Beijing’s economic playbook for Taiwan: big carrots and small sticks

Beijing’s approach to economic coercion against Taiwan is less about brute force and more about baiting. While China has long threatened economic punishment to deter what it sees as separatist behaviour, the past several years have shown a clear pattern: big carrots, but small sticks.

That restraint is not out of goodwill; it results from strategic caution and self-interest. Beijing knows that going too far with economic punishment risks driving Taiwan—and the world—further away. So instead, it relies on targeted trade bans, travel curbs and well-timed financial incentives, aiming to shift sentiment in Taiwan without triggering blowback.

Nowhere is this more evident than in the cross-strait trade relationship. For much of the past decade, China has been Taiwan’s largest trading partner, fuelled by Taiwanese exports of semiconductors, electronics and machinery. Taiwan’s economy is tightly linked to China’s, with around 35 percent of its exports and 20 percent of its imports tied to China and Hong Kong. While Beijing could disrupt Taiwan’s economy, it would pay a steep price: China depends heavily on Taiwanese semiconductors and components, especially chips from TSMC, the world’s most advanced manufacturer.

China’s use of trade bans and incentives has often been surgically targeted at politically sensitive constituencies, especially rural districts with high concentrations of fruit and fish farmers known to lean toward Taiwan’s Democratic Progressive Party (DPP). Academic studies from the mid-2000s show that Beijing offered trade perks to these groups to bolster Kuomintang (KMT) support, a tactic that has since evolved into punitive bans aimed at eroding trust in Taiwan’s DPP government.

When Beijing banned importation of Taiwanese pineapples in 2021—a trade worth around US$54 million, or just 0.015 percent of Taiwan’s GDP—Taipei quickly found new markets. Similar bans after US speaker Nancy Pelosi’s 2022 visit to Taiwan on items including beer, wax apples and fish targeted politically sensitive sectors but had limited economic impact. Agriculture accounts for only 1.7 percent of Taiwan’s GDP, and exports to China have been steadily declining. As shown in the graph below China imposed trade restrictions on 169 Taiwanese export items in 2024, primarily by revoking their tariff-free status. The sole exception was polycarbonate, which was targeted with anti-dumping tariffs. In contrast to the weight of its economic carrots, Beijing’s sticks are deliberately small, sending a message without hurting itself.

Number of import items that China placed a trade restriction on in 2024, by product category. Source: ASPI’s State of the Strait Database.

Beijing does offer carrots, especially to Taiwanese businesses willing to operate from the mainland. Chinese authorities rolled out incentive packages, including subsidies and access to local markets, urging Taiwanese producers to move operations to provinces such as Fujian. The pitch: abandon Taiwan’s ‘separatist’ politics and prosper under Beijing’s wing.

Tourism followed a similar pattern. At its peak in 2015, more than 4 million mainland Chinese tourists visited Taiwan, 40 percent of all foreign visitors to the island. But after the DPP took office in 2016, China began throttling tourist flows, first by reducing group tours, then by banning solo travel. The move hurt Taiwan’s hospitality industry but didn’t break it. Taipei responded by courting tourists from Japan, Southeast Asia and beyond.

Investment has also been part of Beijing’s coercion calculus. Over the past five years, it has encouraged Taiwanese firms to expand on the mainland with promises of equal treatment, favourable regulations and access to Chinese capital markets. But Taiwan has grown wary. The government strictly limits inbound Chinese investment, particularly in sensitive sectors like technology and infrastructure, and many Taiwanese firms have started pivoting to Southeast Asia or back home. The US–China trade war and rising cross-strait tensions have made reliance on China look like a risk, not an asset.

Even in the most strategically sensitive area, semiconductors, China has avoided provocation. It continues to buy massive volumes of chips from Taiwan, knowing full well it cannot replace them in the near term. Rather than restrict trade, Beijing has focused on poaching Taiwanese engineers and luring firms into joint ventures on the mainland. It’s a long game, designed to hollow out Taiwan’s tech edge without setting off a direct confrontation.

Has any of this worked? Not really. Beijing’s economic coercion may have inflicted pain in places, but it hasn’t shifted the island’s political compass. In 2024, voters elected as president the DPP’s Lai Ching-te, a staunch defender of Taiwan’s sovereignty, rejecting Beijing’s warnings. Meanwhile, Taiwan’s government is investing heavily in resilience—diversifying exports, securing new markets for farm goods and proposing a ‘non-red supply chain’ to reduce dependence on China, particularly in the global semiconductor sector.

Beijing likely knows that full-blown economic warfare—banning all trade, blacklisting major companies or launching a blockade—would backfire. Not only would it devastate Chinese manufacturers and alienate global partners, but it could also trigger international backlash and harden Taiwanese resistance.

For now, Beijing seems content to use economic coercion to coax, not crush. Yet there’s a paradox at the heart of this strategy. The more Beijing leans on economic enticements, the more it exposes its own reliance on Taiwan—especially in tech. And the more it uses selective punishment, the more Taiwan adapts and diversifies.

State of the Strait is available here. Governments and organisations can contact [email protected] to discuss co-funding this project and gaining access to the entire State of the Strait database.

Unintended consequence: a bombed Iranian nuclear program may become harder to watch

The 22 June strike by the United States on Iran’s nuclear facilities at Natanz, Fordow and Isfahan risks replacing known quantities—monitored, visible sites—with a dangerous blind spot. Iran’s program may now shift into more inaccessible recesses.

