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Natalie Petit
“History is not the past but a map of the past, drawn from a particular point of view,
to be useful to the modern traveler.” – Henry Glassie, US Historian
Welcome to a new TalkDiplomacy series that aims to trace the roots of current events, issues, triumphs and failures to important historical happenings. Twice a month, readers will receive a snapshot of several influential events that occurred during the corresponding time period in modern history, and an analysis of how these decisions, actions, and ideas have shaped the course of events leading up to present day. A special emphasis is placed on events that influenced current-day diplomacy all over the world.
15 minute read
Contents
April 3rd, 2016: The Panama Papers are published
April 10th, 1971: U.S. ping-pong team begins a week-long visit to China
April 12th, 1961: Yuri Gagarin becomes the first human in space
April 3rd, 2016
The Panama Papers are published
History Seven years ago, an unprecedented leak of 11.5 million confidential files from the world’s fourth-largest offshore law firm, Mossack Fonseca, became known as the “Panama Papers.” The files, obtained from an anonymous source by the German newspaper Süddeutsche Zeitung, exposed wealth stored offshore by politicians, celebrities, and athletes, as well as the rampant tax evasion that accompanied some of the accounts. The International Consortium of Investigative Journalists (ICIJ) and associated media partners launched an in-depth investigation into these documents, exposing the problematic banking practices of several prominent world leaders.
Placing money in offshore banks – which simply refers to banks outside the client’s home country – is not illegal. Offshore banking is often used to conduct international business using foreign currencies or to protect earnings by placing money in more stable markets. However, the practice has also become associated with illicit financial activity as offshore banking makes tracking money more difficult and corruption more probable.
Over 200,000 offshore entities were implicated in the Panama leak, and while most documents showed no illegal activity, some disclosed the true nature of shady accounts at Mossack Fonseca. The most high-profile accounts belonged to Russian president Vladimir Putin (whose inner circle had hidden $2 billion in offshore accounts), the former prime minister of Pakistan, the former president of Ukraine, and the former prime minister of Iceland. Alleged links between Mossack Fonseca and Mexican drug cartels, Syrian regime financiers, dictators, and arms smugglers were also unearthed.
Offshore banking is a complex issue, especially when illegal activity is involved. Three key concepts are important to understand: shell companies, tax havens, and money laundering. First, shell companies are corporations without any active business or assets. They typically only exist on paper – literally, a shell of a company. This itself is not illegal, but funneling income through a shell company in order to avoid paying taxes on it is. Shell companies are often established in a way that makes it unclear who the beneficiary is, thus obscuring where the money in the account came from and where it is going next.
Second, tax havens are countries with very low taxes on income, a lack of transparency in the financial sector, and low barriers to entry for foreign individuals and companies. Many shell companies are registered in such places; known tax havens include Bermuda, the Cayman Islands, and the Netherlands. Finally, money laundering is the process of “cleansing” income earned via criminal activity so that it cannot be tracked or linked back to the perpetrators but still may be used in the legitimate financial sector. Addressing these issues is a massive challenge for financial law enforcement worldwide.
Present The Panama Papers scandal is a modern event that exposed questionable financial activity that had been brewing since the late 1970s. Its release renewed discussion about the potential for abuse of offshore banking by individuals and corporations that wish to bypass financial regulation and highlighted the continued need for effective oversight.
In March 2018, two years after the leak, Mossack Fonseca closed their doors but agreed to continue assisting ongoing investigations into the company’s conduct. Cases have been opened against numerous government officials and businesspeople, several of which are still ongoing. To date, countries have recovered over $1.3 billion in unpaid taxes and penalties. New laws have been enacted in 81 countries, including the aptly named “Corporate Transparency Act” and “Stop Tax Haven Abuse Act” in the United States, an identification law for individuals who own companies in Ghana, and a multilateral agreement to share information on foreign taxpayers with other nations.
The Panama Papers opened the doors to “cross-border investigative journalism,” as an Icelandic journalist involved in the investigation put it, and the inquiry has been the subject of numerous scholarly articles, books, and even movies such as “The Laundromat” on Netflix. Two more international financial investigations followed closely: the Paradise Papers in 2017 and Pandora Papers in 2021. In the latter, fourteen additional offshore service providers were implicated in shady conduct, and again, the questionable offshore banking practices of numerous politicians, celebrities, and wealthy elites (including former British prime minister Tony Blair and Shakira) were brought to light. These investigations demonstrate why, in a highly connected world, exposing such dishonest dealings must not be hindered by national borders.
Sources, and to learn more about…
The Panama Papers investigation, read Luke Harding’s overview in the Guardian, Will Kenton’s explanation for Investopedia, and Frederik Obermaier and Bastian Obermayer’s exposé in Süddeutsche Zeitung.
Continuing consequences of the Panama Papers, read Will Fitzgibbon and Michael Hudson’s report for the ICIJ.
