Monday, December 21, 2020

The Persian Gulf Crisis and the Security Dilemma

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Anant Jani

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The Persian Gulf Crisis and the Security Dilemma

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Global Views 360

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December 21, 2020

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American Assault Ship in the Persian Gulf

American Assault Ship in the Persian Gulf | Source: Cpl. David Gonzalez via Flickr

This article explains the recent tensions between Iran and the United States, and presents it as a case of the ‘Security Dilemma’ theory in practice.

The Persian Gulf Crisis 2019-20

To understand the current crisis in Persian Gulf, we must look at the Iran Nuclear Deal of 2015, also called the Joint Comprehensive Plan of Action (JCPOA).

The JCPOA was signed between The E3/EU+3 (France, Germany, the United Kingdom, the Russian Federation, and the United States, China, with the High Representative of the European Union for Foreign Affairs and Security Policy) and the Islamic Republic of Iran, to permit nuclear capabilities for Iran exclusively for peaceful purposes, in exchange for the lifting of crippling sanctions.

JCPOA terms:

International Atomic Energy Agency representative in Tehran, Iran for talks on JCPOA implementation | Source: Tasnim News Agency

Under this accord, Iran had to reduce its Uranium stockpile by 98% to 300kg, maintain its level of enrichment at 3.67%, reduce the number of centrifuges, and only keep one of its Uranium enrichment plants active. It also had to redesign its reactor at Arak, so it could not produce weapon’s grade Plutonium. Until 2031, Iran is not permitted to make heavy-water reactors.

Further, it was to permit itself to regular inspection of their nuclear site by the global nuclear watchdog, the International Atomic Energy Agency (IAEA).

In return, Iran gained over $100bn of frozen assets overseas, and was permitted to allow trading in oil in international markets and use the global financial system for trade.

Trump Administration’s Revoking of the JCPOA

In 2018, the Trump administration reimposed some of the sanctions in Iran, despite Trump's election promise to reduce involvement in the Middle East. Countering the re-impositions, Iran threatens to resume Uranium enrichment. In May 2019, Iran suspends nuclear deal commitments, and gives other signatories a 60-day deadline to protect it from US sanctions, before resuming Uranium enrichment. The International Atomic Energy Agency (IAEA) reported that Iran had already increased Uranium production, but is unclear by how much.

President Trump signing executive orders, imposing sanctions on Iran | Source: Shealah Craighead via White House

In May 2019, the US increased military deployment in the Persian Gulf, reportedly to prevent what the termed was a “campaign” between Iran and its proxies to threaten US oil shipping in the Strait of Hormuz.

The Tanker Crisis

In June 2019, two tankers were set ablaze in the Gulf of Oman, using mines. The US blamed Iran for these blasts, but Iran denied the charges.

In the same month, Iran Islamic Revolutionary Guard Corps (IRGC) shot down a US surveillance drone, escalating tensions and causing the US to name the IRGC as a terrorist organization.

In July 2019, the British Royal Marine Commandos seized an Iranian tanker off the coast of Gibraltar, as it was suspected to be en route to Syria, in violation of EU sanctions. The US declared that anyone assisting the ship would be considered an accomplice of terrorist groups, namely the Iran’s Islamic Revolutionary Guard.

In retaliation, Iran seized British-flagged tanker in the Strait of Hormuz.

The Iranian tanker was released six weeks later, on the condition that they do not unload their cargo of 2.1million barrels of oil in Syria.

December Air Strikes

In December 2019, the K-1 Air Base in Iraq was attacked by an unconfirmed party, killing one American contractor. This base hosts Americans (amongst other nationalities) who are responsible for training Iraqi troops in counter-terrorism. The Americans alleged that the attack was carried out by Kataib Hezbollah, which denies it. Kataib Hezbollah is a rebel group (recognized as a terrorist group by the US) backed by Iran. The Iraqi’s alleged that ISIL was responsible.

In retaliation for the killing of the American Contractor, the US launched air strikes on the weapons depot and command centres of Kataib Hezbollah in Iraq and Syria in the same month, reportedly killing 25 militiamen.

Assassination of Iranian Major General

Late Iranian General, Qasem Suleimani | Source: Tasnim News Agency

Iraq and Iran condemned the attack, and on 31 December, 2019, Iraqi militia attacked the US Embassy in Baghdad. In response, the US conducted airstrikes at the Baghdad International Airport in January 2020, killing the Commander of Iranian Quds Force, General Qasem Suleimani, the second most powerful man in Iran.

These escalations, placed within the context of US invasions of Iraq and Afghanistan, provide a good example of the Security Dilemma theory and how it plays out in practice.

What is the Security Dilemma?

Before delving into the theoretical definitions it is worth reminding ourselves that States do not behave as they do because a theoretical model demands them to. Rather, most theoretical models are based on observations of real-world behaviour of states, and seek to explain said behaviour. The Classical Realist theory, of which the Security Dilemma is a part, is amongst one of these, and I endeavour to highlight some of the key points of this theory.

