American Contradictions

Diminished US hopes Türkiye can cover withdrawal from Iraq & Syria, Huawei no longer needs Qualcomm chips, Yellen Contradictions: US industrial subsidies good, China's industrial subsidies bad.

May 12, 2024

Diminished US hopes Türkiye can cover withdrawal from Iraq and Syria

By Doga Unlu (Atlantic Council)

The United States is under pressure to leave the Middle East for good. US forces are increasingly attacked in Iraq and Syria as anti-US criticism grows. However, US troops are a long way from returning home, especially amid the tit-for-tat between Iran and Israel, the lack of a ceasefire in the war in Gaza, and the ongoing threat posed by the Islamic State of Iraq and al-Sham (ISIS). Nonetheless, US President Joe Biden has a diplomatic opportunity to strengthen an old partnership and position Turkey as a regional bulwark to encourage a more balanced Iran—a responsibility Turkey has already been taking by mediating between Iran and the United States.

Turkish President Recep Tayyip Erdoğan was set to visit the White House in May—but the trip was postponed, with a Turkish official saying a new date will be set soon. The visit, if solidified, would be the first since Biden took office in 2021, marking improved relations between the NATO countries with the two largest militaries. The United States should not lose the opportunity to support Turkey as a balancing actor in the region. Ankara has proved its ability to maintain good diplomatic relations with “frenemies”—particularly Tehran. While Turkey and Iran have significant disagreements in Iraq and Syria, there are opportunities for cooperation and courting, which position Ankara as a valuable voice of stability and restraint.

The way to achieve such stability passes through Syria, but the argument starts with Iraq. Turkey, Iran, and the United States all have stakes in Iraq that spill over to the rest of the region, particularly Syria. Iraq’s mountainous terrain is home to several paramilitaries, including Iran-backed Kata’ib Hezbollah and Asa’ib Ahl al-Haq, both of which operate in Syria either directly or through affiliated groups, and the Kurdistan Workers’ Party (PKK)—a US-designated terrorist organization with which Turkey has been at war since the 1980s. Yet, the PKK’s Syrian leg, the People’s Defense Units (YPG), receives US support for its assistance in fighting ISIS.

Turkey’s long-standing campaign against the PKK has become increasingly existential in recent months, with Turkish forces suffering unprecedented losses in Iraq. In response, Turkey is signaling increased activity in northern Iraq over the summer—ringing alarm bells for Iran that is fighting to maintain its influence. Tehran gives at least indirect support to the PKK, and Ankara has accused the Iran-backed Patriotic Union of Kurdistan (PUK), the minority stakeholder in the Kurdistan Regional Government, of having ties to the PKK, which Turkish officials have warned against. In March, the Iraqi government in Bаghdad officially banned the PKK following high-level talks with Ankara, marking a major win for Turkey that may compel the PUK to follow suit.

There is a lot at stake for Ankara in preventing Tehran from finding excuses to increase support for the PKK or its Syrian affiliates. While some Iranian proxies target US-backed Kurdish forces to pressure US troops to leave Syria, others fight the Turkish army alongside PKK-linked groups. Turkish presence in northern Iraq pits Turkey against Iran, but also helps mitigate Washington’s concern about Tehran exerting full influence on Iraqi security forces. A large part of that influence can be seen in Iraq’s Popular Mobilization Forces (PMF), which were founded in 2014 to fight ISIS but soon became an umbrella organization of Shia militias loyal to Iran. The PMF acts as a channel for Iran to exert political and military influence in Iraq without being directly involved in internal affairs.

Make no mistake—an angry Iran is not a win for the United States, nor a win for the region. The tricky diplomatic task at hand is encouraging Turkey to partner with the United States while Ankara maintains stable relations with Tehran.

