








EZEKIEL 25 17
The path of the righteous man is beset on all sides by the iniquities of the selfish and the tyranny of evil men. Blessed is he who, in the name of charity and good will, shepherds the weak through the valley of the darkness. For he is truly his brother's keeper and the finder of lost children. And I will strike down upon thee with great vengeance and furious anger those who attempt to poison and destroy my brothers. And you will know I am the Lord when I lay my vengeance upon you.
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RUSSIA-CHINA REPORT"
Shanghai Cooperation Organization" (SCO) (AXIS OF EVIL)http://www.sectsco.org/home.asp?LanguageID=2
The Shanghai Cooperation Organization (SCO) is an intergovernmental
international organization founded in Shanghai on 15 June 2001 by six countries:
China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Its member
states cover an area of over 30 million km2, or about three fifths of Eurasia,
with a population of 1.455 billion, about a quarter of the world's total. Its
working languages are Chinese and Russian. SCO's predecessor, the Shanghai Five
mechanism, originated and grew from the endeavor by China, Russia,Iran,
Kazakhstan, Kyrgyzstan and Tajikistan to strengthen confidence-building and
disarmament in the border regions. In 1996 and 1997, their heads of state met in
Shanghai and Moscow respectively and signed the Treaty on Deepening Military
Trust in Border Regions and the Treaty on Reduction of Military Forces in Border
Regions.On 19 November 2008 the SCO Secretary-General Bolat Nurgaliev met at the
Secretariat with the Deputy Secretary-General of the Association of Southeast
Asian Nations Soeung Rathchavy who arrived in Beijing for working consultations
with the SCO. During the meeting B.Nurgaliev briefed the ASEAN official on main
areas of the activity of the Organisation, the practice of SCO’s interaction
with countries in the region and international organisations. S.Rathchavy
described current goals and tasks concerning further deepening of integration
among the 10 member states of the ASEAN. During the talks both sides expressed
mutual intention to maintain regular contacts based on the MoU between the SCO
and ASEAN signed in April 2005. Exchange of opinions took place over issues of
regular interaction between the two organisations in such fields like economy
and trade, transportation and communications, energy, environmental protection
and sustained development, information technologies and their implementation.
There after, this annual meeting became a regular practice and has been held
alternately in the five member states. The topics of the meeting gradually
extended from building up trust in the border regions to mutually beneficial
cooperation in the political, security, diplomatic, economic, trade and other
areas among the five states. The President of Uzbekistan was invited to the 2000
Dushanbe Summit as a guest of the host state. As the first meeting of the five
heads of state took place in Shanghai, the cooperation mechanism was later known
as the "Shanghai Five".
On the fifth anniversary of the Shanghai Five in June 2001, the heads of state
of its members and the President of Uzbekistan met in Shanghai, the birthplace
of the mechanism. First they signed a joint declaration admitting Uzbekistan as
member of the Shanghai Five mechanism and then jointly issued the Declaration on
the Establishment of the Shanghai Cooperation Organization. The document
announced that for the purpose of upgrading the level of cooperation to more
effectively seize opportunities and deal with new challenges and threats, the
six states had decided to establish a Shanghai Cooperation Organization on the
basis of the Shanghai Five mechanism. In June 2002, the heads of SCO member
states met in St. Petersburg and signed the SCO Charter, which clearly expounded
the SCO purposes and principles, organizational structure, form of operation,
cooperation, orientation and external relations, marking the actual
establishment of this new organization in the sense of international law.
Iran appears increasingly interested in joining the Shanghai Cooperation
Organization (SCO) and form a powerful axis with its twin pillars, China and
Russia, as a counterweight to a US power "unchained". The SCO was initially set
up as an open and nonaligned organization and it was not initially targeted at a
third party. Chinese Assistant Foreign Minister Li Hui said that the Shanghai
Cooperation Organization (SCO) will not take in new members before its six
members make serious studies. The organization is still very young and the six
SCO members need to have further discussions before deciding whether or not to
accept new members, Li said 01 June 2004. Mongolia's demand to participate in
the organization as an 'observer' was approved at the June 2004 summit.
Guidelines on the status of observer nations were approved and it was decided to
award Mongolia this new status.
On 17 June 2004, the Shanghai Cooperation Organization held its annual Summit in
Tashkent, Uzbekistan. Attending this conference was Chinese President Hu Jintao,
Russian President Vladimir Putin, Kyrgyzstan President Askar Akayev, Tajikistan
President Emomali Rakhmonov, Kazakhstan President Nursultan Nazarbayev and
Uzbekistan President Islam Karimov. Much of the pre-summit media attention
included what Russian President Putin and Chinese President Hu hoped would
facilitate the development of economic relations between the SCO countries. This
appeared to have been successful. At the conclusion of the summit, the leaders
signed a document titled the Tashkent Declaration. The declaration summarized
the outcome of the SCO's work since it was set up, evaluated the activities of
the organization's agencies and set new goals. They also signed agreements on
cooperation in fighting drug trafficking and on the protection of secret
information in the framework of the SCO anti-terrorist agency, whose
headquarters were opened in Tashkent.
Several meetings were conducted on the sidelines of the Summit. Chinese
President Hu Jintao met with Afghanistan Transitional President Hamid Karzai,
who was a guest of Uzbek President Islam Karimov, and they discussed
Afghanistan’s attempts to locate and bring to justice the terrorists who
attacked Chinese workers there. In other meetings, Kyrgyz President Askar Akayev
handed over to Hu Jintao a written document to confirm Kyrgyzstan's stance to
recognize China' s full market economy status. Hu said the move by Kyrgyzstan
will "greatly push forward China-Kyrgyzstan bilateral trade and economic
cooperation." Hu made a four-point proposal in meeting with Tajik President
Emomali Rakhmonov on strengthening cooperation. Hu said the two sides should
support each other on major issues, enhance law-enforcement cooperation to fight
against terrorism, separatism and extremism, as well improve economic relations
and cultural exchanges. Rakhmonov said he agreed with Hu's proposals. Kazakh
President Nursultan Nazarbayev visited China last month and the two sides signed
a number of agreements to cement cooperation primarily in oil and natural gas as
well as in other areas. Russia and Uzbekistan signed a strategic-partnership
treaty, with Russian President Vladimir Putin and Uzbek President Islam Karimov
hailing it as a new stage in long-term relations.
April 8, 2008 Introduction What is the history of the SCO? What is the SCO
position on the U.S. presence in the region? What was the SCO’s role in removing
U.S. forces from Uzbekistan? How strong is the SCO’s presence in the region?
What is the status of Iran’s efforts to join the SCO? What are the pros and cons
of Iran joining the SCO? What are Iran’s motivations for joining the SCO? Is
Iran’s desire to join the SCO aimed at the United States?
Introduction
The Shanghai Cooperation Organization (SCO)–comprised of China, Russia,
Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan–began in 2001 as a
confidence-building mechanism to resolve border disputes. In recent years, it
has risen in stature and scope, making headlines in 2005 when it issued a
timeline for U.S. forces to pull out of Uzbekistan. Some experts say the
organization has emerged as a powerful anti-U.S. bulwark in the region, while
others say that because of inherent frictions between its two main members,
Russia and China, the SCO is unlikely to pose a threat to U.S. interests in
Central Asia. Meanwhile, talks are under way to amend the group’s mission
statement to include, among other things, increased military cooperation,
intelligence sharing, and counterterrorism drills. Iran is currently one of four
observers to the SCO. It requested full membership in March, prompting
speculation about the future direction of the SCO.
What is the history of the SCO?
Originally called the Shanghai Five, the SCO formed in 1996 largely to
demilitarize the border between China and the former Soviet Union. In 2001, the
organization added Uzbekistan and renamed itself the Shanghai Cooperation
Organization. Mongolia won observer status in 2004; Iran, Pakistan, and India
became observers the following year. The SCO has since risen in regional
prominence, tackling issues of trade, counterterrorism, and drug trafficking.
Unlike the North Atlantic Treaty Organization (NATO), the organization is not a
mutual defense pact. But the SCO has held a number of joint military exercises,
most recently in 2007 near Russia’s Ural Mountains. Some experts cite a
convergence of interests among members in recent years, including improved ties
between China and Russia and the perceived threat posed by U.S. forces in the
region. Others, including Lieutenant General William E. Odom, senior fellow at
the Hudson Institute, say the SCO is being used by Russia and China as a vehicle
to assert their influence in Central Asia and curb U.S. access to the region’s
vast energy supplies.
What is the SCO position on the U.S. presence in the region?
SCO members say U.S. bases in the region, established in the wake of 9/11, were
not meant to be permanent and were only installed to assist the U.S.-led war in
Afghanistan. China and Russia have chafed at the U.S. military presence in
Central Asia, an energy-rich region both consider within their sphere of
influence. After uprisings in Ukraine, Georgia, and Kyrgyzstan unseated leaders
loyal to the Kremlin, Russia has viewed the U.S. presence in post-Soviet states
with increasing suspicion. Many in Moscow argue the so-called color revolutions
were the work of U.S.-funded nongovernmental organizations. Beijing sees the
U.S. military presence along its western border as part of Washington’s strategy
to contain China, experts say.
What was the SCO’s role in removing U.S. forces from Uzbekistan? On July 5,
2005, the SCO issued a declaration implicitly calling for the United States to
set a timeline for withdrawing its military forces from Karshi-Khanabad Air
Base, located in southern Uzbekistan. But experts say relations between
Uzbekistan and Washington were already on the skids. After 9/11, Uzbekistan
became a strategic partner of the United States, cooperating with American
forces on counterterrorism issues and allowing use of the Karshi-Khanabad air
base. In return, Uzbekistan received security guarantees and military equipment.
Yet a May 2005 uprising in Andijan province, followed by a brutal crackdown by
the Uzbek authorities, led to sharp criticisms from Washington. The Uzbek
government also grew suspicious of U.S. involvement in pro-democracy revolutions
in Georgia, Ukraine, and Kyrgyzstan. Hence, the Uzbek government ended its
military cooperation with the United States and moved to eject U.S. forces from
Karshi-Khandabad. The SCO declaration, most experts say, merely accelerated the
withdrawal of U.S. forces, which was completed by the end of 2005.
How strong is the SCO’s presence in the region?
Not that strong, but growing, most experts say. “The basic picture is the SCO is
not as important as people in Washington think,” says Daniel Kimmage, an expert
on Central Asia at Radio Free Europe/Radio Liberty. The SCO serves more as a
forum to discuss issues of trade and security than a fully-developed
counterpoint to NATO. “If you take NATO as your standard for organizational
effectiveness,” Kimmage says, “the SCO is not even close yet.” Plus, unlike
NATO, there are no mutual defense pledges. Also holding back the organization’s
effectiveness are internal divisions and tensions between its member states,
particularly China and Russia over issues of energy and the construction of
ports in the region. Finally, multilateral institutions historically have a poor
track record in the region. “Most countries do serious stuff bilaterally,”
Kimmage says. That said, most experts agree that the SCO’s influence in the
region is on the rise. “I think the current fears [of Iran joining] are
overblown but that doesn’t mean the capacity isn’t there,” says Martha Brill
Olcott, a senior associate with the Carnegie Endowment for International Peace.
Others say a stronger SCO, particularly one with a military component and Iran
as a full member, might serve as a check to U.S. interests and ambitions in the
region. “An expanded SCO would control a large part of the world’s oil and gas
reserves and nuclear arsenal,” David Wall, an expert on the region at the
University of Cambridge’s East Asia Institute, told the Washington Times. “It
would essentially be an OPEC with bombs.”
