CANADIAN ENERGY LEADERSHIP
IN THE INDO-PACIFIC REGION
By Robert M. Cutler
This article makes a modest proposal about how Canada can offer energy leadership in the Indo-Pacific region that benefits not only itself but also its partners in the region. It begins by explaining what the “Indo-Pacific” means and then moves to discuss Canadian policy issues in the region. It suggests Indo-Pacific energy policy as an issue area ripe for Canadian leadership and makes a specific new proposal in that direction. In conclusion, the article stresses that building Canadian policy first of all on the material basis of Canada’s national interests, namely natural resources development and energy trade in the first instance, is a foundation for the country’s international conduct that will benefit all parties, and not just Canada.
CONSTRUCTING THE “INDO-PACIFIC”
One of the most striking developments since the end of the bipolar Cold War system nearly 30 years ago is that littoral basins such as the Caspian Sea, Black Sea, South China Sea and others have become central to questions of international peace and conflict. The concept of the “Indo-Pacific” links the regional-system level of policy analysis with the global-system level. Different conceptualizations of this have yielded different perspectives. For example, the “Pacific Rim” idea conjures the set of all states having a coast on the Pacific Ocean, whether in Asia or the Americas or elsewhere (including Canada). The “Asia-Pacific” idea mainly limits this to states in Asia, even though the Asia-Pacific Economic Cooperation (APEC) signifies the entire “Pacific Rim.”
The “Indo-Pacific” idea more or less means the Asian segment of the Pacific Rim plus the Indian Ocean basin. This concept of the “Indo-Pacific” puts greater emphasis on the role of India and its subcontinent. It renders Australia and other island nations nearby it to the north more central than peripheral. The Indo-Pacific region, construed most broadly, includes Iran, the Arabian Peninsula, and every African country having an Indian Ocean coastline. Indeed, just as the Persian Gulf may be considered as an extension of the Indian Ocean, so may the Red Sea. That would signify that Egypt, Israel and Lebanon should be considered as countries of the Indo-Pacific region in its broadest sense.
In fact, the central and southern Western Pacific basin is as like a door between the Asian-Pacific Rim and the Indo-Pacific region. Transforming this simile into a metaphor, one might regard Australia as the threshold of this door; and Japan, Taiwan, the Philippines and Indonesia as the hinge. To extend the metaphor, the Straits of Malacca become the keyhole.
Over a decade ago, Japan’s Prime Minister Shinzo Abe originated a strategy for a “Free and Open Indo-Pacific” that provides a good over-arching framework for Canadian-Japanese cooperation in the region. This includes (1) developing a free, open maritime order in the Indo-Pacific region as a public good; (2) enhancing stability, prosperity and peace, including through improved connectivity and enhanced humanitarian assistance and disaster relief; (3) promoting the rule of law and free trade, including through freedom of navigation. The use of the term “Indo-Pacific” did not accelerate in American political discourse until after U.S. President Donald Trump’s 12-day visit to Asia in November 2017. Nevertheless, it had been percolating through Canadian political and diplomatic discourse for several years before then.
CANADA’S POLICY ISSUES IN THE INDO-PACIFIC
Canadian policy and scientific literature on the Indo-Pacific region is sparse, but it is increasing. Three long policy papers are of especial note.
Patrick James, a Canadian-born scholar now professor of international relations at the University of Southern California, frames the Indo-Pacific region in strategic perspective. He summarizes the literature, insofar as it concerns Canadian policy, as of the situation five years ago. On the basis of this literature review, he provides an “inventory of policy ideas for the Indo-Pacific region” divided into three categories: economic, security-related, and institutional. Presented as a collection of brief direct quotations from that literature, this inventory remains couched at a rather general level. The economic policy ideas, often sometimes indefinite, involve trade and collaboration. They concentrate on expanding Canadian commercial relations with China and extending co-operation with India. Security policy ideas mainly involve various forms of co-operative security and democracy promotion. Institutional policy ideas, by contrast with the other two categories, are domestically Canada-centric. Arctic-region themes percolate, somewhat oddly, under the surface in all three categories.[i]
James discusses three particular policy issues in slightly greater detail. These are: (1) Canadian support for India’s entry into APEC once the moratorium on new members is over, (2) the possibility of building region-wide co-operative security structures, and (3) the creation of a Northern Aboriginal-East Asian intergovernmental task force. The gist of James’s overall argument and conclusion is that Canadian foreign policy towards the Indo-Pacific region should seek to redress problems arising from a general lack of strategic planning. Such planning requires going beyond generalities in order to assess and take into account the changes actually occurring in the region.
