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Putin contends with a neighbourhood in turmoil

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Vladimir Putin went to extraordinary lengths to secure a sphere of influence in the former Soviet Union, invading Georgia and Ukraine to try to bring them to heel. So the trouble Mr Putin is suddenly facing in his own neighbourhood is all the more remarkable. Rarely has the Russian president had to contend with so many fires in his backyard all at once.

In the space of two months, three of Moscow’s closest allies among the former Soviet republics have been thrown into turmoil, albeit for different reasons. In each instance, the Kremlin has been in the uncomfortable position of responding to events rather than instigating them.

In the Caucasus, Armenia is again at war with Azerbaijan over the disputed region of Nagorno-Karabakh. Moscow was once able to contain the periodic hostilities between the two, but Turkey’s support for Azerbaijan has challenged Russia’s role as arbiter — though Mr Putin, with France’s Emmanuel Macron, secured a patchily-observed weekend truce.

In Belarus and now Kyrgyzstan, people have revolted against their leaders after disputed elections. Despite a police crackdown, Belarusians have continued to protest en masse against Alexander Lukashenko, their dictator of 26 years, who has stolen a sixth term in office. In Kyrgyzstan, protesters are trying to push out their president for the third time in 15 years.

Belarus, Kyrgyzstan and Armenia are all members of the Eurasian Economic Union and the Collective Security Treaty Organization, the Moscow-led trade and military blocs. Mr Putin has pushed hard to expand and deepen the trade bloc but there have been few takers. The fighting in the south Caucasus will test the credibility of his security club. It is ironic that after all Russia’s efforts to weaken western multilateralism, its own structures look so brittle.

It would be premature to assume Mr Putin has lost his grip on the neighbourhood. He has faced bigger setbacks before. The Kremlin feared fatal democratic contagion from the so-called coloured revolutions in Georgia and Ukraine. It twice failed to install or prop up a pro-Russian leader in Kyiv. It instead carved up the country, gaining territory but losing many Ukrainian hearts and minds.

Mr Putin has tended to exert less control over his allies than he might like. Mr Lukashenko resisted closer union with Russia and toyed with warmer ties with the west. Armenians turfed out their leader in 2018 after a decade of economic stagnation and authoritarian drift. Kyrgyzstan has shown the limits of the Russian model of so-called managed democracy.

Anti-Russian sentiment has played little part so far in these upheavals. But it is becoming increasingly difficult for Russia to preserve its hegemony in the ex-Soviet space. Other powers are increasing their gravitational pull on Moscow’s satellites — China in Central Asia, Turkey in the Caucasus and the EU for Belarusians tired of autocracy and underdevelopment.

In the short term, turmoil in these countries gives Mr Putin an opportunity to tighten his grip. Mr Lukashenko is now wholly dependent on Moscow for his political survival. Armenia needs Russian military help. But Russia’s soft power appeal is thin. It can ill-afford to finance allies at the expense of its own people. The model of crony authoritarianism adopted by the former Soviet republics is inherently unstable — and increasingly liable to implode when public anger over corruption or denied rights boils over. As a leader already in power for 20 years and possibly another 16, this will weigh ever heavier on Mr Putin’s mind.



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Emerging Markets

Regulators close ranks on crypto

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Regulators are continuing to step up their scrutiny of cryptocurrencies, with central banks and South Korea’s tax authorities demonstrating fresh concerns.

In a report published on Wednesday, the Bank for International Settlements, the global body for central banks, argues that digital tokens such as bitcoin have few redeeming features and “work against the public good”. It also dismissed stablecoins — a link between crypto and conventional assets — as an “appendage” to traditional money.

Perhaps unsurprisingly, the BIS did endorse the development of digital currencies backed by central banks, saying they could be a tool to achieve greater financial inclusion and lower the high costs of payments. “Central bank digital currencies . . . offer in digital form the unique advantages of central bank money: settlement finality, liquidity and integrity,” it said.

In contrast, bitcoin wasted energy and cryptocurrencies were “speculative assets rather than money, and in many cases are used to facilitate money laundering, ransomware attacks and other financial crimes”.

South Korea has acted against the financial crime of tax evasion, with more than Won53bn ($47m) of bitcoin, ethereum and other cryptoassets confiscated from 12,000 people. Officials said it was the largest “cryptocurrency seizure for back taxes in Korean history” and noted that local exchanges had allegedly been used to conceal assets because they did not collect the resident registration numbers of account holders. Many of South Korea’s 60 crypto exchanges are battling to meet regulatory conditions to operate beyond September.

This week’s #techAsia newsletter asks whether the death knell is being sounded for cryptocurrencies. That could be the case in China, where it is scaling up tests of its official digital renminbi, and appears serious about stamping out the crypto industry on its soil. Bitcoin fell below $30,000 on Tuesday following the latest regulatory crackdown, but it has recovered to be worth more than $34,000 today.

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China bolsters ties with Myanmar junta despite international condemnation

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Trade and diplomatic ties between Myanmar and China are normalising in the face of intense domestic opposition and international condemnation of the military junta that seized power in February.

Beijing has strengthened relations with Myanmar’s military leaders despite a series of violent attacks against Chinese business interests in the country after Aung San Suu Kyi’s government was toppled.

Yun Sun, an expert on Myanmar-China relations with the Stimson Center, a US think-tank, said Beijing had already made a “fundamental assessment” that Myanmar was moving into another prolonged period of military rule.