The Classical Realist theory holds that States (or State-actors) are the basic unit of any international system. They are the most important actors, as there is no authority higher than them. The international system is fundamentally anarchic, with every actor left to their own devices with no supranational oversight. Each State finds it in their own self-interest to provide their own means for security. Security comes with the ability of the State to exercise its power, and thus Power Hegemony and Security are inextricably linked. In other words, since no State can rely on a supranational authority to provide security (an every-man-for-himself scenario), it is in each State’s best interest to understand the power distribution across all state-actors and maximize power for themselves, as the ultimate security. This results in a zero-sum game, with one actor’s loss being another’s gain. In providing absolute security for one’s own State, one leaves others insecure. The resulting power imbalance manifests in conflict, and for the Realist it follows, therefore, that Conflict is the natural state of affairs.

This, in essence, is the Security Dilemma: Striving for absolute security leaves others absolutely insecure, thus providing powerful incentives for an arms race, leading to further conflicts. It is little wonder that this is also called the Spiral Model, for in the very process of striving for security, one gives birth to escalating conflict.

How does this relate to the Persian Gulf Crisis?

The US has long followed the Realist model, believing that in a state of fundamental anarchy, it is justifiable to have nuclear capabilities and have intense militarization, as a means of gaining absolute security (justified by ‘offense is the best defence’). However, the US is also known for disallowing Weapons of Mass Destruction and nuclear capabilities in other countries, despite having such resources by itself. Here we see the Security Dilemma: to maintain absolute security, the US cannot allow others to be similarly armed. This is seen clearly in the signing of the JCPOA.

Consider the case from Iran’s point of view. As a result of the US war against Al Qaeda and Taliban in Afghanistan and overthrow of Saddam Hussain in Iraq, there has been constant American presence in both the countries bordering Iran since almost two decades. That this poses a threat to Iran is obvious: the US caused fundamental regime changes in Iraq after the war; with its manpower and firepower, alongside its strategic placement on both sides of the Iranian border, the US is at a vantage point to attack Iran – placements that are, paradoxically, intended to guarantee American security.

The American show of strength and the impending danger of conflict leave Iran with two choices: Forge alliances with US adversaries, such as China or Russia, to deter Iran-US conflict, or be nuclear-armed. Iran managed both, causing, in effect, a nuclear arms race that culminated in the JCPOA.  In retrospect, the JCPOA seems like the perfect solution to the Security Dilemma in US-Iran conflicts: not only does it allow Iran to benefit from its suspensions of nuclear capabilities, it also ceases the arms race and de-escalates the conflict. In short, it is the Diplomat’s way out of the Security Dilemma, guaranteeing security without arms.

The Trump administration’s call to reimpose sanctions on Iran only serves to re-ignite security concerns for both countries. With Iran having ousted its JCPOA commitments as of January 2020, we can only hope that de-escalations will soon follow to prevent the otherwise inevitable spiralling into arms race and false absolute security.

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April 13, 2021 7:47 AM

Are India's Antitrust laws effective at controlling monopolies?

On 15th of July 2020, Reliance Industries Ltd (RIL) held its annual general meeting of the shareholders. The chairman and managing director Mukesh Ambani, announced that global tech giant Google would be investing $4.5 billion in Jio Platforms. Facebook also has acquired a 9.99% stake in Jio Platforms. This is the first time in the world that both the global tech giants have invested in the same entity. These investments have boosted the confidence for Jio Platforms and also for India’s growth but there have been questions and speculations about the potential anti-competitive makeup of these deals.

The objective of this article is to explore the interpretation and the effectuality of Antitrust laws in India.

Anti-competitive practices are those business practices which firms engage in to emerge as the or one of the few dominant firms, who will then be able to restrict inter firm competition in the industry in a bid to preserve their dominant status. The Collins English dictionary defines antitrust laws as those laws that are intended to stop large firms taking over their competitors by fixing prices with their competitors, or interfering with free competition in any way. These laws focus on protecting consumer interests and promoting a competitive market. The word ‘Antitrust’ is derived from the word ‘trust’. A trust was an agreement by which stakeholders in several companies transferred their shares to a single set of trustees.

In present-day India, talking about market dominance Reliance Industries Ltd (RIL), resembles American company—John D Rockefeller's Standard Oil Company—of the early 20th century. Mukesh Ambani holds the highest ability to influence markets and policy in every sector in which RIL is present—petrochemicals, oil, telecom, and retail. Many industry experts and critics suggest that Ambani has used his political clout to twist the regulatory framework in his favor.

Gautam Adani, founder of Adani Group | Source: Twitter

Furthermore, economic power in aviation infrastructure is clustering into a few hands as well. In 2019, the Adani Group bagged the 50-year concession to operate all the six Airports Authority of India-operated airports—Lucknow, Jaipur, Guwahati, Ahmedabad, Trivandrum, and Mangaluru—which were put up for auction. The company also obtained a controlling stake in ‘The Chhatrapati Shivaji Maharaj International Airport, Mumbai’ from GVK Airports. Moreover, Adani Group is now set to construct the Navi Mumbai International Airport. The group is now eyeing Indian Railways while they have already established an alarming monopoly in green energy and sea ports. While Airports are natural monopolies, one private company controlling more than 8 important airports is not good news to airlines.