By targeting what could be surveilled, the US may have unintentionally obscured Iran’s next moves, complicating future tracking and deepening strategic uncertainty.

Physical nuclear installations, regardless of their suspected activities, are invaluable sources of intelligence. The centrifuge facilities in Natanz, the tunnels in Fordow and the conversion plants in Isfahan were under comprehensive monitoring by the International Atomic Energy Agency (IAEA) and by US and Israeli intelligence agencies.

IAEA inspections, further restricted by Iran since 2021, nevertheless yielded information about uranium stockpiles, enrichment levels and centrifuge activity. Satellite imaging monitored operations at these locations. Human intelligence, gaining information from defectors and clandestine operations, augmented technical gathering, while signals intelligence captured communications associated with these permanent sites.

These installations were known entities. Their locations, configurations and operations limited Iran’s capacity to function covertly. Natanz’s above-ground infrastructure, despite enhancements following the Stuxnet computer virus attack discovered in 2010, were still susceptible to aerial monitoring. The subterranean configuration of Fordow constrained its scalability, hence restricting enrichment production.

This transparency, however limited, enabled measured responses ranging from sanctions to cyberattacks, without the need for kinetic operations.

The US air strikes with B-2 bombers and bunker-busting ordnance have now wrecked critical infrastructure. Reports suggest Natanz’s centrifuge assembly was heavily damaged, Fordow’s tunnels were compromised and Isfahan’s conversion facilities were hit. Iran’s claim that it evacuated nuclear materials implies potential continuity of operations, even as the physical sites may now be rubble or severely impaired.

This destruction could disrupt intelligence collection in several ways. The IAEA’s monitoring framework might be crippled, as there may not be much left at the sites for on-site inspections to inspect. Moreover, Iran’s has threatened to expel IAEA inspectors. Satellite imagery could lose utility, and Iran could relocate operations to covert sites, as it did after 2002 when Natanz was exposed.

New challenges may arise for human and signals intelligence if scientists and technicians who have been associated with known facilities now move to secret sites. Intercepting their communications or recruiting them as informers will be more difficult.

The decision to strike was a choice to eliminate visible threats at the potential cost of long-term visibility. It assumes that physical damage may impede Iran’s nuclear advancement more significantly than covert relocation may expedite it.

Experience suggests a more complex outcome may be in prospect.  After the 2010 Stuxnet attack, the Shi’ite regime reconstructed Natanz, installing modern IR-9 centrifuges that enhanced enrichment efficiency. After the death of scientist Mohsen Fakhrizadeh in 2020, Iran enacted legislation to augment its program, achieving 60 percent uranium enrichment by 2021. Each disruption compelled Iran to adjust, and adjustments often resulted in less transparency.

The B-2 strikes, far more destructive than prior sabotage efforts, will hamper Iran’s progress, yet this may perpetuate the clandestine cycle on a grander scale.

Iran’s nuclear knowledge—its designs and the expertise of its scientists—persists despite sustained attacks on its personnel, as physical sites house only part of the program. Its nuclear programme could shift to smaller, dispersed facilities, as North Korea’s did with its Yongbyon reactor, or it could repurpose civilian sites, such as universities, as Pakistan did in its early program. These could be harder to detect and monitor.

Iran’s nuclear archive, published by Israel in 2018, revealed a decentralised network of research labs, suggesting covert infrastructure was in place. New sites in the future might lack Natanz’s size, but they might support unobserved low-level enrichment.

The possible intelligence gap might aggravate several threats. Unreliable data on Tehran’s capabilities may undercut deterrence by leaving the US and Israel unsure of how to respond, perhaps leading to escalation or miscalculation.  It might complicate diplomacy, given the 2015 Joint Comprehensive Plan of Action, intended to restrain Iran’s progress, was based on IAEA surveillance of known sites. With those potentially gone and Iran threatening departure from the Treaty on Non-Proliferation of Nuclear Weapons, reopening negotiations may be more difficult.

An intelligence gap might raise proliferation concerns, because unmonitored materials or expertise could leak to non-state actors, particularly if Iran’s beleaguered security system fails to protect relocated assets.

The alternative to all this—refraining from strikes—carried risks. In early 2023 and again in 2024, IAEA inspectors found traces of uranium enriched to 83.7 percent at the Fordow Fuel Enrichment Plant. Ongoing surveillance might have prolonged the decision-making process excessively, permitting Iran to surpass the nuclear threshold. This is usually understood to require 90 percent enrichment, which requires very little more processing of material that has reached 83.7 percent.

However, the strikes may have merely exchanged a singular, known threat for a multitude of unknowns, wagering that Iran’s economic limitations and internal discord may hinder its capacity for covert reconstruction. The current challenge may reside in manoeuvring through this ambiguity, striking a balance between aggressive intelligence gathering and diplomatic caution to avert a nuclear Iran from emerging unseen.

The map, once partially lit, may now be entirely dark, and the stakes may be higher than ever.

Bookshelf: a history of Iran to reach for now

Understanding the unfolding geopolitical drama around Iran requires an understanding of its history. There is perhaps no better English language source for such a review than Abbas Amanat’s Iran: A Modern History, first published in 2017.

Any accurate strategic analysis of the situation in Iran must draw on information relevant to the history, politics, and culture of the nation. Western familiarity with Iran can be limited to a view through reflection of US history, focusing on the revolution and the US Embassy hostage crisis in 1979 and more recent wars with Iran’s neighbours.

