The Big One.
Kashmir on lockdown.
August 5 marked the beginning of a new era for Kashmir. After days of a tense build-up, which included a drastic uptick in the presence of paramilitary personnel in the Indian-administered portion of the region alongside an information blackout, the Indian government announced that it would revoke a longstanding constitutional provision that had granted the state of Jammu and Kashmir special status. It also announced an administrative restructuring of the Indian-administered parts of the region into two new so-called Union Territories. One would be called Jammu and Kashmir and the other Ladakh. The state of Jammu and Kashmir would cease to exist.
This decision by India’s right-wing Bharatiya Janata Party (BJP) government was a long time coming. For decades, the BJP and its ideological predecessors had seen Article 370 and Article 35A of the Indian constitution—both of which carved out special considerations for the only Muslim-majority state in the Indian union—as an aberration. The BJP even put the abrogation of Article 370 into its most recent election manifesto. The objective had been in place even under the previous BJP government led by Atal Behari Vajpayee. What enabled Modi—and his home minister, Amit Shah—to act this time was largely the mammoth electoral mandate that the BJP won in the 2019 Indian elections.
India is in uncharted waters insofar as the implications of the restructuring are concerned. There are serious questions of constitutional interpretation ahead that may require the intervention of the Supreme Court. The BJP has proceeded by presidential proclamation, however, and it’s highly unlikely that these steps will be reversible. Meanwhile, Kashmiris continue to remain under an exceptional crackdown. While press reports from within the information-embargoed region are sparse, the few that have emerged have described an unfathomable stillness over the Valley and in the erstwhile state capital of Srinagar. Indian paramilitary forces are in place to ensure that unrest doesn’t take hold.
We’ve had a few views on the consequences at The Diplomat. Writing from India, both Harsh Pant and Abhijnan Rej chimed in. Harsh writes:
For many in India, too, this move will be difficult to digest. We have grown so used to the status quo that a change of this magnitude challenges our intellectual faculties. But it is also a reality that much as many of us would like to ignore, the status quo on Kashmir had became unsustainable long ago.
Abhijnan, meanwhile, cautions of Pakistan’s response:
When it comes to how Pakistan reacts to this, much will depend on how Rawalpindi and Islamabad weigh the costs of dedicating significant proxy resources – or even a limited conventional military operation – to impose cost out of India for this decision, versus its renewed commitment to coming to America’s aid as U.S. President Donald Trump begins a final push to extricate his country from Afghanistan. Already both centers of power in Pakistan have noted their displeasure at New Delhi’s decision.
The Pakistani reaction has been unsurprisingly sharp (as has China’s response; Beijing is also a claimant in Kashmir). Indian reports suggests that New Delhi is bracing itself for a sharp Pakistan response—both diplomatically and possibly across the Line of Control itself. On Wednesday, Pakistan announced a set of new measures:
The plan to review bilateral arrangements should draw our attention. It suggests Islamabad may review and nullify the 1972 Simla Agreement, which serves as the basis on which both India and Pakistan respect the Line of Control as the demarcation line in Kashmir. Ending the Simla Agreement would be the single biggest political indicator out of Pakistan that it is ready to risk a war over this.
Without extending my introductory analysis too far, I’ll mention that at the end of this newsletter, I’ve appended some of my responses to questions that I received in a conversation with Reuters TradingIndia clients on the political risk implications of the Article 370 abrogation. Scroll down for the rest.
Bottom Line: Narendra Modi is cashing in on his electorally strong position to consolidate Indian control over Kashmir, ending its internal autonomy.
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If you’ve seen headlines that the ongoing dispute between Japan and South Korea is a “trade dispute,” the seriousness of what’s going on between these two U.S. allies may be understated. Following Japan’s removal of Seoul from its trading “white list” of preferred countries, the true nature of the dispute has become apparent. For South Korea, Tokyo’s decisions—beginning with the implementation of export controls in early July—have provided a pretext to relitigate the entire so-called “1965 framework” between their countries. That was the year the two countries normalized diplomatic relations and the Korean progressive left, currently in power, has always seen the terms on which right-wing autocrat Park Chung-hee agreed to normalize ties with Japan as unfavorable and unjust.
In the meantime, Tokyo’s position is clear and based on legal reasoning citing that 1965 treaty between the two sides. Japan is also motivated by deeper frustrations over what it sees as the Moon Jae-in government’s repeated insistence on litigating issues that were previously considered “closed” cases by Tokyo (i.e., the rejection of the 2015 deal on compensation for Korean women who had been taken into sexual slavery by the Imperial Japanese Army and the broader rejection of the 1965 framework’s provisions on compensation for Korean forced laborers).
