In July 2016, in response to North Korea’s rising nuclear threat, the US and South Korea announced their decision to deploy the Terminal High Altitude Area Defense (THAAD), an antimissile battery built to intercept short- and medium-range ballistic missiles. China quickly objected to THAAD on the grounds that it would weaken its nuclear deterrence capabilities and decrease Chinese influence in the region. To coerce South Korea to disable and remove THAAD, China launched a year-long campaign of economic retaliation, targeting the consumer goods, entertainment and tourism industries. Though it faded quickly and quietly, the THAAD dispute reveals much about the current limitations of China’s power, as well as its potential.

China specifically raised concerns that THAAD’s X-band radar, which monitors THAAD’s surroundings, had too large a scope and could gain information about China’s military actions further inland. However, US defense officials have pointed out that an existing, similar instrument deployed in Japan has a comparable, marginally smaller scope. While China’s claims were technically weak, they were understandable symbolically. Many Chinese found it concerning for the US to deploy a military weapon on neighboring South Korea’s territory – a neighbor who had been recently improving relations with China.

After over a year of tensions, in late October 2017, South Korea and China suddenly announced that they would work towards improving bilateral relations. South Korean media content started re-appearing on Chinese platforms that had previously stopped showing it, the consumer goods and tourism industries began to pick up their lost momentum, and the short-lived protests against the South Korean conglomerate Lotte Group had mostly ended.

Looking closer, the limited impact of its economic blows reveals the boundaries of Chinese power. The first retaliatory action to make headlines was limiting Chinese viewers’ ability to access and consume South Korean entertainment. Popular South Korean celebrities also cancelled or suspended public appearances in China. Even within the gaming industry, Beijing tightened regulations to make South Korean games’ entry into the market more difficult. These industries have felt some impact from the ban and experienced a decrease in the trade surplus of media content in the first nine months of 2017. Nevertheless, the entertainment industries were not significantly hurt by China’s ban, as they expanded their presence in other markets.

China also targeted certain South Korean consumer products, including food products, cosmetics, and automobiles. South Korean carmakers Hyundai and Kia both experienced the effects of the THAAD dispute and saw significant drops in Chinese sales. Although many companies have felt a negative impact, the decrease in some sales were compounded by other factors like boycotts from Chinese citizens and not necessarily strictly by Chinese policy. The South Korean cosmetic giant AmorePacific cited both stagnation of the domestic economy and the decrease in tourism after March 2017 as reasons for slowing sales growth and decreased operating profit.

As China was and still is the number one provider of tourists for South Korea, tourism was the industry that experienced the largest setback during the THAAD controversy. Chinese policy was partially responsible, as regional travel companies suddenly stopped selling package tours to South Korea, but other factors like concerns for safety and political tensions, anger at Lotte Group, and increased negative perceptions of South Korea also contributed to decreased tourism, one study showed. Overall, the number of tourists fell by 3.29 million in the first nine months of 2017 as compared to 2016, leading to a total $6.8 billion loss for the tourism industry.

The hardest hit by this economic dispute was Lotte Group, the South Korean conglomerate that sold the South Korean government the land it used to deploy THAAD. Before the conflict, Lotte owned more than 100 department stores and supermarkets in China, but since February 2017, the Chinese government closed more than 70 of them, citing safety concerns. Lotte Group closed the remaining stores after large protests at numerous storefronts. Recently, Lotte Group announced that it would sell all of its stores in China, abandoning its previous effort to expand its presence in the Chinese market.

Despite all of these negative impacts, the South Korean economy as a whole did not suffer significantly from Chinese retaliation. In fact, total Chinese exports increased in 2017; in the first eight months of that year, South Korean exports to China rose by 12 percent. Despite China’s economic might, many Chinese businesses rely on South Korean companies as part of their supply chains, which helps explain why only three main industries were hit.

Though it came out largely unscathed by China’s economic attacks, it would be difficult to argue that South Korea – and the US – definitively won this dispute. Granted, THAAD is still fully operational today. However, during reconciliation talks, Seoul assured Beijing that it would not seek additional THAAD deployments nor join a trilateral military alliance with the US and Japan. China may not have achieved its full desired outcome, but it did succeed in placing some boundaries on its neighbor’s future behavior. Meanwhile, the popularity of domestic boycotts bolstered the Communist Party of China’s (CCP) power at home.

More than anything, this dispute demonstrated the scope of China’s global clout. Its failure to effect THAAD’s removal revealed that its international influence remains limited by its integration into the global economy. In other words, China can only tolerate cutting off its corporations from foreign markets up to a point. Moreover, China clearly still faces bigger security questions surrounding North Korea. However, as China’s economic might continues to grow, it could become a more viable tool for asserting Chinese power globally, as well as garnering domestic support for the CCP.