What is the status of Iran’s efforts to join the SCO?
Since Iranian President Mahmoud Ahmadinejad attended the Shanghai summit in
2006, there has been speculation that Iran might join the SCO. In March 2008,
Iran’s Foreign Minister Manouchehr Mottaki officially announced Iran’s bid,
saying Tehran had submitted a request for full membership to the SCO
Secretariat. As of now, there is no clear mechanism in place to expand the SCO
and offer Iran—or any other potential member—formal membership.
What are the pros and cons of Iran joining the SCO?
Sergey Karaganov, chairman of the Russia-based Foreign and Defense Policy
Council, says eventual membership could “be one of the carrots that [is] part of
a larger deal” to resolve the current nuclear crisis with Iran. Also, membership
“would allow China and Russia to influence more positively Iran’s foreign policy
and, by implication, the Muslim world,” writes Kaveh Afrasiabi, an expert on
Iran, in the Asia Times. Yet other analysts are more skeptical. “At a certain
point it’ll become so diluted that China’s original interest [in the SCO]—to
neutralize its western neighbors—will not have been lost but submerged amid
other issues,” says S. Frederick Starr, an expert on Central Asia at Johns
Hopkins University. Another problem is “nobody will trust the Iranians,” Olcott
says. “[SCO members] may be cutting off their noses to spite their faces,” she
says. “If they want to score geopolitical verbal punching points, it's a good
move. But if you want it to function better, you get nothing by bringing in
Iran.” RFL/RL reports that China and Russia are wary of making Iran a full
member on the grounds that Iranian membership could give the SCO more of an
anti-American tone.
What are Iran’s motivations for joining the SCO?
In addition to a means for Iran to tighten its contacts with Russia, experts say
Iran sees the SCO as a club of like-minded states important to its geostrategic
interests in Central Asia. The SCO also complements Iran’s so-called “looking
East” foreign policy, says Mohsen Sazegara, an Iranian dissident, policy
activist, and former professor at Yale University. He says Iran has strong
historical, cultural, and economic ties with many of the Central Asian
countries. Iran also wants to cultivate a stronger relationship with larger
states like India and China. “China gets a lot of energy from Iran and in the
future wants to get more,” Starr says. But some experts question Tehran’s
“Eastern” orientation. “I think as it becomes exposed and analyzed, [it] will
prove to be more of a slogan than a policy,” said CFR Senior Fellow Ray Takeyh
at a Middle East Policy Council Forum.
Is Iran’s desire to join the SCO aimed at the United States?
Perhaps, experts say. “Part of Iran’s foreign policy, at least in the mind of
the Supreme Leader, is to be anti-U.S.,” Sazegara says. Further, Iran views the
SCO as a potential guarantor of future security, experts say. Membership, for
example, could offer Iran shelter from the international pressure put on Tehran
to end its uranium-enrichment program. Similar protection was provided to
Uzbekistan after the Andijan massacre in May 2005.
(SCO=NEW GLOBAL GAS MAFIA & AXIS OF EVIL)
''Russia-China Security Cooperation Organization-AKA-GLOBAL GAS MAFIA'' Russia
and China have joined together in a strategic partnership aimed at countering
the U.S. and Western "monopoly in world affairs," as was made clear in a joint
statement released by the Chinese and Russian presidents in July 2005. The long
standing border disputes between the two countries were settled in agreements in
2005, and joint military exercises were carried out in the same year.
Furthermore, Russia, in addition to its arms exports, has been increasing its
oil and gas commitments to China. Clearly, the recent comprehensive improvement
of bilateral relations between China and Russia is a remarkable development.
What is the meaning of this military and security related cooperation, and is
the Sino-Russian military liaison likely to expand? Should this rapprochement be
considered as a structural shift of power with the goal of repelling Western
influence from Central Asia and the adjacent areas?
Russian-Chinese Military Maneuvers
In August 2005, for the first time in 40 years, Russian and Chinese armed forces
carried out joint military exercises. China took the lead in proposing the size,
participating type of forces and content of the maneuvers. Allegedly, China also
took care of most of the costs of the exercises. The formal objectives of the
mission were to strengthen the capability of joint operations and the exchange
of experience; to establish methods of organizing cooperation in the fight
against international terrorism, separatism and extremism; and to enhance mutual
combat readiness against newly developing threats. [See: "The Significance of
Sino-Russian Military Exercises"] The exercises comprised "ingredients" such as
the use of strategic long range bombers, neutralization of anti-aircraft
defenses, command posts and airbases, gaining air superiority, enforcing a
maritime blockade and the control of maritime territory. Terrorist movements,
however, do not posses conventional land, sea or air forces, nor do they deploy
their military power in a symmetrical way. Therefore, the objectives of the
joint exercises had little to do with combating terrorism; instead, they were
aimed at conventional warfare, employing all military services except for
nuclear forces. The actual objective of the maneuvers was likely to display to
the Western world that Russia and China consider themselves to be in control of
the Asia-Pacific region and that outside powers will be denied the right to
interfere in their sphere of influence. From a military-operational point of
view, Russia as well as China gained from the experience of the bilateral
exercises. The Chinese armed forces are -- as a consequence of China's
increasing political and economic power -- in a stage of growth, in size as well
as in ambition. Therefore, practicing command and control procedures but also
purely operational aspects, such as carrying out an airborne assault, will
strengthen the capabilities of the Chinese forces. If Russia considers that
China might turn into a threat in the long run, then these exercises have also
been worthwhile for the Russian general staff by providing it insight into how
the Chinese armed forces operate and what their current capabilities are.
Arms Sales
The demonstration of weapon systems at the 2005 Sino-Russian exercises might
have been meant to promote Russian arms sales to observers of the Shanghai
Cooperation Organization (S.C.O.). India, for instance, comprises some 40
percent of Russia's arms exports and Iran is considered to be an important
growth market for the Russian arms market. Currently, some 45 percent of
Russia's arms exports go to China. Since 2000, Russia has delivered weapon
systems to China -- including fighter aircraft, submarines and destroyers --
amounting to an average of US$2 billion annually. China has been the largest
consumer of Russian military equipment for a number of years. Russia's arms
trade to China is an important factor in the cooperation between the two
countries. Nevertheless, Russia seems to be well aware that China would like to
obtain its most sophisticated military technology, which, in case of
deteriorating relations, Beijing might use against Russia. For that reason,
Russia is reluctant to provide China with its state-of-the-art products.
Moreover, there are indications that China is steadily acquiring enough
knowledge to have a solid military industry of its own. Subsequently, in the
coming years China will buy fewer arms from Russia, which will diminish the
value of this cornerstone of their bilateral relationship.
Energy Policy
In August 2005, during a visit to Beijing, Russian President Vladimir Putin
stressed economic ties and especially the work of Russian energy companies in
China, bilateral projects that would distribute those supplies to third
countries, as well as the delivery of Russian oil and gas to China. Furthermore,
in November 2005 Russia and China agreed to double oil exports to China and to
consider constructing an oil pipeline from Russia to China and a
gas-transmission project from eastern Siberia to China's Far East. China,
however, also focuses on Kazakhstan in its need for energy. In December 2005,
the Atasu-Alashankou pipeline between the two countries was opened. In due
course, this Sino-Kazakh pipeline will be enlarged from 1,000 to 3,000
kilometers (621 to 1,864 miles) and will eventually provide China with
approximately 15 percent of its crude oil needs. By establishing energy ties
with Kazakhstan, it is clear that China wants to avoid energy dependency on
Russia. Another argument is that by redirecting Kazakh oil pipelines through
China instead of through Russia, China's influence over Kazakhstan and Central
Asia will increase at the expense of Russia's position. Thus, Russia's energy
power tool -- as used successfully against Ukraine -- seems to be threatened by
China's energy strategy. Although cooperating with China in energy, however,
Kazakhstan has a considerable Russian minority and therefore will be unlikely to
follow an anti-Russian political course.
The Demographics Factor
In December 2005, Russia's interior minister, Rashid Nurgaliev, stated that
illegal immigration is creating a threat to national security in the Russian Far
East. Although Nurgaliev did not mention the word "Chinese," and in spite of
frequent formal statements contradicting such a development, a continuous influx
of illegal Chinese immigrants is taking place in this region. Russia has a long
border with China, some 4,300 kilometers (2,672 miles), and is sparsely
populated in its Far East. The numbers may vary but sources mention a flood of
thousands of Chinese entering Russia, up to allegedly 600,000 per year. It is
not inconceivable that this flood is more than a coincidence; in fact, it might
well be a planned policy directed from Beijing. Possibly, China is carrying out
a policy of "Finlandization" in order to gradually increase its influence over
this Russian region. The reasons for such a population policy might be to create
an overflow area for Chinese citizens from densely populated areas in China
proper, and also to gain a political and/or economic foothold in this area,
which is rich in energy resources.
The Shanghai Cooperation Organization
The Russian-Chinese military exercises of 2005 should not only be considered
from a Sino-Russian bilateral point of view, but also as an activity of the
S.C.O., as was frequently stated by Russian Defense Minister Sergei Ivanov. Not
only did the Russian and Chinese ministers of defense observe the maneuvers, but
also present were representatives from the S.C.O. Formed in 1996 as the
"Shanghai Five" -- comprising Russia, China, Kazakhstan, Tajikistan and
Kyrgyzstan -- in 2001, together with admitting Uzbekistan, the S.C.O. was
formalized as an international organization. Until 2005, the S.C.O. mainly dealt
with regional security -- in particular against the three "evils" of terrorism,
separatism and extremism -- as well as with economic cooperation. However, at
its summit of July 2005 in Astana, the S.C.O. proclaimed a radical change of
course. The governments of the Central Asian member states -- faced with the
Western-supported regime changes in Ukraine and Georgia, as well as with Western
criticism of the Uzbek government's repression of the unrest in Andijan --
increasingly saw their existence threatened, which forced them to choose an
alliance with Russia and China and diminishing the (economically favorable)
relationship with the West. [See: "Intelligence Brief: Russia in the S.C.O."] At
the summit, this led to a final statement of the S.C.O. members in which
Washington's unipolar and dominating policies as well as foreign military
deployment in Central Asia were condemned and the withdrawal of Western military
troops was encouraged. This Declaration of the Heads of Member States revealed a
watershed in the S.C.O.'s range of policy from regional anti-terrorist
activities to claiming an important position in the international arena in
external security policy. In addition to the S.C.O.'s change of course, there
was another significant development at the 2005 summit. In addition to Mongolia,
in July 2005 Iran, Pakistan and India joined the S.C.O. as observers. By
admitting these three states as observers, the S.C.O. now encompasses nearly
half of the world's population. Furthermore, in addition to Russia and China,
India and Pakistan bring together four nuclear powers, whereas Iran possibly has
the ambition to become one. In addition to this, the S.C.O. Shanghai summit of
June 2006 -- which was dominated by energy deals, especially by China --
demonstrated that energy resources (Russia, Kazakhstan and Iran) are also a
crucial focal point for its members and observers. Comprising a considerable
territory in and around Central Asia, a large part of the world population,
energy resources and nuclear arms, the S.C.O. has a formidable political,
economic and military potential. For Russia, the S.C.O. apparently acts as a
means to bring together different policy objectives. Not only China, but India
and Iran as well have a special relationship with Russia. All three states are
important actors in Russia's arms exports. In addition to this, China and India
are gaining a closer relationship with Russia in the field of joint, bilateral
military exercises. Therefore, the fact that India and Iran recently joined
China in its cooperation with Russia within the S.C.O. could prove that the
S.C.O. serves as a platform for Russia's security policy. It is evident that the
S.C.O. is gaining power, in particular since the Astana summit of 2005. It is
likely that this development of the S.C.O. will continue in the coming years.
