International Relations This Week: Episode 91

International relations is a very important segment of the UPSC syllabus. In this series, we present an analysis of the most important international issues and developments that occurred over the past week relevant for the IAS exam. In this article, you can learn more about FATF Grey List, Cyberwar in the Russia-Ukraine Conflict, Funding mechanism for International Solar Alliance and Security pact between Japan and Australia.

TABLE OF CONTENTS

1. Pakistan’s exit from FATF Grey List
2. Cyberwar in the Russia-Ukraine Conflict
3. Funding mechanism for International Solar Alliance
4. Security pact between Japan and Australia

1. Pakistan’s exit from FATF Grey List

Context: Pakistan has been taken off the “grey list” of the Financial Action Task Force (FATF) after being placed under it for four years.

Introduction:

• The global watchdog on anti-money laundering (AML) and combating financing terrorism (CFT), the Financial Action Task Force (FATF), announced taking Pakistan out of the “grey list”. The countries that are categorised as grey list are under “enhanced monitoring”.
• Pakistan was grey listed in February 2018.
• FATF said that Pakistan made “significant progress” in this direction and improved legal and governance mechanisms. This can be attributed to the recent diplomatic efforts by Pakistan’s Foreign Minister and Army Chief General, who visited the United States in this regard. 
• In the recent plenary session (October 20-21, 2022), FATF members including India, reviewed the record of about 26 countries and unanimously agreed to take Nicaragua and Pakistan out of the “grey list”. 
  • India had protested against Pakistan’s lack of action on cross-border terror groups responsible for attacks on India, but it went along with the final decision.
• The FATF sets standards or recommendations for countries to achieve in order to plug the holes in their financial systems and make them less vulnerable to illegal financial activities. 
• It conducts regular peer-reviewed evaluations called Mutual Evaluations (ME) of countries to check their performance on standards prescribed by it. The reviews are carried out by FATF and FATF-Style Regional Bodies (FSRBs), which then release Mutual Evaluation Reports (MERs). 
• For the countries that don’t perform well on certain standards, time-bound action plans are drawn up. Recommendations for countries range from assessing risks of crimes to setting up legislative, investigative and judicial mechanisms to pursue cases of money laundering and terror funding.

FATF and Pakistan:

• Pakistan’s history with the FATF is a long and storied one. It can be traced back to 2008 when the country was first placed on its increased monitoring list — “grey list” — for allegedly failing to take adequate measures to curb terror financing and money laundering.
• When FATF places a jurisdiction under increased monitoring, it means the country has committed to resolving the identified strategic deficiencies within the agreed timeframes and is subject to increased monitoring. This list is often externally referred to as the “grey list”.
• Since 2008, Pakistan has landed on the unwanted list twice more, in 2012 and 2018. 
• In June 2018, Pakistan was placed on the grey list for the third time, with the FATF reasoning being that the country had failed to act against terror financing on its soil.
• Pakistan was handed two action plans encompassing 34 points (27+7) since 2018. It recommended the country formulate laws against money laundering and terror activities in line with international requirements.
  • Though Pakistan adopted various steps, a major sticking point or last item that remained was addressing by “demonstrating that terror finance investigations and the prosecution target senior leaders and commanders of UN-designated groups”.
  •  As per UNSC guidelines, member states should ensure that all designated terrorists are unable to access funds, arms, and travel, and such terrorists are duly and effectively prosecuted.
• At the plenary session in June 2022, the FATF visited Pakistan and reviewed it. It concluded that Pakistan’s measures were reflected “on the ground”. 

Image Source: Times of India

Recent Plenary Session of FATF:

• FATF countries, including India, reviewed the record of about 26 countries, and agreed unanimously to take Pakistan and Nicaragua off the “Grey List”.
• However, Mozambique, the  Democratic Republic of Congo, and Tanzania were added to the “grey list”, whereas Myanmar was moved from the grey list to the black list because of the actions taken by the military junta since the overthrow of the elected government in a coup in February 2021.  
• Myanmar is expected to face severe financial sanctions and an inability to procure IMF, World Bank and ADB loans.

Benefits for Pakistan:

• After the removal, Pakistan would essentially receive a reputational boost and get a clean bill of health from the international community on terrorist financing. 
  • There is research that suggests grey-listing negatively impacts the relationship of the concerned countries with international funders including banks and financial institutions that take note of FATF rankings, as well as existing and potential overseas investors in those countries. 
• On October 21, just ahead of the FATF announcement, the global ratings agency Fitch cut the country’s sovereign rating to ‘CCC+’ from ‘B-’.

2. Cyberwar in the Russia-Ukraine Conflict

Context: Information and cyber warfare have been important but ancillary components of the Ukraine war since its outbreak on February 24, 2022. 