A theater where Turkey and Iran can play friends and foes

The Iraqi government plans to reopen a section of the Kirkuk-Ceyhan pipeline, which runs through northern Iraq and could provide Turkey with significant energy resources. The Turkish Petroleum Corporation’s discovery of high-grade crude oil in the Mount Gabar area in southeastern Turkey (located in a petroleum system running from Iraq) could help reduce Turkey’s oil imports by 10 percent, according to Turkish officials with whom I have spoken. Turkey and Iraq have also agreed to cooperate on a Development Road project to link Iraq’s Basra province to Europe via Turkey. These are great opportunities that the United States should back to break Iraq’s energy dependence on Iran. Doing so would not only help Iraq become a more dependable regional ally, but would also ensure that US measures against Iran are more effective. In March, to give Iraq more time to develop its energy resources, the United States extended a sanctions waiver for Iraqi purchases of Iranian electricity. Turkey is doing precisely that, moving Iraq away from Iran’s orbit and closer to US interests.

Iran sees several problems with these initiatives. For starters, Turkey is Iran’s second-largest natural-gas customer after Iraq, but Ankara has been working to break that dependency by investing in oil and gas exploration around its shore and building infrastructure that would provide easier access to the resources of neighboring countries, including Iraq and Azerbaijan. Ankara has also been reluctant to negotiatewith Tehran about renewing a pipeline contract set to expire in 2026. The list of alternative buyers for Iranian oil is limited due to US sanctions, and Turkey’s projects in Iraq are designed to push Iran into further isolation.

Against these odds, however, Ankara and Tehran have shown interest in increased energy cooperation. In April, Turkish Minister of Energy and Natural Resources Alparslan Bayraktar visited Tehran—only a few months after Iranian President Ebrahim Raisi’s visit to Ankara, which resulted in energy-related economic deals and a renewed commitment to increase annual trade volume to $30 billion. Turkey’s dire economic situation certainly makes any trade relations significant, but, at least when it comes to energy, Ankara has alternatives.

So, why is Turkey courting Iran?

Syria is the backbone of balancing diplomacy between Turkey, Iran, and the United States. Establishing a 900-kilometer secure zone along the Turkey-Syria border to drive Kurdish forces south and return millions of refugees remains a top priority for Ankara. This requires buy-in from Syrian President Bashar al-Assad, who said last year that he would not sit down with Erdoğan without the precondition that Turkey agrees to withdraw its forces from northern Syria—a nonnegotiable item for Ankara. Therefore, Turkey’s message delivery requires the involvement of Iran and Russia. Occupied with the war in Ukraine, Russia is less of a potential advocate than Iran, which started closing gaps with Turkey since the start of the Gaza war by sending high-level delegations to Ankara to discuss regional politics.

Iran views both the United States and Turkey as occupying forces in Syria but believes diplomatic channels could resolve its disagreements with Turkey. Tehran tried to mediate between Damascus and Ankara, although this did not produce results. Turkish leadership continues to explore options to receive support from Tehran and Moscow, as evidenced by Foreign Minister Hakan Fidan’s visit to Tehran in September 2023 to discuss Syria, which was preceded by a visit to Moscow.

The United States needs to understand that Syria is the crucial driving force of Turkey-Iran relations. Although Ankara and Tehran back opposing forces within Syria, Ankara needs Tehran’s support to achieve one of its top foreign policy goals. Therefore, Turkey is motivated to appease Iran through other means, such as energy cooperation. Keeping friendly relations with Iran also helps Turkey protect the security dynamic in Iraq by preventing a red light from Tehran as Ankara maintains its military presence. Here, too, Ankara plays a balancing role by preventing full PMF control on the ground and keeping Iran’s military influence in check.

Turkey and the United States continue to disagree on various policies in the Middle East, such as the United States’ support of Israel and Kurdish forces in Syria. Still, relations between Ankara and Washington are warming up. Turkey’s membership in the Western security architecture allows for more flexibility and room for maneuver and enables Ankara’s balancing act. Objectives surrounding Syria drive Ankara to seek stable relations with Tehran amid geopolitical competition. This allows the United States to partner with Turkey to de-escalate crises, such as the tit-for-tat between Iran and Israel and attacks on US forces in the broader Middle East. If Erdoğan visits Washington in the coming months, Biden should offer the Turkish president enough incentives to strengthen Ankara’s balancing act and encourage a more restrained Iran.