Offshore banking, read Andrew Dehan’s article for Forbes.
Shell companies, tax havens, and money laundering, start by reading the linked articles.
The Pandora Papers, start by reading Sofia Gevorgian’s article for TalkDiplomacy.
April 10th, 1971
U.S. ping-pong team begins a week-long visit to China
History If you’ve seen the classic movie Forrest Gump, you’ll likely remember the scene of Forrest describing how he played ping-pong on the All-American Ping-Pong team against China. He says that the players were the first Americans to visit China in “like a million years or something like that.” Though a fictional depiction, the improvement of relations between the United States and the People’s Republic of China (PRC) truly was impacted greatly by table tennis. And the phenomenon had a straightforward name: ping-pong diplomacy.
Forrest was correct in saying the ping-pong team was the first group of Americans to be legally allowed into China for years (though of course, not a million). Following the Communist takeover in 1949, relations between the U.S. and PRC soured due to stifled diplomatic communication, trade embargoes, and Cold War propaganda. Several U.S. administrations did not acknowledge the legitimacy of the PRC, going as far as backing the exiled government instead. However, by 1971, President Richard Nixon and Chairman Mao Zedong each expressed their desire to reopen dialogues and re-establish diplomatic ties.
When the American table tennis team attended the World Table Tennis Championships in Nagoya, Japan, an unexpected encounter between Zhuang Zedong, the Chinese team’s star player, and a U.S. player named Glenn Cowan opened the door to friendlier relations. Cowan boarded the Chinese team’s bus, and instead of shooing him off, Zhuang shook his hand and gave him a silk-screen picture as a gift. Cowan reciprocated the next day, gifting Zhuang a t-shirt with a peace sign and the Beatles lyrics “Let It Be.” The meeting was caught on camera, and soon, Chairman Mao seized the opportunity to invite the U.S. team to visit in 1971 as a show of good faith. U.S. leaders, including President Nixon and National Security Advisor Henry Kissinger, visited soon thereafter. The Chinese team also toured the U.S. as the first official delegation from Communist China. Nixon later wrote in his memoir that he “never expected that the China initiative would come to fruition in the form of a ping-pong team.”
Present In 2021 during the 50th anniversary of the visit that sparked ping-pong diplomacy, China evoked the spirit of friendship surrounding the events but emphasized the need for conscious effort if the two countries were to return to such relations. “We should not hold our breath for another spontaneous ‘ping-pong moment’,” a spokesperson said. During the Cold War, a Time reporter observed that the back-and-forth game of ping-pong was “an apt metaphor for the relations between Washington and Peking.” It is still a fitting comparison.
It is not feasible to cover U.S.-China relations in this short analysis; the range and depth of issues like trade and economic competition, expanding spheres of influence, and conflicting alliances are too great to discuss adequately. A key issue, and perhaps the most significant, continuous source of tension between the countries, is the dispute over Taiwan. Since 1949, Taiwan has been independently governed by a democratically elected leader, but China still views the island as part of its sovereign territory. Citing the 1992 Consensus as grounds for unity, China has threatened to use necessary means, including force, to reunify the two.
The U.S. maintains “strategic ambiguity” as its official stance on the issue of the sovereignty of Taiwan, which includes three main points:
(1) It “acknowledges the Chinese position that there is but one China and Taiwan is part of China,” with emphasis on the word “acknowledge,” which implies that the U.S. understands but does not necessarily accept the validity of China’s position;
(2) It maintains cultural, economic, and other unofficial ties with Taiwan separately from China;
(3) It forbids the use of force to settle the dispute. (From “Six Assurances” to Taiwan, 1982)
In short, the U.S. supports a “one China policy” – that the two states must reach a peaceful agreement on the issue – while not explicitly taking a side in the sovereignty debate. However, increased arms sales from the U.S. to Taiwan in recent years have flared tensions and reignited Chinese resolve to unify Taiwan under Beijing’s government. Such a sticky situation could lead to a confrontation between the U.S. and China should the PRC use force against Taiwan.
Other important issues in U.S.-China relations include the rapid growth of advanced technology and questions of privacy, China’s Belt and Road Initiative, increased militarization of the South China Sea, and the ongoing trade war.
Sources, and to learn more about…
The beginning of ping-pong diplomacy, start by reading Evan Andrews’ article for History.com, Pete Millwood’s article for History Today, and this article from the U.S. State Department.
The history of U.S.-China relations, start by reading Maurizio Sacchi’s piece for Atlas of Wars and “Major Milestones in US-China Relations” from History.com.
The Taiwan issue, start by reading Lindsay Maizland’s backgrounder for the Council on Foreign Relations.
The ping-pong scene from Forrest Gump, watch it on YouTube here.