Russia will use this organization to reduce Western and U.S. influence in
Central Asia which was accomplished in the aftermath of the September 11
attacks. In such a way, the S.C.O. will represent to Russia a vital instrument
to achieve geopolitical objectives. In envisaging the future position of the
S.C.O., it is important to note that cooperation among its members and observers
is essentially based upon a negative strategic objective: to counter U.S. and
Western influence. To a large extent, common, positive targets are absent. For
example, China is seeking markets and energy resources; Russia is eager to
regain its leadership status within the C.I.S. as well as that of a superpower
in the international arena; and the Central Asian regimes consider the S.C.O. as
their guarantee for political survival. Moreover, India and Pakistan are
probably showing the West that they follow their own independent course and
Iran's objective might be found in anti-Americanism. This mixture of possibly
divergent objectives -- for instance, Iran's support of radical Islamists which
are a threat to the Central Asian states -- demonstrates that they do not
necessarily have much in common. It is not inconceivable, therefore, that the
eventually deviating objectives of the S.C.O. member states and observers will
cause a split in the organization, which would paralyze its activities.
Outlook on Russia-China Relations
In the coming years, Russia is likely to strengthen its ties with China. These
two states are seeking a closer relationship not only in the field of security,
but also in areas such as military cooperation, energy, the arms trade and
foreign policy. Russia has more than once stated that closer relations with
China is a geopolitical objective in order to strengthen Russia's global
position. Nonetheless, this close relationship with China could very well turn
out to be for the short term. In its Far East, Russia is increasingly confronted
with illegal immigration from China. Furthermore, Russia possesses energy
resources that China desperately needs. China is "using" Russia for its military
technology and energy resources. When China reaches its current drive for
independence in military technology and will have created alternative ways of
gaining energy -- for instance through Kazakhstan -- China may reduce ties with
Russia. Moreover, China will continue to use its neighbors, such as Russia, the
Central Asian states and other partners within the S.C.O., to strengthen its
global position. If so required, China will not hesitate to use its power
against one of its former partners, as is demonstrated by China's efforts to
divert energy routes away from Russia.
Russia is well aware that China's growing economic and military importance could
develop into a threat. An indication of Russia's concern toward China could be
in Moscow's alleged creation of a second joint military grouping of defense
forces and internal and security troops. In contrast with the areas of Chechnya
and Dagestan, in Russia's Far East there is no threat of Islamic extremism and
the formation of a joint military command could only be related to a potential
threat from China. In due course, the so far hidden fear of China could cause
Russia to draw back from China and to seek an intensification of political and
economic ties with the West, even if this abandonment from China would mean that
Russia has to accept Western influence in its backyard of the former Soviet
Union.
The West will probably have to cope with increasing ties between Russia and
China and subsequent policies contrary to Western activities in the Far East and
the Pacific. To a certain extent, the West itself is the reason for this
rapprochement between Russia and China. All current Russian major security
documents clearly demonstrate disappointment in the West for leaving Russia out
of Western security policy. The climax of this mistrust has been N.A.T.O.'s war
in Kosovo. Although Russian-Western relations since then have improved, the
feelings of mistrust and disregard are still evident in parts of Russia's
security elite and thus have resulted in closer ties with China.
China's emerging economic and military power will have to be taken into account.
China will become a regional and possibly global power with capacities and
policies that may counter Western influence not only in the Far East, but
elsewhere. Western security policy should be aware of this development. If China
indeed achieves such a superpower position, the West and Russia may find common
ground to seek closer cooperation.
On July 16, the presidents of Russia and China signed a Treaty for Good
Neighborliness, Friendship and Cooperation in Moscow. 1 This treaty is the first
such agreement between these two Eurasian powers since Mao Tse-tung signed a
treaty with Joseph Stalin of the U.S.S.R. in 1950, four months before the
outbreak of the Korean War. That treaty had been driven by anti-Western
sentiments. The motivations behind this new treaty are much more complex and
involve serious geopolitical, military, and economic considerations. In a sense,
this treaty is a logical product of the improvement in Sino-Russian relations
that began under the last Soviet leader, Mikhail Gorbachev, and continued under
Boris Yeltsin. The treaty should signal to the Western world that a major
geopolitical shift may be taking place in the Eurasian balance of power, with
serious implications for the United States and its alliances. The treaty comes
on the heels of another recent security arrangement involving these two
countries: On June 14, Russia, China, and four Central Asian states announced
the creation of the Shanghai Cooperation Organization (SCO), an arrangement
ostensibly aimed at confronting Islamic radical fundamentalism and promoting
economic development. 3 Together, the agreements portend an important evolving
geopolitical transformation for Russia and China, two regional giants who are
positioning themselves to define the rules under which the United States, the
European Union, Iran, and Turkey will be allowed to participate in the
strategically important Central Asian region. Many analysts point out that while
the United States should monitor these developments, there is still no cause for
panic. Contradictions in political objectives continue to exist between China
and Russia, including Russia's "primordial distrust" of the Chinese, according
to Professor James Sherr of Great Britain's Royal Military Academy at Sandhurst.
4 Nonetheless, there is growing concern that the new treaty between Moscow and
Beijing may increase coordination between the two countries against the United
States. The Bush Administration should take steps to protect U.S. interests,
increase regional security, and counter the threat of proliferation of weapons
of mass destruction (WMD). It should, for example, expand intelligence
monitoring of the Sino-Russian strategic partnership, including assessing
possible secret codicils in the treaty. It should boost military and security
cooperation with India and Japan while developing joint efforts with Russia and
China to counter radical Islamic threats in Central Asia. And it should offer
Moscow incentives to scale down its military cooperation with China, especially
with regard to weapons of mass destruction and advanced military technology.
MULTIPOLARITY AND SINO-RUSSIAN STRATEGIC COOPERATION
China and Russia first announced the development of their "strategic
partnership" at a Shanghai summit in April 1996. Since then, they have taken
steps to boost this relationship. During President Jiang Zemin's visit to Moscow
in 1997, he and President Yeltsin committed to promoting a new international
policy based on "multipolarity"--the creation of competing centers of power as a
response to perceived U.S. dominance. 5 They called for the preservation of the
1972 Anti-Ballistic Missile (ABM) Treaty between the United States and the
former Soviet Union, and they supported lifting the U.N. Security Council
sanctions against Saddam Hussein's regime in Iraq. 6 The desire to counter U.S.
global supremacy and the West's pressure on both countries regarding the rights
of independence-seeking ethnic minorities (and human rights in general)
furnished much of the impetus for a friendship treaty between Russia and China
as well as the creation of the so-called Shanghai-6 Organization (SCO). The
parties of this organization vehemently oppose the policy of NATO-led
"humanitarian interventions," such as the Kosovo war, which was not sanctioned
by the U.N. Security Council. Chairman Jiang has repeatedly declared that "hegemonism
and power politics" are the "main source of threat to world peace and stability"
as well as China's interests. 7 Beijing is clearly interested in curtailing the
U.S.-led condemnations and sanctions of China for human rights, as in the
aftermath of the 1989 Tiananmen Square massacre. Furthermore, Russia and China
are both seeking to safeguard their status as two of the five permanent members
of the U.N. Security Council. Finally, they are working to boost each other's
military potential as well as that of other countries that pursue anti-American
foreign policies, such as Iran and Iraq. 8 The state-run media in Russia and
China often point to "U.S. hegemonism" and "U.S. power politics," and call for
the "establishment of a new international order" under United Nations tutelage.
9 Some of the forms of cooperation that have followed such rhetoric clearly pose
a threat to U.S. interests. For example, the Russian and Chinese navies began
conducting joint military exercises in 1999. 10 These maneuvers included the
Russian Pacific Fleet missile cruisers and destroyers as well as warships from
the Chinese Eastern Fleet. 11 The Sino-Russian exercises this year allegedly
included Russian TU-22 bombers equipped with long-range nuclear-capable cruise
missiles flying attack missions against simulated U.S. forces in East Asia. 12
In view of these actions, the assertions made by the Chinese and Russians that
the new strategic relationship is not aimed at any one nation have a
particularly hollow ring.
13 More than the formalization of the new treaty, it is the massive Russian arms
sales and WMD-related technology transfers to China that make the multipolar
rhetoric of these new "friends" of particular concern to the United States and
its allies in Asia. A world system that is not dominated by one country is
attractive to both Moscow and Beijing for similar reasons: Economically, it
offers them alternative sources of technology, financing, and markets for their
raw materials, goods, and services. Moreover, an overburdened U.S. military
would pose less of a risk to Russia and China in the regions where they assert
their own power. Alternative poles of power in which there is a proliferation of
weapons of mass destruction would force the United States to spread its
resources thinly to deal with evolving crises in different regions
simultaneously. The reason for Russia's willingness to support China's security
interests and vice versa may lie in the fact that each country now views the
other as its "strategic rear." 14 Russian leaders have often stated that the
threats to Russia are NATO enlargement to the East 15 and radical Islamic forces
active in Chechnya and among Moscow's Central Asian allies. Beijing views U.S.
predominance in the post-Cold War world--from its success in the Gulf War to its
support of Taiwan security--as important threats to China. Russia has stated
that "there is only one China" and that Taiwan is China's "internal affair,"
while Beijing has expressed unequivocal support for Russia's strong-arm tactics
in Chechnya. 16 Nevertheless, attempts to add other major Asian powers to this
strategic partnership have been problematic. Moscow has tried to woo India into
the strategic multipolar relationship by holding out the carrot of access to
Russia's military hardware to boost its military capabilities. 17 The problem is
that China and India have long been strategic competitors. Russia also has
longstanding issues with other Asian countries, such as its dispute with Japan
regarding the Northern Territories (Kurile Islands) that the U.S.S.R. occupied
in 1945. In addition, Japan is apprehensive about China's bid to dominate East
Asia. The task of drawing more countries into this plan may prove very
difficult.
ARMS SALES AND MILITARY COOPERATION
China has made it clear that it is interested in creating "pockets of
excellence"--local weapons development programs based on foreign technologies;
but to do so it must first obtain that foreign technology. The large number of
Russian weapons scientists who moved to China over the past decade may be the
most dangerous aspect of the Sino-Russian strategic relationship. 18 China was
the leading customer of the Russian military-industrial complex in the 1990s.
Chinese leaders turned to Russia for weapons systems that were designed to
counter the U.S. military in the Cold War. In particular, they have focused on
boosting China's missile forces and related space systems as well as air and
naval force capabilities. Between 1991 and 1996, Russia sold China weapons worth
an estimated $1 billion per year. Between 1996 and 2001, the rate of sales
doubled to $2 billion per year. Reportedly, the two had signed a military sales
package in 1999 that between 2000 and 2004 would be worth $20 billion. 19 China
also obtained important know-how through the theft of U.S. warhead designs and
guidance systems technology. 20 In 1999, China tested the JL-2
submarine-launched ballistic missile (SLBM) and the DF-31 intercontinental
ballistic missile (ICBM); it also announced its acquisition of the neutron bomb.
