Chinese Foreign Ministry spokesman Zhao Lijian speaks during a daily media briefing in Beijing, China, March 19, 2021. EPA
Chinese Foreign Ministry spokesman Zhao Lijian speaks during a daily media briefing in Beijing, China, March 19, 2021. EPA
Chinese Foreign Ministry spokesman Zhao Lijian speaks during a daily media briefing in Beijing, China, March 19, 2021. EPA
Chinese Foreign Ministry spokesman Zhao Lijian speaks during a daily media briefing in Beijing, China, March 19, 2021. EPA

China fumes as US allies unite on nuclear subs


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China slammed a move by the US and UK to help Australia build nuclear submarines, saying the new partnership will stoke an “arms race” as tensions heat up in Asia-Pacific waters.

Prime Minister Scott Morrison joined with US President Joe Biden and UK Prime Minister Boris Johnson on Wednesday night to announce a new security partnership that will allow Australia to acquire nuclear-powered submarines.

While it could take more than a decade for Australia to build one, the agreement shows the US joining with key English-speaking allies to form a more cohesive defence arrangement to offset China’s rising military prowess.

The partnership “greatly undermines regional peace and stability, aggravates the arms race and hurts the international non-proliferation efforts,” Chinese Foreign Ministry spokesman Zhao Lijian told reporters in Beijing on Thursday. He also questioned Australia’s commitment to forgo developing or acquiring nuclear weapons, and said the US and UK were “using nuclear exports as geopolitical gaming tool and applying double standards.”

The move will elevate Australia into an elite club of only a handful of nations that operate nuclear-powered submarines, which can travel long distances without the need to refuel. They would complement plans by the US, Britain and other nations to deter Chinese aggression against Japan and Taiwan to the South China Sea and the Indian Ocean.

“This is the biggest surprise in Australian geopolitics in decades,” said John Blaxland, a former intelligence officer who is now a professor in international security at the Australian National University. “The subs deal shows the US now sees the utility of bolstering Australia’s capabilities to complement its own in a way it never did before.”

“This is the biggest surprise in Australian geopolitics in decades
John Blaxland,
former intelligence officer

Relations between the US and China have remained tense, with a phone call last week between Mr Biden and China President Xi Jinping failing to produce a breakthrough on disputes regarding climate change, tariffs and exports of high-tech goods. Beijing has also sparred with the UK over Hong Kong and Australia over a probe into the origins of the coronavirus.

“The pact itself also speaks to a significant change to the geostrategic dynamics in the Indo-Pacific,” Blaxland added. He said it was “linked to the post-Brexit re-engagement of the UK in the region, the more belligerent stance of Mr Xi’s China, and a greater concern about the precariousness of American military power and its ability to deter or win a potential conflict in the Pacific.”

Rifts among allies

While the deal strengthens bonds between Australia, the US and the UK, it caused a rift with two other allies: France and New Zealand, which has a longstanding policy to exclude nuclear-powered vessels from its waters. The deal automatically scuppers a 2016 agreement with French military shipbuilder Naval Group to build up to 12 submarines, a project with a price tag of an estimated A$90 billion ($66 billion).

France issued a terse statement, saying the decision was “contrary to the letter and spirit of the cooperation that prevailed” between the nations. France’s Minister of Europe and Foreign Affairs Jean-Yves Le Drian and Armed Forces Minister Florence Parly also took aim at Biden: “The American choice to exclude a European ally” from the three-way deal “shows a lack of coherence that France can only note and regret.”

Hours later in Canberra, Mr Morrison told reporters that he understood France’s disappointment and hoped President Emmanuel Macron could “move past what is obviously a very difficult and disappointing decision.” Still, he said that the situation had changed drastically since 2016.

“These are game-changing differences in the technology and the opportunity that Australia has,” Mr Morrison said. “But there have also been game-changing developments in the strategic circumstances of our region, which continue to accelerate at a pace even not envisaged as little as five years ago.”

After the US’s humbling retreat in Afghanistan, the new pact will help Mr Biden’s efforts to show American resolve over China in the Asia-Pacific region. Next week the president will host the first face-to-face meeting in the White House of leaders from Quad nations, which includes Australia as well as Japan and India.

Mr Morrison has received praise for the deal at home, particularly as he pushes back against Chinese trade reprisals, including crippling tariffs on Australian barley and wine and restrictions on coal shipments. The Australian leader has helped turn the Five Eyes intelligence-sharing network -- including the US, UK, Canada and New Zealand -- into a group that regularly criticises China’s human-rights record.

Mr Morrison said he had further calls with allies around the region after announcing the partnership, which he would extend to China despite growing tensions between the two countries that have put ministerial-level ties in a deep freeze. “There’s an open invitation for President Xi to discuss other matters,” he said.

The International Atomic Energy Agency said it was informed “at an early stage” about the deal. Its inspectors will now work with the UK and US to ensure the transfer of atomic material to Australia conforms with the Nuclear Non-Proliferation Treaty, the Vienna-based agency said in a statement.

While it could be a long time before Australia builds a nuclear-powered submarine, the US could potentially transfer one into Australian waters for training before then, according to Paul Maddison, former commander of the Royal Canadian Navy.

“The capability these subs offer is exactly what Australia needs in terms of endurance, range and stealth,” said Mr Maddison, who is now director of the University of New South Wales Defence Research Institute. “But it’s no small thing to introduce nuclear propulsion into the order of battle. It will require a skillset that simply doesn’t exist in Australia.”

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Engine: 8.0-litre, quad-turbo 16-cylinder

Transmission: 7-speed auto

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The flights: South African Airways flies from Dubai International Airport with a stop in Johannesburg, with prices starting from around Dh4,000 return. Emirates can get you there with a stop in Lusaka from around Dh4,600 return.
The details: Visas are available for 247 Zambian kwacha or US$20 (Dh73) per person on arrival at Livingstone Airport. Single entry into Victoria Falls for international visitors costs 371 kwacha or $30 (Dh110). Microlight flights are available through Batoka Sky, with 15-minute flights costing 2,265 kwacha (Dh680).
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

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The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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The burning issue

The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.

Read part three: the age of the electric vehicle begins

Read part two: how climate change drove the race for an alternative 

Read part one: how cars came to the UAE

Updated: September 16, 2021, 1:51 PM