In October 2014 China established, together with other Asian countries, the Asian Infrastructure Investment Bank (AIIB). The creation of the AIIB was a consequence of China’s exasperation at America’s refusal to reform the Bretton Woods institutions (i.e. the International Monetary Fund, or IMF, and the World Bank) and the Asian Development Bank (ADB). For years, China has asked to reform the IMF and the World Bank so as to reflect the global clout of the Chinese economy. But the US Congress is adamant not to yield influence, within institutions dominated by America, to a country it perceives as a threat. As for the ADB, Japan has more voting rights there than China, even though China is Asia’s biggest economy. Since China owns the world’s largest foreign-exchange reserves, it can afford to build alternative institutions and to bypass the United States.
The creation of the AIIB clearly indicates that Asia’s balance of power is swinging to China’s advantage, for this is the first time that America is unable to thwart the creation of a rival Asian financial institution. After the Asian financial crisis of 1997, for example, the United States blocked the creation of a proposed Asian Monetary Fund (AMF). Nearly two decades later, China’s will has prevailed.
Despite its intensive lobbying, America has not been able to convince its allies to stay out of the AIIB. In March 2015, Britain, France, Germany and Italy announced their intention to join the AIIB as founding shareholders. In Asia, major US allies such as South Korea, New Zealand, Singapore, and Thailand have announced that they will join the AIIB despite Washington’s pressures. Even Japan and Australia, which had originally indicated that they would not become AIIB members, are likely to join soon. In the Middle East, Israel just added its name to the list of “rebels” by submitting its application to the AIIB.
Israel’s decision to join the AIIB is but another indication of a growing Israeli readiness to defy US President Barack Obama. The looming agreement between the Obama administration and Iran raises concerns in Israel about America’s reliability. While China will never replace America as Israel’s strategic ally, Israel is definitely taking some eggs out of the American basket.
The Obama administration must understand that it cannot enjoy the best of two worlds. It cannot refuse to grant China more influence within the Bretton Woods institutions and expect China to stay still. It cannot abandon its allies and expect them not to develop alternative ties. As Jewish Agency Chairman (and former prisoner of Zion) Natan Sharansky recently argued in a Washington Post op-ed, America under Obama suffers from “a tragic loss of moral self-confidence.”
When US leaders were dealing with the Soviet Union, Sharansky explains, “They felt they were speaking in the name of their people and the free world as a whole, while the leaders of the Soviet regime could speak for no one but themselves and the declining number of true believers still loyal to their ideology. But in today’s postmodern world, when asserting the superiority of liberal democracy over other regimes seems like the quaint relic of a colonialist past, even the United States appears to have lost the courage of its convictions.”
Because the United States seems to have lost the courage of its convictions, it is losing the confidence of its allies. Instead of trying to lobby Western countries (including Israel) not to join the AIIB, America should convince its allies that it is reliable and determined.
When America displays moral relativism and weakness, there are consequences. China’s success with the AIIB is one of them, and Israel made the right decision by joining this new bank.