NS4054 Fall Term 2015

Papers for Discussion October 21/26

Overview

• Issie Lapowsky, How Climate Change Became a National Security Problem, Wired, October 20, 2015

• Traditionally in the U.S. climate change has been framed as

• An economic issue,

• An environmental issue, and

• A public health issue

• Only recently has climate change been taken seriously as a national security by politicians

• However for some time now military minds have been sounding the alarm on climate change

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Climate and National Security I

• Syria to Arab Spring

• In 2003 DoD report noted that climate change could lead to food shortages and drought

• Create instability on vulnerable countries

• Many dismisses report as reflecting a far off threat

• Since then defense and intelligence agencies have concluded climate change a more immediate threat

• Council on Foreign Relations paper 2007

• Offered recommendations on how to mitigate risk

• CIA Report in 2008

• Attempted to predict climate change’s impact on national security by 2030

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Climate and National Security II

• By 2014 DoD had

• Adopted term “threat multiplier” to describe climate change

• Put out a Climate Change Adaptation Roadmap which Surveyed the vulnerability of country’s military bases

• Research began to reveal how climate change contributed to the Arab Spring and the conflict in Syria

• Framing climate change as a national security threat has advantages

• Increases sense of urgency, but also creates a path for environmental solutions

• Military could play an important role in building advanced green technology

• Helping secure the country’s grid and give the U.S. a strategic advantage over other countries in the future – in attacking problems in a broad systematic way

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Climate and National Security III

• While security implications of climate change are real – critical not to raise too many alarms

• Best to acknowledge that climate change not the biggest national security risk today

• Framing it that way only makes it easier for critics to write off the issue entirely

• Best to argue that climate change not the biggest security issue, but one that will make security harder

• If framed as a security issue the military will want to respond

• Way they respond will have little to do with stopping the spread of climate change

• Will have to do with protecting military interests

• May make international cooperation over climate change more difficult.

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China’s Currency I

• Mark Miotrowski, China’s Currency on Track to Challenge the U.S. Dollar in Oil Markets, The Fuse October 15, 2015

• Overview

• China’s forthcoming launch of a crude futures contract to be traded with the yuan is another step towards challenging the role of the dollar and the currency’s dominance in oil markets

• Since 1400s six dominant currencies have been the world’s reserve currency

• Global power usually associated with a dominant currency – one that has the role of a reserve currency

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Reserve Currencies

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China’s Currency II

• There has already been movement in deplcing the dollar in oil deals

• China overtook the U.S. in 2015 as the top importer of crude oil

• As major producers competed for market share from Chinese buyers they have been willing to do deals in yuan:

• Russia,

• Iran

• Angola

• Venezuela, and

• Sudan

• Others likely to follow

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China’s Currency III

• Growing use of the yuan in oil trading represents the decline of the petrodollar – dollars earned by producers through the sale of petroleum

• Shifts will have major implications for the geopolitical backdrop

• Provides a boost to the new crude futures exchange.

• IMF meanwhile looking at whether to include the yean in the Special Drawing Rights (SDR) the IMF’s basket of reserve currencies

• If included a symbolic victory for China

• Yuan would take a major step in its role as an international currency along side the euro, yen and Swiss franc

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China’s Currency IV

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China’s Currency V

• This would enable China to attract more investors

• With a more liquid market of yuan assets China can accelerate transforming Shanghai into a major international financial center by next decade

• With 64% of currency reserves in global banks held in dollars China has a long way to go to achieve its goal.

• Furthermore 60% of the world’s economic output is either in the dollar or “dollar zone” – currencies pegged to the dollar.

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China’s Currency VI

• What does the dollar’s supremacy mean for the average American?

• Relative stability of the dollar is what drives the global demand for dollar denominated assets

• Dollar’s significance enables

• inexpensive lending for Americans

• allows the government and U.S. companies to borrow easily

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China’s Currency VII

• Financial Crisis a Turning Point

• One reason China is so determined is because of its desire for superpower status

• Another factor is its frustration during the 2008 international financial crisis

• Crisis demonstrated how vulnerable the rest of the world is to the U.S. economy and its currency

• Although the recession began in the U.S. it negatively impacted China

• In aftermath of the financial meltdown, Chinese officials believed the U.S. manipulated the global financial system and passed its economic paid on to the rest of the world

•

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China’s Currency VIII

• U.S. actions included

• Depreciation of the dollar

• Three rounds of quantitative easing, and

• Allowing debt to balloon

• Also showed the danger of holding reserves of the dollar• The recession of 2008 also hurt China’s export economy with

demand for its goods and products taking a big hit in Europe and the U.S.

• The export-led economy that sustained growth fo so long in China is not viable in the longer term.

• By moving toward a consumer based economy the yuan has a better chance of becoming a major reserve currency

• China would not have to worry about the yuan appreciating

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World’s Largest Economies

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