It has been suggested that Russian scientists and blueprints were used in
developing these and other armaments. 21 China is building a modern air force to
operate over the East China and South China Seas. In 1993-1997, it acquired 74
SU-27 Flankers and the rights to produce 200 more under a Russian license. 22
These planes are similar to the American F-14s and F-15s. Earlier this year,
China acquired 40 SU-30 MKK multi-purpose fourth generation fighter-bombers (a
modernized version of the SU-27) as well as the in-flight refueling capability
needed to extend the Flanker's range. The Chinese military also purchased a
license to produce 250 SU-30 fighters domestically. Altogether, China has bought
or is planning to manufacture up to 525 of these combat aircraft. Its air force
already has acquired the over-the-horizon targeting capability that may prove
crucial in future conflicts, and it is seeking airborne early warning
capabilities for wide-area air and naval battle management, most probably by
purchasing the Russian A-50 Beriev. 23 China has clearly achieved breakthroughs
in missile technology by importing systems and prototypes from Russia. It is
deploying S-300 surface-to-air missiles (SAMs) to protect ballistic missile
bases that could target Taiwan. It is also developing indigenous SAMs based on
Russian designs, such as the S-300, SA-12, and SA-17 Grizzly. 24 Beijing is
emphasizing the modernization of the People's Liberation Navy as well. It has
acquired four Kilo-class diesel submarines.
Most important, Russia has sold Beijing two Type 956E Sovremenny-class
destroyers armed with supersonic, nuclear-capable, Moskit missiles (SS-N-22).
This destroyer-missile system was designed specifically to hit U.S. aircraft
carriers. Some destroyers to be produced in China are based on Russian know-how.
Russia also has sold China its Kamov Ka-28 (Helix) anti-submarine,
destroyer-based helicopters. 25 Such transfer of knowledge is the key to China's
being successful in upgrading its military potential; Russia and China have
established mechanisms for military technology transfer and intelligence
sharing. Russia even allowed China to use its space-based global positioning
system, known as GLONASS. A real-time satellite imagery download system may also
be in operation. Most worrisome, however, is a broad program already in place to
train military students, scientists, and engineers. According to Chinese
military sources quoted by the Hong Kong media, up to 1,500 Russian scientists
work in China's design and production facilities. 26 China is clearly on track
to a comprehensive upgrading of its defense research, development, and
production programs. 27 The relationship between China and Russia is symbiotic.
China is acquiring capabilities to counter U.S. naval and air power in the Far
East and intimidate neighbors like Taiwan. Russia is seeking to become a
regional rival to the United States, maintaining its defense industrial base and
using money from arms sales to China and others to modernize its own armed
forces. However, cooperation between the two countries is not limited to
military technology and production.
COOPERATION IN CENTRAL ASIA
Opposition to the United States as the sole superpower is not the only
consideration driving the developing strategic partnership between Moscow and
Beijing. Both Russia and China are concerned about Muslim radical movements in
their territories and around their borders. Since the 1970s, the Turkic Muslim
Uighurs in the Western Chinese province of Xinjiang, 7 million strong, have been
conducting a violent struggle for independence. They have killed police and
soldiers, planted bombs, and robbed banks. In 1997, they exploded a bomb in
Beijing, wounding 30 people. They have also developed connections to radical
Islamic movements and are training in religious schools (medrese) and camps in
Afghanistan and Pakistan. Stability in Xinjiang is important to China. It is
seen as a test case of central control, relevant to Beijing's grip over Tibet
and Inner Mongolia. Xinjiang is also viewed as a traditional buffer against
Turkic Muslim invasions from the Northwest. And it contains three major oil
basins: the Turpan, Jungar and Tarim, with up to 150 billion barrels of
reserves, according to some optimistic estimates. The People's Liberation Army
maintains numerous bases and nuclear weapons testing grounds in the region,
which could be threatened if the Uighurs gain control. Russia is in a similar
position as it enters the seventh year of conflict in Chechnya.
Radical Muslim penetration of other North Caucasus autonomous republics, such as
Daghestan, is increasing, as evidenced by non-Chechen participation in terrorist
activities in Russia. The Russian leaders fear a chain reaction among the
country's 20 million Muslims. In the long term, the threat of Muslim
insurrection in Central Asia looms ever larger. The ruling regimes, allied with
Russia, suffer from a lack of both legitimacy and democracy. With economic
reforms in the Central Asian countries sputtering or stalling, corruption runs
rampant, GDPs are flat, and living standards are abysmally low; Islamic radicals
are busily recruiting and training the next generation of jihad warriors. The
radical drug-pushing Taliban regime across the Amu Darya river is menacing. A
flood of drugs and weapons overwhelms the Russian expeditionary force (the 201st
Infantry Division) on the Tajik-Afghan border, while indigenous support,
corruption, and political maneuvering by Moscow and Dushanbe prevent Russia and
the Tajiks from wiping out the Islamic rebels. The secular, authoritarian, and
corrupt regimes in Central Asia rely upon their traditional ties to Moscow as
life insurance. And Russia believes it must either fight the Islamists in the
deserts of Central Asia or face them in Northern Kazakhstan, where many ethnic
Russians reside. Russia finds its options limited: to face the instability in
Central Asia on its own or to bring in China as a partner. Beijing views Central
Asia, with its weak governments and rich natural resources--especially oil and
gas--as its future natural sphere of influence. The recent institutionalization
of the SCO demonstrates that Moscow and Beijing hope to be the decisionmakers in
Central Asia, possibly to the exclusion of Turkey, Iran, and the United States.
What remains to be seen is how effective the two counties will be against the
Taliban, the Islamic Front of Uzbekistan, and the organization of Osama bin
Laden.
ECONOMIC DEVELOPMENT
Economic cooperation is another important leg of the Sino-Russian partnership.
If China seeks to maintain its impressive economic growth rate of 1985-2000, it
will face a major raw materials shortage--China imported 30 million tons of oil
in 1999; by 2010, it may import 100 million tons a year. By 2010, China will
face a water deficit of 10 percent of its total consumption. By 2020, it will
not be able to supply itself with oil, iron, steel, aluminum, sulfur, and other
minerals. Sino-Russian trade was at $5.5 billion in 1999, accounting for 1.6
percent of China's foreign trade and 5.7 percent of Russia's. 28 While the trade
structure between these two countries is weak and primarily involves Russian raw
materials and Chinese low-quality consumer goods and food, the potential for
growth in trade and investment is very high. Chinese experts predict that Russia
will be able to export 25 billion to 30 billion cubic meters of natural gas to
China annually, as well as 15 billion to 18 billion kilowatts of electricity
from the newly completed hydropower stations in Siberia and 25 million to 30
million tons of oil from the Kovykta oil field in Eastern Siberia. In addition,
Russia can pump oil produced in Kazakhstan to Irkutsk and then supply it to
China. Furthermore, Russia is willing to build six nuclear reactors in China to
generate up to 1.5 trillion kilowatts. 29 Russia and China are also seeking
high-tech civilian cooperation.
Chinese officials have invited Russian high-tech experts and engineers to build
high-tech incubators in the northern city of Harbin. The two countries are
considering building a bridge over the Amur river to connect Heihe city in
Heilongjiang province with Blagoveshchensk. There also are numerous projects for
developing free economic zones along the Chinese-Russian border and an
international port in the mouth of the Tumannaya river (Tumangan), where the
Russian, Chinese, and Korean borders meet. That port has been on the drawing
boards for 15 years. Russia and China also could cooperate in developing a
network of railroads and pipelines in Central Asia, building a pan-Asian
transportation corridor (the Silk Road) from the Far East to Europe and the
Middle East. However, ambitious Chinese plans to build the longest pipeline in
the world, from Western Kazakhstan to China, at a cost of $10 billion have run
into financing difficulties. 30 Thus far, the target of $20 billion in trade
established by Presidents Jiang and Yeltsin in 1997 has not been reached. The
West remains China's leading trade partner--a fact that has become a major
impediment to a deeper Sino-Russian alliance.
LIMITS TO SINO-RUSSIAN COOPERATION
The West will remain China's leading trade partner for the foreseeable future.
Japan, the United States, Taiwan, and Europe account for over $284 billion in
trade with China, while Russia and Central Asia provide only $7.7 billion in
trade. 31 Moreover, Russia is incapable of meeting China's needs for high
technology and foreign investment to maintain its current GDP growth, an
important issue if the Communist Party is to maintain its grip on power. From
the Russian point of view, the vast and expanding conventional imbalance of
military and economic power is a concern.
Many elites and ordinary people in Russia are suspicious of China. Some fear
that the underpopulated Russian Far East and Siberia could become targets for
Chinese expansionism in the 21st century 32 since the population disparity is
immense. Only 8 million Russians live between Lake Baikal and the Pacific, while
over 200 million Chinese live in Northeast China. Only 30 million Russians live
to the east of the Ural Mountains. The ethnic Russian population of the Far East
is falling due to high rates of mortality and emigration back to European
Russia, while hundreds of thousands of Chinese peasants, migrant workers, and
small traders have moved into the area illegally. Frequent intermarriages are
further irritants to the Russian elite. 33 Russia must undergo a steep learning
curve to adjust to the growing power of China and forgo the leadership position
it historically has occupied in Eurasia. A Russian military force in the Far
East will not be capable of countering a powerful Chinese military without
increasing reliance on a nuclear deterrent. 34 However, China, with its deeper
pockets and larger military, might have to address Central Asian security
challenges regardless of Russia's wishes, and China's appetite for Russian raw
materials may cause its leaders to ponder the value of their ties with Moscow
for their country's economic development. As one expert pointed out, "Russia is
likely to discover that it can no longer manage an equal partnership with
China"; Russia will "likely face a choice between the increasingly close embrace
of a more dynamic China and attempting to find regional and global partners to
help balance Chinese influence." 35 Riding the Chinese dragon may prove less
comfortable for the Russians than they thought it would be, at which point a
renewed interest in a genuine partnership with the United States may emerge.
Carefully developing a policy toward the emerging alliance will require
monitoring Sino-Russian "friendly" developments.
IMPLICATIONS FOR U.S. FOREIGN POLICY
Though a full confrontation between the United States and Russia and China today
is unlikely, a Moscow-Beijing policy of strategic cooperation to limit U.S.
policy initiatives may well affect relations between the United States and each
of those two regional powers. The situation has evolved beyond Russia's playing
the China card to get more Western economic assistance or China's playing the
Russia card in order to be taken more seriously in Washington. It is an evolving
relationship that requires U.S. policymakers to examine the changing
geostrategic reality and take steps to ensure that U.S. security and national
interests are not at risk. Russia's military assistance to China, including in
the areas of advanced conventional weapons and weapons of mass destruction,
should continue to be a major concern of the Bush Administration. Moreover,
attempts by both countries to exclude the United States from developing Central
Asian energy resources, as well as their support of authoritarian regimes in the
interest of "fighting Islamic fundamentalism," must be countered peacefully but
firmly. Specifically, the Bush Administration should: More closely monitor
relations between Russia and China, especially in national security areas. The
intelligence community should be instructed to establish whether secret codicils
exist in the new treaty that provide for the parties to conduct joint military
action in case of foreign military operations against one of them. Specifically,
this intelligence gathering should focus on the possibility of the Russian
Pacific Fleet's intercepting the U.S. Seventh Fleet in any confrontation in the
East China Sea. It should also examine military and dual-use technology transfer
programs between Russia and China, including the involvement of Russian
scientific and engineering personnel in modernization programs of the People's
Liberation Army. Strengthen military and security cooperation with India and
Japan. India has thus far resisted Russia's advances to coordinate security
strategy, despite its 50-year-old ties to the Russian military-industrial
complex. The Bush Administration should strengthen U.S. cooperation with India
to fight terrorism and narcotics trafficking, and it should seek greater
cooperation with India on security issues in Central Asia and on assuring
freedom of navigation in the Indian Ocean. While the Administration should
explore arms sales to India and military-industrial cooperation, it should not
allow the United States to become embroiled in helping India settle the Kashmir
dispute with Pakistan. Washington and Tokyo should enhance efforts to encourage
joint military exercises and the gathering of intelligence about military
activities in Russia and China. The United States and Japan should encourage
their businesses to invest in the Russian Far East and Chinese Northern
provinces and enhance economic ties to these provinces. Offer to help Russia and
China counter the efforts of radical Islamic groups in Central Asia, including
the Taliban and the Osama bin Laden organization.