April 12th, 1961
Yuri Gagarin becomes the first human in space
History With a grin and a “Let's roll!” Soviet cosmonaut Yuri Alekseyevich Gagarin became the first person to enter outer space on the morning of April 12th, 1961. His 108-minute flight aboard the Vostok I spacecraft went as planned: he orbited the earth once at a speed of 27,400 kilometers per hour, then reentered the atmosphere before ejecting himself and parachuting to the ground. Later, he recalled landing near a small village where a woman and her granddaughter were understandably shocked to see a man in a metallic space suit fall from the sky. The Soviet Union had kept the mission quiet prior to the launch, but when Gagarin returned successfully the news spread around the world within minutes. He became an international icon.
Born on a collective farm outside Moscow, Gagarin came from humble, difficult beginnings. He was a gifted student and a gregarious conversationalist, and was noticed immediately by his superiors, being chosen out of hundreds to be among the first group of Soviet cosmonauts. Amidst volatile relations between the U.S. and the Soviet Union (his flight occurred only a few months before the Berlin Wall was built and a year before the Cuban Missile Crisis increased nuclear tensions to an extreme), he served as a perfect ambassador for the Soviets, breaking stereotypes and easing some tension during his visits to other countries. Sadly, he never took another space flight; he was killed in a plane crash only seven years after his initial success.
With the announcement of Gagarin’s success, most attention was focused on the United States’ reaction. Headlines in the U.S. later that day read “Soviets put man in space. Spokesman says U.S. asleep.” Because of the time difference, officials at NASA (the U.S. federal space agency) were asleep when reporters called about the news that the Soviet Union had beaten the U.S. in sending a human to space. NASA was preparing space flights too, but had at that point only completed a 17-minute test flight with a chimpanzee. Spurred by Cold War rivalry, NASA sent the first American into space less than a month later.
Gagarin’s flight was an important moment in the first few years of the “Space Race,” the Cold War era competition between the Americans and Soviets to develop superior space exploration capabilities. Major events unfolded quickly: in 1957, the Soviet Union launched Sputnik, the first man-made satellite to be placed into orbit, and the U.S. launched its own satellite the following year. A Soviet probe was the first to reach the moon in 1959, though it was not manned. A decade later, the paramount achievement of the Space Race occurred: Apollo 11 landed on the moon and humans took their first steps onto the lunar surface. With “one small step for man, one giant leap for mankind,” the U.S. crossed the finish line of the Space Race.
Present By the mid-1970s, the urgent sense of competition that had defined the last two decades waned while interest in cooperation waxed (lunar pun intended). The first joint U.S.-Soviet mission was completed in 1975. The Apollo-Soyuz mission sent American astronauts to dock in orbit with a Soviet spacecraft. Commanders of the mission from each country met and shook hands in space, symbolizing the spirit of collaboration and improving East-West relations. Today, the International Space Station (ISS) hosts international crews that live and work together aboard the station. The ISS was preceded by the Russian Mir space station, the first long-term, collaborative space station orbiting the earth in the 1990s.
The concept of space diplomacy has extended guidelines for political and scientific interaction to the final frontier. Jennifer Littlejohn, Principal Deputy Assistant Secretary in the U. S. State Department’s Bureau of Oceans and International Environmental and Scientific Affairs, describes a shift that occurred from thinking about space as a realm reserved only for adventurers and astronomers to thinking about how space exploration can improve our lives on earth. She mentions GPS, weather forecasting, ATM cards, and scratch-resistant glasses as examples of innovations we owe to space exploration. With the introduction of private and commercial entities alongside state-run space programs (e.g., Virgin Galactic, Elon Musk’s SpaceX, and Jeff Bezos’ Blue Origin), ensuring the peaceful and fair use of space is necessary. With over 3,000 satellites in orbit, the area surrounding our planet is becoming increasingly crowded. Space diplomacy assists in mitigating conflicts in space, safeguarding important missions, developing sustainable practices for space activities that all parties must adhere to, and addressing pressing issues like space debris.
A tangible example of space diplomacy is seen in the Artemis Accords, to which 21 countries are currently signatories. The mission of the Accords is to “increase the predictability, transparency, safety, and sustainability of human space exploration, and to ensure space exploration is carried out for the benefit of all countries and of all humankind.” Space is “for all” as the theme of the 73rd International Astronautical Congress in 2022 suggests, and diplomacy must continue to reach for the stars.
Sources, and to learn more about…
Yuri Gagarin and the Soviet space program, read Stephen Dowling's article for BBC, Robin McKie’s article for the Guardian, and this archived NASA article.
The Cold War Space Race, start by visiting https://www.history.com/topics/cold-war/space-race.
Space diplomacy, read Jennifer Littlejohn’s brief, this interview with the co-founder of the Duke Space Diplomacy Lab, and Benjamin Schmitt’s article for the Center for European Policy Analysis.
The Artemis Accords, read this State Department brief.