In the coming weeks, the remnants of this heated dispute will fade as the region turns its attention to the 2018 Pyeongchang Olympics. With North and South Korea planning to march under a united flag and create a joint women’s ice hockey team, there are modest signs of peace and hope. But even as the world comes together for 17 days of symbolic unity, the underlying distrust in the region caused by this conflict cannot be swept aside with colorful flags and cheerful processions. While nations applaud each others’ athletic accomplishments, the THAAD battery lies a mere 125 miles away, casting an uneasy shadow over the celebrations.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff, editors or governors.

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Self-Sufficiency in the Modern World      

Today’s world does not easily lend itself to self-sufficiency. Take, for instance, the United States, a country that is agriculturally independent, but relies on Saudi Arabia for its oil. Liberalist theorists assert that economic interdependence is the road to peace, as countries mutually benefit, taking advantage of plentiful resources and exchanging them for goods they need. Upon hearing the word “self-sufficiency,” most would point fingers at either Cuba or North Korea – both of which are economically isolated with only some reliance on foreign imports. However, few would think of Russia as self-sufficient. From oil to wheat, and from timber to automobiles, Russia has mastered the art of producing enough goods to equip a population of 144 million people. Yet in response to sanctions and unfavorable political sentiments in the Western world, Russia is starting to master the art of self-sufficiency in other areas –particularly its pharmaceutical industry.

In the Soviet era, Russia mainly traded with other communist countries, but produced the bulk of their goods, including medicines, domestically. Only after the collapse of the Soviet Union in 1991, did Russia begin to rely on Western medicines, as the West was far more advanced both economically and technologically. Investor and Vice President at Investo, Balaji Viswanathan stated that “except for medicines, none of the other [imports]are too critical to stall an economy. This is why the erstwhile USSR was able to sustain that long alienating the world markets (foreign trade contributed to less than 4% of Soviet’s GDP)”.

However, the one industry that has long relied on foreign imports is now rapidly being propped up by the Russian Ministry of Industry and Trade. On March 11, 2011 then-Prime Minister Vladimir Putin announced the Pharma-2020 plan, “a radical strategy to develop the country’s pharmaceutical industry and diversify the country’s economy through the creation of new jobs and reduction of Russia’s dependency on imports”. It is not a coincidence that the imposition of sanctions by Western countries on Russia has corresponded with the country’s sudden transition to domestic goods.

The Origins of the Sanction War

The consequential sanctions were first imposed with the deadly Ukraine crisis, which first escalated as a result of former President Victor Yanukovich’s decision to take a $15 billion loan from Russia to “move his country toward a planned ‘Eurasion Union’, with Belarus, Kazakhstan, and Russia” instead of having Ukraine join the European Union. Ignoring President Putin’s claims that his country had not mobilized troops to fight against pro-Ukrainian forces in east Ukraine, the Russian military had secured a strong and deadly presence in the Donbass region. While Ukraine was dealing with a weak government and internal turmoil, Russian forces seized the Crimean peninsula, boosting pro-Russian fervor among citizens and asserting their might over Ukraine.

Shortly after this slew of events, Western leaders imposed sanctions in two series. The first targeted members of Putin’s inner circle like President of Rosneft, Igor Sechin, and first deputy chief of the Kremlin staff, Vyacheslav Volodin, as well as senior officials and military leaders. The second series of sanctions, also known as “sectoral sanctions”, hit Russia the hardest, because they prevented financial institutions from lending any money to Russia. Journalist Frances Coppola of Forbes magazine stated that “by imposing sanctions on entities within the financial services and energy sectors, [the]Treasury has increased the cost of economic isolation for key Russian firms that value their access to medium- and long-term U.S. sources of financing”.

In response to these sanctions, Russia imposed import bans of their own in August 2014. Prime Minister Dmitri Medvedev stated that all “beef, pork, fish, fruit, vegetables and dairy products from the European Union, the United States, Canada, Australia and Norway” would be banned. As a result of this “economic isolation,” Russia scrambled to prop up its domestic production in hopes of becoming self-sufficient. The latest industry to be hit by severe import cuts was the pharmaceutical industry, with 80 percent of Russia’s medication being imported from foreign countries. As a result, Prime Minister Medvedev stated that “domestic produce must account for 90 percent of Russian drugstore stocks by 2018”.

Although the Russian government wants to maintain its assertiveness before the West in light of damaging sanctions, such assertion is ultimately hurting its own citizens more severely than Western economies. With regards to bans on imported drugs, those that will be most affected will be Russians with “orphan diseases” or rare illnesses. These patients rely on highly effective medicines that can only be found outside of Russia’s borders and that “can never be certified in Russia because the procedure requires extensive human testing here — which is impossible because there are simply not enough patients”.

