Iran, China and Russia: What’s on the Table at the G7 — Amanpour and Company

[00:00:00] Speaker 1: - Elizabeth Economy, welcome to the show. [00:00:03] Elizabeth Economy: - Thanks, Walter, great to be here. [00:00:05] Speaker 1: - President Trump and our Western European allies are meeting for the G7 summit this week. Tell me how the Iran deal is going to affect the relationship between the U.S. and its G7 allies and affect the region. [00:00:22] Elizabeth Economy: - I mean, you know, it's great news. Obviously, the U.S. and Iran have a memorandum of understanding. They're supposed to sign the deal later this week on Friday. And, you know, it leads to a cessation of hostilities. There's a plan for longer term negotiations around two months that will hopefully lead to a new agreement on the part of Iran to halt its nuclear weapons program. And of course, this is going to open back up the Strait of Hormuz. So I think, you know, from the perspective of this meeting, the G7 meeting, having President Trump arrive, be able to announce that a deal has been reached is all a positive. And the Europeans, I think, are interested in figuring out how they can support the deal moving forward, beginning with, I think, working to clear minds from the Strait of Hormuz. So I think it's a good beginning for the G7 meeting to, you know, start off with this deal. And certainly for the region, which has been battered by this war over the past four months or so, this is very welcome news. You know, of course, there are skeptics, you know, about the durability of this deal. We've had ceasefires before. But I think there's a fairly strong commitment, at least on the part of the United States, to try to make this stick. So, you know, we'll hold on to some optimism, perhaps, until proved otherwise. [00:01:42] Speaker 1: Hovering over this week's G7 summit, of course, is China. What is the differences and what are the alliances or the alignments of Europe and the United States when it comes to dealing with China? [00:01:56] Elizabeth Economy: You know, China has been, sort of occupied, a fairly central position on the G7 agenda for, I'd say, about five years now. And there are really two sets of issues where you find the United States and the other G7 partners, in fairly close alignment. You know, one is around sort of trade and investment where all these countries face similar challenges from China's economic model. And that's true whether we're talking about, you know, China's economic coercion. So, you know, for example, when Australia called for investigation into the origins of COVID and China started to boycott a lot of Australian goods coming into China. So these countries have developed sort of an anti-coercion platform around which, you know, they will work together to support countries that are facing economic coercion from China. Certainly, we've seen over the past just two or three years, efforts on critical minerals and rare earth elements, and efforts to develop alignment on exploring new sources of mining and refining of these rare earths, because there's too much dependence on China in this space. So that issue of supply chain dependency is, I think, another area where there's alignment within the G7, and we've seen sort of new arrangements emerge. And then I think in terms of trade defense measures, so China's export of its overcapacity is a, you know, a source of very serious concern for all the G7 members, right? We've seen it in the clean tech space on solar panels and batteries and EVs, and we're going to see it across, you know, a whole array of other technologies and products. So alignment, again, around tariffs, around export controls, on investment screening. So there's a lot of work to be done in aligning our policies around these areas and sort of cooperating together. So not just even aligning, but cooperating. And then I think the second area where the G7 has sort of focused on China has been in terms of China's role on the global security front. And here, of course, China has been, you know, sort of an economic lifeline for Russia in Russia's war of aggression against Ukraine. And, you know, that's been very problematic. And also China's sort of destabilizing behavior in the Indo-Pacific. That's another area where the G7 has taken note and has sort of called out that, you know, sort of negative action by Beijing. And, you know, frankly speaking, the whole sort of emerging axis of China, Russia, North Korea and Iran is something that I think greatly concerns the G7. So I think both in terms of the economic space and the security space, there's general alignment within the G7 that, you know, they need to develop a set of countermeasures to sort of respond to what is a growing and really challenging threat that China is posing. [00:05:02] Speaker 1: Well, you talk about reducing the dependency on China for supply chain, for rare earth minerals. Sometimes talk about de-risking, which is there's a risk if we rely too much on China. And yet, if we proceed down this path, doesn't that make it harder to kind of wean China away from its alliance with Russia and Iran? [00:05:25] Elizabeth Economy: Well, I don't think so. I mean, I think, you know, there's sort of two separate issues, really. You know, China depends on Iran and Russia, really, for natural resources. It aligns with those countries on political grounds more than, and security grounds, more than necessarily on economic grounds. And so the issue of de-risking is actually something that China itself