despite the millions of acres of industrial cropland, satellite-guided tractors, and shining supermarkets in places like the United States, a large percentage of food worldwide is still produced on relatively small parcels of land by smallholder, subsistence farmers who rely solely on rainfall to water their crops and animals. These practices mean that long-term changes in climate intimately impact food production—perhaps more than any other sector of the global economy. Since the mid-1800s and the Industrial Revolution, surface air temperatures over Earth’s land area have warmed by an average of 1.5°C.6 Much of that warming has occurred since 1975 as concentrations of carbon dioxide and other greenhouse gases (GHG) in the atmosphere steadily accumulate.7 In places like sub-Saharan Africa, unlike highly industrialized economies, agriculture represents a disproportionately large percentage of countries’ gross domestic product (GDP) and employs up to 80 percent of the rural population. Farming in such places often occurs on heavily degraded lands and lacks high-quality inputs like seed and fertilizer and access to agricultural markets. It is no surprise, then, that subsistence farmers represent over half of the world’s hungry people (of whom half, in turn, are women).8 According to the United Nation’s World Food Programme (WFP), at least 80 percent of the world’s hungry people live in places prone to natural disasters and environmental degradation, including many of the world’s poorest places.9 Climate change impacts on agriculture vary considerably by geography. Climate change has already been linked, for example, to changing patterns of agricultural pests and diseases, saltwater intrusion from sea level rise, and even the decline of nutritional quality in plants. In fact, recent research has shown that with highly elevated concentrations of atmospheric carbon dioxide (CO2), iron and zinc content in plants could fall by as much as 17 percent, accompanied by an increase in starches and sugar production in plants. This shift in nutritional quality could cause an additional 175 million people to experience zinc deficiency and 122 million to experience protein deficiency, according to researchers.10 Undernutrition already costs the global economy $3.5 trillion in lost opportunity and human capital.11 Climate change most directly impacts food production through crop yield changes, typically from temperature increases and rainfall variability. A general rule of thumb in the equatorial tropics is that every 1°C rise in mean temperature is associated with a 10 percent drop in crop yields. Temperature spikes during critical phases of a plant’s growth can lead to outright crop failure. Although impacts will vary considerably by crop and production system, some countries in sub-Saharan Africa and other low-latitude places will likely see yields from rain-fed maize, wheat, and rice fall considerably in the coming decades.12 While reports often reference a 1.5°C to 2°C “safe” level of warming that would avoid the most devastating impacts from climate change, agricultural systems—especially where crops are already grown dangerously close to their biophysical limits— are immediately vulnerable to any additional warming. Crop Yields Will Likely Plummet Due to Climate Change Source: Andrew J. Challinor et al., Climate Change 2014: Impacts, Adaptation, and Vulnerability (New York: IPCC, 2014), https://www.ipcc.ch/site/assets/uploads/2018/02/WGIIAR5-Chap7_FINAL.pdf. By some estimates, between 12 and 39 percent of the world’s land surface will develop novel climates by 2100 as a result of climate change.13 Today’s agriculture remains land and resource intensive. Agricultural production—both crop and pasture—occupies more than 40 percent of total land area and accounts for at least 70 percent of all freshwater withdrawals globally.14 Climate change, land degradation, and biodiversity are linked in a complex feedback loop—a vicious cycle.15 These impacts are already being felt and chronicled today. A recent report by the Intergovernmental Panel for Climate Control (IPCC) suggests that soil is eroding 10 to 100 times faster than it is being formed, a process accelerated by climate change impacts like drought and high-intensity rainfall.16 Meanwhile, unprecedented biodiversity loss— especially among pollinators, bacteria, and fungi in soils, and natural predators that control pests—is being fueled in part by climate impacts, according to the Food and Agriculture Organization (FAO) of the United Nations.17 Ultimately, climate change will most severely impact those places least able to cope. Climate change will threaten years of development progress and thrust many vulnerable populations into poverty—adding as many as 122 million more people by 2030.18 Increasing evidence shows that climate change may also slow the decrease in inequality between countries, reducing GDP among the world’s poorest populations by up to 30 percent.19 As a consequence, climate change is fraught with questions of global justice and inequality, especially as industrialized countries generated an overwhelming majority of historical CO2 emissions. THE THREAT FROM DROUGHT Of all the impacts from climate change on agriculture and food security, drought may be the most harmful for smallholder farmers and other vulnerable populations. Given improved early warning and humanitarian responses, large-scale deaths from famine are increasingly a thing of the past, but drought in the Horn of Africa, Southern Africa, and Central America has been long associated with famine. In these places where rain-fed agriculture is prevalent, over 80 percent of a drought’s economic impact is felt in the agricultural sector.20,21 Multi-year drought is especially devastating for subsistence farming families. Each year without a good harvest pushes the hunger season further ahead and diminishes seed stock for next year’s planting.22 Long-term drought also destroys precious topsoil, allowing it to blow away in high winds or wash away during heavy rains. From a food security perspective, drought in some parts of the world is increasingly synonymous with El Niño. A climate phenomenon resulting from irregular Pacific Ocean temperatures near the equator off the coast of South America, El Niño is triggered by a change in trade winds that would typically push colder waters westward. Research indicates that a general warming trend on the earth could increase the frequency of so-called “Super El Niño” events.23 Consistent with this trend, the 2015/16 El Niño event was among the strongest on record, bringing record drought to Central America’s Dry Corridor. Droughts and other climate-related extreme events are becoming more frequent because of the impacts of climate change, some evidence shows. In fact, they have more than doubled in frequency over the last 25 years, as researchers noted in the 2018 edition of The State of Food Security and Nutrition in the World. In the early 1990s, approximately 100 of these events were recorded each year; today, that number is 213.24 Moreover, in a relatively new area of investigation, researchers have linked the impacts of climate change to so-called “multiple breadbasket failure,” or the potential for widespread weather-related losses to major food-producing regions simultaneously. Addressing food system impacts from climate change is not merely an environmental challenge, it is a human development imperative. In summary, addressing food system impacts from climate change is not merely an environmental challenge, it is a human development imperative. By some estimates, global food production must increase by as much as 70 percent by 2050 to meet the needs