Pharma 2020: A Comprehensive Overview

Since its announcement in 2011, the Pharma 2020 plan has not garnered much media attention. Nonetheless, it is one of Putin’s most ambitious plans. While Pharma 2020 will render Russia almost entirely self-sufficient in the pharmaceutical industry, it will also make Russia technologically competitive with the West.

What exactly does this program entail? It essentially consists of three phases, each targeting a specific aspect of the domestic pharmaceutical industry: improved health care for the Russian people, “improved training of doctors”, and improved “international competitiveness of the domestic pharmaceutical industry” by “encouraging the development and production of innovative medications”. The budget for this plan is 188 billion rubles, “80 percent of which is to be invested toward research and the development of new products”. Many large pharmaceutical companies have already begun building facilities around Russia, while others have partnered with Russian companies in joint ventures.

On paper, Pharma 2020 appears to be a much-needed boost to the Russian economy and pace of innovation. However, before Putin coaxes foreign investors and companies back, there must be a dramatic shift in the political climate with the West. Once tensions are eased, Russia may begin making preparations to become an export-oriented hub of innovation.

A Muscovite’s Perspective

One of the people that has experienced the effect of these sanctions first-hand is my grandmother, and lifelong Moscow resident, Raisa Shumilina. In a brief, 30-minute sit-down interview, she shared her thoughts on the import bans, the situation in Crimea, and how these changes have affected her.

As a handicapped pensioner, her medicines are all paid for by the government. She noticed the changes in produce and medicines in 2014, the year that the sanctions were imposed. Ever since then, she has received “50% imported and 50% domestically produced medicines,” compared to the 100 percent foreign-made medicines she used to receive. When questioned about her feelings towards domestically produced medicines, she stated, “I don’t trust their quality. . .maybe I’m wrong, but at this very moment, I’m skeptical.” She admitted that the new medicines had no noticeable effects on her health, but felt it was safer to rely on foreign medicines. If she has the option to, she pays out of pocket just to be able to own or have imported medicines.

Revitalizing a Struggling Economy

Despite the economic uncertainty and political turmoil that Russia has experienced over the last few years, President Vladimir Putin’s approval rating has sky-rocketed to an impressive 89 percent. Igor Yurgens, the chief economist at the Institute of Contemporary Development said, “The consensus of 80 percent of Russians is that we have to reply, that we will fight.” It is not a surprise that so many Russians support their current leader and his United Russia party.  With the annexation of Crimea and now with the sudden boost in domestic production of goods, nationalistic fervor is more widespread than ever before, and the “we-will-tough-it-out” sentiments that much of the Russian public has expressed are not without reason. If the Russian government continues to invest in local industries and promote the domestic production of commodities, the Russian economy will eventually stabilize. As inflation rates return to healthy levels, unemployment rates decrease, and living standards improve, hopefully the Russian people will finally be able to enjoy the financial and social stability that they have longed for.

Nevertheless, Russia still has a lot more catching up to do to match the West’s pace of innovation and economic growth. An ambitious, but unrealistic goal, Putin’s Pharma 2020 plan should be postponed to a later date, as it will take many years before Russia fully restore relations with the West and begins to enjoy an adequately stable economy. Although the economy is at a much more stable place than it was in the winter of 2014, it still has a long way to go. With the ruble’s unhealthy dependence on oil prices and the lack of foreign investment, the country will not be able to financially support and promote domestic industries. The abundance of oil means Russia will not abandon the resource so easily, but the lack of foreign investments is a problem that Russian policymakers can solve. Controversial policy moves like the annexation of Crimea and the backing of the Assad regime make Russia a powder keg of instability. To revive the flow of capital, Putin needs to address his critics’ concerns and cooperate with the West, the source of many potential funds. If Putin continues to destabilize his country’s economy with an aggressive foreign policy, Pharma 2020 will never receive enough money to become a reality.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff, editors or governors.

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While the new leader was warmly met by the eager masses ready to move past the repressive Ahmadinejad era, there was no telling whether his words would bear fruit. Rouhani’s potential to affect such change was eclipsed by a shadow of doubt stemming from the supposition that he would serve as merely yet another slave to Supreme Leader Ayatollah Khamenei and his Islamic regime. So has Iran’s “angel” Rouhani upheld his rhetoric presented during his campaign since entering office? Now, more than 6 months into his presidency, the gulf between his words and actions can be qualitatively tracked.

Appeasing the Hardliners

How has Rouhani performed thus far in winning the favor of governmental hardliners while working towards his progressive reform plans? At the start of his presidency, Rouhani took initiative to begin thawing strained US-Iran relations with a visit to the United Nations. You may recall his fifteen-minute phone call with President Obama during the trip, a call that garnered both support and criticism. Regardless of the critics, this phone call was a huge first step in the right direction towards reconciling US-Iran relations considering that the two states have not shared this level of contact since the 1979 Iranian Revolution. Furthermore, Khamenei approved of Rouhani’s October trip to the United States. Although unable to appease hard-liners on the issue as they derided his approach, as long as the President is able to maintain the Supreme Leader’s support, he will be able to ward off hard-liner criticisms in his advances towards a relaxed relationship with the West.