Jeffrey B. Kucharski has had a long public service career in five Alberta government ministries as well as foreign postings in Asia including with the Federal Department of Foreign Affairs and International Trade. He writes more recently than James and with a narrower policy-specific focus, looking directly at those changes actually occurring in the region. He also makes some specific recommendations. He begins by subsuming what James calls “institutional issues” under either the trade or the security rubric, according to whichever of the two is appropriate. He suggests that Canada “should focus on making tangible commitments to ASEAN’s political security community, which could also go a long way to assisting Canada in gaining membership in the 2019 East Asian Summit.” He observes that Canada’s support for the rule of law “in solidarity with its allies and partners in line with Canada’s foreign policy priorities” may require it to act more like a traditional power.
Kucharski implies that a rethinking may be called for, concerning the approach to multilateral issues that have animated Canada’s international institutionalism for many decades, defining its diplomatic profile. This could entail “allocating additional hard-power resources to Indo-Pacific security in order to bring resource commitments in line with Canada’s long-term trade, diplomatic and security interests in the region.” By this, Kucharski means in particular the securing of sea lanes and increased participation in maritime exercises. These would include also the demonstration of support for international norms of freedom of navigation.[ii]
On trade, he argues that a free-trade agreement with China is inappropriate. He advocates, instead, increased trade with the member-countries of the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP, the re-branded substitute for the original TPP) as well as with India. This direction, he suggests, would represent an excellent opportunity for Canada to strengthen economic and security relations; an action plan for this, he says, is needed.
Finally, he correctly points to energy security as a key instrument for Canadian foreign and security policy. Canada’s energy resources could enhance regional energy security in the Indo-Pacific region and leverage trade agreements with countries there. Kucharski suggests trying to institutionalize multilateral energy arrangements within CPTPP and/or APEC; however, this idea now appears unworkable. That is because actual co-operation on the ground is superseding it, notably with Japan.[iii]
Perhaps the most thorough and nuanced, recent strategic analysis of Canada’s potential for the Indo-Pacific region is by three authors from the Macdonald-Laurier Institute including its Managing Director Brian Lee Crowley. They make the case that “the only serious and practical alternative to American leadership in the Indo-Pacific is the emerging democratic axis between India and Japan.” Only these two countries “have the strategic weight, economic heft, and shared values and interests in a liberal world order to counterbalance prospects of Chinese strategic predominance.”[iv] Canada, having a close relationship with each of those two countries, as well as with Australia and South Korea, is well placed to pursue such a strategy. Indeed, such a strategic goal would simultaneously serve Canada’s particular national interest in its own economic well-being and its general shared interest in co-operation and multilateralism with others.
That commentary was written in the first few months after Donald J. Trump assumed the Presidency of the United States. It also suggested that Indo-Japanese co-operation could reawaken American ambitions to leadership in the region. In the meantime, and independent of any Canadian initiatives, this has already happened. The U.S. National Security Strategy document released in December 2017 hinted at this, and the forthright and attention-getting speech by U.S. Vice-President Michael R. Pence in early October 2018 drove the point home.[v]
Canada has its own reasons to oppose China’s behaviour in Indo-Pacific affairs. This is so, independent of whatever Canada may wish to be the case. China, despite rhetoric to the contrary, objectively opposes Canada’s diplomatic preference for multilateralism and co-operation. That may seem an odd thing to assert, given China’s rhetoric and its superficial behaviour. Multilateralism and co-operation are not value-neutral; they always have a normative context, which is always embedded in them.
Canada prefers to extend multilateral co-operation according to such a normative context characteristic of the general international system since the end of the Second World War. China, on the other hand, wishes to impose a different normative order on the international system. At least three policies characterize such a Chinese normative offensive. First is that the norms implicit in the Belt and Road Initiative (BRI, formerly One Belt One Road or OBOR) oppose the existing international order. Second is the creation of the Asian Infrastructure Investment Bank (AIIB) with its implicit trading and financial rules, including the establishment in Beijing of a commercial arbitration court to judge administratively any disputes. Third, but not least, is the institution of intellectual property theft as an explicit instrument of state policy. This last occurs not only through cyber-attack, but moreover through the legitimation of such theft, by making “technology turnover” clauses a regular and obligatory feature of commercial contracts. Intellectual property “turnover” thus becomes an overt and explicit condition of doing any business in China.