of a growing population.25 This is both a challenge and an opportunity: in developing countries, GDP growth in the agricultural sector is more than twice as effective at reducing poverty than growth in competing sectors, but climate change will make it more difficult to meet production needs and to secure poverty reduction targets through agriculture.26 AGRICULTURAL GREENHOUSE GAS EMISSIONS Although the agricultural sector will suffer from the impacts of climate change—especially in developing countries and for subsistence farmers—agriculture is also increasingly being recognized for its underlying contributions to GHG emissions. In fact, by some estimates, agriculture and food systems account for one-quarter of global GHG emissions. Not all greenhouse gases are created equal. Some, like methane (CH4), remain in the atmosphere for a shorter period but have a much stronger greenhouse gas effect: CH4 has almost 30 times the effect of CO2. Agriculture is the single largest contributor to non-CO2 GHGs and accounts for half of all such global emissions. Livestock production alone is estimated to emit almost 15 percent of all global GHGs, mainly in methane from livestock’s digestive systems, but also from production of animal feed and forage, transportation, and processing.27 Livestock belong to a unique class of mammals called ruminants that, unlike ourselves, can acquire nutrients from grasses by fermenting them in a specialized stomach before digestion. A by-product of ruminant digestion is methane. With 3 to 4 billion head of ruminant livestock in the world, this enteric fermentation contributes greatly to agriculture’s GHG footprint, one that is likely to increase given meat consumption trends across emerging economies. The second largest category of agricultural GHG emissions come from our soils. Soil represents a significant stockpile of carbon (and non-CO2 GHGs), holding more than three times the amount currently in the atmosphere.28 Complex interactions of microorganisms, constantly at work in agricultural soils, are disturbed by tillage, deep ploughing, and the overuse of synthetic fertilizers. A by-product of such disruptions is GHG emissions. It is estimated that 75 billion tons of topsoil on arable lands are lost each year, at a cost of $400 billion to the global economy.29 Not only does soil organic matter help to improve moisture retention, reduce fertilizer runoff, and limit erosion, it may also be agriculture’s greatest opportunity for carbon capture. Not all of the food system’s contribution to climate change comes from on-farm production. Increasingly, GHG emissions from food loss and waste are capturing headlines. Globally, $1 trillion in food is lost or wasted each year. In industrialized nations like the United States, this often occurs on the demand side: unpurchased or uneaten food ends up in landfills and produces methane as it degrades.30 In developing countries, up to 40 percent of harvests are lost before making it to market because of inadequate storage or transport infrastructure.31 All told, if it were a country, food loss and waste would be the third largest emitter in the world behind China and the United States. The agricultural sector—which combines deforestation from agricultural expansion (agriculture is the leading global driver of deforestation) with emissions from the processing, transportation, and marketing of food products—contributes in multiple ways to the underlying problem of climate change. CLIMATE CHANGE, FOOD INSECURITY, MIGRATION, AND INSTABILITY The 2014 Quadrennial Defense Review (today’s National Defense Strategy) marked a turning point in how the United States thinks about the issue of climate change. For the first time, the Department of Defense cited climate change as a “threat multiplier” and noted that “the impacts of climate change may increase the frequency, scale, and complexity of future missions.”32,33 This position results, in part, from the steady advancement in academic research that links climate change to global instability. As the evidence base grows, it becomes increasingly clear: the link between climate change and global instability often runs through our food systems. The link between climate change and global instability often runs through our food systems. That conflict is on the rise around the world is unmistakable. Today, more countries experience violent conflict than at any time in nearly three decades.34 If current trends persist, more than half of the world’s poor will be living in countries affected by high levels of violence in next decade.35 This trend has led to the displacement of over 70 million people from their homes, with many crossing borders to seek refuge—numbers not seen since World War II, if ever before.36 Displacement can produce hunger and, in a vicious feedback loop, hunger can produce displacement. Over 60 percent of the hungry people on the planet live in conflict-affected countries and three-quarters of stunted children live in these same places.37 SAHEL The relationship between climate change, food insecurity, and instability frequently centers on control of critical natural resources like land and water, further mediated by factors like poverty, demographics, and history of violent disputes. In fact, the United Nations Environment Programme reports that almost half of all internal conflicts over the past 70 years resulted from resource competition.38 This phenomenon is playing out today in the African Sahel, a strip of arid land that sits below the Sahara Desert and stretches across the continent from Senegal to Djibouti. The region is home to almost 100 million people and hosts one of the fastest population growth rates in the world, with the number of people in the region expected to double in the next two decades.39 Many families in the Sahel rely on subsistence agriculture and pastoralism for their livelihoods and depend heavily on natural resources like land and water. In a region already synonymous with drought, the region is increasingly considered by experts as a climate change hotspot, with unpredictable weather patterns becoming the new norm. The region is expected to warm at a rate 1.5 times faster than the global average, with temperatures increasing by 3°C to 5°C by 2050.40 The region suffers from desertification from the Sahara Desert: the desert expanded by almost 20 percent over the last half century and creeps south by more than a mile each year.41 In one of the most striking examples of climate impacts and environmental degradation, Lake Chad, a critical water resource for fishers, pastoralists, and farmers, has lost 90 percent of its volume since the 1960s.42 Across the Sahel, water availability per capita has plummeted in recent decades. This pressure on both land and water have caused widespread conflict between herders and sedentary agricultural communities. The Sahel is also home to a growing number of extremist organizations, including Boko Haram, al-Qaeda, and Al Shabab. Population growth, pervasive poverty, and environmental degradation have fueled these groups’ ability to recruit for their causes, exploiting desperation and benefiting from limited state security presence in this expansive, sparsely populated region.43 Former U.S. Africa Command (AFRICOM) commander General Waldhauser communicated this complexity to the Senate Armed Services Committee in early 2019: “Very few, if any, of Africa’s challenges can be resolved using only military force. Consequently, U.S. Africa Command emphasizes military support to diplomacy and development efforts.”44 Major Water Sources Like Lake Chad Are Disappearing Source: “How climate change can fuel wars,” Economist, May 23, 2019, https://www.economist.com/ international/2019/05/23/how-climate-change-can-fuel-wars. THE DRY CORRIDOR AND THE NORTHERN TRIANGLE The complicated relationship between climate change, food insecurity, and conflict is also often further filtered through the lens of migration. In sub-Saharan Africa, South Asia, and Latin America alone, over 140 million people may be forced to migrate internally from the impacts of climate change by the year 2050, according to World Bank estimates.45 This migration is often the by-product of food insecurity. Through research with refugees in Afghanistan, Bangladesh, Iraq, Nigeria, Sudan, and Syria, for example, WFP estimates that, in those contexts, a 1 percent rise in food insecurity is associated with a 2 percent increase in migration.46 Among those surveyed, most migrated internally three to five times before making the decision to leave their country because of overwhelming security concerns or an inability to meet basic needs. This phenomenon—the relationship between climate change, food insecurity, conflict, and migration— is on clear display today in Central America. The Dry Corridor of Central America (a geographical area of tropical dry forest that runs from southern Mexico to Panama) has experienced five consecutive years of erratic weather patterns, from prolonged drought to excessive rainfall, with dire consequences for families farming maize, bean, and coffee, in particular. Most farmers in the Dry Corridor— representing a large portion of the region’s labor force—are subsistence producers, growing their food on steep hillsides and in poor soil. Intense drought, driven by one the most powerful El Niño events on record, saw river levels in the corridor fall 20 to 60 percent below normal and crop losses between 50 and 90 percent in 2015 and 2016.47 The Northern Triangle region of Central America (Guatemala, Honduras, and El Salvador) is home to some of the Western Hemisphere’s poorest populations. Irregular migration to the United States from the region has increased because of erratic weather, El Niño impacts, and associated productivity losses and crop failures.48,49 In one study, almost half of the interviewed families with a recently emigrated family member were experiencing food insecurity— levels of food insecurity previously unseen in the region.41 On average, 250,000 people leave the Northern Triangle each year—many bound for the United States—a figure that is expected to more than double in 2019.50 In these countries, erratic weather events destroy crops and livelihoods and force families into a host of negative coping strategies, like selling farm equipment and livestock and eventually migrating. Ultimately, food security is almost never the sole driver of instability or conflict. The conditions for conflict can be met when food insecurity joins certain individual motivations (e.g., existing grievances or underlying poverty), as researchers note in one review of over 50 peer-reviewed scientific journal articles on the link between food insecurity and instability.51 They categorize drivers of food-related instability into three interrelated groups that include resource competition, market failure, and climate-related extreme events, and note that 30 percent of the analyzed studies identify climate change as the principle driver of food-related instability. This trend is unlikely to fade. Research from the International Fund for Agricultural Development shows that countries with the largest proportions of youth populations also tend to be countries that depend most heavily on agriculture.52 Although the relationship between climate change and migration—or climate change and conflict—can be challenging to prove empirically, anecdotally they appear inextricably linked. RETHINKING FOOD SYSTEMS IN THE FACE OF CLIMATE CHANGE The link between climate change and increased food insecurity is not inevitable—nor are the outsized GHG emissions stemming from the global food system. As our understanding of the link between climate change and food insecurity improves, so too does our knowledge of how food systems can be part of the climate change solution. The consensus among scientists and policymakers today is that if we are to meet the 2030 Sustainable Development Goal of zero hunger (SDG 2), we must find ways to sustainably increase food production while significantly reducing the carbon footprint of our food system. Increasingly, we have evolved from a long period of identifying problems to offering solutions and are transitioning from theory to practice in the agricultural climate change space. The politics of solution offering has, for many years, been caught up in debates over climate justice and “polluter pays” principles: the idea that those most responsible for historical emissions—mainly, industrialized countries— should be most responsible for emissions reductions. Agriculture represents a disproportionately large portion of most developing countries’ economies. Asking millions of subsistence farmers to consider the emissions produced through their agricultural practices has been politically fraught. In fact, global climate negotiations have largely avoided the question of agricultural mitigation, driven by a strong coalition of developing countries that argue that actions in their countries’ agricultural sectors should be limited to adaptation. This reasoning has changed in recent years with the emergence of climate-smart agriculture (CSA): agricultural interventions and technologies designed to simultaneously adapt systems to change, mitigate GHG emission, and increase production. More than 1,700 unique CSA interventions across more than 30 developing countries— including cover cropping, reduced or zero-till agriculture, integrated crop-livestock systems, agroforestry and silviculture, conservation of plant genetic material and crop wild relatives, and water management strategies like alternate wet and dry rice irrigation—show that farmers around the world are increasingly adopting beneficial CSA practices, especially when these practices yield gains in productivity and income.53 In 2014, at the United Nations Climate Summit, the United States—alongside other donors, multilateral organizations like the FAO and the CGIAR research program on Climate Change, Agriculture, and Food Security, and private sector companies—launched the Global Alliance for Climate Smart Agriculture to help promote CSA and sustain momentum around the concept.54 Food security solutions to the problem of climate change extend beyond on-farm actions. Project Drawdown, one of the first comprehensive global efforts to catalogue solutions to fight climate change and their impact on GHG emissions, cites three agriculture-related actions in its top 10 most impactful actions, two of which are consumer-facing: reducing food waste and adopting plant-rich diets.55 Other food-system measures in their solutions list include expanding the use of clean cookstoves and reducing deforestation from agricultural expansion and use of biochar. Project Drawdown is by no means the only effort to highlight the importance of diet in the climate change problem. The EAT-Lancet Commission Report on Food, Planet, Health has helped to bring this concept into the mainstream and has generated renewed interest in the idea of food as medicine.56 The urgency of responding to climate change has helped force an important convergence between agriculture, nutrition, and environmental communities; climate change and food security have even appeared in the 2020 Democratic primary discourse.57 Increasingly, people from different spheres are asking the same question: “How can we produce sufficient food to meet the needs of a growing population