Introduction: 

• Russian cyber-attacks against Ukraine have persisted ever since Russia’s annexation of Crimea in 2014, intensifying just before the 2022 invasion.
• Ukraine’s public sector, energy, media, financial, business and non-profit sectors have suffered the most. 
• Since February 2022, limited Russian cyber-attacks have undermined the distribution of medicines, food and relief supplies. 
  • Their impact has ranged from preventing access to basic services to data theft and disinformation, including through deep fake technology.
• Other malicious cyber activities involve sending phishing emails, distributed denial-of-service attacks, and the use of data-wiper malware, backdoors, surveillance software and information stealers.

Cyber operations originating from Russia:

• A report from Microsoft has revealed that at least six separate Russian nation-state actors have launched damaging cyber-attacks against Ukraine since the invasion began.
• The study, released in April 2022, detailed how Microsoft researchers have tracked at least 237 “cyber operations” originating from Russia.
• Microsoft has observed these cyber-attacks as being “strongly correlated and sometimes directly timed” with Russia’s kinetic military operations targeting services and institutions crucial for civilians.
• The report concluded that Russian State Agencies such as GRU, FSB and SVR “have conducted destructive attacks, espionage operations, or both, while Russian military forces attack the country by land, air, and sea.”

Agencies involved in Cyber Attacks:

• GRU is the Main Directorate of the General Staff of the Armed Forces of the Russian Federation.
• SVR is the Foreign Intelligence Service of the Russian Federation focusing mainly on civilian affairs.
• The Federal Security Service (FSB) of the Russian Federation is the principal security agency of Russia.

Coordinated Operations by Russia:

• Russia’s cyber attacks are very well coordinated with military operations on the ground by Russia’s armed forces.
• Various researches have shown that critical infrastructure in Ukraine is targeted by cyber attacks right before any armed attack by the forces.
• Russian cyber groups have also targeted other countries that are supporting Ukraine.
  • Around 42 countries are targeted by Russian groups across key sectors like government offices, software companies and critical infrastructure organisations.
  • SpaceX’s Starlink internet communications systems in Ukraine have also come under increasing cyberattacks from Russia.
  • SpaceX, with the help of the United States Agency for International Development (USAID), has sent at least 5,000 Starlink terminals to Ukraine to help them in the ongoing conflict.
• These coordinated attacks are a new form of hybrid threat posed by many countries in future. 

Ukraine’s resistance: 

• European Union, the US and NATO-led initiatives have been carried out with the aim of neutralising these cyber threats and protecting essential infrastructure. 
  • As part of these initiatives, the EU has activated its Cyber Rapid Response Teams (a project under Permanent Structured Cooperation (PESCO) in the area of security and defence policy), to support Ukraine’s cyber-defence.
• Non-government and private players have supported Ukraine through various cyber-resilience activities. Since the beginning of the invasion, a significant number of counter-attacks have been launched by independent hackers, affecting the Russian state, security, banking and media systems. 
• The European Parliament has called for stepping up cybersecurity assistance to Ukraine and for making full use of the EU’s cyber-sanctions regimes against individuals, entities and bodies responsible for or involved in the various cyber-attacks targeting Ukraine.

3. Funding mechanism for International Solar Alliance

Context: Recently, the International Solar Alliance (ISA) in its General Assembly meeting in New Delhi approved the “Solar Facility” which is a payment guarantee mechanism.

Introduction:

• To bolster investments in solar power projects, the International Solar Alliance (ISA), in its recent General Assembly meeting, approved the ‘Solar Facility’, a payment guarantee mechanism.
  • The assembly is the apex decision-making body of the 110-member ISA that works with governments to improve energy access and security worldwide and promote solar power as a sustainable way to transition to a carbon-neutral future.
• The Solar Facility is expected to stimulate investments into solar projects through two financial components — a Solar Payment Guarantee Fund and a Solar Insurance Fund. 
• The key mission of ISA is to unlock about $1 trillion of investments in solar power by 2030 while reducing the cost of the technology and its financing.

Solar Payment Guarantee Fund:

• The payment guarantee fund will only provide a partial guarantee.
• With minimal default, the guarantee fund would enable investments in geographies that do not receive investments.

Solar Insurance Fund:

• It will reduce the burden of insurance premiums for solar developers in the pre-revenue phase of the project.
• It will offset the cost of insurance for a specified period.

Significance:

• The objective of the facility is to attract private capital to flow into “underserved markets” in Africa.
• ISA also aims to crowdsource investments from across the globe and proposed projects in Africa would be able to purchase payment guarantees or partial insurance premiums from these funds.
• An interconnected grid would help all the participating entities in attracting investments in renewable energy sources as well as utilising skills, technology and finances.
• Resulting economic benefits would positively impact poverty alleviation and support in mitigating water, sanitation, food and other socio-economic challenges.
• The proposed integration would lead to reduced project costs, higher efficiencies and increased asset utilisation for all the participating entities.
• The Solar Facility will also provide a mechanism for payment and insurance to cover the first loss guarantee.
• India’s solar power experience will help African countries in solar power development with regards to consulting, assisting, aggregating electricity demands, designing bids for them, awarding capacities, transmission and distribution among other things.