The Japan-Korea crisis is now about fundamental issues of national identity and the terms on which Koreans should relate to Japan. The manifestation of this crisis is deeply economic, however. South Korean President Moon has resolved to help the country’s high-tech manufacturing base reduce its reliance on Japan-sourced components across the entirety of its supply chain. What makes Seoul’s leverage unique in this ongoing dispute is that its domestic high-tech industry is more critical to global technology supply chains than it ever has been in the past. For instance, Samsung Electronics and SK Hynix account for a majority of the world’s production of DRAM—a component necessary for the device you’re likely viewing this newsletter on and much more.
For the United States, the ability—or will—to resolve this crisis remains distant. There are career Northeast Asian security bureaucrats within the State and Defense Departments that appreciate the gravity of what’s happening, but without higher-level attention—and a novel approach, possibly involving the application of “sticks” more than “carrots” toward both allies—things appear set to get much worse.
Bottom Line: The most serious bilateral crisis between South Korea and Japan is about fundamental issues with identity.
You might have noticed something about North Korea: it’s launching an awful lot of missiles—or “projectiles”—again. July 2019 was a dynamic month in this regard. It began with great (albeit unfounded) optimism after Trump and Kim Jong Un shook hands at the inter-Korean border on June 30, promising to reconvene working-level talks, but quickly gave way to pessimism, amid back-to-back-to-back missile tests.
The so-called KN23, North Korea’s new precise, quasi-ballistic missile, and a new artillery system have received top billing recently. Both systems present a serious challenge for the United States and South Korea: particularly their missile defense capabilities. On August 5, North Korea conducted a particularly significant test of the KN23, one day after the alliance had started its new late-summer computerized command post military exercise, the successor to the old Ulchi-Freedom Guardian drills.
The August 5 launch saw two KN23 missiles fly all the way across North Korea, from a launch site on the western side of the country, and hit a target island precisely. The North Korean state media report on the test said that it demonstrated the “actual war capacity” of the missile. What made the test most unnerving was the low altitude at which the missiles flew—reportedly 37 km—which would present a challenge for the missile defense systems that are currently deployed in South Korea.
Trump has described Kim’s launch of “short-range” missiles as “very standard,” but these new systems make it amply clear that they’re far from the old standard Scuds that the United States and South Korea had gotten used to. These represent a real new qualitative capability and will seriously complicate wartime planning for the alliance. Kim Jong Un has suggested further tests will come as the exercises run through August. After that, the door to diplomacy remains open, but not for much longer.
Bottom Line: North Korea’s return to missile-testing is here to stay as long as the U.S. and South Korea continue their exercises.
As promised up top, here is an excerpt from my exchange with investors interested in India on the practical implications of the Kashmir decision. Names of the questioners have been omitted for privacy.
What do you expect from here?
I expect a protracted and technical legal process by which these unprecedented proposals are implemented. Regarding your question, I should caveat that I am far from an expert in Indian law or the constitution, but the experts who I’ve spoken to in the past 12 hours disagree sharply between themselves on key constitutional questions here. They also disagree about the extent to which the Supreme Court will be eager to intervene.
The second development I expect is a highly securitized an unstable situation in the Kashmir Valley for at least 6 months—perhaps as long as 18 months in the worst case.
It’s still early enough that most Kashmiris under the information embargo believe that their predicament is due to a heightened security risk from across the Line of Control (the official rationale for the paramilitary surge in the leadup to Monday).
When the truth of what has happened becomes known more widely, we should expect serious unrest. The BJP may not have chosen to take this decision during the summer months, when Kashmir is prone to greater unrest.
I am not sure but i don't think there has been a historical case of a state being made a UT. Does taking away the statehood status from J&K and making it a UT move India away from the very concept of a Federal state?
My third and final expectation is that the international official reaction, outside of Pakistan, will remain tepid.
Yes. There has been some serious concern on this point from the BJP’s opponents, who’ve cited this precedent as a troubling one.
What can the government do to massage the situation? Could an economic package for J&K work?
Could it? Sure! But as with all economic packages, the details matter. Right now, everything on the economic benefits for Kashmiris and Ladakhis is rather vague. We have promises of private investment flowing into the state as a result of the shift in constitutional status, but it’s unclear if that can happen in the short-term, especially if there is great unrest.
That’s all for this week!
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