Qualcomm confirms that Huawei no longer need its chips

By Efe Udin (Giz China)

Qualcomm, a leading American semiconductor company, has recently confirmed that Huawei, a Chinese telecommunications giant, no longer requires its processors. This announcement comes amidst ongoing tensions between the United States and China over trade and technology restrictions. The confirmation by Qualcomm’s CFO that Huawei will not be purchasing 4G chips from the company in the future underscores the significant shift in the global technology landscape.

History of Huawei – Qualcomm business

The relationship between Huawei and Qualcomm has been marked by both collaboration and competition over the years. Huawei, founded in 1987 by Ren Zhengfei, initially focused on manufacturing telecom equipment and gradually expanded its operations globally. The company’s rise to prominence was supported by the Chinese government through loans and policies favouring domestic companies, enabling Huawei to compete effectively in the telecom equipment market. On the other hand, Qualcomm, established in 1985, has been a key player in the wireless communication and semiconductor industries. The company’s innovations, such as the development of CDMA technology in 1989 and the introduction of the Snapdragon processor in 2007, have significantly shaped the mobile technology landscape.

The relationship between Huawei and Qualcomm took a competitive turn as Huawei started producing its own processors and modems, directly competing with Qualcomm’s products. This competition intensified as Huawei invested heavily in 5G communication technologies, becoming one of Qualcomm’s main competitors in this space. However, after the ban on Huawei by the U.S., the Chinese brand no longer had access to key technologies that it needed to produce its chips. For this reason, it had to rely on Qualcomm chips for a few years. However, it had access to only Qualcomm’s 4G chips.

Huawei’s Shift to Independence

Huawei’s decision to move away from Qualcomm’s processors is a strategic move towards independence. The company has been actively working on developing its own chipsets, particularly the Kirin series, which has been used in its smartphones. This shift is seen as a response to the ongoing trade tensions and restrictions imposed by the United States on Huawei’s access to advanced technology and components.

Huawei’s shift to independence can be seen in its latest flagship phones, the Huawei Pura 70 series. According to reports, this series uses more Chinese-made components than parts from the rest of the world combined. This move aligns with Huawei’s strategy to reduce its reliance on foreign suppliers and enhance its self-sufficiency in the wake of US sanctions and trade restrictions. The Pura 70 Ultra and Pura 70 Pro models from the series come with a range of components from China. This includes memory chips and the advanced Kirin 9010 processor.

Export Restrictions Impact Reduces

The revocation of export licenses for Qualcomm and Intel, two major American chipmakers, will have limited impact on Huawei’s mobile phone processors. This is because Huawei already has its own Kirin chipsets, which it uses in its smartphones. Also, the company has been working on extending its Kirin technology to other important terminals, such as notebooks, to reduce its reliance on Intel.

Huawei is also developing a Kirin PC version of the processor. This chip should be more powerful than the mobile chips similar to Apple’s “Pro” and “Max” versions. The new chip should come with multi-core performance close to that of the M3, making it a decent competitor in the market.

Huawei’s Growth Amidst Challenges

Despite the challenges posed by the ongoing trade tensions and restrictions, Huawei has continued to grow and expand its operations. The company reported a significant increase in revenue in 2023, with a total revenue of almost $100 billion. This growth is due to Huawei’s focus on developing its own technology and reducing its reliance on foreign components.

Huawei’s mobile phone shipments and revenue performance for Q1 2024 showed significant growth. According to reports, Huawei’s net profit for the first quarter of 2024 was approximately 19.65 billion yuan (about $2.8 billion), representing a 564% year-on-year increase. This surge in profit is largely due to the company’s strong performance in the Chinese smartphone market. Huawei sits at the top of the Chinese mobile phone market in terms of mobile phone shipments. Huawei’s mobile phone shipments in China increased by 70% in the first quarter of 2024, contributing to its overall growth.

Conclusion

The confirmation by Qualcomm that Huawei no longer needs its chips marks a shift in the global technology landscape. Huawei’s decision to move away from Qualcomm’s processors and develop its chipsets is a strategic move towards independence and a response to the ongoing trade tensions.

Huawei’s strategic shift towards using its Kirin processors in its smartphones starting in 2024 may have an impact on Qualcomm. It could lead to a decline in Qualcomm’s shipments to Chinese smartphone brands. This move by Huawei reflects a broader trend of the company aiming for greater independence and reducing reliance on foreign suppliers, particularly in response to trade tensions and restrictions imposed by the United States.