Radical Islamic subversion in Central Asia and Xinjiang is a threat to regional
security. While opposing Islamic terrorism and militancy, the Bush
Administration should help develop the democratic and participatory aspect of
civil societies in the region by providing support to developing indigenous
democratic institutions, with moderate Islamic participation. It should support
the development of joint energy, services, and manufacturing projects in Central
Asia among, for example, Russian, Chinese, Turkish, and Indian firms. Beyond
such efforts, it should ask to join the SCO as an observer, to examine how
sincere China and Russia are about cooperation in dealing with Islamic
fundamentalism. Offer incentives to Moscow to prevent the transfer of WMD and
advanced military technology to China, Iraq, and Iran. A cooperative
relationship between U.S. and Russian aerospace companies and agencies may occur
if Russia agrees to prevent the transfer of WMD and sensitive advanced
conventional weapons technology to China, Iraq, and Iran. The Administration
should explore how to assist Russian companies currently doing business with
China in this sensitive area to convert their operations to civilian production.
Focus U.S. public diplomacy efforts on the problems inherent in closer
Sino-Russian relations. Russians have had many apprehensions regarding China,
especially its intentions in the Russian Far East and Siberia. The debate on
Sino-Russian relations should be encouraged, involving the U.S. academic
community, international broadcasting, and NGOs. Washington should reach out to
the Russian people as well as the Chinese business community (through the
Chinese-American Chamber of Commerce and other organizations) to explain that a
military anti-American alliance between Moscow and Beijing may threaten economic
cooperation with the United States, including access to U.S. financial markets.
CONCLUSION
The signing of the Russia-China Treaty of Friendship this week, on the heels of
the creation of the Shanghai Cooperation Organization last month, portends the
establishment of a strategic partnership that could influence the future of
Eurasia and East Asia for decades to come. The anti-American rhetoric that has
dominated Russian-Chinese summits in the past, and Russia's military technology
transfers to China, are causes of concern for U.S. defense planners. China and
Russia have one of the longest land borders in the Eastern Hemisphere, vast
human and natural resources, and complementary national economies with great
potential for trade and investment. They also have legitimate concerns regarding
the spread of terrorism and militant Islam. They have a right to manage their
own relations unless it threatens the security interests of third parties, such
as India, Japan, and the United States. Washington should support economic
cooperation. However, the degree to which the Sino-Russian alliance may become
anti-American and anti-Western in the future depends on how deeply the two
Eurasian powers feel that the United States threatens their interests. While it
values friendly relations with both countries, Washington should oppose
anti-American elements in the character and direction of the alliance. Dr. Ariel
Cohen, is Research Fellow for Russian and Eurasian Studies in the Kathryn and
Shelby Cullom Davis Institute for International Studies at The Heritage
Foundation.
Endnotes 1. Vsevolod Ovchinnikov, "No Need to Fear the Chinese Tiger: Russia
Enters the 21st Century Shoulder to Shoulder with Its Great Neighbor,"
Rossiyskaya Gazeta , September 19, 2000, reported as "Russia and China to Sign
Friendship and Cooperation Treaty," FBIS-CHI-2000-0919. 2. "Hegemonism" has
become a shorthand reference to the global preeminence and superpower status of
the United States and includes its plans to deploy missile defense, defend
Taiwan, and expand NATO. 3. Martin Fackler, "China and Russia Form New Bloc,"
Associated Press, June 15, 6:50 a.m. The Shanghai Cooperation Organization
(formerly the "Shanghai Five" and now also known as the "Shanghai Six") consists
of Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. 4. James
Sherr, "Policy Toward the `Far Abroad,'" Russia in the International System ,
Conference Report CR2001-02, National Intelligence Council, Washington, D.C.,
June 2001, p. 22. 5. Helmut Sonnenfeldt, "The Evolving International System and
Russia's Relevance," Russia in the International System m> , p. 62. Sonnenfeldt
notes that besides China and Russian, the country most ardently denouncing
unipolarity is France. 6. "Russian-Chinese Statement," ITAR-TASS, Moscow,
December 10, 1999, as reported by FBIS-SOV-1999-1210. 7. Ibid ., p. 28. 8. Ibid
., p. 29. 9. Peng Shujie and Quian Tong, "President Jiang Zemin and President
Putin Hold Talks," Xinhua Domestic Service in Chinese, reported as "Jiang Zemin,
Putin Hold Talks, Sign Documents," FBIS-CHI-2000-0718. 10. Agence France-Press,
"Spokeswoman Says PRC Backs Russia Action in Chechnya," Beijing, October 12,
1999, as reported by World News Connection, FBIS-CHI-1999-1012. 11. Brian Mosely,
"Russia a nd C hina to Hold Joint Naval Exercises," Associated Press, September
27, 1999, at http://www.freerepublic.com/forum/a37efa8452c60.htm. 12. Bill Gertz,
"Russian Forces Help China in Mock Conflict Nuclear War on U.S. Troops," The
Washington Times , April 20, 2001, p. A1. 13. Mark Burles, "Chinese Policy
Toward Russia and the Central Asian Republics," RAND Corporation, No.
MR-1045-AF, 1999, p. 35, at http://www.rand.org/publications/MR/MR1045. 14.
Ovchinnikov, "No Need to Fear the Chinese Tiger." 15. Mikhail Alexeev, "Russia's
Foreign and Security Goals," Russia in the International System, pp. 25-26. 16.
Robert J. Saiget, "China, Russia Beef Up Cooperation on Ethnic Separatism,
Taiwan, Terrorism," Agence France-Press, Hong Kong, November 18, 2000, as
reported by World News Connection, FBIS-CHI-2000-1118. 17. Moscow announced that
India will finance development of the fifth generation Russian fighter, the
Sukhoi SU-37. 18. John Deutsch, Threats to National Security, hearing before the
Committee on National Security, U.S. House of Representatives, February 12,
1998, 105th Cong., 2nd Sess., at http://proxy.lib.umich.edu:2059/congcomp/printdoc
. 19. Stephen J. Blank, "Military Capabilities of the People's Republic of
China," testimony before the Committee on Armed Services, U.S. House of
Representatives, 106th Cong., 2nd Sess., July 19, 2000, p. 5, at http://www.fas.org/spp/starwars/congress/2000_h/00-07-19blank.htm.
20. Report of the Select Committee on U.S. National Security and
Military/Commercial Concerns With the People's Republic of China (Cox Committee
Report), U.S. House of Representatives, Washington, D.C., 1999, pp. 186-187,
191, 196-197. 21. Mark Stokes, "China's Strategic Modernization: Implications
for the United States," U.S. Army War College Report, 1999, p. 204, at http://www.nyu.edu/globalbeat/asia/Stokes0999.html
; see also Blank, "Military Capabilities of the People's Republic of China." 22.
Burles, "Chinese Policy Toward Russia," pp. 35-36. 23. Jeremy Page, "Russia
Seeking to Sell Radar System to China," The Russian Journal , No. 43 (November
4, 2000). 24. See Military Analysis Network, HQ-9/FT-200, at http://www.fas.org/man/dod-101/sys/missile/row/sa-17.htm.
25. Olga Kryazheva, "Russia-China Arms Trade Growing," Weekly Defense Monitor ,
Center for Defense Information, Vol. 4, Issue 5 (February 3, 2000), at http://www.cdi.org/weekly/2000/issue05.html#5.
26. Tung Yi, "Russian Experts Said Helping PRC Make High Tech Weaponry," Sing
Tao Jih Pao , September 6, 2000, p. A39, as reported in FBIS-CHI-2000-0906.
Areas of cooperation extend to submarine construction, including advanced models
(the 93 and 94); the Jian J-10 fighter jet; nuclear weapons development; cruise
missiles; and jet propulsion. 27. Burles, "Chinese Policy Toward Russia," pp.
35-36. 28. Jua Ta-chen, "Thoughts on Issues of Sino Russian Economic and Trade
Cooperation Facing the 21st Century," Ta Kung Pao , July 18, 2000, in
FBIS-CHJI-2000-0718. 29. Ibid . 30. Burles, "Chinese Policy Toward Russia," p.
36. 31. Calculated from Chinese Foreign Trade Ministry statistics, at http://www.moftec.gov.cn/moftec/official/html/statistics_data/e2000-01-051c.htm
, and U.S. Department of Commerce statistics, at http://www.export.gov/docTSFrameset.html
, as well as Burles, "Chinese Policy Toward Russia," pp. 20-21. 32. Yu. M.
Galenovitch, Rubezh Pered Startom. Kitayskaya problema dlia Rossii I ShA na
Poroge XXI Veka , Moscow, Science Public Foundation, 1999, pp. 72-73. 33.
Moscow-based experts who requested anonymity, in interviews with the author,
Moscow, May 16-20, 2001. 34. Russian military sources have disclosed that there
is not a single battle-ready division in the Asian part of Russia. 35. Sherman
Garnett, "Slow Dance: The Evolution of Sino Russian Relations," Harvard
International Review , Winter 1996-1997, p. 29, as quoted in Burles, "Chinese
Policy Toward Russia," p. 48.
Gazprom WANTS oil will reach $250
Gazprom, Russia’s gas monopoly, on Tuesday predicted oil prices would reach $250
a barrel in 2009. The striking prediction came as the International Energy
Agency, the developed world’s energy watchdog, warned that record high prices
were needed to choke off demand in order to balance the oil market.It is the
IEA’s most candid admission to date that oil supply is struggling to catch up
with Asian demand, and follows the sharp rise in prices last week, which saw
crude jump more than $16.24 in less than 36 hours to a record $139.12. Gazprom’s
prediction came at a strategy presentation in Deauville, where Alexei Miller,
chief executive, said: “Today we are witnessing a very great change for
hydrocarbons. The level is very high and we think it [the price of oil] will
reach $250 a barrel.” A company spokesman specified that Gazprom believed that
level would be hit in 2009.That is substantially higher than forecasts by
analysts, who see oil prices in 2009 ranging between $100 and $200.In its
monthly oil market report, the IEA said “supply growth so far this year has been
poor and higher prices are needed to choke off demand to balance the market”. It
added: “Abnormally high prices are largely explained by fundamentals”. Mr Miller
agreed with the IEA’s assessment, saying that speculators were not ”a
determining influence”. He said: ”Competition for resources and their use is
growing.” The market responded by pushing prices back up after they had fallen
below $134 earlier in the session. Nymex July West Texas Intermediate rose 70
cents to $134.95, while ICE July Brent added 53 cents to $134.38.As expected,
the IEA cut slightly its forecast for annual oil demand growth, but surprised
the market with a deep reduction in its forecast for supply growth from non-Opec
nations, leaving the world more dependent on the producers’ cartel. It cut its
demand growth forecast further by 80,000 b/d to an annual increase of 800,000
b/d because of record high prices, the slowing US economy and the partial
removal of fuel subsidies in some Asian countries.
