A new strategic environment

Q: What conclusions do you think Chinese President Xi Jinping has drawn from Russian President Vladimir Putin’s failures in Ukraine and the from NATO’s response to the invasion, including new members joining NATO?

A: Well, I think that Xi probably believed Putin: that this was all going to be over in a week, if not three days, as I suspect most observers believed, when that 40-kilometre column of tanks began grinding out and then started to be destroyed by the Ukrainians.

What are the lessons for China? One is that, unless you can win a war very quickly, you’ve got to be prepared to dig in for a long time. Does Xi want to go in and actually bomb Taipei and other major cities of Taiwan? I’m not sure that that’s a very attractive proposition to him. The other possibility is to establish some sort of blockade around Taiwan. But that would be difficult to maintain, particularly as the Japanese and I think the Americans would be very concerned to break it.

While Xi’s military forces have been increasing in strength and number, they have not fought a war since the conflict with Vietnam in 1979. There is no evidence of the Chinese forces actually knowing what to do in a war; having the best equipment in the world does not necessarily win your war.

So, I think Xi would have taken some pause from what has happened in Ukraine. But the other side of this is the supply of munitions. Ukraine has done well because many other countries – including Australia with Bushmasters and other countries with missiles and the like – have supplied the ammunition, the guns, the materiel to Ukraine. But there is a finite number of munitions in the world; so, the ability to supply those weapons if this becomes a long-term conflict will be very telling.

Q: Taiwan occupies a very important position strategically, opening out onto the East China Sea and the South China Sea. Its geographic position effectively enables it to block any major egress of substantial Chinese naval forces into those regions that China wants to control.

A: I have a theory that, historically, Chinese regimes have sought to build a wall around China. That is what the Great Wall of China was for: to stop invasion from the west flank of China, which is the most exposed flank.

But the part which is most exposed today is the South China Sea and the East China Sea. I think there is something in the Chinese psyche about protecting themselves from potential invasion. It’s certainly present in the nationalistic rhetoric that Xi uses now. Obviously he’s using it for domestic political purposes in China, but nonetheless that type of rhetoric has to strike a chord with the people of China by appealing to the nationalistic fervour of the Han Chinese who live in that great fertile area along the east coast of China.

The danger, of course, is that a huge proportion of world trade travels through that area. And that is why, when China made noises about the East China Sea, the Taiwan Straits, being part of territorial China, other countries, including Australia and the United States, said, No, that is not true: these are international waters through which our trade travels and will continue to do so.

That is why like-minded democratic countries must ensure that they continue to transit those waters, particularly with their naval vessels.

Q: During the covid19 pandemic, our overseas supply chains were disrupted. If China is able to project its power further into the Pacific, we could be at risk of very long supply chains for things such as oil, and even our undersea telecommunications will come under threat. What are the industries that we need here in order to survive if our supply chains are cut? What do we do to enhance national resilience?

A: Two things in particular. First, we need to diversify the means of communicating between us and the rest of the world. We cannot rely just on an undersea cable. We need satellites, we need various means of communicating so that, if, for example, the undersea cable was cut, we would have other means of maintaining that communication.

The second most important thing is fuel security. We have a limited storage of fuel within Australia. We’ve been a little blasé in the past about this. We’ve worked on the premise that, if there was a conflict close to Australia, the civilian use of fuel would fall so there’d be more there for military use. But that is rather short sighted.

We need to be looking at alternative means of producing fuel in Australia. A lot of development is going on with biofuels. I think we are on the cusp of being able to produce much more fuel here.

At the same time, we shouldn’t be closing down the fuels that we’ve got that we can use for ourselves. This country is one of the most resource rich in the world, in terms of fuels. We can’t just be looking to move to some other renewable form of energy if one of the unintended consequences of that is that, if there is a conflict, we are simply unable to fuel what we need to fuel in Australia.

Q: We also need, for example, chemicals to keep our water supply usable. We need microprocessors to keep our communications, cars, trains and refrigerators going.

A: Indeed, we haven’t touched on microprocessors. The majority of particularly high-level microprocessors are made in Taiwan. And while the Taiwanese are looking to diversify where that production is occurring, the reality is that currently and for the foreseeable future, it is going to remain in Taiwan.

So, if people say that Taiwan is not a vital interest to Australia, that is a foolish statement. If Taiwan were invaded, one of the possible consequences would be that the chip-production facilities would be destroyed. That would put an enormous burden economically on the rest of the world, running to billions of dollars, even for a country like Australia. Then there is the impact it would have on industry, on the ability to produce practically everything.

The alternative possible consequence would be that, if the chip-production factories somehow remained intact after an invasion, everybody would be at the beck and call of the Chinese regime so far as chip production is concerned. And it wouldn’t be a free market exercise as it is at the present time.

Q: Do you think we could persuade Taiwan to do some chip manufacturing in Australia?

A: Well, the Taiwanese are certainly showing interest in doing some manufacturing in other places. They are looking to manufacture more in America. There has been talk about manufacturing in Japan; the Europeans are looking at the possibility of attracting Taiwanese manufacturers to Europe. We should be in on that as well. We should be making offers to Taiwan.

Of course, one thing about chip manufacturing, is that it requires a lot of energy. The Industrial Revolution itself, with its great advances, was essentially an energy revolution. If you do not have energy, there is not much you can actually do.

And one of those things you are going to have trouble doing without energy is actually defending your own country.

Q: Where does the AUKUS agreement and the acquisition of nuclear submarines fit into the new strategic environment that Australia faces?

A: The main benefit of nuclear submarines is that you can deploy them for a much longer period of time. And I suspect that we will see in the not too distant future drone submarines as well.

One of the challenges is to find submariners. It takes a particular type of person who wants to live under the sea for three or four or five months at a time. So, that is a challenge.

I believe that, if it is possible, we should lease some nuclear-powered submarines from America or elsewhere, at least in the short term. The problem with the new submarines is that we are not going to see one for a long time.

In the 2016 White Paper mentioned earlier [see Part One], we wrote with the view that we would see the first new submarine operational between 2025 and 2030. That has gone out a long way further now. We are really behind the eight ball in this regard: other countries are building submarines at a much faster rate.

So, we need to be making the critical strategic decision to obtain another submarine or series of submarines as quickly as we can. That may mean we don’t build them here in Australia, but the security concerns should outweigh anything else.

Q: The Kwinana oil refinery has been shut down. Should this be nationalised and expanded?

A: As you know, we have closed down almost all our oil refineries in Australia, leaving us completely dependent on oil shipped in from overseas. In the event of conflict, one of the things any enemy would do would be to seek to cut off our supply lines. Which means we would run out of oil in a relatively short period of time.

So, whether we look to re-establish closed refineries, or we establish new ones, or, as I said earlier, we look at the great potential with biofuels, we should be doing it urgently, in the next three to five years. We can’t be thinking about it in 10 or 15 years. The reality is now. We cannot wait.

This interview was originally published in News Weekly.