Despite facing challenges due to export restrictions and bans, Huawei has shown resilience and growth, reporting a substantial increase in revenue in 2023 and a remarkable surge in net profit for the first quarter of 2024. The company’s focus on developing its technology, including the Kirin chipsets, has been instrumental in its continued success and expansion, particularly in the Chinese smartphone market where Huawei has regained its position as a top player in terms of mobile phone shipments.

Yellen Contradictions

By Kai Ryssdal and Sean McHenry (excerpts)

“We think China is massively subsidising investment in this set of industries that they have targeted as critical to their growth prospects.”

“we [USA] have targeted a few industries, particularly clean energy, electric vehicles, batteries, renewables […] we’re very explicitly subsidising investments in these important strategic areas. And what we don’t want to see is massive Chinese subsidies to firms with huge overcapacity that will just drive our firms out of business. “

As the November election draws nearer, U.S. Treasury Secretary Janet Yellen has been making the case for the Biden economy. Over the weekend, Yellen spoke at the East Valley American Jobs Center in Mesa, Arizona, where she touted the over $1 trillion in spending that Congress authorized with the CHIPS and Science Act, Bipartisan Infrastructure Law and the Inflation Reduction Act, along with the Biden administration’s bet that it will lead to more jobs in the domestic semiconductor chip manufacturing industry.

At the same time, inflation remains elevated and polling shows that it continues to be a chief concern for many Americans. It likely won’t be the only economic issue that looms large this November. In her latest appearance before the House Committee on Ways and Means, Yellen faced a line of questioning from Republicans over the president’s tax policy proposals.

“Marketplace” host Kai Ryssdal sat down with Yellen at the Treasury Department to discuss the state of the economy. The following is an edited transcript of their conversation.

Ryssdal: When you see polls, though, that show the president not getting credit for economic growth, and in point of fact, credit largely going to his presumed opponent, do you look at it and say, “What do we have to do to get a break?”

Yellen: There has been a trifecta of legislation passed — the Bipartisan Infrastructure Act, the CHIPS and Science Act and the Inflation Reduction Act — which is a monumentally important set of clean energy incentives. And with these investments is coming tremendous opportunities for Americans that will boost their living standards.

Ryssdal: Let’s talk about America and the global economy for a second, China’s specifically, which is the last time you and I spoke, in Beijing. You’re just back a number of weeks ago from another trip there. You said the first time you went, what you had to do was set a floor under the relationship. And we talked about that at the time and now you’re building on that. Are you satisfied that the relationship is stable?

Yellen: We’ve formed two working groups, an economic working group and a financial working group, that report to both of us. They’ve met four times. And they’re really digging in and discussing issues in ways that are, including around our concerns, one of which is Chinese overcapacity in advanced manufacturing, exchanging papers, analysing data and really pushing one another to, and we’re working also on joint things, especially when it comes to financial stability that will be good for the entire globe.

Ryssdal: Let me ask you about one of the focuses of that trip, which is, as you mentioned, overcapacity in advanced products, electric vehicles, batteries, all of those things. Is it possible we’re just being outcompeted by the Chinese in those fields?

Yellen: Well, we don’t think the playing field is level. And we think China is massively subsidizing investment in this set of industries that they have targeted as critical to their growth prospects.
Ryssdal: Subsidizing more than we are with our investments in the CHIPS Act and the infrastructure and all that? Because we’re pouring billions — you are pouring billions in.

Yellen: Well, we have targeted a few industries, particularly clean energy, electric vehicles, batteries, renewables, where we’re not trying to dominate the globe and be the only country in the world that supplies these goods. But we do think it’s critical for national security, for the sake of supply chain resilience, and to create good manufacturing jobs where people can get ahead to have a presence in these industries. So yes, we’re very explicitly subsidizing investments in these important strategic areas. And what we don’t want to see is massive Chinese subsidies to firms with huge overcapacity that will just drive our firms out of business. And I can tell you, this is a concern not just of the United States, but of Europe and Japan and of developing countries like India and Mexico.