In contrast, Amanat traces the development of today’s modern state, the latest iteration of what has been a millennia-long nation in some form or another. Beginning with the emergence of the Safavid Empire, Amanat recalls the rise of a distinctly Shia Persian Iran whose realm nevertheless encompassed a range of ethnically and religiously diverse groups along the periphery of what the Safavids then called ‘the guarded domains of Iran’. Tension between the powerful Shia Persian core and other groups—including Kurds, Azeris, the Baloch, Arabs and Turkmens—is a longstanding feature of Iranian statehood, with various groups repeatedly unwilling to sacrifice their cultural identities in favour of a narrow, monocultural conception of Iranian identity.

Much of the book is dedicated to the 20th century. Amanat details the pivotal moments in Iran’s modern history: the 1905–1911 Constitutional Revolution; the two world wars; the 1953 coup backed by the CIA- and MI6; the 1979 Islamic Revolution; and the 2009 Green Movement. Recurring historical themes dominate: Persian centralisation of power, including over natural resources; the persecution, state-directed or otherwise, of both ethnic minorities, such as the Kurds, and religious minorities, such as Baha’is; the marginalisation of women; a tense rural-urban divide; modernisation; the arts; agriculture; foreign influence; and the role of Shia clergy.

Amanat should be praised for his focus on two themes often obscured from historic, and strategic, analysis.

The first is Shi’ism and the role of Iran’s clerical authorities in the state. Islamic jurisprudence and the complexity of Shia governance is a theme with which many Western readers would be unfamiliar, and the book deftly guides readers through its essential role in society, religion and politics in Iran.

The task demands meticulous analysis and sophisticated explication, and Amanat patiently describes terminology that is perhaps unique to Shi’ism and the Islamic Republic’s form of governance. No understanding of modern Iran is complete without a grasp, even faintly, of the role of the country’s ecclesiastical establishment in politics.

The second is the description of the arts. Forays into Iranian architecture, music, handcrafts, poetry and cinema convey beauty, while also explaining Iran’s social and political history.

If there is one take-away from Iran: A Modern History for Australian policy makers, diplomats and strategic analysts, it is Iran’s sense of itself as a nation of consequence and Iranians as custodians of a great intellectual, artistic, technological and cultural heritage that has enriched human civilisation. Yet today, many Iranians feel that the country fails to live up to this legacy, floundering as a global pariah and stifled at home.

However, when Iran is given to rapid and revolutionary changes, the ensuing leadership often represent a narrow grouping of Iranian society. Amanat has elsewhere indicated his disdain for revolutions because they have been ‘miserable in terms of their outcome’. He argues that narrow political representation is a recipe for instability, for example the 1953 coup, the White Revolution and the Islamic Revolution.

And this instability tends to be at the centre of challenges to Australia’s interests in relation to Iran. Instability can result in: oil shocks; sanctions that stifle trade, tourism and research cooperation; armed conflict; hostage diplomacy; human rights abuses; and espionage activities on Australian soil. Additionally, the growing Iranian diaspora will also want to see Australian parliamentarians raise their concerns here and abroad.

A word, too, on media discourse as it prevails in the West and in Australia in particular. Most Iranians—including non-Persians and non-Shias—value the political unity of Iran as single state. They view ethnic, religious (including, increasingly, agnostics and atheists) and ideological heterogeneity as a characteristic feature, if not a strength, of the nation. For this reason, separatist struggles are largely absent from recent Iranian history.

Naive suggestions by commentators that regime change in Iran can be implemented by arming and supporting separatist movements are ill-informed and, if acted upon, likely to result in a response reminiscent of the bloody suppression of Kurds following their uprising against Saddam Hussein. Even in the context of Israel’s bombing of Iranian nuclear sites and top military brass, many Iranians eschew violence as the path to change.

However Iran emerges from the conflict with Israel, Australia, as a leader in human rights advocacy and the rules-based order, should support the Iranian people to realise their potential and exercise their rights. This is work that Australia has done, principally through the United Nations, for decades. A more equal Iran is a more stable Iran.

The Strait of Hormuz: what Iran sees as its trump card

In the wake of the US strikes on Iran, focus has shifted to how Tehran will respond. Its options range from direct attacks on US bases to exerting pressure on maritime trade through the Strait of Hormuz. The Iranian parliament’s reported vote to blockade the strait offers a possible clue. Can Iran realistically close this chokepoint, and what would that mean for Australia?

Wedged between Iran and Oman, the Strait of Hormuz is the only maritime gateway to the oil-rich Persian Gulf, carrying about a quarter of the world’s crude exports. Iran’s control of the northern shore has long fuelled fears it could shut the strait in retaliation to an attack. The threat is hardly notional: Tehran has used shipping harassment for leverage before, including during the 1980s ‘Tanker Wars’ with Iraq.

After Trump quit the Joint Comprehensive Plan of Action nuclear deal in 2018 and launched its ‘maximum-pressure’ campaign, Tehran again turned to commercial shipping. In May 2019, four tankers were attacked with limpet mines in the Gulf of Oman, almost certainly by Iran. Two months later, Iran’s Revolutionary Guards (IRGC) seized the British-flagged tanker Stena Impero in the Strait of Hormuz and briefly detained the Liberian-flagged Mesdar. Those incidents opened a two-year stretch of Iranian harassment of civilian and naval traffic in the world’s busiest oil chokepoint.