and do so in a way that nourishes both people and planet?” U.S. GOVERNMENT FOOD SECURITY AND CLIMATE CHANGE PROGRAMS The United States has in place a variety of global food security funds, policies, and programs. Today, Feed the Future, an initiative led by USAID’s Bureau of Food Security, spends more than $1 billion annually on agriculture-led growth and nutrition in countries around the world. Emergency food assistance through USAID’s Office of Food for Peace (FFP) includes both in- kind commodities (P.L. 480) and cash-based assistance (Emergency Food Security Program).58 The United States was instrumental in launching and is involved in several global movements and initiatives: the public–private partnership-focused New Alliance for Food Security, Scaling Up Nutrition (SUN), and 1,000 Days movements, among others. A whole-of-government Global Food Security Strategy coordinates and guides these efforts. For more information on U.S. government global food security policies and programs, see the CSIS brief U.S. Policy Roadmap: A Drive to Transform Global Food and Nutrition Security.59 The urgency of responding to climate change has helped force an important convergence between agriculture, nutrition, and environmental communities. The United States and other donors have long committed to help protect the food security of impoverished communities in the face of climate change, driven by goals to reduce poverty and ensure that hard-won development outcomes are not erased. Because the U.S. global food security space involves broad participation by diverse actors, determining the complete extent of its climate-sensitive investments is a challenge. According to the Organization for Economic Cooperation and Development (OECD) Development Assistance Committee, in 2017 the United States provided just over $2 billion in climate-sensitive development finance to developing countries, including approximately $300 million (15 percent) to the food security sector.60,61 These projects cover a variety of themes. Established by USAID and the Consumer Goods Forum, the Tropical Forest Alliance 2020, for example, works with governments and private sector actors to curb deforestation from agricultural activities and supply chains, especially for commodities like soy, beef, palm oil, and paper/ pulp. SERVIR, a joint initiative between the National Aeronautics and Space Administration (NASA) and USAID, helps developing countries use Earth-observation satellites to improve environmental decisionmaking and climate services. Other initiatives include a collaboration with the CGIAR on low emissions agriculture, funding support to the BioCarbon Fund Initiative for Sustainable Forest Landscapes, and participation in the Low Emission Development Strategies Global Partnership, a learning and technical cooperation platform. In addition to these climate-specific projects and programs, the U.S. government has made efforts to systematically climate-proof its food security development portfolio. The 2014 Executive Order (#13677) on Climate-Resilient International Development—still in effect— requires the “integration of climate-resilience considerations into all United States international development work.”62 Evidence of this integration can be seen across U.S. government global food security programming. While initially established exclusively in 19 stable, emerging economies, the second phase of Feed the Future adds resilience as a new strategic objective of the program and reorients it towards more fragile settings in 12 target countries where climate impacts are prevalent and interact with other social, economic, and political forces to drive poverty and instability.63 Meanwhile, through USAID’s FFP, humanitarian programs are increasingly rolling out in response to the increase in climate-related extreme events. FFP’s 2016–2025 Food Assistance and Food Security Strategy squarely includes climate change in its updated conceptual framework and calls for increased collaboration and cross-learning with USAID’s Bureau for Economic Growth, Education, and Environment (E3). FFP also works in close collaboration with the Famine Early Warning Systems Network (FEWS NET), which collaborates with five U.S. agencies providing food security projections in high-risk places around the world and specialized reports on weather and climate. RECOMMENDATIONS Establish a position of leadership in climate change and food security international forums. While many U.S. government climate and food security efforts have continued at the technical level, the United States has stepped away in recent years from highly visible, global leadership roles related to climate change, especially the Paris Agreement and Green Climate Fund (GCF), a multilateral funding mechanism designed to help developing countries transition to low-emission, climate- resilient development. The abandonment of this mantle of global leadership—which should be quickly corrected— puts progress in the fight against climate change at great risk. Agriculture, for example, has recently climbed onto the agenda at annual climate negotiations for the first time, after decades of sustained effort. This recognition of agriculture’s role means that developing countries are willing to take steps to reduce the GHG emissions from their agriculture-dominant economies. But they must know that they will be supported, financially and technically. In 2016, the United States signed an agreement to transfer $3 billion to the GCF. By early 2017, the GCF had received approximately $1 billion when the Trump administration indicated that it would provide no additional funds. Without sustained financial support from the United States through the GCF—and any number of multilateral climate funds including the Global Environmental Facility—widespread adoption and scaling of climate-smart agriculture practices will be more difficult to set in motion. Support domestic efforts to promote climate resilience in food systems: The credibility and potency of our leadership at global levels begins with our commitment to change and improve our own priorities. Very public controversies around the alleged suppression of research regarding the impact of climate change on food production from the Agricultural Research Service at the U.S. Department of Agriculture (USDA) has brought into question the administration’s ability to lead by example. For continued progress in reducing agriculture’s global greenhouse gas footprint and improving adoption of climate-smart agricultural practices, the United States must walk the walk here at home. Climate-smart interventions are not limited to developing country contexts. In the United States, cover cropping, for example, has increased considerably, but the practice still represents only a small percentage of planted area. These and other regenerative practices are being rolled out in the United States thanks, in part, to USDA’s 10 regional Climate Hubs, led by the Agricultural Research Service and the Forest Service. In this same spirit, the United States should continue and expand its leveraging of domestic university research programs for developing global climate solutions in agriculture. U.S. universities, through the Feed the Future Innovation Labs, are currently involved in research on climate resilient sorghum, wheat, millet, cowpea, chickpea, and beans.64 Finally, recent years have seen the emergence of several mechanisms that compensate U.S. farmers for storing carbon in their agricultural soils, including in California and several non-profit and private sector initiatives. These initiatives require federal support to be sustainable in the long run, a step that should be explored within