I think what’s happened in China is that China has a macroeconomic situation where an unusually low fraction of their output, their economy’s output, is devoted to consumer spending. And they have a savings rate that’s the highest, among the highest in the world, around 45%. They used to channel that savings into infrastructure, they really don’t need that much more infrastructure, then into real estate and property development —

Kai: Which has been problematical —

Yellen: And that sector has problems. And what to do with all of those funds? Well, their decision is: “Let’s channel those funds that we don’t need to put into property and infrastructure, into advanced manufacturing.” And that’s what we’re seeing. And so the subsidies are enormous. And China has built enough capacity, for example, in solar panels to supply twice the total global demand. So, you know, we suffered in the late 1990s and early 2000s what’s called a “China shock,” in which really Chinese dumping and overcapacity put many American workers — caused layoffs of many American workers in many parts of the country. And we don’t want to see that happen again.

Ryssdal: I’m going to oversimplify here, but bear with me. Your message to the Chinese, at least as reported publicly, has been, “We want to engage, we do not want to decouple.” You’ve been very clear about that. But you’ve also said, “When it comes to national security, fundamentally all bets are off.” Do you think they hear you when you say that?

Yellen: They do. I think they’re worried that when we say “national security,” that that’s a very broad concept and that we’re using national security to impose restrictions with the idea of harming their economic progress. That’s what they’re worried about. And my job is to explain to them that we are trying to carefully target restrictions, to make sure that they really address national security concerns, and not harming their economy broadly. And to open up a channel by which we will listen to their concerns, if they think that our restrictions are too broad.

Ryssdal: You did what economists do in that speech and you gave some data and some case studies, and it was, I recommend people read it or go listen to it on the stream. I want to know why you decided it was important to give that speech now.

Yellen: You know, from my standpoint, I think it’s important for Americans to understand how critical democracy is to economic performance. Of course, democracy is important in and of itself. But I thought what I can add is to elucidate the relevance of democracy to good economic performance and to fight back against the idea that democracies just aren’t an efficient way to help people get ahead. And you sometimes hear this in countries like China that say, “Well, you know, we have an authoritarian government. We decide to do something and we can move quickly. And look how slow it is for, sometimes, democracies to move.” But the research suggests that democracy is actually critical to high living standards, on average, other things equal. Income is 20% higher in democracies, and there are very good reasons. And it’s important for Americans to understand that.

Ryssdal: When we were in China, and you were, you know, you got the red carpet treatment, you came down the stairs, and ambassadors and dignitaries were there to welcome you, and I asked you if you were a diplomat now and what you thought of that. And it was an interesting answer. I guess the corollary question now is — it’s not really a question. You’re kind of a politician now.

Yellen: Well, I want to be clear, what I say and do is governed by the Hatch Act. I am not allowed to get into electoral politics, but it is really important for me to explain what President Biden’s economic strategy is and how we see that as helping Americans prosper over time. And there are a lot of different dimensions to that. And one of them, I believe, is to explain why our system and why the policies we’re putting into place will get to, do well for Americans over time and are the appropriate ones to address a lot of long-standing structural issues. Look, you know, we’ve seen in this country over decades that the typical American who does not have a four-year college degree has barely seen any increase in their real or inflation-adjusted wages, really, in 40 or 50 years. And there’s been deindustrialization through many parts of the country that have reduced job opportunities. And what do we see? We see even rising death rates, deaths of despair in parts of the country where jobs have dried up, and Americans feel that that’s an economy that’s not working for them. And President Biden, the Biden-Harris administration, is focused on changing that, and developed a strategy that first succeeded in generating a rapid recovery from the pandemic, establishing solid growth and a strong job market and is now investing for the medium and longer run in people, in strategic industries, in the economy that can create good jobs with middle-class incomes for people, including those who don’t want to get a college degree.

Ryssdal: Sorry, one more China question. You get all kinds of social media love for your food choices when you go to China. Your chopsticks skills are apparently impeccable. What do you make of that?

Yellen: You know, I think the Chinese are happy to see a person who appreciates Chinese culture and is a regular person that they can identify with.

Ryssdal: Is that — you’re a regular person?

Yellen: Yeah, I think so.

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