Catering to Reformists

During his reign thus far, Rouhani has been performing a careful balancing act; he has struck a careful balance between the hardline and reformist camps while avoiding alienating Khamenei and other key government players. The new President has successfully garnered and maintained support from notable predecessors, including popular former reformist President Mohammad Khatami and former President Akbar Rafsanjani, one of the pillars of the 1979 Iranian Revolution, who remarked that “Rouhani’s success in New York is the mark of the divine victory.” Although not to the degree which former president Khatami was able to mobilize the “Iranian street,” Rouhani seems to have been met with considerable success in galvanizing the reformist camp, namely the youth who have warmly accepted his overtures to reduce Internet censorship.

Ending Sanctions

Perhaps his most significant achievement thus far has been unveiled at the negotiation table with Western powers. Back in November, Rouhani was able to successfully reach a temporary deal with the United States while entering into a year-long negotiation period to construct a permanent deal to ease sanctions. The $7-billion USD received by Iran in sanctions relief created room for a rise in the Iranian Rial and a minor stabilization of the national economy. Both the initial agreement and the overtures by both parties have been called nothing short of “historic” in the media.

Economic Viability

As mentioned, some of the easing of sanctions has seen a rise in the purchasing power of the Rial thereby providing Iranian citizens with some relief. Analyst groups claim that “last year, with economic pressure at its peak, Iran suffered from severe hyperinflation, and the Rial became the least valued currency in the world. This is no longer the case, as the Rial has gained significant value in 2013’. However, further economic steps must be made; the nuclear deal with the West has yet to come into full form, and whether Obama will be able to convince Congress to further repeal sanctions will prove to be a major determinant of whether Rouhani’s reform efforts retain momentum.

Relations With Israel

Thanks to his reputation as the new face of Iran, Rouhani has garnered a considerable amount of positive press and, for the most part, positive attention from the West – which has acted as a negative force against Israel. Within a month of Rouhani’s holding office, Israeli Prime Minister Benjamin Netanyahu dubbed him a “wolf in sheep’s clothing,” immediately dismissing him as nothing more than another mere slave to the Islamic regime. However, it seems that Israel emerged as the real loser in this love triangle between the United States, Iran and itself, failing to turn the West against its enemy as it had hoped. Within weeks after the Prime Minister’s fiery comment, Iran successfully brokered the temporary deal with the United States. Since then, public Israeli threats and comments against the country have subsided as the country now seems more preoccupied with the Palestinian question than the Iranian-nuclear issue at the moment.­­­

Human Rights

The human rights issue is arguably the weakest front of Rouhani’s presidency thus far. The leader’s promises on this subject seem to be little more than empty rhetoric, as notable action has yet to be taken to restore basic human rights and create equality among members of the citizenry. Premature optimism for Rouhani to improve civil rights issues has all but withered as the only observable change has been a steep rise in executions since he took office.

Another warning sign in his term stems from the detainment of prisoners within the country. The government’s minor gesture of releasing a few political prisoners in December did little to placate the mounting concerns of relatives and families of those still imprisoned, including activists of the “Iranian Street.” Additionally, despite early promises to address the house arrests of Green Revolution leaders Kharibi and Mousavi’s house arrests, not even a mention of the issue has been made. The president has remained silent even amidst mounting claims from close family and friends that their health is deteriorating significantly as a result of being confined within their households for several years now.

Whether Rouhani’s strategy to maintain popular support follows that of his predecessor Khatami’s path remains to be seen. In the middle of Khatami’s second term, his base fell apart due to youth and women disenfranchisement. Rouhani’s track record on human rights and freedoms may very well be what determines his support from his base.

Implications for U.S.-Iran Relations

Despite his shortcomings on the human rights dilemma, Rouhani’s successes have provided the Iranian regime with some degree of legitimacy it had been lacking for years, both in the eyes of the international community and the Iranian electorate. The real question for the Obama administration, however, is whether the Rouhani government’s newfound political capital and prestige is enough to placate conservative Hawks in Congress on both sides of the aisle who have been itching to introduce further sanctions. Any new congressional sanctions against Iran would not only spell the end of the current deal but would most likely set back nuclear negotiations by a number of years. Yet Rouhani, a veteran statesman and diplomat, is keenly aware that the halls of Congress are just as significant an arena for statecraft and diplomacy as the negotiating table. Rouhani’s foreign minister Javad Zarif has recently made a concerted effort to promote lobbying of their position to Congress via the small-but-growing Iranian-American lobby already present in the country.We will know soon enough how far Rouhani is willing to go to make good on his campaign promises in seeking to uplift the Iranian state.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff and editorial board.

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