After Iran’s 2019 attacks on commercial shipping, Washington set up the International Maritime Security Construct to protect shipping, with Australia among its founding members. The strait’s security is critical to Australia’s economy, which is why Canberra sent a warship and personnel, including me, to help keep it open.

Long before Iran’s April 2024 missile barrage on Israel, the two rivals were already skirmishing at sea. In March 2021, an Israeli-owned freighter was hit by what was almost certainly an Iranian missile in the Arabian Sea. A month later, limpet mines widely blamed on Israel crippled the Iranian-flagged MV Saviz in the Red Sea, a vessel believed to serve as an IRGC forward base. These incidents show how the proxy war spills into maritime space and how Tehran uses strikes on merchant shipping for strategic signalling.

Iran views its grip on the Strait of Hormuz as its trump card and has repeatedly harassed and attacked commercial and military vessels transiting the strait to make a political point. It is therefore no surprise that the Iranian parliament has reportedly approved a motion to blockade the waterway. Whether Tehran can, or will, carry it out is another question.

Naval blockades are back in vogue: Russia’s bid to choke Ukraine’s grain exports in the Black Sea, Houthi claims of blockading the Red Sea to Israel-linked ships, and fears that Beijing might apply a naval blockade to ring-fence Taiwan all show how coercion at sea is reshaping security debates.

Naval blockades are lawful under the law of armed conflict, but only if they meet strict tests: they must be formally declared and notified, enforced impartially and effectively, and limited to stopping enemy commerce or contraband. Crucially, a blockade cannot starve civilian populations or seal off neutral ports.

An Iranian blockade of the Strait of Hormuz would choke access to neutral gulf ports without targeting contraband or enemy vessels—neither the United States nor Israel is based inside the gulf, Bahrain’s US naval facility notwithstanding. Because it would indiscriminately impede neutral trade, such a move would fall outside the legal limits of naval blockade, despite the Iranian parliament’s reported approval.

Even if an outright blockade breached international law, Tehran could still attempt to close the strait. Its conventional navy is ageing and limited, but the IRGC navy fields swarms of fast-attack craft, anti-ship missiles, drones and mines—an asymmetric mix designed for narrow-water choke-points. Iran would not even have to act decisively: a simple claim that it had laid mines could divert commercial traffic until US-led forces proved the channel clear, a process that could take weeks.

Despite years of rhetoric, Tehran is unlikely to close the strait. Its strategic partnership with Beijing is a brake: China is the world’s largest crude importer, and roughly half of its oil arrives via gulf producers transiting the strait. Crippling that flow would undercut a key supporter and damage Iran’s own diplomatic gains with Beijing.

China is hardly alone in its dependence on Strait of Hormuz oil. A closure would jolt the global economy and bite Australia in particular. Despite the 8000-kilometre distance, most of Australia’s crude arrives via this chokepoint, and the nation imports about 91 per cent of its fuel.

Most of Australia’s petrol, diesel and jet fuel arrives as finished product from refineries in Singapore, South Korea and Japan, but those refineries source much of their crude from the Middle East via the Strait of Hormuz. Any prolonged disruption there would therefore ripple straight down Australia’s supply chain. The risk is magnified by Canberra’s chronic shortfall against the International Energy Agency’s 90-day stockpile obligation: as of March 2025, Australia held barely 56 days of fuel in reserve.

Australia’s 1990–2020 naval deployment to the Middle East was never mere alliance diplomacy; it safeguarded the long sea lines that bring fuel to Australia. That dependence remains, yet decades of under-investment leave the Royal Australian Navy with only 10 surface combatants until the 2030s—several in refit—hardly able to assist in breaking an Iranian blockade today if Washington came calling.

Despite the Iranian parliament’s vote to ‘blockade’ the Strait of Hormuz, Tehran is unlikely to follow through. Shutting the waterway would penalise neutral gulf ports and anger China—its most important economic partner and a veto-wielding UN Security Council member. Even so, experience shows any escalation will spill into the maritime domain. For Australia, the message is clear: rebuild strategic fuel stocks to meet International Energy Agency obligations and strengthen supply-chain resilience; and, as an island nation reliant on vulnerable sea-lines of communication, invest now in a navy capable of keeping them open.

This article was first published in The Age and The Sydney Morning Herald.

Australia’s fuel insecurity is not hypothetical

For more than a decade, commentators, analysts and industry have warned Australian governments about fuel vulnerability. Yet little has changed. Despite repeated reviews and rising geopolitical tensions, there has been little concrete action to strengthen our sovereign fuel capability. As recent global conflicts—including the invasion of Ukraine, Houthi attacks on crude oil tankers in the Red Sea and Iranian threats to close the Strait of Hormuz—demonstrate, fuel supply is no longer a theoretical risk; it’s an active, accelerating threat.

Our continued reliance on imported refined fuels is a major blind spot, especially in northern Australia. The region is central to our defence posture and economic prosperity but is served by thin supply chains, single pipelines and just-in-time logistics. This fragility could become a strategic liability in any conflict or emergency.

Biofuels have long been championed as an alternative to fossil fuels and an enabler of the transition to clean energy, and rightly so. They offer emissions reductions, economic opportunities for farmers and regional manufacturing, and a pathway to decarbonising heavy transport. But biofuels alone cannot meet Australia’s liquid fuel demands, let alone guarantee fuel availability in times of crisis. Limited feedstocks, land constraints and scale limitations mean they can be only part of the solution.

