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ASEAN ministers warn Taiwan tensions could spark 'open conflicts'
By Lisa Martin and Rose Troup Buchanan
Phnom Penh (AFP) Aug 4, 2022

Lenders could delay Sri Lanka bailout: president
Colombo (AFP) Aug 5, 2022 - A potential International Monetary Fund bailout for Sri Lanka could be delayed if its creditors -- the largest being China -- do not agree on concessions, the island's president warned Friday.

A crucial debt restructuring -- with the countries to which it owes billions agreeing to write off some of their dues -- is a pre-condition before the IMF will approve a bailout for the country, where inflation is rampant and shortages of essentials widespread.

"Until you come to an agreement among the official creditors, it is not possible to go to the London Club," Ranil Wickremesinghe told a forum, referring to subsequent debt talks with commercial lenders.

Wickremesinghe did not name a single country, but analysts said he was referring to China, the largest single bilateral creditor, which is owed over 10 percent of Sri Lanka's foreign debt.

Officials say that clinching an agreement with Beijing is crucial, but China has not publicly shifted from its offer of more loans rather than taking a haircut on existing credit.

The IMF is likely to insist on painful reforms as part of any bailout, and Wickremesinghe warned: "It may be bitter, but any medicine for recovery is bitter. You have to take injections."

Previous presidents, including his immediate predecessor who fled abroad and resigned last month, borrowed heavily from Beijing for infrastructure projects, most of which became white elephants.

Analyst Victor Ivan said debt talks could be leveraged by Beijing to extract concessions in the South Asian island, which has become a geopolitical hotspot.

Unable to pay back a $1.4 billion loan, Colombo handed a Chinese-funded and -built deep sea port to a Beijing company in 2017 on a 99-year lease.

"China has done it in the past, but to do it so openly now could backfire on them given Sri Lanka's circumstances," Ivan told AFP.

Beijing has publicly offered Colombo more loans to pay off its debt to China, a move that is not acceptable to other creditors who want all lenders treated equally.

"Renegotiating the Chinese debt could be a sticking point," former Central Bank of Sri Lanka deputy governor W. A. Wijewardena told AFP. "There will have to be hard bargaining with them."

The US appeared to nudge the island's creditors Thursday to cut a deal on their debts.

On the sidelines of an ASEAN meeting, US Secretary of State Anthony Blinken said an IMF bailout "requires appropriate debt restructuring that has to be done on an equitable basis with all of the creditors doing what's necessary".

Sri Lanka defaulted on its $51 billion foreign debt in mid-April and sought talks with the IMF.

The country has also borrowed heavily from neighbouring India this year to battle fuel shortages. New Delhi is yet to declare its stance on restructuring.

Southeast Asian foreign ministers urged restraint Thursday as China launched massive military drills off Taiwan, warning the situation risked spiralling into "open conflicts".

A furious Beijing kicked off its biggest-ever exercises around Taiwan in response to US House Speaker Nancy Pelosi's visit this week to the self-ruled island.

Ministers from the 10-member Association of Southeast Asian Nations (ASEAN) meeting in Phnom Penh warned against "provocative action".

The situation "could lead to miscalculation, serious confrontation, open conflicts and unpredictable consequences among major powers", the ministers said in a joint statement published Thursday.

Chinese Foreign Minister Wang Yi is attending the talks along with his US counterpart Antony Blinken, though they are not expected to hold a one-on-one meeting.

At a meeting with ASEAN ministers, Blinken said the United States had contacted China "at every level of government" in recent days to call for calm and stability.

"I hope very much that Beijing will not manufacture a crisis or seek a pretext to increase its aggressive military activity," Blinken said.

"We and countries around the world believe that escalation serves no one and could have unintended consequences that serve no one's interests including ASEAN members and including China."

But Wang, speaking on the sidelines of the ASEAN summit Thursday, said the "flagrant provocation" by United States had set an "egregious precedent."

"If it's not corrected and countered, will the principle of non-interference in internal affairs still exist? Will the international law still be upheld? How can the regional peace be safeguarded?" he said, according to Chinese state media Xinhua.

Beijing, which considers Taiwan a part of its territory to one day be reclaimed, by force if necessary, was enraged by the trip by Pelosi -- the highest-profile elected US official to visit the island in 25 years.

It vowed "punishment" and state TV said it began military drills, including live-fire exercises, at 0400 GMT in several areas encircling Taiwan.

Late Thursday, Japan's foreign minister Hayashi called for an "immediate stop" to the exercises.

"China's actions this time have a serious impact on the peace and stability of the region and the international community. I once again demand the immediate stop of these military exercises," Hayashi told reporters.

His comments came after the Japanese defence minister said five Chinese ballistic missiles fired during the exercises were "believed to have landed within Japan's (exclusive economic zone)".

EU foreign policy chief Josep Borrell, also in Phnom Penh, condemned the Chinese response.

"There is no justification to use a visit as pretext for aggressive military activity in the Taiwan Strait. It is normal and routine for legislators from our countries to travel internationally," he tweeted.

Kung Phoak, Cambodia's deputy foreign minister and ASEAN spokesman, urged both sides to stabilise the situation.

"We hope de-escalation happens... and normalcy returns to the Taiwan Strait," he told reporters.

- 'Miscalculation' fear -

ASEAN is split between countries with close ties to China, such as Myanmar, Cambodia and Laos, and others that are more wary of Beijing and its growing international assertiveness.

But no ASEAN country formally recognises Taiwan and none has shown an appetite for backing Taipei against China.

The ministers' statement -- which avoided referring to Taiwan by name -- said ASEAN "stands ready to play a constructive role in facilitating peaceful dialogue", though it is not clear either side is interested in outside mediation.

While Wang and Blinken are not scheduled to meet bilaterally, they will both attend a meeting Friday of the ASEAN Regional Forum (ARF), a 27-member body set up to discuss security issues that also includes Russia and the EU.

Australian Foreign Minister Penny Wong, who will also join the ARF gathering, said the fragile status quo in the Taiwan Strait must be maintained.

"All parties should consider how they can contribute to de-escalating current tensions," Wong told AFP.

"One of the risks the region is concerned about is the risk of miscalculation."

Pelosi's visit and the flare-up over Taiwan have overshadowed the ASEAN meeting, which had been due to focus on the violent political crisis in Myanmar.

ASEAN has spearheaded so far fruitless diplomatic efforts to ease the turmoil that has flowed from last year's military coup.

Several members are growing increasingly angry at the junta's stonewalling tactics.


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TRADE WARS
China's Taiwan war games threaten more global supply chain disruption
Beijing (AFP) Aug 4, 2022
Chinese military exercises around Taiwan are set to disrupt one of the world's busiest shipping zones, analysts told AFP, highlighting the island's critical position in already stretched global supply chains. The drills - China's largest-ever around Taiwan - are a major show of strength after US House Speaker Nancy Pelosi infuriated Beijing by visiting the island. The manoeuvres kicked off Thursday and will take place along some of the busiest shipping routes on the planet, used to supply vita ... read more

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