does. China has been de-risking, you know, its own economy for a decade or more, right? Diversifying, you know, we've seen it diversify, for example, its sources of energy extremely successfully, right, in terms of both, you know, from clean energy to, you know, oil and gas, from many different sources to nuclear power. China's been doing this very aggressively. It's been de-risking its supply chain across, again, a whole array of critical technologies. Xi Jinping is essentially, you know, the Chinese leader is essentially trying to create fortress China. You know, he talks all the time about the need for China to have, you know, independence in, you know, its food security, in its energy security, and in its technology security. So that's been China's approach for its own economy for a very long period of time. So really it's the United States and, you know, other advanced democracies just playing catch up in many respects to what China has already been doing and recognizing the risks that come from this over-dependence. And, you know, frankly speaking, we didn't even realize this, I think, until COVID when we became acutely aware of our dependence on China for the personal protective equipment, right? The masks and the gloves and the ventilators that we needed, and they were in such short supply. And we saw, to some extent, China weaponized those things, right? China can use things like this PPE, like its control over active pharmaceutical ingredients, right? The precursors that we need for so many of our drugs. And, as you mentioned, the rare earths and critical minerals, right? When China decides to turn off, you know, its exports, right? The entire world suffers. And so I think it's, you know, it's really imperative, frankly, that we begin to develop alternative sources for these goods. [00:07:45] Speaker 1: Well, let's talk about the Belt and Road Initiative. Exactly how does that get countries to align with China? And does the West have a suitable counterpart? [00:07:59] Elizabeth Economy: Yeah. So Belt and Road Initiative, you know, began as a sort of hard infrastructure play back in 2013. That's when Xi Jinping first announced it. And at the time it was really about connecting some lesser developed Chinese cities and regions to external markets through infrastructure investment. So ports and railroads and highways. It has evolved since then to include, you know, the digital Silk Road, which is all about, you know, subsea cables and the digital infrastructure, 4G, 5G, data centers, right? E-payment systems, satellite systems. There's the Health Silk Road, which sort of came to fruition during COVID export of Chinese, you know, medical technology. And then the Green Silk Road, which is about the clean tech space. You know, does the Belt and Road enable China to get countries to align with it? I think there is not evidence really, for example, in UN votes, that, for example, countries that receive the most investment from China necessarily align with China on issues that are important to China in the United Nations. We haven't seen that kind of alignment emerging. And frankly speaking, in many countries, there have been a lot of popular protests around Belt and Road projects. So even as though many of those projects are welcomed, certainly by leaders, there's a lot of consternation at the local level. Why? Because China often has exported its own labor to do the projects, which means local communities don't benefit. Often the governance around these projects is not very strong. So no social impact assessments or environmental impact assessments. Deals are struck in a non-transparent way, right? So, you know, a lot of local people may believe that their leaders are pocketing some side money. And then sometimes the quality of the projects is not particularly high. So even though the, you know, infrastructure support is much needed and, again, welcomed because oftentimes Western companies are not willing to go in to do this kind of work, you know, the projects have not been uniformly successful. About a third of them have either been canceled or stalled, run into very significant difficulty. [00:10:16] Speaker 1: Well, you talk about the difference. Yeah, go ahead, sorry. [00:10:19] Elizabeth Economy: Yeah, I was going to say, that being said, to your point about, you know, does the West offer a comparable, you know, sort of a competitive kind of project? No. And there have been a number of efforts in the past couple of administrations, in U.S. administrations, to do that. And I would say none of them has succeeded. And, you know, we've tried working with partners and allies to do this, but it's very difficult. Again, you know, if you're looking at the Chinese priority areas of mining, of digital infrastructure and of clean tech, they really dominate. And, you know, you're looking at, you know, going into mining in places where Western companies just haven't wanted to go. This is too difficult to do that. But Chinese companies heavily subsidized, you know, are in it for the long term, right? And they don't mind the conditions and they don't mind working, you know, in very challenging conditions. And so they have a long term strategy that is paying off and we're facing the consequences. That being said, I think it's important to recognize that despite all of the attention that Belt and Road gets, if you look across the world, China is the largest source of investment in none of these regions. So, you know, Europe is the largest investor in Africa. Japan is the