Sophie Shevardnadze: Honorable Kevin Rudd, former PM of Australia, it’s really great to have you with us on this show today.

KR: Good to be back in Moscow.

SS: Yeah. The weather is great, too. So, mr. Rudd, to the serious matters now. Australia is doubling its military budget; I know, that’s going to surge from $24 bn in 2016 to $42 bn in 2025-26. So what big threat is it preparing for?

KR: I think, generally, Australia, given the uncertainties of the Asia-Pacific region, like most other states, has been increasing its defence outlays. In fact, you will find that the last year was the first year in history that more money was spent on military hardware in Asia, than in Europe. That is a reflection of where, in fact, we have a deteriorating, overall national security circumstances and security circumstances across the wider region – which raises the question, as to why is this coming about and what we need to do at the level of diplomacy to ensure that we avoid future conflict and war. Our region, as you know, is full of unresolved territorial disputes, and as a consequence, you’ll see all governments across the region, regrettably, increasing their defense outlays.

SS: We’re going to go through all of that in detail, but just your personal take: do you think that is justified that Australia is radically increasing its budget right now?

KR: What you see across the region is that every country, practically every country, is increasing its defence outlays, which, I think, goes to the question of how do we actually bring about a better set of regional arrangements to ensure long-term peace and security through diplomacy.

SS: But, I’m thinking – under a military partnership with the U.S., Australia hosts U.S. Marines, it had military exercises and Royal Australian Air Force chief Leo Davies, he has said that America’s growing military presence in Australia is a “natural evolution”.

KR: Historically, U.S. Marines – about a thousand of them – would spend about three months a year in Australia, in Darwin, in the northern territory, and they’ve done that more or less consistently since the end of the WWII. Now, the huge strategic development is that now there will be two thousand of them for six months a year. I doubt that figure alone alters the central strategic balance. I think the broader question is this – how do you go bringing about a better set of institutional arrangements in East Asia, where you do not have an equivalent of the CSCE,  OSCE, or even the Council of Europe to act as a diplomatic buffer against the pre-existing security tensions on the faultlines of the unresolved border arrangements.

SS: Right now, Australia is seen as a partner in Obama’s strategic “pivot to Asia”, which is aimed at containing or isolating China. Do you feel like this American strategy is in Australian interest?

KR: When it comes what the Americans at a different stages called “the rebalance”, or, at a different stage it’s called “pivot”, the question is the mathematics of what has actually occurred. Remember, in the past, the U.S. Navy globally dedicated about 60% of its naval capacity to various theaters around the world, including the Atlantic, including the Mediterranean, including the Middle East, and about 40% to the Pacific. Now, the figure which the U.S. is aiming for is a 50/50 balance. But against overall reduction in the level of U.S. naval capabilities in actual fleet and subsurface units – you know what my prediction will be? It will probably end up in net terms being about the same as what it was before. But you’ve right to point to a fundamental causal factor here, which is the rising tensions which exist between China and the U.S. – something which I’ve spent the last two years working on, in my work at the Harvard Kennedy School and now  as president of the Asian Policy Institute of the Asia Society in New York.

SS: But, I feel like, innbetween America and China, Australia finds itself in somewhat of a funny situation: Commander of America’s 7th Fleet, Admiral Joseph Aucoin urged Australia to follow America’s lead and send warships to the disputed waters around China – a move that would certainly make Beijing at least a little nervous. Do you think that Australia should directly challenge China?

KR: We in Australia had quite a little bit of wisdom. Having full recognition about the geographical circumstances in Asia, since European settlement began 220 years ago – and that is, we are a long way from everywhere. Our closest neighbor is the largest Muslim country in the world, Indonesia, with a population of 240-250 million. We in Australia have a population of 24 million. We are in a region which has a population of 3-4 billion people. As a consequence, over the last 50, 60, 70 years we’ve learned to walk and chew gum at the same time: have great relations with economic partners across East Asia while maintaining an alliance relationship with the U.S. that, effectively, we’ve had continually since 1917 – which is quite a long time ago. So, when it comes to the tensions which exist between China and the U.S., my view, in my period in office, was what should we do to reduce those tensions over time. That, I think, is the key challenge facing political leaders and diplomats today.

