Earlier this week the deadline for the Iranian nuclear negotiation passed after a flurry of activity in Vienna. In the end, the negotiation were extended a further seven months in what Anthony Bubalo called a 'negative non-failure':

That the talks did not end simply in a comprehensive failure was no great surprise. The stakes are too high. As I explained last week, for the Rouhani Government and the Obama Administration, a nuclear deal holds the key to critical broader objectives: for Rouhani, it can end Iran's political and economic isolation; for Obama, it can recalibrate America's posture and policy in the Middle East.

Moreover, comprehensive failure would have led to an escalatory spiral of increased sanctions and an acceleration of Iran's nuclear program. We could have seen increased tension between the US and Iran in Iraq, undermining the military campaign against Islamic State. The risk of military confrontation in the Middle East would have risen as well.

Major local elections are taking place across Taiwan this weekend, in what is widely seen as a 'barometer' for presidential elections in 2016 and the future of Taiwan's relations with the mainland. Danielle Cave wrote on the important and interesting election for the mayor of Taipei:

KMT, known as pro-business and pro-China, is allegedly the richest political party in the world with registered assets in excess of A$1 billion. And Taipei is traditionally a KMT stronghold, so it is the KMT's race to lose. But some of the most recent polling (election laws prohibit the release of poll results in the final ten days before voting) show Ko leading Lien by more than 10%. The contest has been both dramatic and bizarre, and policy positions have often been overshadowed by intense mud-slinging. There have been allegations of corruption and money laundering,organ trafficking, wiretapping and a Watergate-type scandal. 

The debate over the Australia-China Free Trade Agreement and its significance for Australia's strategic relations with China and the US, as well as China's regional aspirations, continued this week. Sam Roggeveen on its relevance in terms of China's wider policies:

But to me, the mystery is not why Beijing opted for carrots in this case rather than sticks. As Malcolm Cook explained, withholding the FTA would have damaged the domestic economic reform agenda which is at the centre of Beijing's concerns. Rather, the mystery is why Beijing has used sticks against other regional powers lately, and indeed why it bothers with the stick at all.

Hugh White responded to the question Sam raised:

Sam's post however raises the deeper question of why China should think that this will help build its new model of great power relations in Asia. One simple answer is that everyone else does it. Most models of leadership at all levels of human interaction – even America's — involve a mix of both carrot and stick, and there is no reason to expect China's be to any different.

But I think there may be a more specific answer: the main target of China's sticks in the East and South China Seas is not its neighbours themselves, but Washington. It wants to convince America to step back from leadership in Asia by convincing Washington that it will have to confront China militarily to preserve its regional primacy, and that the costs and risk of doing so would be immense. It is trying to intimidate America, in other words. There is a good chance that it is working.

Last week Malcolm Cook argued that the FTA with China was driven by economic reasoning rather than strategic calculations. Hugh White says that in reality, FTAs make little difference economically:

Yes, that's right – four hundredths of a percentage point. In other words, the impact on GDP for China, as for Australia, was estimated to be utterly negligible, and there is no reason to believe that the deal that has now been done will have a significantly greater effect. Indeed the Productivity Commission's 2010 report on FTAs strongly suggests that it won't. It concludes that FTAs in general do nothing at all to boost trade or growth.

But are there other economic benefits? One view is that China values an FTA with Australia to drive reform within China, which might indirectly boost growth. One cannot dismiss this out of hand, but it does seem on the face of it very improbable. The CCP seems to have no trouble driving reform on its own, and if it needs help from outside, why Australia? China has already signed FTAs with many advanced and prosperous countries which pose it no strategic problems. How does adding Australia to the list help?

Malcolm responded, saying that the structural changes that occur to national economies as a result of FTAs are often underestimated and hard to measure, thus: 

Economic interests and strategic ones are both important, and these interests certainly do intersect. But in the case of the China-Australia FTA, I think Hugh understates the deal's economic importance to China and overstates the intersection between China's global economic interests and regional security interests. He also overstates the prominence of these regional security interests in this intersection.

Economics does explain the China-Australia FTA better than Strategic Studies.

