Thursday, 18 September 2014

Scotland's independence will have strategic consequences

Yes or No? Scottish voters will put their money where their mouths are today and tomorrow about whether independence from the 300 year old United Kingdom is desired.

If the answer is yes, the UK will lose about a third of its territory and 8% of its citizens. This is the same equivalent area as if Waikato, Bay of Plenty, Gisborne, Hawkes Bay, Taranaki and Manawatu were to break away from the rest of New Zealand.

The Scots have harboured resentment towards their English partners since the beginning of their unification. That resentment manifested as the creation of the Scottish National Party (SNP) in 1934, now headed by charismatic leader Alex Salmond.

Needless to say, London is watching nervously for the results of the vote. But it isn’t the only capital city of countries with regional independence questions observing the process. Some EU countries are equally worried.

The referendum would not lead to immediate independence if the vote is ‘yes’. The stage would be set for 18 months of complicated negotiations between Edinburgh, London and potentially Brussels to decide what international recognition the new country will enjoy.

England and Scotland have been unified in various ways since England’s Queen Elizabeth I died childless and her crown passed to James VI of Scotland in 1603. The two countries remained connected, – but crucially independent – attached only by the familial lines through the House of Stewart.

In 1707, the Scottish and English parliaments united and became Great Britain. At that point Scotland was bankrupt, with its wealth spent on a poorly organised trading colony in Panama. England’s maritime hegemony was blamed for the eventual bankruptcy by hindering the Scot’s “Darien Scheme”. 

Whether Scotland votes for or against independence will be historically interesting, but the consequences of a ‘yes’ vote will have more serious strategic consequences in the immediate and near future.

Lost in the media blitz and concerted fingernail biting of economists and politicians is the question of Scotland’s role in the UK’s strategic and national security architecture. Both the British Prime Minister and American President Barack Obama have urged Scotland to remain in the union. Scottish secession would hurt the NATO alliance and the European Union, they both claim.

What these two powerful leaders are referring to begins with the reality of the decades-old positioning of Britain’s nuclear submarines – the Trident class – at Faslane on Scotland’s West Coast.

Scotland houses the biggest concentration of British nuclear weaponry and it is not clear whether London would be able to lease the naval and air bases from Scotland in a similar deal to the one with Cyprus.

Trident submarines are part of the NATO nuclear triad deterrent (considered as the land-based, sea-based and air-based launch capabilities of nuclear weapons in the event of a war. A triad gains “survivability” for a second strike should NATO countries be attacked).

The SNP has called the Trident submarines an “affront to basic decency with its indiscriminate and inhuman destructive power”. This statement, amongst others, is causing alarm among American and British strategic planners.

Losing the submarine bases in Scotland would leave NATO vulnerable. But that gap would likely only be temporary. However, relocating the bases has been estimated to cost London up to $US5 billion.

Scotland would also be forced to create and fund its own military force as London firmly stated it would gift no equipment or assets to Edinburgh. It is also unclear whether an independent Scotland would be able to fund its own modernised military.

Another strategic obstacle would be the weakening of the UK’s negotiating powers on the diplomatic front in key problem-areas around the globe. The inability of the UK to remain intact would smack as hypocrisy should London intervene in ongoing conflicts in Ukraine, Syria or even South East Asia for instance.

Scotland could also find it difficult to re-enter the European Union if it succeeds given how many other restive regions in the EU also want independence. Allowing Catalonia or Belgium for example to following Scotland’s lead might be too great a risk for Brussels.

Scotland’s economic outlook is just as strategic as its national security, and as yet there is not indication that an independent Scotland would be allowed to retain the British pound. Neither has London indicated support for a currency union with an autonomous Scotland.

No currency would also mean no national bank. And that’s one of Brussels’ requirements for joining the eurozone. Also, should one of Scotland’s banks get into trouble, the lack of a central bank precludes Scotland from bailing it out.

However, smaller countries can often be more robust than larger countries so a new Scottish currency may not be as bad as some economists predict, according to iconoclastic economist Nassim Nicholas Taleb.

“Just look around: Singapore, Denmark, Norway, Switzerland, Dubai, compared to their neighbors. Focus on otherwise same ethnicity (Cyprus vs Greece, Lebanon vs Syria). Things are a bit more complex,” he says.

One idea for a new currency is the so-called “Scotsie” which would rely heavily on the Scottish footprint in the banking and investment trust sectors. However, Edinburgh’s financial health could be dangerously relying on an inherently unstable sector.

Finally, a longer-term issue for the UK could be the evisceration of the British Labor Party. It supported the SNP in its push for autonomy, but also relies on a good deal of Scottish support for its own party politics in England and may struggle to form a strong government for generations.

The UK may also be burdened with a disproportionately high share of debt if Scotland dumps 143 billion pounds onto London’s books. Interest rates can be expected to rise, as will taxes. Public spending would concurrently drop throughout the UK to service the larger debt.

Should the “no” vote win this week, London will turn immediately to regaining the support of close to 45% of Scots who are currently polling for independence. That will be an uphill battle and will almost certainly lead to greater secessionist feelings in years to come.

However, no matter when Scotland splits from the UK, many of its inherent strategic and economic constraints will dictate its geopolitical realities.

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