SS: So what do you do to reduce those challenges? Because, the military tension is becoming more and more acute, and… actually, I was going to ask you – do you feel like this could spiral out of control and then actually turn into a real confrontation between the U.S. and China?

KR: There’s always a danger of that. There’s what I would describe as just too much military hardware flying around the place, or on the surface of the sea. And it follows , almost, as a question of probability that when you have X number of military and naval and air assets in a confined space from a different countries – certainly, there could be an accident. And, if there’s an accident, like an accidental collision, then we know from history that that can give rise to crisis, and that, in turn, can give rise to conflict. So, therefore, my strong argument is how do you go about reducing this level of strategic tensions. And so, I think, what you see in our region, areas where the U.S. and China, in foreseeable future, will not agree, whether it’s the East China sea, or South China sea or even elements of Taiwan policy. I just regard this as a reality, it’s been that way for a long time. But, there are other areas where the U.S. and China and our friends in Russia can, in fact, work together – and I’d point here to the challenges represented by North Korea, and the North Korean nuclear weapons program. Now, I regard that as a common challenge for us all, and it is a basis upon which to develop some mutual trust between China, the U.S. and Russia, it’s in dealing with common problems like that.

SS: Fair enough. Yet, this somewhat of a confrontation  that’s not like openly out there, because America and China have really solid economic ties, is really in the center of attention right – because of the military buildup on all sides and all parties involved. So, just recently, China has come under fire for deploying surface-to-air missiles on the contested island in the waters of the South China sea – a move, that Beijing says, is defensive. I’m thinking, like, faced with all this American military buildup in the region, America is surveilling, patrolling the area around China, China’s seas – do you blame China for being defensive or building up on defense?

KR: When you look at China’s military modernization, part of me recognizes that as a natural product of a country moving from being a smaller power to becoming a much greater power. I mean, China’s now the second-largest economy in the world – it has the capacity to invest in its military, and the military modernization program which is underway in People’s Liberation Army, directed by Xi Jinping, the President, is formidable. But, it is against the argument of China’s national budgetary capacity. It is kind of normal that it develops much more sophisticated military capability. We’ll be pressed to look in history to find a country which suddenly become a very large global economy and saying: “Well, thank you, no, I’m just not going to bother developing my defence forces”. So, I have a fairly practical approach to this. You see, military capabilities are one thing. Dealing with underlying strategic tensions is another. And that’s where my analysis goes. North Korea is arguably an area where the two countries can cooperate together with Russia. Frankly, counter-terrorism in Asia, is an area where Russia, China and the U.S. could cooperate a lot more effectively. And also, given that we have such a problem with natural disasters in Asia, where, when they hit, because it is so populous, often it is a huge loss of life – the prospect of the three militaries, the ones that I’ve mentioned, and the others of East Asia, cooperating on large-scale counter-disaster exercises and deployments is probably something that all the peoples of Asia would welcome, wherever they come from, because when disaster hits, innocent suffer.

SS: There’s also a lot of talk about protecting the freedom of navigation – how do Chinese behaviour in the South China sea contradict that? Does it somehow contradict freedom of navigation or somehow threaten that?

KR: We need to see two sets of bigg strategic problems, and they are related, but they are distinct. The first is, in the South China sea, you see six different claimant states with different claims on different parts of what’s called the Archipelagic region of the South China sea, land features and then, associated sea features. If you would put this jigsaw on the map, you and I would both get dizzy within a few seconds, because it is so complicated. But, frankly, it’s been that way for a long time. That’s why our chinese friends sought, partly successfully but with much more still to be done, on developing what’s called a “Code of Conduct”, a set of negotiations with the countries of Southeast Asia which have these conflicting claims, to be able to work together to manage peacefully the resource within the area, whether they are fishing resources or whether they are minerals on the surface of the sea. That’s one set of issues, and it requires a very delicate handling, and diplomacy is the only way through. The second is the one you referred to before, which is conflicting perspectives on the question of freedom of navigation. On the question of freedom of navigation, the truth at present is that there’s no problem. There’s no problem. In the future, whether that becomes a problem because of the way in which these territorial claims are resolved, and how many of them are – is, frankly, an open question. I go back to my continuing point: the only way to deal with this, frankly, given the high seas and coastal sea areas are fundamental for transporting goods around the world, is through peaceful diplomacy and peaceful resolution of long-standing territorial and maritime disputes.