China is arguably a greater threat to the multilateral order, usually called “liberal,” than is the United States under President Trump. This is because that order can survive American withdrawal or attempts to injure it, for it can later be built back up. China, however, seeks to transform that order normatively and to embed those changes first in practice and then in law. From that point, there would be no return. In this respect, Chinese strategy is very similar to the Soviet international-law offensive of the late 1960s, 1970s and early 1980s, although the norms that China seeks to implant are different and indeed more aggressively pursued.[vi]
Given China’s threat to the multilateral liberal order, decisions need to be made about which markets merit priority. Japan is a key democratic ally. Canada can make a contribution to Japan’s security by providing energy resources and reducing Japan’s reliance on the South China Sea as a maritime transit region.
THE INDO-PACIFIC AND CANADIAN ENERGY LEADERSHIP
It is worthwhile to recall briefly the global landscape of the energy markets and Canada’s place in them. World energy consumption has more than tripled since 1965. In a world where population, life expectancy, average educational level, personal income per capita, and political participation are all increasing, the demand for energy will also only continue to grow. The world’s energy mix is changing, but demand for oil will remain the principal energy source at least until 2040, while natural gas production will become the second-largest energy source overall. Rising energy demand offers Canada an opportunity to serve global markets with responsibly produced energy displacing production from countries having a poorer environmental performance.
Canada exported 3.3 million barrels of oil per day to the U.S. in 2017, equivalent to 99 percent of all Canadian crude oil and equivalent exports. As is well known, Canada has no oil export pipelines that go to either coast for other foreign markets. This is so, despite the fact that many Canadian friends and allies, such as Japan, would be very happy to see more Canadian energy going their way.
It is therefore difficult to underestimate the significance of the agreement announced in early October 2018 for liquefied natural gas (LNG) shipments to Japan. This is unequivocally a win-win deal for Japan and Canada. World oil and gas production and consumption, driven by higher oil prices and by anticipated increases in gas demand, are set to spike significantly in the 2020s. By contrast, the oil sands price outlook has stagnated due to a variety of market-access issues. LNG prices are expected to improve, and LNG is increasingly a favoured fuel. Canada is finally out of the starting-blocks in the international race to garner oil and gas investments, even if these have been accelerating elsewhere around the world for some time.
The highly publicized natural gas cutoffs by Russia to Europe, violating agreed contracts in the winters of 2006 and 2009, are the most striking recent examples of threats to security of energy supply. The European Union has responded by increasing the number of gas pipeline interconnectors amongst its member-states, particularly in heavily-affected Central and Eastern Europe. It has also mandated the diversification of multiplication of supply sources, for example the Southern Gas Corridor through Turkey, which will bring gas from the Caspian Sea basin directly into Europe.
Other sources of gas supply disruptions, besides politically motivated and contractual disputes, include weather-related catastrophes such as hurricanes and accidents such as fires and explosions. Geopolitical and geo-economic events leading to gas supply disruptions may include, but are not limited to, American sanctions against Iranian exports and the fragility of passage through the Straits of Malacca.
Canadian energy leadership would entail the production and world export of more Canadian oil and gas to Canadian allies in the Indo-Pacific region. Trans-Pacific shipments need not negotiate choke-points or fragile and militarized transit regions like the South China Sea. Even more important is a culture of leadership in Canadian international diplomacy.
What would this mean today? Some may find this question difficult, because it seems to be at odds with the established Canadian orientation towards inclusion and allowing all voices to express themselves. Yet this tactic often delays decision, whereas decision is at the core of leadership. Inclusiveness and letting participants have as much “space” as they wish is very good in the conduct of multilateral negotiations based on the principle of consensus. Such a tactic, however, is sub-optimal in the world of Realpolitik and Realökonomie; and that is the world into which twenty-first century international affairs are ineluctably heading.
Michael S. Neiberg, who holds the Chair in War Studies at the U.S. Army War College, offers an overview of the history of Canadian grand strategy. He distinguishes amongst three phases of development: (1) an Imperial model lasting through the early 1940s, entailing reliance on Britain at least as much as on the United States; (2) a “middle power punching above its weight” model from the early 1940s through the early/mid-1980s; and (3) a “material” model since then, focusing on stability of trade while still coupled with an internationalist predisposition.[vii] The material model opens the way to a different kind of international leadership for Canada, relying upon past achievements and established reputation. This type of international leadership bases the national interest, first of all, upon its material endowment and for the benefit (likewise first of all) of its own citizens. There is no contradiction.