USDA’s existing authorities or in the next Farm Bill cycle. Raise the profile of climate-related food insecurity within U.S. diplomatic and national security strategies. From the National Defense Strategy to the U.S. intelligence community Worldwide Threat Assessment, there is increased understanding of how food insecurity can drive global instability and that climate change can fan these flames. Driven by the events in the Sahel and Dry Corridor, along with other climate and food security-related conflicts like Darfur (desertification and inter-ethnic violence between pastoralists and farmers) and Syria (drought-related migration from rural to urban areas), climate change and food insecurity have entered the U.S. diplomatic and national security discourse as root drivers of conflict. As noted in a 2012 USAID report, Frontiers in Development, “the security challenges posed by fragile and failing states and the deprivation that accompanies them makes it all but inevitable that soldiers and humanitarians, diplomats, and development experts will find themselves operating in increasing proximity to one another, often addressing the same issues with different tools and for complementary purposes.” Food insecurity and climate change, then, must remain at the forefront of U.S. whole- of-government discussions around the humanitarian- development-peace nexus and of the United States’ leadership role more broadly in addressing complex global problems. The establishment of a new leadership for Relief, Resilience, and Response (R3) at USAID will help to situate food security and climate change along the entirety of the relief and development spectrum. Leverage USAID’s reorganization to further mainstream climate resilience into U.S. global food security programs. USAID’s proposed reorganization—rightfully well received by the development and humanitarian communities— does not prioritize climate change. The E3 Bureau and its Office of Global Climate Change, which helped shepherd the Global Climate Change and Development Strategy (2012–2018), will cease to exist in the new structure. Climate change experts from E3’s Climate Adaptation team will merge with staff from the Office of Water in a new Bureau of Resilience and Food Security. While this merge could help streamline strategies, the symbolic loss of a dedicated office to climate change should not go unnoticed. Steps should be taken to ensure this reduced visibility is not accompanied by reduced action. The reorganization represents a timely opportunity to revisit USAID’s 2012 Resilience Policy and to ensure that climate change considerations are central to shock-resistant development and humanitarian-for-development efforts. A guiding resilience framework—one that situates climate change alongside other interrelated stressors—can help USAID effectively deploy its diverse expertise to an equally complex problem. Chase Sova is a non-resident senior associate with the Global Food Security Project at the Center for Strategic and International Studies (CSIS) in Washington, D.C. He is also senior director of Public Policy and Research at World Food Program USA (WFP USA). Kimberly Flowers is director of the Humanitarian Agenda and the Global Food Security Project at CSIS. Christian Man is a research fellow with the Global Food Security Project at CSIS. This brief is made possible by the generous support of The Bill & Melinda Gates Foundation. CSIS Briefs are produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s). © 2019 by the Center for Strategic and International Studies. All rights reserved. 1Amended from Raj Patel, Stuffed and Starved: The Hidden Battle for the World Food System (Brooklyn, N.Y.: Melville House Pub., 2007). 2Food Security Information Network (FSIN), Global Report on Food Crises 2019 (FSIN, 2019), http://www.fsinplatform.org/sites/default/files/resourc- es/files/GRFC%202019_Full%20Report.pdf. 3Food and Agriculture Organization (FAO), International Fund for Agricul- tural Development (IFAD), United Nations Children’s Fund (UNICEF), World Food Programme (WFP), and World Health Organization (WHO), The State of Food Security and Nutrition in the World: Safeguarding Against Economic Slow- downs and Downturns (Rome: FAO, 2019), http://www.fao.org/3/ca5162en/ ca5162en.pdf. 4FAO et al., The State of Food Security. 5United Nations Office for the Coordination of Humanitarian Affairs (OCHA), Global Humanitarian Overview 2019 (Geneva: OCHA, 2019), https:// www.unocha.org/sites/unocha/files/GHO2019.pdf. 6Intergovernmental Panel on Climate Change (IPCC), Climate Change and Land (IPCC, 2019), https://www.ipcc.ch/site/assets/uploads/2019/08/Edit- ed-SPM_Approved_Microsite_FINAL.pdf. 7Atmospheric physicists measure CO2 in parts per million (ppm). At the time of the Industrial Revolution, atmospheric concentrations of CO2 mea- sured 275ppm. Today, that concentration has increased to 420ppm and, if left unchecked, is expected to rise to 550ppm over the next half century. 8FAO, International Fund for Agricultural Development (IFAD), and WFP, The State of Food Insecurity in the World (Rome: FAO, 2015), http://www.fao. org/3/a-i4646e.pdf. 9WFP, Climate-Related Disasters and Food Insecurity in 2017: Preparedness and Response (WFP), https://docs.wfp.org/api/documents/WFP-0000023693/ download/. 10Matthew Smith and Samuel Myers, “Impact of anthropogenic CO2 emis- sions on global human nutrition,” Nature Climate Change 8 (2018): 834–839, https://www.nature.com/articles/s41558-018-0253-3. 11FAO, State of Food and Agriculture 2013: Food Systems for Better Nutrition(Rome: FAO, 2013), http://www.fao.org/publications/sofa/2013/en// 12J.R Porter et al., “Food Security and Food Production Systems,” in Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, eds. C.B. Field et al. (Cambridge, UK and New York: Cambridge University Press, 2014), 48–533. 13John Williams, Stephen Jackson, and John Kutzbach, “Projected distri- butions of novel and disappearing climates by 2100 AD,” Proceedings of the National Academy of Sciences of the United States of America 104, no. 14 (2007): 5738–5742, https://doi.org/10.1073/pnas.0606292104. 14FAO, Aquastat Database, http://www.fao.org/nr/water/aquastat/wa- ter_use/index.stm. 15IPBES, “Report of the Plenary of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services on the work of its seventh session,” 2019, https://www.ipbes.net/system/tdf/ipbes_7_10_add-1-_ad- vance_0.pdf?file=1&type=node&id=35245 16J.R Porter et al., “Food Security and Food Production Systems,” in Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, eds. C.B. Field et al. 17FAO, The State of the World’s Biodiversity for Food and Agriculture (Rome: FAO, 2019), http://www.fao.org/3/CA3129EN/CA3129EN.pdf. 18FAO, State of Food and Agriculture: Climate Change, Agriculture and Food Security (Rome: FAO, 2016), http://www.fao.org/3/a-i6030e.pdf. 19Noah Diffenbaugh and Marshall Burke, “Global warming has increased global economic inequality,” Proceedings of the National Academy of Sciences of the United States of America 116, no 20 (2019): 9808–9813, https://doi. org/10.1073/pnas.1816020116. 20Alex de Waal, Mass Starvation: The History and Future of Famine (Cam- bridge, UK: Polity Press, 2018). 21FAO et al., The State of Food Security. 22The “hunger season” refers to the time of year for subsistence farming families that typically coincides with the rainy season, when crops are grow- ing but not yet harvested and last year’s food stocks have run out. 23Wenju Cai et al., “Increasing frequency of extreme El Niño events due to greenhouse warming,” Nature Climate Change 4 (2014): 111–116, https:// www.nature.com/articles/nclimate2100. 24FAO et al., The State of Food Security. 