SS: So let’s talk a bit about trade and economy. I know that a Chinese company has rented out a port in Darwin, Australia for a hundred-year period, or something like that, and it’s actually right next door to where American and Australian soldiers conduct their drills, and it has made American military really nervous. So, I’m just wondering, is Chinese economic presence in Australia somehow threatening Australian and American military security?

KR: Based on the example that you’ve just referred to, obviously, no. Until about two years ago, Australia was the single largest destination of Chinese foreign intervention in the world. There Chinese investments in  mining ventures and all sorts of economic operations right across Australia. Because we run a very open foreign investment regime, we are pretty relaxed about that. In fact, we just see it as a natural progress. To begin with, it was British investment, then it was American investment, then in was Japanese investment, and now it’s Chinese investment, and there’s a new wave of Indian investment coming in. That’s what happened, so we are pretty relaxed about all of that. THerefore, I go back to your proposition that there’s some binary problem between Australian views of the world and relationships between the U.S. and China. As I’ve said, we do know how to walk and chew gum and sometimes, we fundamentally disagree with what the U.S. does. Let me give you an example: my party, the Australian Labor Party, from day one opposed the U.S. invasion of Iraq. The Americans were not happy with that, but when I was elected as PM, I proceeded to withdraw our forces from Iraq, which were placed there by previous conservative government. Now, that didn’t lead to happy times between me and president Bush, when I was a PM of Australia. But, if you want a practical example of the fact that we, Australians, from time to time, think that our American friends get things wrong – it’s a pretty big example.

SS: But, at this point, do you ever feel that Australia can become a platform where America and China compete for dominance?

KR: If you look at the pattern of the U.S.-China relations, there’s a big North East Asia focus, there’s a big East Asia focus… unless both of them have big deep interest in Antarctica at some stage, I really don’t see that happening geopolitically. Again, I go back to the question – what is necessary for this part of the world to ensure long term peace and stability, to continue to underpin  the phenomenal economic growth we’ve seen in Asia over the last 40 years? Since the end of the Vietnam war. We’ve not have a major conflict since the  end of the Vietnam war. Asia now represents about 45% of global economic activity, and by the time we get to mid-century, it will be more than half. So, therefore there’s global interest in this region continuing to be a driver of global growth of trade and investment. What we lack in East Asia is a regional institution which is capable of reducing pre-existing tensions, and that’s why as PM I launched the proposal to develop overtime what I’ve called an “Asia-Pacific Community” – and the member states would be Russia, the U.S., China, Japan, Korea, the ten  Southeast Asian states together with India, Australia and New Zealand. At present, they are all members of a loose organisation called The East-Asian Summit, and when I was in office, I undertook a lot of diplomacy to ensure that we added both Russia and the U.S. to its membership, so that all the relevant security players would be around one table, with an open mandate, called the Kuala Lumpur Declaration of 2005, which established the East-Asia Summit,  to deal with cooperative projects in security, in politics and in economy as well. By developing that institution, overtime,  and strengthening its role, I would hope it would act to reduce pre-existing strategic tensions in Northeast Asia. At present, there’s nothing – so, as a result, you have these bilateral frictions, people just rubbing up against each other all the time. Far better if you would have a multilateral institution which can take some of these frictions down, a little bit, and cause there to evolve the habits and culture of security cooperation and dialogue. Some might say that it’s just wildly idealistic – I don’t think so, I think we get to choose our own futures, and that is why, slowly but surely, you see regional countries beginning to talk the same language about developing East Asia Summit to a much more robust regional institution with all players around the table, Russia included.