Read about One Sun One World One Grid in the linked article.

4. Security pact between Japan and Australia

Context: Japan and Australia recently signed a new joint declaration on security cooperation.

Declaration on security cooperation:

• Japan and Australia have signed a new bilateral security agreement to reflect the deteriorating security outlook for their region driven by China’s increasing assertiveness.
• The upgrade of the Joint Declaration on Security Cooperation, a pact first signed in 2007 was the major outcome of Japanese Prime Minister Fumio Kishida’s meeting with his Australian counterpart Anthony Albanese.
• It builds on a reciprocal access agreement that Kishida inked in January with the then Australian Prime Minister Scott Morrison that removes obstacles to holding joint military exercises in either country. 
• That is the first such agreement Japan has struck with any country other than the United States. 
• Japan announced that its Self-Defence Forces will train and take part in exercises with the Australian military in northern Australia for the first time under the agreement.
• The declaration covers military interoperability, intelligence, cybersecurity, operations in space, law enforcement, logistics and protecting telecommunications.
• The declaration also refers to cooperation in “resisting economic coercion and disinformation” — threats that China is widely accused of.

Significance of the cooperation for Japan and Australia: 

• China’s defence budget has more than quadrupled since 2007 when Australia and Japan signed their first defence declaration.
• In 2006, Japanese warplanes scrambled to intercept 22 Chinese military aircraft in Japanese airspace. 
  • Last year, Japanese warplanes scrambled in response to 722 Chinese aircraft.
• China is Japan’s biggest trading partner, but the countries have traded verbal blows over the Senkakus – uninhabited islands in the East China Sea that are administered by Japan since 1972 but claimed by China, where they are known as the Diaoyu. 
• In 2021, the Chinese Communist Party aired a video in which it warned Japan of a nuclear response and “full-scale war” if it interfered with China’s handling of Taiwan.
• Recently, ballistic missiles fired by China are believed to have landed in Japan’s exclusive economic zone (EEZ).
• Concerns about China’s growing influence in the region heightened when Beijing signed a security pact with the Solomon Islands that has raised fears of a Chinese naval base being established in the South Pacific less than 2,000 kilometres (1,200 miles) off Australia’s northeast coast.
•  China and Australia also have various disputes over technology and trade barriers. China was also accused of illicit influence in Australian politics.

Other significant agreements between Japan and Australia:

• Japan and Australia also agreed to cooperate on energy security, which is threatened globally by Russia’s invasion of Ukraine. 
  • The pact follows talks in July 2022 between Australia, Japan, India and the US –members of the Quadrilateral Security Dialogue (Quad) – about setting up supply chains for clean energy systems that do not rely on non-democratic nations.
• Australia provides most of Japan’s energy (about 40%) in the form of LNG and coal.
• Japan and Australia also signed a critical minerals partnership that would strengthen supply chains for Japanese manufacturers. 
  • Australia’s resources of critical minerals like antimony, cobalt, lithium, manganese ore, niobium, tungsten and vanadium rank in the top five globally. 
  • Australia is the world’s top producer of lithium and rutile and the second-largest producer of zircon and rare earth elements.
  • The latest figures forecast that the value of lithium exports from Australia is due to increase more than 10-fold — from $1.1 billion in 2020-21 to almost $14b in 2022-23, with export volumes expected to grow steadily in future years.
• Japan and Australia also pledged to work together towards effectively implementing their respective Paris Agreement commitments and to reach net zero emissions by 2050. 
  • Both countries also pledged to continue to support initiatives that will advance clean energy technologies and supply chains, including hydrogen and ammonia, under the Japan-Australia Partnership on decarbonisation through technology, as well as through regional multilateral initiatives including the Quad.
• The partnership is a natural progression of Australia’s role as a stable and reliable supplier of minerals and energy to Japan, and underlines Australia’s growing role as a global supplier of critical minerals.

Implications for India:

• As far as India is concerned, the moves to sign reciprocal logistic agreements with the US, Australia and Japan, its 2+2 dialogues with the US, Japan and Australia and Russia, and its participation in the Quad have been timely. 
• Besides the Malabar Exercises with the other Quad countries, India is participating with the navies of Australia, Canada, Japan, the US and South Korea in the anti-submarine Sea Dragon Exercises in the Pacific Ocean. 
• The G-7 initiatives like “Blue Dot”, “Build Back Better” (B3W), and the European Union’s “Global Gateway” initiative are all attempts to counter China’s Belt and Road Initiative which often uses opaque methods for financing projects resulting in indebtedness in partner countries. 
• These developments will enable India to become part of the evolving security architecture for a rules-based order and freedom of navigation in the region, and act as a deterrent for future unbridled and aggressive Chinese expansion into the Indian Ocean.

Read more International Relations This Week articles in the link.

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