“I think the Chinese can see that this military coup is successful and is here to stay,” she added.

The resumption of state-level engagements and economic activity signals that Myanmar is reverting to its traditional economic reliance on China. The country has used its larger neighbour as a buffer against international sanctions and divestment by foreign investors, who have announced plans to quit the country or shelved projects.

Since the coup, 875 people have been killed by the junta and 6,242 arrested, according to the Assistance Association of Political Prisoners (Burma), a human rights group. The country’s economy and public services were severely disrupted by mass protests in the three months that followed the putsch, and have only partially recovered.

The resumption of bilateral trade will fuel the widespread suspicion among anti-coup resistance groups that China was prepared to support the new military regime.

The cumulative value of China’s imports from Myanmar for the first five months of the year was $3.38bn, up from $2.43bn in 2020 and $2.56bn in 2019, before the coronavirus pandemic, according to official Chinese customs data.

Exports to Myanmar for the same period have not recovered to the same extent, however. By the end of May, goods valued at $4.28bn had been shipped to Myanmar, compared with $4.56bn and $4.79bn in the two previous years.

In a further sign of strengthening diplomatic relations, Chen Hai, China’s ambassador to Myanmar, met coup leader and military commander-in-chief Min Aung Hlaing in Naypyidaw, the capital, in June. In a subsequent statement, Chen referred to Min Aung Hlaing as the leader of Myanmar.

China was among the countries that abstained in a UN general assembly vote last week calling on the international community to halt the flow of arms to Myanmar and release Aung San Suu Kyi and other political detainees. 

Beijing had good relations with the government of the deposed leader, who is in detention facing multiple criminal charges. However, it has refrained from criticising the military, fanning anger among the mass protest movement that sprang up after the coup. 

Beyond being Myanmar’s biggest trading partner, China also has strategic infrastructure investments in the country, including energy pipelines that give Beijing a critical link to the Indian Ocean.

James Char, a Myanmar expert at the S Rajaratnam School of International Studies in Singapore, said many people in Myanmar still blamed the Chinese government and business interests for complicity in supporting the military’s decades of rule before the transition to democracy.

“The Chinese, themselves, are very clear about [public sentiment in Myanmar],” Char said.

Attacks on China-linked businesses in the wake of the coup culminated in an explosion at a Chinese-backed textile factory west of Yangon on June 11, according to reports from local Myanmar media, as well as junta-controlled information services and Chinese state media.

Beijing’s wariness of inflaming Myanmar protesters would probably slow Chinese direct investments and the resumption of planned larger-scale developments that formed part of President Xi Jinping’s Belt and Road Initiative, analysts said.

Additional reporting by Sherry Fei Ju in Beijing



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Australia calls Great Barrier Reef warning politically motivated

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Australia has labelled a draft decision by the UN’s World Heritage Committee to include the Great Barrier Reef on its “in danger” list as politically motivated.

The committee, which is chaired by Tian Xuejun, China’s vice-minister for education, and selects Unesco World Heritage sites, proposed adding the world’s largest collection of coral reefs to the danger list because of the damaging impact of climate change and coastal development.

The designation could ultimately lead to the reef losing its World Heritage status, although officials said listing was intended to prompt emergency action to safeguard a living structure that stretches 2,300km along Australia’s eastern coast.

But Sussan Ley, Australia’s environment minister, said the government had been “blindsided” by the committee’s finding and alleged there was a lack of consultation and transparency. She added that Canberra would challenge the draft decision.

“When procedures are not followed, when the process is turned on its head five minutes before the draft decision is due to be published, when the assurances my officials received and indeed I did have been upended, what else can you conclude but that it is politics?” she said.

That the World Heritage Committee is chaired by a senior Chinese official has stoked suspicions in Canberra that it had been singled out over its diplomatic and trade clash with Beijing.

China-Australia relations have soured following Canberra’s call last year for an inquiry into the origins of Covid-19 and Beijing’s imposition of tariffs on Australian wine and barley imports.

Ley said she and Marise Payne, Australia’s foreign minister, had already spoken with Audrey Azoulay, Unesco director-general, to complain about the draft decision.

But scientists downplayed the suggestion that the “in danger” listing was politically motivated. Three mass bleaching events in five years demonstrated the need for the government to do more to tackle climate change, they said.

“I’m seeing some press coverage saying this is all a plot by China not to buy wine, lobsters and to screw the Barrier Reef. I think that’s pretty far-fetched given that the draft decision released overnight will be voted on by 21 countries,” said Terry Hughes, professor of marine biology at James Cook University.

The controversy will heap further international pressure on Canberra, which has been pressed by the US, UK and others to commit to a national target of net-zero emissions by 2050.

In a draft decision due to be voted on next month, the committee urged Canberra to “provide clear commitments to address threats from climate change, in conformity with the goals of the 2015 Paris Agreement, and allow to meet water quality targets faster”.

It noted the loss of almost one-third of shallow-water coral cover following a “bleaching” event in 2016 — a process linked to warmer than normal water that can lead to a mass die-off of coral.

The row over the “in danger” listing occurred at a difficult time for Australia’s conservative coalition, which is embroiled in internal squabbling over climate policies.

On Monday, Barnaby Joyce, a climate sceptic and supporter of coal mining, ousted Michael McCormack to become leader of the National party, the junior coalition partner to the Liberal party, and Australia’s deputy prime minister. Joyce is expected to oppose any move to commit to net zero by 2050.

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