SS: Talk to me about the TPP. Australia is part of the American-led Trans-Pacific Partnership trade deal – for those who don’t know that – which brings together Pacific Rim nations, is part of the pivot to Asia strategy that’s aimed at isolating China. Is this a realistic goal? Can you really isolate the second-largest economy in the world? Or is this a symbolic move, more than anything else?

KR: Well, we in Australia have no interest in isolating China at all. I mean, we’ve had an extraordinarily strong economic relationships with the Chinese going back for 30 years. Our bilateral economic relationship is bigger in every respect than the Russian economic relationship with China. Quantitative terms, it’s much bigger.

SS: But you do agree that the primary goal of this trade deal is to isolate China, because otherwise China would be part of the deal…

KR: Actually, I don’t accept that proposition. But, the advantage, the net advantage to Australia with the TPP, which, again, has been negotiated under the current conservative Australian government, not by me – it’s net impact on the Australian economy in terms of additions to the economic growth is very marginal, very thin, very small. Why? Because Australia is already a very open economy. It’s the economies which are currently much less open, for example Japan, and for example, Vietnam, good friend of the Russian Federation, which stand to benefit most as the consequence of this arrangement, because you are prizing open the doors of their markets and we know, that there may be initial difficult structural adjustments on the way through, but what happens is that growth then takes off. So, the economies that benefit most, literally, are Vietnam and Japan, but in New York, in the think-tank that I lead, called Asia Policy Institute of the Asia Society, we have already launched an independent policy commission with participation from across the region, including China, on how to make sure that the TPP does not lock China out in the future. That is one of the initiatives we have taken and and we have brought together China’s trade officials, I think, some from Russia as well, and certainly, other countries in the region, with that strategic objective. You see, I do share the concern myself that we cannot allow trade policy to divide the region. Trade was one of the few things which has brought the region together over the last 30-40 years. You start to create blocks, you start to have trade wars, and frankly, that’s bad for everybody.

SS: So, why do you think China wasn’t offered to be part of the TPP, because I’ve also spoken to Chinese officials, not only trade officials, but government officials, and they say: “You know, we’ve never got the proposal. We would be part of it gladly.”

KR: Well, it’s an American initiative and the Americans issued invitations. My view has always been, on the public record, when in office, that if this thing ever became a reality – and bear in mind, it’s still not a reality, because the Congress is yet to ratify it, and in the U.S. at present you have a very trade-hostile Congress – but if it does, my position has consistently been since time in office that you cannot create a trading block which locks China out. It makes no sense. China has still this enormous amount of economic growth to contribute to the rest of the world, and, frankly, I think it is utterly self-defeating to lock the Chinese out.

SS: But you feel like it’s to Australia’s advantage to be part of the TPP? You’ve mentioned yourself that you had the best economic relations with China, you’re top trading partners, just last year you’ve signed the Free Trade agreement – is it for Australia’s advantage to be part of TPP? Because… you’ve said Vietnam, Japan – what about Australia?

KR: Let me go the question of Japan. Japan is critical, it’s the third largest economy in the world, but one which is notoriously protected.  I have Japanese friends, who, in a quiet room, over a drink or two, would admit the same thing. What PM Abe has done is, I think, deployed Japanese membership of the TPP to prize open his own economy against the domestic pressures towards protectionism which he has. Why is that the advantage to all of us? Because, the global economy, stand benefiting from a much more strongly growing Japanese economy, whereas the Japanese economy has been bubbling along at about 1%, 1.5% for a long period of time. We need to see trend growth in Japan, 3% plus, and in the absence of a stronger traded sector of the Japanese economy, forcing within Japan, domestically, a de-regulatory agenda which opens up the market to much more domestic competition in services sector and retail; Then, I fear, Japan will not be making a contribution to the global economy as much as PM Abe wants. So if you look at it from that perspective, there is a real virtue in having any multilateral or plurilateral trade agreement with the third largest economy in the world to pull open the doors, but, in my judgement, not to the exclusion of China, and I have been consistent on this for many-many years.

SS: Mr. Rudd, thank you very much for this interview, we wish you all the lack and we thank Moscow’s Lotte Plaza for hosting us for this interview. Thank you.

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