25FAO, How to Feed the World in 2050 (Rome: FAO, 2009), http://www.fao. org/fileadmin/templates/wsfs/docs/expert_paper/How_to_Feed_the_World_ in_2050.pdf. 26World Bank, World Development Report 2008: Agriculture for Development (Washington, D.C.: World Bank, 2008), https://openknowledge.worldbank. org/handle/10986/5990. 27FAO, Tackling Climate Change Through Livestock: A Global Assessment of Emissions and Mitigation Opportunities (Rome: FAO, 2013), http://www.fao. org/3/i3437e/i3437e.pdf. 28Eric Oelkers and David Cole, “Carbon dioxide sequestration: a solution to the global problem,” Elements 4 (2008): 305–310, http://citeseerx.ist.psu. edu/viewdoc/download?doi=10.1.1.818.8787&rep=rep1&type=pdf. 29H. Eswaran, R. Lal, and P.F. Reich, “Land Degradation: An Overview,” in Proceedings of the 2nd International Conference on Land Degradation and Desertification (Khon Kaen, Thailand: Oxford Press). 30FAO, Global Food Losses and Food Waste: Extent, Causes and Prevention,(Rome: FAO, 2011), http://www.fao.org/3/mb060e/mb060e.pdf. 31WFP, Zero Loss for Zero Hunger: Preserving Harvests: Eradicating Hunger (WFP) https://documents.wfp.org/stellent/groups/public/documents/ reports/wfp289791.pdf?_ga=2.213735639.2112710292.1569252487- 973524119.1525373566. 32Department of Defense, Quadrennial Defense Review 2014 (DOD, 2014), https://archive.defense.gov/pubs/2014_quadrennial_defense_review.pdf. 33Department of Defense, National Security Implications of Climate-Re- lated Risks and a Changing Climate (DOD, 2015), https://archive.defense. gov/pubs/150724-congressional-report-on-national-implications-of-cli- mate-change.pdf?source=govdelivery. 34United Nations and World Bank, Pathways for Peace: Inclusive Approaches to Preventing Violent Conflict (Washington, DC: 2018), https://openknowl- edge.worldbank.org/handle/10986/28337. 35Organization for Economic Cooperation and Development (OECD), States of Fragility 2015: Meeting Post-2015 Ambitions (OECD, 2015), https:// www.oecd.org/publications/states-of-fragility-2015-9789264227699-en. htm. 36United Nations High Commissioner for Refugees (UNHCR), Global Trends in Forced Displacement in 2018 (UNHCR, 2019), https://www.unhcr. org/5d08d7ee7.pdf. 37FAO et al., The State of Food Security. 38United Nations Environment Programme (UNEP), From Conflict to Peace-building: The Role of Natural Resources and the Environment (Geneva: UNEP, 2009), https://postconflict.unep.ch/publications/pcdmb_policy_01.pdf. 39OCHA, The Sahel: Converging Challenges, Compounding Risks (OHCA, 2016), https://reliefweb.int/sites/reliefweb.int/files/resources/sahel_info_ sheet_052016.pdf. 40IPCC, “Fifth Climate Change Assessment Report: Impacts, Adaptation and Vulnerability,” Working Group II, 2014, https://www.ipcc.ch/report/ar5/ wg2/. 41Nathalie Thomas and Sumant Nigam, “Twentieth-Century Climate Change over Africa: Seasonal Hydroclimate Trends and Sahara Desert Expansion,” Journal of Climate 31, no. 9 (2018): 3349–3370, https://doi. org/10.1175/JCLI-D-17-0187.1. 42UNEP, The Tale of a Disappearing Lake (UNEP, 2018), https://www.unen- vironment.org/news-and-stories/story/tale-disappearing-lake. 43Regional Bureau for Africa, United Nations Development Programme (UNDP), Journey to Extremism in Africa (UNDP, 2017), https://journey-to-ex- tremism.undp.org/content/downloads/UNDP-JourneyToExtremism-re- port-2017-english.pdf. 44Thomas Waldhauser, Statement of General Thomas D. Waldhauser, United States Marine Corps, Commander United States Africa Command, Senate Committee on Armed Services, February 7 2019: A Secure, Stable, and Prosperous Africa is an Enduring American Interest, https://www.armed-services.senate. gov/imo/media/doc/Waldhauser_02-07-19.pdf. 45Kanta Kumari Rigaud et al., Groundswell: Preparing for Internal Climate Migration (Washington, DC.: World Bank, 2018), https://openknowledge. worldbank.org/handle/10986/29461. 46WFP, At the Root of Exodus: Food Security, Conflict and International Migration (WFP, 2017), https://docs.wfp.org/api/documents/WFP- 0000015358/download/?_ga=2.173431136.2112710292.1569252487- 973524119.1525373566. 47FAO, Situation Report: Dry Corridor Central America (Rome: FAO, 2016), http://www.fao.org/3/a-br092e.pdf. 48Food Security and Emigration: Why people flee and the impact on family members left behind in El Salvador, Guatemala and Honduras (Panama City: WFP, 2017), https://docs.wfp.org/api/documents/WFP-0000022124/down- load/?_ga=2.177100902.2112710292.1569252487-973524119.1525373566. 49International Organization for Migration (IOM), London School of Economics and Political Science (LSE), Organization of American States (OAS), and WFP, Hunger Without Borders: The Hidden Links Between Food Insecurity, Violence and Migration in the Northern Triangle of Central America,” (WFP, 2015), https://documents.wfp.org/stellent/groups/public/documents/ liaison_offices/wfp277544.pdf. 50Congressional Research Service, “Central American Migration: Root Causes and U.S. Policy: Updated June 13, 2019,” Federation of American Scientists, https://fas.org/sgp/crs/row/IF11151.pdf. 51WFP USA, Winning the Peace: Hunger and Instability (WFP USA, 2017), https://www.wfpusa.org/wp-content/uploads/2019/03/wfp_food_securi- ty_final-web-1.pdf. 52IFAD, 2019 Rural Development Report: Creating Opportunities for Rural Youth (IFAD, 2019), https://www.ifad.org/documents/38714170/41133075/ RDR_report.pdf/7282db66-2d67-b514-d004-5ec25d9729a0. 53Chase Sova et al., Bringing the Concept of Climate-Smart Agriculture to Life: Insights from CSA Country Profiles Across Africa, Asia, and Latin America (World Bank and the International Centre for Tropical Agriculture, 2018), http:// documents.worldbank.org/curated/en/917051543938012931/pdf/132672- WP-P168692-PUBLIC-4-12-2018-12-27-47-CSAInsightsfromCSAProfiles.pdf. 54CGIAR was formerly known as Consultative Group on International Agricultural Research. 55Paul Hawken, Drawdown: The Most Comprehensive Plan Ever Proposed to Reverse Global Warming (New York: Penguin Books, 2016). 56Walter Willett et al., “Food in the Anthropocene: the EAT–Lancet Commission on healthy diets from sustainable food systems,” The Lancet Commissions 393, no. 10170 (2019): 447–492, https://www.thelancet. com/pdfs/journals/lancet/PIIS0140-6736(18)31788-4.pdf?utm_cam- paign=tleat19&utm_source=HubPage. 57Charlie Mitchell, “Climate Town Hall Brings Food and Agricul- ture to Center Stage,” Civil Eats, September 5 2019, https://civileats. com/2019/09/05/climate-town-hall-brings-food-and-agriculture-to-center- stage/. 58At the time of publication, USAID is undergoing a process of organiza- tional reform, in which the Office of Food for Peace will be combined with the Office of U.S. Foreign Disaster Assistance into a new Bureau for Human- itarian Assistance. The Bureau of Food Security, meanwhile, will become the Bureau of Resilience and Food Security. 59Kimberly Flowers, U.S. Policy Roadmap: A Drive to Transform Global Food and Nutrition Security (Washington, D.C.: Center for Strategic and Interna- tional Studies [CSIS], 2019), https://csis-prod.s3.amazonaws.com/s3fs-pub- lic/publication/190104_GlobalFoodandNutrition.pdf. 60Development Assistance Committee, OECD, Climate-Related Develop- ment Finance Data (OECD, 2018), http://www.oecd.org/dac/financing-sus- tainable-development/development-finance-topics/Climate-related-devel- opment-finance-in-2018.pdf. 61Overseas development assistance provided by the United States in 2017 totaled $35.3 billion, the largest single country contribution. 62Office of the Press Secretary, “Executive Order 13677: Climate-Resilient International Development,” The White House, https://obamawhitehouse. archives.gov/the-press-office/2014/09/23/executive-order-climate-resil- ient-international-development. 63Julie Howard and Emmy Simmons, Risk and Resilience: Advancing Food and Nutrition Security in Nigeria Through Feed the Future (Washington, DC: CSIS, 2019), https://csis-prod.s3.amazonaws.com/s3fs-public/publica- tion/190212_NigeriaResiliance_WEB.pdf. 64A complete list of Feed the Future Innovation Labs can be found at https://www.feedthefuture.gov/feed-the-future-innovation-labs/