Elliot Brennan on what the port call of Vietnamese ships to the Philippines this week means:

In what was the first ever port call between the countries, two Vietnamese frigates visited the Philippines on Tuesday. An unnamed Filipino naval officer said the two countries would hold peaceful joint patrols and operations in the Spratlys.

But the timing of the maiden port call was clear. It coincides with the first anniversary of China's declaration of an Air Defence Identification Zone (ADIZ) over parts of the East China Sea, including the Senkaku/Diaoyu Islands. Ever since, Southeast Asian states have worried about Beijing's intentions for its territorial disputes in the South China Sea.

US Secretary of Defence Chuck Hagel somewhat unexpectedly announced his resignation this week, after only two years on the job. Tom Switzer on why Hagel did not gel with President Obama:

Moreover, although he initially shared the President's instinctive realism and caution about indiscriminately throwing America's weight around in the world, it is widely understood Hagel clashed with the White House over Obama's failure to prosecute the case against Assad's regime in Syria more aggressively. He was seen as outside the President's tight bunker of advisers that has centralised foreign-policy decision-making more than any president since Nixon.

Andrew Kwon also weighed in on what will be expected of Hagel's replacement:

Obama's eventual nominee will reflect a desire to either increase or decrease this trend of centralisation. Obama can pick a Secretary of Defense either because he/she will advocate and execute White House policy, or because he/she can be trusted to work in relative autonomy. These qualities are not mutually exclusive, but they won't always synchronize. The President's eventual choice will reflect his preferences and determine the direction of US National Security policy for the foreseeable future.

Merriden Varrall was at the Fifth Xiangshan Forum last week in Beijing, where perceptions of history played a critical role:

As such it is almost inconceivable that the Chinese Government could concede territory in the South China Sea without suffering a strong domestic backlash. Yet it seems that some compromise will be necessary for genuine cooperation and dialogue in the region. Policy-makers hoping to influence China's behaviour in the South China Sea need to understand just how critical the politics of history is to Chinese national identity and not presume that Chinese leaders will be either willing or able to back away from their understanding of historical facts.

China has been using a 'financial repression' strategy, says Julian Snelder:

The payoff of China's 'financial repression' strategy is uncertain in the long run, but today it buys geopolitical influence and explains Beijing's enthusiasm for establishing new multilateral lending agencies under its own aegis (it also has two very large export/development banks of its own). To be sure, there is much investment needed globally in infrastructure, not least in America. Governments inevitably must play a role in infrastructure building, and China should pursue quality opportunities abroad. If eventually, however, the financial returns on China's overseas development projects are poor, we might not ever hear the news. But we will see the consequences of misallocation and misadventure: high indebtedness, low returns for savers and pensioners, and ultimately lower living standards for Chinese citizens, who will foot the bill for Beijing's moneybags foreign policy.

Fiji was the big winner from visits by President Xi Jinping and Prime Minister Narendra Modi to the Pacific Island region, argued Jenny Hayward-Jones and Philippa Brant:

Even if Xi and Modi's visits were more about style than strategic substance, Fiji's government has had a big win in the last week. Fiji has reasserted its claims for regional leadership, potentially at the expense of Papua New Guinea, which has been seeking a similar role for itself in recent years. In acting as the host for two meetings of Pacific Island leaders, the Fiji Government portrayed Fiji as the natural hub for the region. It also benefited more than any other country from the few new aid announcements that were a necessary feature of the visits of both leaders, propelling it into the international spotlight for a few days.

Mark Tamsitt on the election outcomes in the Solomon Islands:

The elimination of outgoing prime minister Gordon Darcy Lilo, who was rumoured to be forming a pre-election coalition, introduces another element of uncertainty. Although Steve Abana's Democratic Alliance Party won the highest number of seats with seven MPs, their numbers are no guarantee that they will be able to form a coalition with independents. Changes of leadership in 2006 and 2011 sparked protests when voters suspected pressure and meddling from business. It is not out of the question that dissatisfied voters will take to the streets again to protest against the new leader or take part in opportunistic looting.

Photo courtesy of Flickr user Michael Hamann.