India has established antitrust laws to promote competition. For 40 years, India followed the Monopolies and Restrictive Trade Practices Act 1969 (MRTP). This act was based on principles of import substitution and a command-and-control economy. However, over time several amendments had to be made to the act. In 2002, the Indian approved a new comprehensive competition legislation. This is called the Competition Act 2002. The act focused on regulating business practices in order to prevent practices having an appreciable adverse effect on competition (AAEC) in India. The act primarily regulates three types of conduct: anti-competitive agreements (vertical and horizontal agreements), abuse of a dominant position, and combinations such as mergers and acquisitions. The act lists out the cartel agreements that it intends to prevent. This list includes price-fixing agreements, agreements between competitors seeking to limit or control production, market-sharing agreements between competitors and bid-rigging agreements. These agreements are called “cartel” arrangements.

The competition Act is enacted by the Competition Commission of India (CCI), which is exclusively responsible for the administration and enforcement of the Act. It comprises a team of 2 to 6 people appointed by the government of India. The CCI has previously handled high-profile cases. In 2018, CCI imposed a fine of Rs135.86 crore on Google on the grounds that Google misused its dominant position and powers to create a search bias. In another important case, the CCI, ordered a probe into Idea, Vodafone and Airtel when Reliance Jio owner Mukesh Ambani lodged a complaint against the three for forming a cartel and denying Jio the POI required for network connection, causing multiple call failures. The Cellular Operator Association of India was also probed for encouraging the same.

In some cases, the Competition Commission has been successful in tackling activities that are against the free competitive market. However, critics and economists believe that the act is now unable to adapt to the changing business environment in e-commerce, telecom, technology and the government’s role in distorting competition. Demonetization and GST drove the formalization of the economy. One consequence of them was that bigger, better organized players gained at the cost of smaller ones with lesser resources. The Insolvency and Bankruptcy Code (IBC) was designed to solve the problem of non-performing assets (NPAs) of banks. But consequentially, it has also led to a consolidation in many sectors.  

However, CCI has expressed inability to consistently adjudicate punitive measures due to obligation in several cases. This points to the loopholes in the very provisions of the Competition Act 2002. In an Economic and Political Weekly (EPW) article, Aditya Bhattacharjea—an Economist—argues that even though the 2002 Act represents an improvement from the MRTP Act which was extremely restrictive, the present act also remains riddled with loopholes and ambiguities. According to Bhattacharjea, this creates unnecessary legal uncertainty, which acts in advantage of lawyers and law firms. For instance, the act allows the CCI to leave some scope of flexibility for “relative advantage, by way of contribution to the economic development.” Bhattacharjea argues that this may allow large firms to justify their anti-competitive practices in the name of development.

Mark Zuckerberg and Mukesh Ambani having online interaction after Facebook invested in Jio Platforms | Source: NDTV

Data portability plays a significant role in determining market power of certain firms. In 2017, the CCI closed cases against both WhatsApp and Jio involving allegations of predatory pricing and privacy violations. In both these decisions, the regulator did not consider the restrictions around data portability as a competitive advantage. The possible data leveraging advantage for the attempted monopolization could be the ‘portfolio effect’. Portfolio effect refers to increasing the range of brands, by bundling of telecom or messaging service and other service offerings or illegal vertical restraints, even predatory pricing. This in turn may lead to greater ability of further leveraging, deterring innovation and results in degradation of quality. Another possible advantage is explained as the theory of leveraging. The best example of leveraging is when Microsoft entered the media-player market by extending its quasi-monopoly on the operating systems market by taking advantage of the indirect network effects. In case of Facebook acquiring 10% of Jio’s shares, it is a concern that both entities could potentially use WhatsApp’s market dominance in telecom and social networking services and establish dominance in e-commerce market through anticompetitive acts.

There was a consensus among Indian policymakers at the time of the 1991 economic reforms that economic liberalization would eliminate the nexus between the business elites and the policymakers. On the contrary, the relationship between these two groups got further strengthened.

On the other hand, few critics and industrialists argue that extreme restrictions on growing companies hampers the progressive growth of the national economy. While RIL’s Jio looks like a cause for concern, the company has also saved Rs. 60,000 crores for annual savings in India. In addition to that, the entry of Jio to the telecom industry has led to a rise in data consumption and improved accessibility and affordability of the internet across the nation.

However, the concern still lingers as the question of whether this growth is a result of actual innovation or crony capitalism remains unsolved.

However, the fact that telecom, organized retail, ports and airports have two or three players controlling the bulk of the sector needs to be addressed. A healthy competition is quintessential for long-term growth and innovation. Harmful trade practices and cartelization does not only affect small manufacturers but also the general public.

The government, CCI and other lawmakers must closely examine the present laws and provisions and need to see if they are required to amend the act.

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