2
Iran and Cyber PowerIran has rapidly improved its cyber capabilities. It is still not in the top rank of cyber powers, but it is ahead of most nations in strategy and organization for cyber warfare. Iran has a good appreciation for the utility of cyber as an instrument of national power. Its extensive experience in covert activities help guide its strategy and operations using cyber as a tool for coercion and force, and it has created a sophisticated organizational structure to manage cyber conflict. This means any attack on the United States will not be accidental but part of a larger strategy of confrontation. Iran sees cyberattacks as part of the asymmetric military capabilities it needs to confront the United States. Iran’s development of cyber power is a reaction to its vulnerabilities. Iran is the regular target of foreign cyber espionage. Iran and Israel are engaged in a not-always covert cyber conflict. Stuxnet, a cyberattack on Iranian nuclear weapons facilities, accelerated Iran's own cyber efforts. What Iran’s leaders fear most, however, is their own population and the risk that the internet will unleash something like the Arab Spring. Iranian security forces began to develop their hacking abilities during the 2009 “Green Revolution” to extend domestic surveillance and control. These domestic efforts are the roots of Iran's cyber capabilities. Iran’s trajectory shows how a medium-sized opponent willing to allocate resources can build cyber power. Three military organizations play leading roles in cyber operations: the Iranian Revolutionary Guard Corps (IRGC), the Basij, and Iran’s “Passive Defense Organization (NPDO).” The IRGC is the perpetrator behind a series of incidents aimed at American targets, Israeli critical infrastructure, Saudi Arabia, and other Gulf States. The Basij, a civilian paramilitary organization controlled by the IGRC, manages what Basij leaders say are 120,000 cyberwar volunteers. The number is probably exaggerated, but the Basij uses its connections with universities and religious schools to recruit a proxy hacker force. The NPDO is responsible for infrastructure protection. To ensure coordination between cyber offense and defense, Supreme Leader Ali Khamenei created a “Supreme Council of Cyberspace” composed of senior military and intelligence officials. Years of constant engagement with Israeli and Saudi Arabia have improved Iran's cyber capabilities, and experience with covert action gives Iran the ability to conceptualize how cyberattacks fit into the larger military picture. The tools used by Iran are usually modified malware from the criminal market that do not have the destructive effect of more advanced cyber "weapons." As an Israeli general put it in 2017, “They are not the state of the art, they are not the strongest superpower in the cyber dimension, but they are getting better and better.” Iran sees cyberattacks as part of a continuum of conflict. Earlier this year, IRGC Deputy Commander Hossein Salami said, "we are in an atmosphere of a full-blown intelligence war with the US and the front of enemies of the Revolution and the Islamic system . . . This atmosphere is a combination of psychological warfare and cyber operation, military provocations, public diplomacy, and intimidation tactics." Iran has probed U.S. critical infrastructure for targeting purposes. How successful an attack would be is another matter. The kind of massive denial of service attacks Iran used against major banks in 2011-2013 would be less effective today given improved defenses. The most sophisticated kinds of cyberattack (such as Stuxnet or the Russian actions in the Ukraine) are still beyond Iranian capabilities, but poorly defended targets in the United States (of which there are many) are vulnerable—smaller banks or local power companies, for example, or poorly secured pipeline control systems. What stops Iranian action is not a shortage of targets but rather questions about the utility of such attacks. How likely is an attack against the United States? A decision for a cyberattack on the United States will depend on Iranian calculations of the risk of a damaging U.S. response. While the Iranians may appear hotheaded, they are shrewd and calculating in covert action and will consider how to punish the United States without triggering a violent response. If we look at Iranian cyber actions against U.S. targets—the actions against major banks or the more damaging attack on the Sands Casino—Iranian attacks are likely to be retaliatory, intending to make the point that the United States is not invulnerable but without going too far. Attacking major targets in the American homeland would be escalatory, something Iran wishes to avoid. It wants to push back on U.S. presence in the region and demonstrate, to both its own citizens and its Gulf neighbors, that the United States can be challenged. If Iran does act in the United States, crippling a casino makes a point. Blacking out the power grid or destroying a pipeline risks crossing the line. What the United States is doing is not deterrence. The new U.S. approach is to engage cyber opponents on their own networks. The genesis of this tactic is the realization that U.S. networks are unavoidably vulnerable. By imposing consequences (ranging from sanctions and indictments to various levels of cyberattack), the United States can change opponents’ calculations of risk and reduce the chances of a serious cyberattack. There is also a sense that having "stood up" Cyber Command, the United States should make use of it, particularly since cyber operations are perceived as not posing the same risk (of either escalation or casualties) as a conventional attack. Iran is engaged in a delicate game of "chicken,” and how the United States reacts will shape the likelihood and scope of cyberattacks. If the United States launches air strikes on Iranian targets or leadership, Iranian cyber action is likely. This shows the need for a finely calculated U.S. response. The "Tanker War" of the 1980s is instructive, even though it predated cyber warfare, as both sides were able to use limited force in a defined space while avoiding a larger conflict, and the steady use of measured force by the United States ultimately led the Iranians to end their attacks on tankers. How far the United States and Iran can go in cyber operations and how public they can be requires an unavoidable period of trial and error. This is a space for conflict where the rules are unclear, and the risks not yet measured. James Andrew Lewis is a senior vice president at the Center for Strategic and International Studies in Washington, D.C. Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s). © 2019 by the Center for Strategic and International Studies. All rights reserved.
6