However, the agency warned that so far, there were “very few signs of slowing
demand in non-OECD countries where economic growth is far more significant than
price in determining demand”.The cut in the IEA’s forecast for oil demand growth
was overshadowed by a larger cut in forecast supplies. The agency cut its
forecast for non-Opec supply growth to just 455,000 b/d, or 225,000 b/d below
last month’s forecast. It expected most of the non-Opec fresh output to be in
the form of biofuels, which would account for 72 per cent of the supply
increase. The non-Opec supply growth forecast for 2008 is now below the growth
achieved by the group both in 2007 and 2006, in spite of significantly higher
oil prices.The agency also warned that the imbalance between demand and supply
forced a counter-seasonal drop in rich countries’ oil inventories in April. It
estimates that stocks fell in April by 8.1m barrels, compared with a traditional
increase in April of about 30m barrels.It warned that current prices could
“impinge upon growth prospects”, even though the global economy is more
resilient to rising oil prices. “Globally, the high oil price is contributing to
inflationary pressures,” it said.The IEA’s warning echoes comments on Monday by
Tony Hayward, chief executive of BP, who said the oil market was not well
supplied. “In a well functioning market where supply and demand are balanced,
prices should be stable. Where prices are high, however, they show that supply
is not responding adequately to rising demand ... and that is where we find
ourselves today,” Mr Hayward said.Francisco Blanch, head of commodities research
at Merrill Lynch, said on Tuesday he was raising his forecast for WTI prices in
the second half of the year to $121.50, based “a combination of lower than
expected supplies and unrestricted demand. Non-OPEC output is really struggling
to expand.”
Russian Prime Minister Vladimir Putin on Monday said it was time for Russia to
rebuild links with former Cold War ally Cuba, news agencies reported.The Kremlin
is angry at U.S. plans for a missile defence system in Eastern Europe, and last
month a news report suggested Russia might use Cuba, a thorn in America's side
for half a century, as a refueling stop for nuclear-capable bombers.The Russian
Defence Ministry denied the report and said it had no plans to open any military
bases abroad, but a top U.S. general was drawn to say such a move would cross a
"red line".Moscow was the Caribbean island's key oil, arms and grain supplier
for 30 years, until subsidies propping up the economy of Fidel Castro's
revolutionary government fell to a trickle and then dried up entirely after the
collapse of the Soviet Union."We need to reestablish positions on Cuba and in
other countries," news agency Interfax quoted Putin as saying at the weekly
presidium meeting of key government ministers.Just 144 km (90 miles) from the
coast of U.S. state of Florida, Cuba still has no formal diplomatic ties with
Washington D.C.At the height of the Cold War in 1962, a two-week crisis over
Soviet missiles on the island nearly led to full-blown war.Putin's remarks came
after Russian Deputy Prime Minister Igor Sechin reported on a recent three-day
visit to Cuba, where he discussed a raft of trade and investment issues and met
with Raul Castro, Fidel's brother and now the island's leader."We agreed on a
priority direction for cooperation, this being energy, the mining industry,
agriculture, transport, health care and communications," news agency RIA quoted
Sechin as saying.
Several Russian ships and 1,000 soldiers will take part in joint naval maneuvers
with Venezuela in the Caribbean Sea later this year, exercises likely to
increase diplomatic tensions with Washington, a pro-government newspaper
reported on Saturday.Quoting Venezuela's naval intelligence director, Salbarore
Cammarata, the newspaper Vea said four Russian boats would visit Venezuelan
waters from November 10 to 14.Plans for the naval operations come at a time of
heightened diplomatic tension and Cold War-style rhetoric between Moscow and the
United States over the recent war in Georgia and plans for a U.S. missile
defense system in the Czech Republic and Poland.Cammarata said it would be the
first time Russia's navy carried out such exercises in Latin America. He said
the Venezuelan air force would also take part.Venezuelan President Hugo Chavez,
an outspoken critic of Washington, has said in recent weeks that Russian ships
and planes are welcome to visit the South American country."If the Russian
long-distance planes that fly around the world need to land at some Venezuelan
landing strip, they are welcome, we have no problems," he said on his weekly
television show last week.Chavez, who buys billions of dollars of weapons from
Russia, has criticized this year's reactivation of the U.S. Navy's Fourth Fleet,
which will patrol Latin America for the first time in over 50 years.The
socialist Chavez says he fears the United States will invade oil-rich Venezuela
and he supports Russia's growing geopolitical presence as a counterbalance to
U.S. power.Chavez has bought fighter jets and submarines from Russia to retool
Venezuela's aging weapons and says he is also interested in a missile defense
system. Two Russian strategic bombers landed in Venezuela on Wednesday as part
of military maneuvers, President Hugo Chavez said, welcoming the unprecedented
deployment at a time of increasing tensions between Moscow and the U.S.The
Venezuelan leader said the two Russian Tu-160 bombers will conduct maneuvers and
that he hopes to "fly one of those things" himself.Russian military analysts
said it was the first time Russian strategic bombers have landed in the Western
Hemisphere since the Cold War. The provocative foray into Venezuela was certain
to add to the strain in U.S.-Russian relations created over Russia's war in
Georgia.Chavez called the deployment part of a move toward a "pluri-polar world"
— a reference to moving away from U.S. dominance. "The Yankee hegemony is
finished," Chavez said in a televised speech.The Russian Defense Ministry said
the bombers flew to Venezuela on a training mission and would conduct training
flights over neutral waters in the next few days before returning to Russia,
according to a statement carried by Russian news wires.Ministry spokesman
Alexander Drobyshevsky refused to say how long the deployment would last or
whether the planes were carrying any weapons. Military officers in the past have
said Russian strategic bombers do not carry live weapons on patrol flights.NATO
fighters escorted the two Russian bombers on their 13-hour trip to Venezuela
over the Arctic and Atlantic Oceans, the Defense Ministry said.The Russian
deployment appeared to be a tit-for-tat response to the U.S. move to send
warships to deliver aid to U.S.-allied Georgia after its war last month with
Russia."This is a redux of Cold War games, and a dangerous thing to do," said
Moscow-based military analyst Pavel Felgenhauer. "It will only strengthen the
hand of those in the United States who want to punish Russia for its action in
Georgia.
"Earlier this week, Russia said it will send a naval squadron and long-range
patrol planes to Venezuela in November for a joint military exercise in the
Caribbean.Alexander Konovalov, head of the Moscow-based Institute for Strategic
Assessment, said the deployment would lead to further deterioration in
U.S.-Russia relations."It's a demonstration of Russia's ability to do things
nasty: You send warships to the Black Sea and we send bombers next to your
door," Konovalov said. "It will have a negative impact on global stability.
"Meanwhile, NATO said Wednesday it had ended a routine exercise by four naval
ships in the Black Sea. Russia had denounced the exercise as part of a Western
military buildup sparked by the Georgia conflict.The alliance said the four
ships — U.S. frigate USS Taylor and three similar vessels from Spain, Germany
and Poland — were moving back to the Mediterranean Sea after the 18-day
mission.Chavez has strongly backed Russia's stance in Georgia. He denied that
Russia's plan for a deployment later this year is related, saying the Russian
navy's visit has been planned for more than a year.Venezuela remains a leading
oil supplier to the United States, but as tensions with Washington have grown,
Chavez's government has spent billions of dollars on Russian weapons including
helicopters, Kalashnikov rifles and Sukhoi fighter jets.Chavez said Wednesday
that Venezuela is looking to buy Russian submarines and is working with Russia
to set up an air-defense system including long-range radar and "rockets ready to
defend the country."He also announced the country will soon buy 24 Chinese-made
K-8 flight training and light attack aircraft. The socialist leader, who
survived a failed 2002 coup he blames on Washington, repeated his accusations of
U.S.-backed attempts to kill him or topple him, saying U.S. forces are "looking
for active soldiers, looking for pilots to bomb Miraflores," the presidential
palace. The U.S. Embassy denied it. "The United States continuously strives for
positive and productive relations with Venezuela," Embassy spokeswoman Robin
Holzhauer said. "Unfortunately, the Venezuelan government often responds to
these open overtures with name-calling and storytelling. These Venezuelan
actions are unfortunate for both of our countries." Chavez has called the U.S.
Navy's newly re-established Fourth Fleet a threat.
On Wednesday, he said he's sure "nuclear submarines pass under our noses" off
Venezuela's coast. He said Venezuela is aiming to strengthen its "defensive
capability with our strategic allies, and Russia is one of them." Later, Chavez
called the U.S. the "empire" as he addressed troops at the christening of a new
coast guard patrol ship. "Every day, relations between Venezuela and Russia will
continue to deepen." He dismissed comparisons to the Cold War, but mentioned
Cuba while saying he had been reviewing flight theory in a simulator in hopes of
flying one of the Russian planes. Addressing his close friend Fidel Castro,
Chavez said: "I'm going to fly a Tu-160. Fidel, I'm going to fly low past you
there."
Russia must stake its claim to a slice of the Arctic's vast resources, the
secretary of Russia's Security Council said on Friday at an unprecedented
session of the council held on a desolate Arctic island.Russia, the world's
second biggest oil exporter, is in a race with Canada, Denmark, Norway and the
United States for control of the oil, gas and precious metals that would become
more accessible if global warming shrinks the Arctic ice cap.Underlining
Russia's claims to the region, Security Council Secretary Nikolai Patrushev
assembled the defence and interior ministers and the speakers of both houses of
parliament for the meeting on the Arctic island, Russian news agencies
reported.Russia, the world's biggest country, says a whole swathe of the Arctic
seabed should belong to it because the area is really an extension of the
Siberian continental shelf."The Arctic must become Russia's main strategic
resource base," Russian news agencies quoted Patrushev as saying. The Council
usually meets only in Moscow.Patrushev, formerly Russia's powerful domestic spy
chief, said competition from other Arctic powers was increasing and that Russia
must strengthen transport links across its Arctic regions to drive
development.Canada, Norway, Russia, the United States and Denmark -- which
governs Greenland -- all have a shoreline within the Arctic Circle, and have a
200-mile (320-km) economic zone around the north of their coastlines.Russian
officials say they are entitled to a bigger share. They base the claim on the
contention that the Lomonosov ridge, a vast underwater mountain range that runs
underneath the Arctic, is an extension of the Siberian continental shelf.Under
the United Nations Law of the Sea treaty, any state with an Arctic coastline
that wishes to stake a claim to a greater share of the Arctic must lodge its
submission with the U.N.'s Commission on the Limits of the Continental Shelf.
Russian geologists estimate the Arctic seabed has at least 9 billion to 10
billion tonnes of fuel equivalent, about the same as Russia's total oil
reserves.Last year a submersible with a senior Russian lawmaker on board planted
a Russian flag on the Arctic seabed. The crew were greeted as heroes when they
returned to Moscow.Russian news agencies said the special Security Council
session was held at the Nagurskaya base, Russia's most northerly border outpost.