Synthetic fuels—produced using renewable energy, captured carbon and water—offer a compelling complement. Unlike biofuels, they don’t rely on agricultural inputs and can be produced close to where they’re needed, including in remote or contested areas. This decentralised production potential is ideally suited to defence operations, humanitarian response, and disaster recovery, where fuel access is essential.

Northern Australia could be the proving ground for this transformation. With abundant renewable resources, carbon-capture potential and proximity to strategic infrastructure, the north could host a new generation of co-located defence, biofuel and synthetic fuel production hubs.

Despite this strategic potential, the government remains largely disengaged. While civilian sectors cautiously advance bio and synthetic fuel projects, government operations continue to rely almost entirely on imported fossil fuels. This is a missed opportunity. The government could play a catalytic role as a market-shaping buyer, helping to de-risk early-stage production, stimulate demand and establish sovereign supply chains for both bio and synthetic fuels. Targeted investment in synthetic fuel demonstrators at key defence sites, such as Darwin, RAAF Tindal and the Delamere Weapons Range, would send a clear signal to industry, while co-locating production near logistics and training hubs would create economies of scale. Importantly, procurement frameworks must recognise that resilience has a cost, and that cost should be treated not as a budgetary burden, but as a strategic investment in risk mitigation. In a contested or crisis scenario, the true cost is not the price of fuel but the price of not having it.

Twelve years ago, a landmark fuel security report warned that Australia treated fuel as a commodity, not a critical asset. That warning still stands. The 2023 Defence Strategic Review echoed it, calling for action on fuel vulnerabilities and single points of failure, but implementation remains elusive. The 2024 National Defence Strategy skirted the issue entirely.

Australia needs a whole-of-government fuel strategy that elevates energy security to a national security priority. We must value fuel not by its price but by its availability when it matters most. Sovereign fuels, both bio-based and synthetic, may cost more upfront, but they’re far cheaper than the cost of strategic delay or fuel denial.

This is not a call to abandon biofuels; it’s a call to go further. We need both biofuels and synthetic fuels to build a resilient, self-reliant and sustainable fuel future—one that supports regional jobs, drives decarbonisation and ensures Australia’s defence forces can operate when the unexpected hits.

Why South Korea won’t build the bomb

The idea of South Korea developing nuclear weapons is reaching critical mass, if you’ll excuse the pun. Surveys show as much as 70 percent of the public now in favor. There has also been plenty of commentary on why it’s necessary: North Korea’s growing arsenal, China’s rise, and the United States’ perceived increasing unreliability. The feedback buzz between public opinion and commentary has grown so much that the issue became a presidential campaign topic.

However, just because something is popular and there are good reasons for it doesn’t mean politicians will deliver it. Both sides of politics have their reservations. The left sees it as harmful to relations with Pyongyang and at odds with the goal of denuclearising the north, while those on the right fear alliance pushback, damage to exports, and weakening of relations with China.

But the more fundamental obstacle is that going nuclear would require consistent unity of national purpose: an executive must decide to do it, a legislature must pay for it, and the apparatus of government must facilitate it. These efforts must then be sustained long enough to make it happen. But unity is a typically scarce commodity in South Korean politics, and is certainly nowhere to be seen now.  Politics has been nothing if not turbulent over the past 10 years.

The country remains relatively functional and maintains bipartisan focus on certain policy approaches. Still, embarking on something new and ambitious, such as a nuclear weapons program, is different to merely keeping on. It requires a novel and sustained confluence of ideological currents.

In South Korea, North Korea is an ideological fulcrum. The extreme right wants to liberate the north at the risk of war, while the furthest left wants the north’s regime to reign over the entire peninsula. Politics happens in the middle. The left wants to accommodate the north’s preferences on the way to cooperative unification, while the right insists that the north must accommodate the preferences of the south—including denuclearisation—if cooperation is to proceed.

The left now holds both the legislature and the presidency. Security plays a crucial role in outreach to the north, as it provides the South Korean public with the confidence needed to pursue cooperative peace, or even unification. But those on the left believe that security can come from the US alliance and from South Korea’s considerable conventional capabilities. In their view, nuclear weapons are not only unnecessary; they would disrupt engagement with Pyongyang and derail the agenda internationally.

The right doesn’t get to decide matters of state anymore. But even if missteps by the left gave it that power in the future, it would balk at nuclearisation. For the right, the US alliance is central to protecting the south from the north. And while some parts of the Trump administration may be open to the idea of South Korea going nuclear, an effort in that direction would face considerable alliance headwinds. Also, the fear of damage to South Korean exports and relations with China means it’s not a serious option. To this side, trying to convince the US to do something, such as nuclear sharing, is a better option.

Given that developing nuclear weapons is a non-starter, why all the smoke if there is no fire? The short answer is that it promises a solution to very real problems in the eyes of those in the centre, for which the left and right lack answers. Nukes would allow South Korea to stand up to bullying from increasingly powerful and assertive North Korea and China, while also greatly reducing dependence on a capricious US intent on increasing South Korea’s involvement in checking China. But as popular as it is, there is no broad constituency to make it happen, and certainly not one strong enough to sustain it when that nice-in-theory idea meets geopolitical realities.

Germany steps up from reluctant power to Baltic deterrent

Germany’s decision to permanently station a combat brigade in Lithuania is more than a military deployment. It’s a strategic signal that Berlin is finally ready to lead from the front.