largest investor in Southeast Asia. And the United States is the largest investor in Latin America. So it's just our kinds of investment are different. We don't tend to do the high profile infrastructure projects. [00:11:47] Speaker 1: Well, the US has retreated a lot from global leadership. You've talked a lot about Belt and Road. We've pulled back on both foreign investment, but obviously USAID. Likewise, relationships with our NATO allies. We've pulled back on that. To what extent does that help China? And to what extent are they successfully capitalizing on that? [00:12:14] Elizabeth Economy: I think that's a really, it's a really important distinction to make. Certainly the Trump administration has withdrawn the United States from its traditional position as, you know, the most important sort of global provider of public goods. We have, you know, stressed our, you know, certainly our NATO allies threatened to withdraw from NATO, threatened to invade Greenland. We have taken our political model off the table as a sort of source of competition. We have a non-ideological foreign policy. So we're no longer interested in promoting ourselves as, you know, a democracy that no longer matters to this particular administration. That's not a, we don't consider that a selling point anymore. So we, and as you say, we've, um, you know, basically shuttered USAID, uh, which is, you know, meant that we've taken ourselves out of this space of, uh, providing aid to some of the world's, you know, poorest and, and, you know, most impoverished countries. It was really important source of, of, of assistance for these countries. And frankly, an important source of us soft power. So we've definitely taken a step back. I think our reputation globally has clearly suffered. That's evident from, you know, an array of global public opinion polls. Uh, you know, our, our reputation has, is sinking, is almost sunk. Um, whereas, you know, China's is, you know, rising a little bit, but the truth is China has not been able to capitalize, uh, I think very effectively. And the reason behind that is, you know, it promotes itself as a stabilizing force in the global economy and in the global system. But again, countries look at what China is doing in terms of the export of its overcapacity. That's not stabilizing, uh, for other economies. When China weaponizes its control of rare earth elements, it's not stabilizing for other countries. You know, when China undertakes sort of its military, uh, assertive actions in the Indo-Pacific, not stabilizing, supporting Russia and Iran, not stabilizing. So it hasn't, uh, uh, uh, sort of undertaken, uh, what it has promised, which is to be a stabilizing, uh, force in the, in the global economy and the sort of global security arena. And frankly, it hasn't stepped up to fill the vacuum that's been left by the United States in terms of the provision of global aid. So, you know, initially China, you know, went to a few countries and said, oh, we will replace the United States for this, you know, million or $2 million program. But it has made very clear that it is not planning to replace, you know, what the United States used to do with USAID, China's overseas development assistance is a fraction, a tiny fraction of what the United States traditionally has provided globally. [00:15:00] Speaker 1: Why? [00:15:02] Elizabeth Economy: Because it, first of all, it doesn't believe that it needs to do it, right? It can win simply by being present if the U.S. has, has completely removed itself from the global stage. But because China is primarily a self-interested actor, uh, it has never, uh, wanted to assume the sort of burden of the kind of global responsibility that the United States has. I mean, and to be fair, we should remember that its per capita GDP is, you know, roughly 13,000 U.S. dollars and the U.S., you know, per capita GDP is over $80,000. So at some level, you know, it is still a developing or middle income economy. So it doesn't want that burden, but it wants to focus on its core interests and advancing its own interests. [00:15:48] Speaker 1: So let me ask then the big question that must be facing the G7 in France right now, which is, is it and should it be the goal of the West right now to confront China and contain it? Or should we try to get better relations and more cooperation? [00:16:07] Elizabeth Economy: I think here, um, that there's probably a generally agreed upon line, um, that roughly matches what the United States has done, which is to say a kind of tactical stability that sort of is an overlay against the very fierce strategic competition. So, you know, enabling the development of channels of communication. So we have this board of trade and board of investment. You know, we want to continue to work with China where we can. We're going to have talks on artificial intelligence. We're reconstituting our military to military discussions. You know, do I think that any of these things are actually going to lead to big breakthroughs in the relationship or materially change the relationship? No, but it's important that we keep talking and keep trying to find areas of common ground. But fundamentally what you see with this administration, and I think what you see with Europe and Japan, South Korea is a very competitive sense around technology, around the economy and around security. And I don't think that that's going to change. [00:17:13] Speaker 1: Elizabeth Economy, thank you so much for joining us. [00:17:16] Elizabeth Economy: Thank you.