As the Swiss-American scholar and Yale University professor of international affairs Arnold Wolfers put it in the middle of the last century, “The psychology of the actors in the international arena, instead of operating in limitless space, is confined in its impact on policy by the limitations that external conditions—the distribution of power, geographical location, demography, and economic conditions—place on the choices open to governments in the conduct of foreign relations.”[viii] What would it mean to take these realities explicitly into account, in a “material” model of Canadian foreign policy?
A “TRIPLE TRIANGLE” INITIATIVE FOR CANADA
Canada is not part of the Indo-Pacific region, except insofar as the “Pacific” is extended to include the whole Pacific Rim. However, Canada has important geopolitical relations and common geo-economic interests with significant countries in the Indo-Pacific region: in particular Japan and India, not forgetting Australia. In particular, Japan is a partner of Canada along with India, for asserting the rule of law in the Indo-Pacific region, this as a response to China’s rise.
The so-called “Quad” (formally the Quadrilateral Security Dialogue, or QSD) amongst Japan, Australia, India, and the United States was informally revived by agreement amongst these countries’ four leaders during the ASEAN summits in 2017. The QSD dates back to the 2007 initiative of Japan’s Prime Minister Shinzo Abe, based upon the concept of a “Democratic Peace” to embrace most of Asia. Canada has no reason to seek to duplicate the QSD and would fail if it tried to do so. That is because the QSD is nowadays contextualized first of all by issues around the militarization of Chinese international behaviour.
Rather, Canada should explore its common interests within the three triangles Canada-Japan-Australia, Canada-Japan-India, and Canada-Australia-India. There is no cost at all nor any downside to such an initiative. Each of these triangles would have a distinct configuration of relevant issue-areas.
Canada’s participation in a Canada-Japan-Australia triangle would be contextualized by the 2013 Japan-Australia Economic Partnership Agreement as well as by the 2017 Japanese-Australian Acquisition and Cross-Servicing Agreement. Canada’s participation in a Canada-Japan-India triangle would be contextualized by the 2014 Special Strategic and Global Partnership between Japan and India. Canada’s participation in a Canada-Australia-India triangle would be contextualized by the three countries’ common heritage as Commonwealth countries.
One cannot expect policy symmetry in such a “triple triangle” (three triangles comprising Canada plus two of the three: Australia, India and Japan). For example, any triangle including Australia would necessarily focus on military and security issues, simply because Canada and Australia, for all of their historical and geological common attributes, compete for the same energy markets with the same energy products.
Likewise, any triangle including Japan (except for Canada-Australia-Japan) might well focus on Canadian-Japanese co-operation in the construction of LNG re-gasification facilities in third countries. Japanese industrial experience combined with Canadian LNG export to third countries (not only India) represents enormous potential for bilateral Canadian-Japanese energy co-operation. This would be a logical development, building upon the successful LNG project in western Canada, in which Japan is involved.
Such an initiative appears all the more necessary, given the creation of the U.S.-Japan-Australia fund for Indo-Pacific infrastructure projects that was announced in July 2018, designed to counter China’s BRI/OBOR.[ix] This fund is established by the Overseas Private Investment Corporation (U.S.), the Bank for International Cooperation (Japan) and the Department of Foreign Affairs and Trade (Australia). It will concentrate on energy, transportation, tourism and technology infrastructure. India was not mentioned or included. Neither was Canada.
Canada should not expect a Canada-centric analogue to the QSD to emerge from these three triangles. In the twenty-first century, however, bilateral diplomacy can go only so far; and multilateralism is part of the DNA of Canada’s diplomacy. Such a “triple triangle” initiative, then, should not be undertaken with direct reference to the QSD or the tasks that the latter has set for itself.
Such an autonomous Canadian initiative should, rather, have for its agenda the pursuit of Canadian national interests defined first of all in the material sense, in the context of the Canadian tradition of peace and security activities. Given objective conditions of Canada’s international situation as characterized by Wolfers, co-operation on energy export outside North America is surely the most evident issue with which to start.
Kucharski’s concluding exhortations to usher in “a new international order built around energy, climate and security” seem comparatively unconnected to the realities that he analyzes in the body of his paper. At the same time, he invokes Canada’s well-known “unique perspective [for] for enhancing regional and energy security” in order to underline the need for domestic economic investment in infrastructure and export capacity.[x]
If the world “needs more Canada,” then it is instructive to understand what this means in specific terms.[xi] The emerging global LNG market gives Canada the opportunity to shape the architecture for global geo-economics in the decades to come. The recent Polish and Greek decisions for long-term imports of American LNG are examples of how this energy resource may be used for strategic goals, responding simultaneously to national interests and to the upholding of international norms.