The foreign basing, which began in May, marks a decisive shift in Germany’s role within NATO, from hesitant stakeholder to serious security provider on the alliance’s most vulnerable frontier.

It is Germany’s first permanent foreign troop deployment since World War II. At Rukla base in central Lithuania, German Chancellor Friedrich Merz addressed German and Lithuanian troops, saying, ‘the security of our Baltic allies is also our security’. For a country once defined by military caution, those words (and the 4,800 troops and 200 civilian personnel behind them) reflect how deeply the strategic environment has changed.

The 45th Armoured Brigade, newly created for the purpose, is a direct response to Russia’s 2022 full-scale invasion of Ukraine. Given their long memories of Soviet occupation, Lithuania, Latvia and Estonia have been sounding the alarm for years and have pushed for a more credible NATO posture in the region. Now, with the brigade expected to reach full capacity by 2027, Germany has finally delivered.

It’s a far cry from the Berlin of five years ago, still mired in debates about helmets and export licences: then, Germany sent Ukraine helmets but declined to supply it with weapons. Today, Merz, unlike his predecessor, Olaf Scholz, has embraced the role of defence leader with visible enthusiasm. He has promised to build Europe’s strongest conventional military and to hit a new NATO spending target of 5 percent of GDP by 2032—3.5 percent for procurement and 1.5 percent for military-relevant infrastructure such as roads, ports and rail. Lithuania has already pledged to reach that same figure next year.

What’s changed? The short answer is Zeitenwende—’turning point’. Scholz introduced the term in 2022 to signal a turning point in German security thinking. But Merz is putting that rhetoric into action. He has lifted the constitutional brake on government debt to enable rises on the defence budget, has backed legislative reforms to make overseas service more attractive, and has placed deterrence at the centre of Germany’s alliance commitments.

This isn’t just about Ukraine. It’s about broader European resilience in an age of geopolitical instability. Merz made that clear during his visit to Vilnius: ‘we stand firmly by Ukraine, but we also stand together as Europeans’. The underlying message: Europe can’t afford to remain dependent on the United States for its security guarantees—not when Washington’s reliability can change with each election.

That’s where this deployment really matters. It’s Germany saying to its allies (and to Moscow) that it understands the stakes and is prepared to act. It’s not a symbolic gesture or a temporary reassurance. It’s a forward posture, anchored in long-term planning and alliance integration.

Of course, it’s not all smooth sailing. Germany still faces problems with military readiness, logistics and recruitment. Deploying thousands of troops abroad brings its own challenges, especially in a force that’s been hollowed out by years of underinvestment. Earlier this year, the German parliament passed new rules to boost pay and conditions for deployed personnel, but rebuilding a robust force takes time.

Still, the political will is there—and that’s new. German leaders used to tread cautiously on anything to do with boots on the ground. Now, they’re making the case that leadership in Europe includes hard power, not just economic clout or diplomatic mediation.

This shift is also about alliance credibility. NATO has promised collective defence since 1949, but in recent years some members (particularly in Eastern Europe) have wondered whether the West would really come to their aid in a crisis. By basing troops in Lithuania, Germany’s helping to close that credibility gap.

It’s also a hedge against future uncertainty in the US. Donald Trump repeatedly called out Germany for underspending on defence during his first term, and there’s no guarantee of US consistency on NATO during his second. Merz, when asked about the possibility of a US troop drawdown in Europe, said he had no indication it would happen. But Berlin’s clearly preparing for that possibility anyway.

So what does this mean for the alliance more broadly? For one, it strengthens deterrence in the east. It also puts pressure on other European powers to follow suit. Especially those with the means but not the will. Germany’s move raises the bar for what leadership looks like in this new security environment.

And for Australia? While the immediate focus is on NATO’s European flank, the implications are global. A more militarily assertive Germany could have ripple effects across transatlantic industrial cooperation, Indo-Pacific planning, and NATO’s global partnerships—areas where Canberra is increasingly engaged.

In short, Germany has stepped into a role that many allies had been hoping for. Few expected so soon. The deployment to Lithuania isn’t just a policy decision. It’s a strategic pivot. And with it, Germany’s finally aligning its military commitments with its political and economic weight. That’s good news for NATO, and a timely reminder that leadership, when it counts, is still possible.

ASPI Defence Conference: Australia’s shared security with PNG and the Pacific

‘Australia is secure when Papua New Guinea is secure, and Papua New Guinea is secure when Australia is secure,’ said Billy Joseph, PNG’s Minister for Defence. It was an important reminder of the closeness of our two countries. In a time when neighbours are seemingly at conflict across the globe, Australia and PNG have an important shared history and future vision that centres around cooperation and trust.

Joseph joined Australia’s minister for defence industry and minister for pacific affairs, Pat Conroy, at ASPI’s Defence Conference on 4 June. During their ministerial panel, they shared their thoughts on security in the region and on the importance of an integrated approach that included climate, economic and cyber security alongside more traditional defence avenues.

‘The security and defence of both Australia and Papua New Guinea are inextricably intertwined given close proximity’, Joseph said, and as such we must ‘appreciate that PNG resilience and preparedness is also important to Australian defence and security’.

Joseph confirmed PNG had initiated defence-specific treaty discussions, noting that ‘security isn’t black and white—it’s a whole package’.  While PNG desires a strong economic partnership with China ‘just like everybody else’, he clarified that ‘when it comes to security, we choose our traditional Pacific partners, which is Australia and the US’.