The Venezuelan Drama in 14 ChartsThis February marks the 20th anniversary of Hugo Chávez’s rise to power in Venezuela. Unfortunately, under his regime, one of the most prosperous and promising countries in Latin America and the developing world has been in a downward trajectory. How did this happen? Chávez, a former military officer, rose to power by taking advantage of the social discontent generated by Venezuela’s poor economic performance over the past two decades and running an intense populist campaign of incendiary and divisive rhetoric. However, upon assuming power, Chávez began dismantling democratic institutions. By taking control of all branches of the state, he was able to circumvent the system of checks and balances. Progressively, his government became the authoritarian, militaristic, socialist, and corrupt regime that exists today. On the economic front, state interventions in the private sector became increasingly common where all types of controls were imposed. Hundreds of private companies, both national and foreign, were interfered with or expropriated under different procedures and millions of hectares of land were seized. Chart 1: Price of Venezuelan Oil, 1999-2012 At first, everything seemed to work well because the price of oil increased steadily—in a country that has heavily depended on oil resources for decades. At one point, in 2011, it reached $100 per barrel. Source: Ministerio del Poder Popular de Petróleo Chart 2: Total External Debt, 1999-2012 Taking advantage of the financial strength provided by the extraordinary oil revenue, the government borrowed massively from international markets. Source: ECLAC Chart 3: Venezuelan Imports, 1999-2012 With all those resources, the regime was able to expand public spending enormously, creating a big consumption boom that was increasingly satisfied by imports. Domestic production, severely debilitated and under constant threats, was woefully incapable of satisfying demands in any sector. Source: Banco Central de Venezuela Chart 4: Population Under the Poverty Line, 1999-2012 In different degrees, that boom was enjoyed by almost everyone. Poverty had been reduced because a portion of the oil revenue and loans were used to fund a wide variety of social assistance programs. These social programs made the regime more popular and enabled it to advance on its populist agenda. Source: Encuesta Nacional Encovi Chart 5: GDP Per Capita, 2013-2018 The good times did not last long. By 2012-2013, the signs of a crumbling model had become apparent. A prolonged depression has ensued since then, rivaling in its magnitude the Great Depression in the 1930s in the United States and most of the worst economic crisis documented in modern economic history. Source: IMF and own estimates (for 2018 a GDP decline of 15 percent is assumed) Chart 6: Oil Production and Prices, 1999-2018 As history has repeatedly shown, it is not possible to have sustained economic growth while depending on the price of a single commodity and borrowing money. Moreover, the Venezuelan system became extremely corrupt and incompetent, which further reduced the already-declining resources. Venezuela’s main source of income became increasingly limited. Source: OPEC and Ministerio del Poder Popular de Petróleo Chart 7: Total Imports, 1999-2017 As oil revenue fell and international reserves were depleted, the government responded by cutting imports massively. There were not enough dollars to pay for imports, and whatever was available was being used to service the enormous foreign debt and fill the pockets of government officials and collaborators. Source: BCV, ECLAC, and Torino Capital Chart 8: Industrial Establishments in Venezuela, 1999 and 2017 This meant that there was not enough foreign currency to import food, medicine, or raw materials needed to supply the companies that had managed to survive. Eventually, the foreign debt payments also became untenable, and the country was declared to be in selective default. As the years passed, Venezuela became more dependent on oil revenue and loans from international financial markets. However, those two sources of funding have dried up. Still, Venezuela could not produce what could not be imported because either the infrastructure had been destroyed or it could not import the raw materials it needed for production. As a result, Venezuela, which in the 1990s used to produce 70 percent of the food it consumed and import 30 percent, now produced only 30 percent and imported 70 percent. Source: Conindustria and Reporte 1 Chart 9: Annual Inflation Rate, 2012-2018 Although the Chávez regime did not have enough foreign exchange reserves to cover imports or service its foreign debt, this did not prevent the regime from printing bolivars, the national currency, at an increasingly frantic pace. This fueled massive inflation, which today represents the only ongoing case of hyperinflation in the world. Source: IMF and Venezuela National Assembly Chart 10: Monthly Minimum Salaries in Latin America As a result of this uncontrolled inflation, wages plummeted. Wages in Venezuela are the lowest in the entire region and among the lowest in the world currently—$6 per month. More shockingly, not only is this the minimum salary, it is the country’s median wage. This means that half of the workforce is earning less than $6 per month. Source: Chile, Ecuador, Brazil, Argentina, Colombia, Mexico, Haiti, Cuba, and Venezuela Chart 11: Population Under Poverty Line By 2017 poverty had skyrocketed to record levels. Since data is only available up to that year, the above graph does not even reflect the impact of hyperinflation in 2018. Therefore, it is safe to assume that these statistics are much worse today. Practically the entire country is living in poverty. Source: Encuesta Condiciones de Vida, Encovi 2016 and 2018 Chart 12: Beyond the Economic Numbers The terrible crisis facing the Venezuelan people goes beyond economic problems. Venezuela’s infrastructure, a long-time victim of negligence with limited investments, has practically collapsed. Blackouts have become widespread, occurring with increasing frequency and duration in every region. Access to clean running water is consistently declining, limited by continuous interruptions. Approximately 70 percent of public transportation is completely out of service. Telecommunications, from basic telephone services to the internet, experience constant failures. Source: Comité de Afectados Por Apagones Chart 13: Homicide Rate, 1999-2017 Crime is rampant in Venezuela as a result of the complete institutional collapse. The country has one of the highest murder rates in the world, as the judicial system and other parts of government meant to provide law and order are not working. Source: Observatorio Venezolano de Violencia Chart 14: Migration Internal discontent is growing, but so is the repression by the regime. The country has around 235 political prisoners, many of whom have been tortured or kept in inhumane conditions. Furthermore, the most important opposition parties have simply been outlawed. Venezuelans, feeling desperate and hopeless, are fleeing from the disaster brewing in their home country. According to the United Nations, at least 3 million, or around 10 percent of the national population, have left the country as of late 2018. Venezuela has become a case of a failed state, and the repercussions are not limited to the waves of refugees flooding the region. The country has also become an international hub of criminal activity. At least 12 high ranking governmental officials including the Vice President Tareck Al-Aissami have been designated by the U.S. government as international drug kingpins. Overall, the past two decades under Chávez’s regime have represented a brutal setback in all dimensions of social life for the Venezuelan people. This should serve as a dire warning to those in the region in the potential path of socialist and authoritarian leaders. Gerver Torres is a non-resident senior associate with the Americas Program at the Center for Strategic and International Studies in Washington, D.C. Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s). © 2019 by the Center for Strategic and International Studies. All rights reserved.
1