Building oil export pipelines to serve markets outside North America will enhance Canada’s contribution to global order in the crucial world-economic and global-financial spheres. To do so will create constructive openings for Canadian values, diplomatic norms and national interests to engage the opposing norms being set out by such other states as China. Those states will deploy their own values and norms, whether Canada engages and does so on its own behalf or not.
In a multicultural world, Canada does the world no favours by representing universal interests and arguing that they are Canada’s.[xii] Rather, it is to the world’s advantage that Canada represents its own national interests and argues that these are universal interests. There is no contradiction. That is the proper way to assert “more Canada in the world.” The place to start is with the material foundation of Canada’s national interests, namely natural resources, and energy in the first instance. The recognition of these material interests must have behavioural consequences.
ABOUT THE AUTHOR
Robert M. Cutler (firstname.lastname@example.org) is Senior Researcher, Institute of European, Russian and Eurasian Studies, Carleton University; Fellow, Canadian Energy Research Institute; and Senior Fellow, Canadian International Council. This article is an expansion of keynote remarks made to the Macdonald-Laurier Institute’s conference The Global Significance of Canada’s Energy Resources, Ottawa, 4 October 2018. Redacted prior to China’s publicized detention of Canadian citizens on charges of spying, it does not invoke this issue directly.
[i]. Patrick James, Grand, Bland or Somewhat Planned? Toward a Canadian Strategy for the Indo-Pacific Region, SPP Research Paper 7:21 (Calgary: University of Calgary, School of Public Policy, 26 August 2014).
[ii]. Jeffrey B. Kucharski, Energy, Trade and Geopolitics in Asia: The Implications for Canada, SPP Briefing Paper 11:19 (Calgary: University of Calgary, School of Public Policy, July 2018), 8.
[iii]. Jessica Jaganathan and Julie Gordon, “LNG Canada, Nation’s Biggest Private-Sector Project Yet, Wins Go-Ahead,” Financial Post, 2 October 2018, http://business.financialpost.com/commodities/energy/update-3-massive-canada-lng-project-gets-green-light-as-asia-demand-for-fuel-booms .
[iv]. Brian Lee Crowley, Shuvaloy Majumdar and David McDonough, Responding to China’s Rise: Japan and India as Champions for the Rule of Law in the Indo-Pacific (Ottawa: Macdonald-Laurier Institute, 31 August 2017), 2.
[v]. [Michael R.] Pence, “Remarks by Vice President Pence on the Administration’s Policy Toward China,” (Washington, D.C.: U.S. Government, 4 October 2018), http://www.whitehouse.gov/briefings-statements/remarks-vice-president-pence-administrations-policy-toward-china/ .
[vi]. On the Soviet international-law offensive, see Robert M. Cutler, “East–South Relations at UNCTAD: Global Political Economy and the CMEA,” International Organization 37:1 (Winter1983), 127–31, 138–41; and Robert M. Cutler, “The Soviet Union and World Order,” in Global Peace and Security: Trends and Challenges, ed. Wolfram F. Hanrieder (Boulder, Colo.: Westview Press, 1987), 88–92.
[vii]. Michael S. Neiberg, “A Middle Power on the World Stage: Canadian Grand Strategy in the Twentieth Century,” Journal of Military and Strategic Studies 14:2 (2012).
[viii]. Arnold Wolfers, “The Determinants of Foreign Policy,” in Arnold Wolfers, Discord and Collaboration: Essays on International Politics (Baltimore, Md.: Johns Hopkins Press, 1962), 45.
[ix]. Jason Scott, “U.S.-Led Infrastructure Fund to Counter China in Indo-Pacific,” BNN Bloomberg, 30 July 2018, http://www.bnnbloomberg.ca/u-s-led-infrastructure-fund-to-counter-china-in-indo-pacific-1.1116358 .
[x]. Kucharski, Energy, Trade and Geopolitics in Asia, 9.
[xi]. Heather Reisman, The World Needs More Canada. (Toronto: Chapters, 2017).
[xii]. Compare Albert O. Hirschman, The Passions and the Interests: Political Arguments for Capitalism Before Its Triumph. (Princeton, N.J.: Princeton University Press, 1977); 2013 edition with a foreword by Amartya Sen and a new afterword by Jeremy Adelman.