The base is on Alexandra's Land, part of the Russian-controlled Franz Josef
archipelago.Russia flexed its muscles in America’s backyard yesterday as it sent
one of its largest warships to join military exercises in the Caribbean. The
nuclear-powered flagship Peter the Great set off for Venezuela with the
submarine destroyer Admiral Chabanenko and two support vessels in the first
Russian naval mission in Latin America since the end of the Cold War. “The St
Andrew flag, the flag of the Russian Navy, is confidently returning to the world
oceans,” Igor Dygalo, a spokesman for the Russian Navy, said. He declined to
comment on Russian newspaper reports that nuclear submarines were also part of
the expedition. The voyage to join the Venezuelan Navy for manoeuvres came only
days after Russian strategic nuclear bombers made their first visit to the
country. Hugo Chávez, the President, said then that the arrival of the strike
force was a warning to the US. The vehemently antiAmerican Venezuelan leader is
due to visit Dmitri Medvedev, the Russian President, in Moscow this week as part
of a tour that includes visits to Cuba and China. Peter the Great is armed with
20 nuclear cruise missiles and up to 500 surface-to-air missiles, making it one
of the most formidable warships in the world. The Kremlin has courted Venezuela
and Cuba as tensions with the West soared over the proposed US missile shield in
Eastern Europe and the Russian invasion of Georgia last month. Vladimir Putin,
the Prime Minister, said recently that Russia should “restore its position in
Cuba” – the nation where deployment of Soviet nuclear missiles in 1962 brought
Russia and the United States to the brink of nuclear war. Igor Sechin, the
Deputy Prime Minister, made clear that Russia would challenge the US for
influence in Latin America after visits to Venezuela, Nicaragua and Cuba last
week. He said: “It would be wrong to talk about one nation having exclusive
rights to this zone.” Moscow was infuriated when Washington sent US warships
into the Black Sea to deliver aid to Georgia after the war. Analysts said that
the Kremlin was engaging in gunboat diplomacy over the encroachment of Nato into
the former Soviet satellites of Georgia and Ukraine. Pavel Felgengauer, a
leading Russian defence expert, told The Times: “It’s to show the flag and the
finger to the United States. They are offering a sort of gangland deal – if you
get into our territory, then we will get into yours. You leave Georgia and
Ukraine to us and we won’t go into the Caribbean, OK?” He described the visit as
“first and foremost a propaganda deployment”, pointing out that one of the
support vessels was a tug in case either of the warships broke down. Latin
America was one of the arenas of the Cold War in which the US and the Soviet
Union battled for ideological dominance. Russia has agreed to sell more than $4
billion (£2 billion) worth of armaments to Venezuela since 2005 and disclosed
last week that Mr Chávez wanted new antiaircraft systems and more fighter jets.
Mr Dygalo denied any link with Georgia and said that Mr Chávez and Mr Medvedev
had agreed on the exercises in July. Sea power In the Battle of Tsushima in 1905
– the largest naval battle since Trafalgar – the Russian fleet sailed 18,000
miles (33,000km) to Port Arthur in the Pacific, where it was outmanoeuvred and
destroyed by Japanese forces During the 1962 Cuban missile crisis, the Soviet
Navy conducted 180 voyages on 86 ships to transfer weapons to Cuba. Russian
President Dmitry Medvedev's visits to Venezuela and Cuba during a week-long trip
to Latin America look set to irk Washington, highlighting a foreign policy
challenge facing President-elect Barack Obama. His trip to Venezuela, a key
buyer of Russian arms, coincides with the two countries' first joint naval
exercise in the Caribbean -- traditionally viewed by the United States as its
backyard. During his stay in Cuba, the Russian leader is likely to demonstrate
Moscow's commitment to renew a Cold War-era alliance with Havana, abandoned
after the collapse of the Soviet Union. Russia has stepped up ties with
Venezuela and Cuba as its relations with the West and particularly the United
States soured in the past few years amid a series of rows ranging from Kosovo to
U.S. missile defense plans in Eastern Europe. The ties plummeted to a post-Cold
War low after the West condemned Russia's invasion of Georgia in August. Moscow,
annoyed by NATO warships appearing in or near its borders in the Black Sea to
deliver aid to Georgia, dispatched its own warships to the Caribbean for the
exercises with Venezuela, a buyer of billions of dollars in Russian arms. Ahead
of Medvedev's visit, the Russian military said they were discussing with Havana
air defense cooperation. Medvedev marked Obama's election victory on November 4
with the announcement of plans to deploy Russian missiles close to NATO's
European borders in retaliation for Washington's plans to set up elements of its
missile defense system in Eastern Europe. But later he softened his tone, saying
Moscow pinned hopes on the new U.S. administration making steps to improve ties.
Medvedev said on November 14 Russia will not be the first to deploy its missiles
and called on Obama to revise the shield plans -- seen by Moscow as a security
threat.
BROADENING TIES Medvedev's November 26-27 visits to Venezuela and Cuba are the
expected highlights of a tour formally centered on his participation in the
summit of the APEC Asia-Pacific Economic Cooperation forum in Peru on November
22-24. Kremlin officials say the visit has no political context and is targeted
at expanding Russia's presence in Latin America and the broader Asia-Pacific
region, viewed by Moscow as one way to help cushion against the effects of the
economic crisis. "There is no specific message," one official said. "Latin
America is far away and the president naturally used the opportunity of the APEC
summit to visit as many countries as possible to promote better bilateral ties."
Russia, which wants to diversify its current Europe-focused trade, has sought to
establish itself as an Asia-Pacific player, using APEC participation as one
vehicle to do so. At last year's summit in Australia, Moscow won the right to
hold the grouping's summit in 2012. A presence in Asian and Latin American
markets is becoming increasingly important for Russia as Europe and the United
States enter a recession. Analysts say emerging markets like China and India
have better chances to maintain some growth. "We need to expand to new markets
or, at least, make sure that we maintain our positions in markets where we are
already present," Medvedev told government officials earlier this week. Russia
has been actively negotiating access to Venezuela's oil sector and is eyeing
Brazil's lucrative metals and agricultural sectors. Medvedev is likely to throw
his weight behind Russian companies in the two countries. His visit to Brazil is
also expected to give a boost to ties amongst the BRIC group that also includes
India, China and Russia. Foreign ministers from the fast-growing BRIC nations,
which are pressing for equal participation in drafting a new global financial
architecture, met in Moscow in May. Medvedev is due to visit Brazil on November
24 and will stop briefly in Portugal on his way to Latin America on November 21.
spy at the heart of Nato may have passed secrets on the US missile shield and
cyber-defence to Russian Intelligence, it has emerged. Herman Simm, 61, an
Estonian defence ministry official who was arrested in September, was
responsible for handling all of his country's classified information at Nato,
giving him access to every top-secret graded document from other alliance
countries. He was recruited by the Russians in the late 1980s and has been
charged in Estonia with supplying information to a foreign power. Several
investigation teams from both the EU and Nato, under the supervision of a US
officer, have flown to the Estonian capital Tallinn to assess the scope of what
is being seen as the most serious case of espionage against Nato since the end
of the Cold War. “The longer they work on the case, the more obvious it becomes
how big the impact of the suspected treachery really is,” according to Der
Spiegel magazine. A German official described the Russian penetration of Nato as
a "catastrophe". Comparisons are being drawn with the case of Aldrich Ames, the
former head of the CIA counter-intelligence department who was in effect
Russia's top agent in the US. "Simm became a proper agent for the Russian
government in the mid-1990s," says the Estonian deputy Jaanus Rahumaegi who
heads the country's parliamentary control commission for the security services.
On the face of it, the Simm case resembles the old-fashioned Cold War spy story.
He used a converted radio transmitter to set up meetings with his contact,
apparently someone posing as a Spanish businessman. As in the 1950s and 1960s,
it seems that the operation was a husband-and-wife team. His wife Heete – who
previously worked as a lawyer at the national police headquarters – has also
been detained on charges of being an accessory to treason. Mr Simm was ensnared
because of blunders that have dogged modern espionage ever since the KGB first
pitted itself against the West. First, he bought up several pieces of valuable
land and houses including a farmhouse on the Baltic Sea and a grand
white-painted villa outside Tallinn. Second, his contact officer got careless
and tried to recruit a second agent – who reported the incident to the security
authorities. That is when the Estonian mole-hunters began to reconstruct the
movements of the supposed Spaniard and followed the thread back to the agent
inside Nato. But Mr Simm was not some relic from the days of Kim Philby or other
notorious deep-cover agents. He was at the cutting edge of one of Nato’s most
important new strategic missions: to defend the alliance against cyber-attack.
Mr Simm headed government delegations in bilateral talks on protecting secret
data flow. And he was an important player in devising EU and Nato information
protection systems.
Estonia – described by NATO Secretary General Jaap de Hoop Scheffer as "Nato's
most IT-savvy nation" – conducts much of its government and commercial business
online. People vote and pay their taxes online, government meetings involve
almost no paperwork. As a result, when it angered Russia in 2007, by removing a
Soviet war memorial, it became the target of hostile attacks on the internet.
Estonia has been lobbying hard to put cyber-defence on the Nato agenda, and has
set up a Cyber Defence centre in Tallinn which is supposed to help the Alliance
as a whole. Now that project could be compromised. The other important question
in the Simm case is whether he was operating alone. A senior Estonian police
officer claimed asylum in Britain in the 1990s reportedly telling the
authorities that he was trying to escape pressure from the Russian secret
service to sell secrets. The Russians, it seems, were keen to buy as many
place-men as they could: the prospect of Nato forces hard up against the
northern Russian border was too alarming for the Kremlin. Moreover, Mr Simm was
for many years in charge of issuing security clearance: he could have nodded
through other Russian agents. Mr Simm is likely to be formally arraigned at the
beginning of next year after the damage control teams from Nato have completed
their work. If found guilty he could face between three and fifteen years in
prison. Neither the Simms, nor their defence lawyer, have commented on the
charges. Nato too has refused to say anything. But there is no doubting that the
case is a serious embarrassment. And though Russia may have lost an agent – "a
gold card operative" according to one Estonian newspaper – it has achieved a
tactical victory by sewing suspicion between western Nato members and the new
east and central European entrants.
Russian President Dmitry Medvedev on Friday embarked on a four-nation Latin
American tour seen as sending a defiant message to the United States at the
close of the George W. Bush presidency. The tour, including talks with the
outgoing US leader, naval exercises off Venezuela and a visit to arch US foe
Cuba, has evoked fears of renewed Cold War-style rivalry in Latin America, while
attracting some ridicule from sceptics. "The current level of cooperation could
be broader than in the Soviet era. Latin America has already ceased to be the
United States' backyard," a Russian diplomatic source told the Russian daily
Kommersant. "Now the region is following its own line, which gives Russia an
opportunity to strengthen our position," said the official. Medvedev starts his
tour in Peru, meeting Bush at the Asia-Pacific Economic Cooperation (APEC)
forum, where Russia's anti-US stance and failure to join the World Trade
Organization contrasts with the views of most members. Officials said Medvedev
and the outgoing US leader would discuss the global financial crisis, the August
war in Georgia and the touchstone issue of US missile defense plans in eastern
Europe. Russia analysts say Moscow's quest for influence in Latin America is
intended to counter US influence in the former Soviet satellites of eastern
Europe, the Caucasus and Central Asia. On Monday the Russian leader heads to
Brazil, a key trading partner with which Russia is interested in joint energy
projects. On Wednesday, he goes to Venezuela for talks with President Hugo
Chavez, a vocal critic of Washington, as Russian warships led by a
nuclear-powered cruiser prepare for joint exercises in the Caribbean Sea.
Russian media say officials will also pursue arms and energy deals with
Venezuela, which has already bought a slew of Russian weapons.
The weapons sales have prompted concern on the part of US ally Colombia that
Venezuelan stockpiles could fall into the hands of leftist FARC rebels.
