14 NOVEMBER 2018
Quad members still face the challenge of defining its common agenda
As officials from the ‘Quadrilateral’ grouping of India, Australia, Japan and the U.S. meet in Singapore on Wednesday, their challenge will be to accurately describe their common agenda. The Quad is billed as four democracies with a shared objective to ensure and support a “free, open and prosperous” Indo-Pacific region. During this round, the four countries are expected to discuss infrastructure projects they are working on, and building humanitarian disaster response mechanisms. Over the past few months, India and Japan have announced they will combine efforts on a number of projects in South Asia, including bridges and roads in Bangladesh, an LNG facility in Sri Lanka and reconstruction projects in Myanmar’s Rakhine province. Australia has unveiled an ambitious $2 billion project to fund infrastructure and build maritime and military infrastructure in the Pacific region, on which it is willing to cooperate with other Quad members. The four countries are expected to talk about regional developments, including elections in the Maldives, the collapse of the government in Sri Lanka and the latest developments in North Korea. With Quad talks being held on the sidelines of the East Asia summit, the Regional Comprehensive Economic Partnership summit and the ASEAN-India informal summit, discussions will include some of the overlapping issues among these groupings.
However, despite the potential for cooperation, the Quad remains a mechanism without a defined strategic mission. In 2007, when the grouping was first formed following cooperation after the 2004 tsunami, the idea was to better coordinate maritime capabilities for disaster situations. When revived in 2017, the grouping seemed to have become a counter to China’s growing inroads into the region, despite denials that any particular country had been targeted. Even a common definition of the geographical area encompassed has yet to be found. While Washington sees the U.S. and India as “bookends” of the Indo-Pacific, India and Japan have included the oceans up to Africa in their definition. The entire focus on the Indo-Pacific makes the Quad a maritime, rather than land-based, grouping, raising questions whether the cooperation extends to the Asia-Pacific and Eurasian regions. Even on maritime exercises, there is a lack of concurrence. India has not admitted Australia in the Malabar exercises with the U.S. and Japan, despite requests from Canberra, and has also resisted raising the level of talks from an official to the political level. The fact that India is the only member not in a treaty alliance with the other Quad countries will slow progress somewhat, although each member is committed to building a stronger Quadrilateral engagement. The outcome of the third round in Singapore will be judged by the ability of the group to issue a joint declaration, which eluded it in the first and second rounds.
A meeting of OPEC and its allies in December will decide the future course of oil prices
The fickle nature of the global petroleum market has been on display over the last few days as prices reacted to statements and counter-statements by producers and consumers. Over the weekend, Saudi Arabia signalled its discomfort with the falling prices and hinted at a fresh cut of one million barrels a day. The benchmark Brent crude, which slipped below the $70 a barrel mark last Friday, reacted sharply on Monday, rising to above $72. That prompted a tweet from U.S. President Donald Trump asking for lower prices, and so, on Tuesday prices again fell to below $69! The price of Brent crude, which had risen over the $85 mark in early October, is down by about 20% from its October peak. Interestingly, Saudi Arabia’s latest call to cut output comes just months after the OPEC cartel decided to increase its output. In their June meeting, OPEC members decided to ramp up supply after apprehensions over Iranian supplies in the wake of economic sanctions imposed by the U.S. Since then, the U.S. has granted a temporary waiver to eight countries, including major buyers India and China, to continue importing oil from Iran for at least the next six months. The way prices have responded to OPEC’s output decision, however, suggests that it may still be too early to dream about higher prices in the near future. A crucial meeting between the cartel and its allies in the first week of December will decide the 2019 output level. That might well set the trend for oil prices in the new year.
Even after OPEC’s sudden change in its supply outlook, oil surprisingly continued its longest losing streak on record, perhaps owing to expectations that the production cut would not raise prices significantly. In fact, technically speaking the oil market is yet to break its short-term downtrend that began after the fall from its peak in October. Oil prices were down on Tuesday as well. This price action suggests that markets could probably still be worried about the risks of any kind of sustained rise in oil prices. For one, strong U.S. opposition to higher oil prices could be making investors feel jittery. Mr. Trump’s tweet on Monday, for instance, negated the bullish influence of OPEC’s announcement almost immediately. The increasing output of shale is another significant threat to oil prices. The U.S. Energy Information Administration last week predicted that American crude output would increase at a higher pace than expected and lead to lower prices next year. This is not at all surprising because U.S. shale producers have traditionally increased their output in response to higher oil prices. Also, producers like Russia have been non-committal on any significant production cut. Any slowdown in global economic growth is another risk factor that may weigh down oil.