Conroy reiterated that Australia’s partnership interests went beyond the security space. ‘We don’t just want to be the security partner of choice; we want to be the development partner of choice. We want to be the economic partner of choice. We want to be the people movement partner of choice and we’re going to use every tool of statecraft to deliver that,’ he said.

For Joseph, the strategic intent of the security treaty was clear. He said that PNG wanted ‘to send a message with all this competing interests in the region that PNG stands with Australia and those countries that share the same values and that we have strategic trust in, and also countries that subscribe to an international rules-based order and a free and open Indo-Pacific.’

Joseph also stressed the importance of economic development  alongside security development. He noted that Pacific countries, including PNG, faced resource challenges and that, because of this, there ‘lies opportunities as well as risks—risks in that countries can use economy as a means to push the security interest’.

It’s an important reminder that shared threats are often a driver of shared security. Joseph recalled the concern from PNG prompted by the Chinese navy’s circumnavigation of Australia and live-fire drills in February this year, stating that PNG is ‘not ignorant of what [they] are dealing with, but has to respect sovereign states’.

It was something that other Pacific nations should also have watched closely. In order to circumnavigate Australia, those ships sailed past the coast of PNG through the Torres Strait, with reports of a large drone flying overhead raising alarm across the country. The exercise wasn’t a signal just for Australia; it was for the Pacific. China can and will deploy warships to the region when it wants, with little consideration or notice given to its partners in the region. Its decision in September to fire a missile with a dummy warhead close to or over the top of several Pacific island countries without warning was another example of China failing to care about the region and its security concerns.

That is why Pacific nations must band together to understand and mitigate joint threats for the sake of regional security. Initiatives including the Pacific Response Group and the Pacific Policing Initiative are Pacific-owned and led and directly address the issues raised by Pacific leaders in numerous forums. As Conroy said, his ‘first piece of advice to every country in the world is: respect and follow Pacific priorities’. He also said that ‘security should be driven by sovereign governments in the Pacific where there was a gap and should be filled by other nations in the Pacific, including Australia as a proud member of the Pacific Islands Forum’. China is still seeking to disrupt these initiatives, and counter them with its own alternatives. But none of those alternatives will be led by the region.

During the panel discussion, Joseph remarked that ‘they say when two elephants fight, the grass suffers’—a sobering metaphor for how smaller nations are often caught between great power rivalries—and that the Pacific ‘doesn’t want to be the grass’. But the evolving partnership between Australia and PNG sends a different message to the region. Through deeper cooperation and mutual respect, Pacific nations are asserting their agency. They are not passive ground to be trampled, but more resilient actors shaping the region’s security landscape on their own terms.

Working with Ukraine is how Australia can supercharge defence innovation

‘High-tech trench warfare’ was an oxymoron—until Russia began its full-scale invasion of Ukraine. On Ukraine’s battlefields, Cold War artillery meets 21st-century innovation. Shells fall while AI-enabled drones swarm the air, land and sea.

In the face of a better-equipped Russian military, Ukraine has fused necessity with ingenuity to leapfrog traditional defence innovation cycles. The result is a military-tech ecosystem, filled with innovators personally connected to those serving on the frontline, that now outpaces the peacetime capabilities of most nations.

Australia can and should involve itself with this frenzy of military innovation, reaping the immediate rewards of collaboration and access to systems we can deploy promptly, and learning how to create a similar innovation environment at home.

Brave1, the Ukrainian government’s defence technology accelerator organisation, lies at the heart of this transformation. Combining public grants, private sector innovation and real-time battlefield feedback, its companies produce rapid, scalable solutions.

Ukraine’s armaments sector is like an overclocked early Silicon Valley, where innovations at first emerged from research funded by the US Department of Defense.

But unlike Silicon Valley, Ukraine lacks the domestic capital market capable of expanding production lines and taking these technologies global. That’s where countries like Australia come in.

Brave1 is a living example of wartime innovation. Since Russia’s invasion in 2022, Ukraine has developed world-leading capabilities, many of them from scratch. Its drones have not only reshaped the front lines but sunk a third of Russia’s Black Sea fleet.

In Operation Spiderweb on 1 June, Ukrainian drones deployed behind Russian lines reportedly destroying more than US$7 billion in military aircraft. This is just one example of a sustainable systemic edge built on fast feedback, agile development and open communication between soldiers and innovators.

Ukraine’s system produces practical, scalable and networkable tech. One emergent firm, Vidar, has developed acoustic sensors that triangulate artillery fire in real time. Another, Swarmer, is building AI-enabled systems to let one operator control a full drone swarm, solving the pilot bottleneck that limits most drone programs.

Ukraine aims to produce 4.5 million drones in 2025 alone, three times as many as in 2024. It has tested drones with maximum ranges of 3,000 km. Australia’s 2024 drone innovation program, by contrast, funded just three companies to build 100 prototypes, each with a 5 km range. Australia’s ambition is modest and experimental; Ukraine’s is vast and operational.

Brave1 is about more than drones. Ukraine’s expansive ecosystem includes more than 3,500 domestically developed military and dual-use tech products, and Brave1 is now expanding grants to leading companies into more conventional equipment, such as guided missiles. Its competitive grant model, overseen by military and technical experts, weeds out the unworkable and accelerates what matters.

As Brave1’s head of investor relations, Artem Moroz, says, Ukraine’s approach enables its industry to achieve ‘three innovations per day’, a volume and velocity almost unimaginable in Australia’s defence procurement system.

Australian innovators are capable. But we’re held back by legacy procurement models, limited risk appetite, and policy uncertainty. Our innovation sector risks being left behind. Ukraine offers an example of how to change that, if we’re bold enough to act.

There’s a diplomatic, economic and technological dividend to seizing this moment. Australia could invest in Ukraine’s Brave1 startups, either through a government fund, officially encouraged private capital or joint research and development. This would support Ukraine’s sovereignty, deepen bilateral ties and inject Australian investors and innovators into the world’s most dynamic defence tech lab.

An independent Ukraine will emerge deeply tied to Europe, with a tech sector hungry for capital, markets and scale. Australia, with its $167 billion tech sector and growing defence industry, should be positioning now for strategic partnerships—especially as Ukraine calls out for international support. Brave1 is showing us the future of warfighting and innovation.

The opportunity is clear, if Australia is brave enough to seize it.

This article was originally publish in Innovation Aus.

This article has been corrected to state Artem Moroz’s title as head of investor relations.

This article was originally publish in Innovation Aus.

Keeping the Indo-Pacific on board with the global anti-spyware movement

Launched in early 2024 by Britain and France, the Pall Mall Process is one of two global initiatives aiming to set norms to prevent the harmful proliferation of commercial spyware. But unless the process becomes more inclusive, flexible and responsive to emerging economies, it risks lacking global legitimacy. This is an opportunity to empower Global South  countries to shape—and co-own—the spyware governance agenda.

Spyware misuse is widespread. Europe has seen scandals in Italy, Greece, Poland and Serbia, with spyware deployed against political opponents, activists and journalists. Indo-Pacific cases are growing too: Indonesian agencies have reportedly imported and deployed spyware via Singapore; Thailand has used Pegasus against pro-democracy activists; and Singapore has warned of spyware-linked phishing. Despite global abuse, regulation remains uneven, hindered by limited capacity, conflicting priorities and scepticism toward international initiatives. Many governments view surveillance as vital for national security.

In April, government, civil society and private sector representatives met in Paris to launch the Code of Practice for States—part of the Pall Mall Process—promoting voluntary controls over commercial cyber intrusion capabilities, including spyware.

While 28 states signed the 2024 declaration, only 25 endorsed the code. There are glaring absences in global efforts to regulate this growing threat. The signatories were mostly European. Some of the biggest hosts of spyware firms (for instance Spain, Cyprus and Israel) and most of Asia, Latin America and Africa were not included. While Australia and Singapore endorsed the initial 2024 declaration, neither signed the code of conduct.

This diminishing support reflects the difficulty of achieving broad-based adoption. To maintain traction in such contexts, the international movement to counter the proliferation and misuse of spyware must reframe its appeal and provide states with more adaptable pathways that reflect their diverse capacities, political priorities and tech-security interests.

This means moving away from an all-or-nothing compliance model and instead adopting a tiered approach to participation. Such a model would allow countries to gradually engage with the initiative, building confidence as regulatory capacity grows over time while working toward higher standards. It would also shift the emphasis from a rights-based to an interest-based framework—one that speaks to sovereignty, regime security and strategic autonomy.

For many governments, spyware regulation may be more appealing if it is presented as a means to protect national sovereignty from foreign espionage—including by major powers—and to control the domestic spyware market, thereby avoiding rogue use by political rivals, security agencies or foreign contractors. Reframing the initiative this way acknowledges that spyware is not inherently illegitimate. The goal is to create guardrails, not prohibitions, to ensure spyware use is lawful, controlled and transparent.

The first tier of this model could start with a public declaration of intent to align with the code’s core principles. This would include basic commitments to transparency in procurement of cyber intrusion tools and the introduction of oversight mechanisms, even if minimal. Lowering the entry threshold allows states to signal support without being overwhelmed by technical or legal burdens.

The second tier would involve tailored support and technical assistance. This would mean that the group of signatories recognises the diversity of national security contexts among themselves and would offer customised capacity-building programs. Assistance could take the form of legal advisory services, knowledge-sharing and exchange platforms, and training to develop oversight institutions. A roadmap with milestone targets—shaped collaboratively with the country in question—could provide structure while accommodating political and institutional sensitivities and constraints.

The third tier would entail more advanced reforms. These might include establishing independent regulatory bodies, creating import and export controls for commercial cyber intrusion capabilities, and requiring vendors to undergo licensing and perform due diligence. Legal safeguards against misuse could then be expected, alongside clear mechanisms for accountability. The move to this stage should be gradual, calibrated to the readiness and willingness of each jurisdiction.

Importantly, inclusive consultation and co-design are essential throughout this process. Governments, the private sector, civil society and academia all have roles to play. Companies should be compelled to disclose their supply chains and conduct due diligence. In return, states could offer regulatory clarity and reputational incentives for responsible behaviour. Civil society actors, who often lead investigations into spyware abuse, can contribute to transparency and accountability through monitoring and public reporting.

This tiered approach is not just a diplomatic strategy; it is a necessity. Spyware is now so widely available to both state and non-state actors. Its misuse undermines global norms for responsible behaviour in cyberspace, erodes trust in digital systems and threatens civil liberties. But the solution cannot be imposed through rigid frameworks that ignore geopolitical realities. In today’s fracturing order, global coalitions of across the Global North and South must be brought along through partnership, trust, respect for national concerns and mutual interest, rather than pressure to follow unrealistically high standards.