Lima-based analyst Alejandro Deustua, of the country's Diplomatic Academy,
criticised Russia's military role in South America, saying it was time for
Russia to "explain plainly to each South American country what their intentions
are with these military exercises." Russian Foreign Minister Sergei Lavrov
insisted Russian weapons sold in Latin America were defensive rather than
offensive and that Russian moves were not aimed at "third countries" -- a clear
reference to the United States, RIA Novosti reported. Medvedev rounds off his
tour in Cuba, the flagship ally of the Soviet Union in the Cold War and the
United States' communist arch-foe in the western hemisphere since the late
1950s. Russian energy firms have been actively seeking projects in Latin America
such as possible involvement in a planned South American gas pipeline. A
proposed Russian purchase of a major stake in Spanish energy company Repsol -- a
major player in the region -- is likely to advance such goals. But Medvedev's
tour has drawn repeated sniping from the influential daily Kommersant, which
said Russia's plans were falling apart as oil prices fell and Moscow's economic
fortunes plunged. The newspaper wryly noted Chinese President Hu Jintao had
beaten Medvedev to the region on a tour this week and observed: "The Russian
delegation headed by Medvedev may not be offered the most profitable contracts
in Cuba but only those that don't appetize Chinese businessmen." Latin America
analyst Johanna Forman, of the Center for Strategic and International Studies in
Washington, described as "ham-fisted" a trip crafted months before the November
4 election victory of a more conciliatory US president, Barack Obama. "It's more
an in-your-face approach that may not resonate when you have a new
administration ... The Russians are still fighting a war with Bush," she said.
Russian President Dmitry Medvedev agreed to help start a nuclear energy program
in Venezuela and said Moscow is willing to participate in a socialist trade bloc
in Latin America led by President Hugo Chavez. Medvedev used his visit to
Venezuela—the first by a Russian president—to extend Moscow's reach into Latin
America and deepen trade and military ties. Chavez denied trying to provoke the
United States, but he welcomed Russia's growing presence in Latin America as a
reflection of declining U.S. influence. Chavez and Medvedev planned to visit a
Russian destroyer docked in a Venezuelan port on Thursday. The arrival of
Russian warships this week for training exercises with Venezuela's navy was the
first deployment of its kind in the Caribbean since the Cold War. Accords signed
Wednesday included one pledging cooperation in nuclear energy for peaceful uses.
Russia also agreed to work with Venezuela in oil projects and building ships.
Moscow plans to develop a nuclear cooperation program with Venezuela by the end
of next year, said Sergey Kirienko, head of the Russian Federal Atomic Energy
Agency. "We are ready to teach students in nuclear physics and nuclear
engineering," he said through an interpreter. He said the help would include
"research and development" and "looking for uranium in the territory of
Venezuela." Chavez says Venezuela hopes to build a nuclear reactor for energy
purposes. The Venezuelan leader—one of the world's most strident U.S.
critics—thanked Medvedev for helping to create a "multi-polar" world with
declining U.S. influence. Medvedev called Venezuela "one of our most important
partners in Latin America" and pledged to keep supplying the South American
nation with weapons. But he said arms sales to Venezuela "are not aimed against
any other country."
Chavez's government has already bought more than $4 billion in Russian arms,
including Sukhoi fighter jets, helicopters and 100,000 Kalashnikov rifles.
Chavez had assembled a group of Latin American allies for talks hours before
Medvedev's visit, and leaders including Bolivia's Evo Morales and Nicaragua's
Daniel Ortega joined them for a late-night meeting. Medvedev said Russia is
ready to "think about participating" in the Bolivarian Alernative for the
Americas, likely as an associate member. Chavez launched the socialist trade
bloc, named after South American independence hero Simon Bolivar, as an
alternative to U.S.-backed free-trade pacts. The Russian naval squadron deployed
to the Caribbean includes the destroyer Admiral Chabanenko and the
nuclear-powered cruiser Peter the Great, the largest in the Russian fleet. The
military show of force is widely seen as a demonstration of Kremlin anger over
the U.S. decision to send warships to deliver aid to Georgia after its conflict
with Russia, and over U.S. plans for a European missile-defense system. But U.S.
Secretary of State Condoleezza Rice told reporters in Washington on Wednesday
that "a few Russian ships is not going to change the balance of power" in the
region. Medvedev was to finish his four-nation Latin American tour in Cuba.
Medvedev said he also discussed the global financial crisis with Chavez, and
"exchanged different ideas of what actions to take in this situation." Chavez
blames the financial crisis on U.S. free-market capitalism.
Russia will complete Iran's first nuclear power plant in 2009, Itar-Tass news
agency quoted the head of Russia's state nuclear corporation as saying on
Thursday. The launch of the Bushehr plant's nuclear reactor has frequently been
delayed. Russian and Iranian officials have given different dates for the
start-up. Iran's foreign minister said last year the plant would launch in
mid-2008. Russia has already delivered nuclear fuel under a $1 billion contract
to build the Bushehr plant on the Gulf coast in southwest Iran. Russia has
blamed previous delays on problems with receiving payment from Iran. "Work is
ongoing and certain difficulties which arose, including those connected with
timely financing, are being resolved due to joint efforts between the Iranian
purchaser and the Russian contractor," Tass quoted Sergei Kiriyenko, the head of
Russia's Rosatom nuclear corporation, as saying. "Next year we should conclude
all the work," Kiriyenko was quoted as saying. Kiriyenko was in Caracas,
Venezuela, accompanying President Dmitry Medvedev on a visit. Russia agreed in
1995 to build the plant on the site of an earlier project begun in the 1970s by
German firm Siemens. The Siemens project was disrupted by Iran's 1979 Islamic
revolution and the 1980-88 Iran-Iraq war. "The position of Russia has not
changed: that Bushehr should be finished as soon as possible," a spokesman for
Rosatom said. "But that must not affect the security of the plant and the
functioning of its systems." "The main question is the integration of Russian
equipment with the equipment delivered to the plant at Bushehr by the Germans,"
the spokesman said. Atomstroyexport, the Russian firm building the plant, said
in September the plant was nearing completion and that it would start
"technological work" in December 2008 to February 2009 that would put the plant
on an "irreversible final" course.
Analysts say Russia has used Bushehr as a lever in relations with Tehran, which
is at loggerheads with the West over its nuclear programme. Russia's Foreign
Minister Sergei Lavrov has repeatedly said Moscow does not want Iran to be armed
with nuclear weapons but that Russia has seen no evidence that Tehran is seeking
to build atomic bombs. Iran denies having a bomb programme and says it has the
right to develop civilian nuclear power. Russian and U.S. officials point to
cooperation over Iran as an area where Moscow and Washington have been able to
work together despite a general cooling of ties.
Three
Chinese institutions were among the world's top four banks at the end of
2007 at a time when the
market capitalisation of
Western banks was suffering from a global financial crisis, a study showed
Wednesday. The number one spot in the rankings, compiled by the
Boston Consulting Group, was
occupied by the Industrial and Commercial Bank of China, with market
capitalisation of nearly 340 billion dollars (218 billion euros). In second
place was
China Construction Bank,
followed by HSBC of Britain, Bank of China, Bank of America and Citigroup of the
United States. The study found that banks in North America and
Western Europe had suffered a
loss of 695 billion dollars in market capitalisation at the end of 2007 while
their counterparts in emerging market countries Brazil, Russia, China and India
had seen their market capitalisation increase by 753 billion dollars. Major US
and European banks have suffered losses and asset writedowns stemming from the
near collapse of US subprime -- high risk -- mortgage sector, which undermined
the value of billions of dollars' worth of their mortgage-backed securities.
This is another reason why the US government
shouldn't be spending borrowed money to finance extra-constitutional spending.
The Chinese government has begun a concerted campaign of economic threats
against the United States, hinting that it may liquidate its vast holding of US
treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent
days warning - for the first time - that Beijing may use its $1.33 trillion
(£658bn) of foreign reserves as a political weapon to counter pressure from the
US Congress. Shifts in Chinese policy are often announced through key think
tanks and academies. Described as China's "nuclear option" in the state media,
such action could trigger a dollar crash at a time when the US currency is
already breaking down through historic support levels. It would also cause a
spike in US bond yields, hammering the US housing market and perhaps tipping the
economy into recession. It is estimated that China holds over $900bn in a mix of
US bonds. When the federal government is asked to do things the Constitution
doesn't tell it to do, and when more and more money flows through it, and with
that more and more power, it's hard to stop spending. And with that comes
borrowing. And with that comes slavery. The same thing could happen even if
spending were kept in the context of the Constitution, but once you escape its
limits, there is then no limit. The rich rule over the poor, and the borrower is
servant to the lender. - Proverbs 22:7 (NIV)
China's oil giant Sinopec Group has signed a US$70 billion oil and natural gas
agreement with Iran, which is China's biggest energy deal with the No. 2 OPEC
producer. Under a memorandum of understanding signed Thursday, Sinopec Group
will buy 250 million tons of liquefied natural gas over 30 years from Iran and
develop the giant Yadavaran field. Iran is also committed to export 150,000
barrels per day of crude oil to China for 25 years at market prices after
commissioning of the field. Iran's oil Minister Bijan Zanganeh, who is on a
two-day visit to Beijing pursuing closer ties, said Iran is China's biggest oil
supplier and wants to be its long-term business partner. Official figures show
that China imported 226 million tons of oil in2003, about 13 percent of which
coming from Iran. Beijing expects to secure foreign energy supplies by the deals
for its economy, which has turned China into a major oil importer but suffers
severe power shortages.A former KGB officer said to be close to President
Vladimir Putin was selected at a shareholders meeting Monday to head Transneft,
the state-owned monopoly pipeline operator. Nikolai Tokarev had run state-owned
oil exporting firm Zarubezhneft since 2000, the year Putin became president. He
previously had served a brief stint at Transneft as vice president. Tokarev will
replace Semyon Vainshtok, who was picked to head the state-run corporation
overseeing construction of sports facilities and infrastructure in Sochi for the
2012 Winter Games.
The choice of a former KGB officer to run Transneft, which is 75 percent state
owned, comes ahead of parliamentary and presidential elections in Russia and
fits a Kremlin pattern of putting trusted people in key government and corporate
positions. "This is part of the configuration around the presidential
succession," said Vladimir Pribylovsky, a political analyst.Bulgaria and Russia
signed a deal Friday to build a natural gas pipeline that would undercut a rival
project backed by the U.S. and European Union and strengthen the Kremlin's
dominance over EU energy supplies.The agreement came after visiting Russian
President Vladimir Putin pushed hard to secure Bulgaria's crucial participation
in the projected South Stream pipeline, which would cross from Russia under the
Black Sea to Bulgaria and then branch off for delivery deeper in Europe. Putin
brushed off concerns about Russia's increasing influence, saying after the
signing ceremony that the pipeline agreement and other deals would "seriously
increase the energy security of the Balkans, Europe as a whole and, of course,
Bulgaria." The deal required last-minute negotiations, amid tough bargaining by
Bulgaria and wariness about Russia's clout. The Bulgarian Cabinet approved the
agreement at an extraordinary meeting only a few hours before it was
signed.Bulgaria's interests are fully protected, because the company which will
be set up to construct and run the pipeline on Bulgarian soil will be with 50
percent Bulgarian and 50 percent Russian ownership," Bulgarian Prime Minister
Sergei Stanishev said. Russia's state-controlled gas monopoly, OAO Gazprom, had
previously been offering a minority stake in the part of the pipeline that would
run through Bulgaria.
"Until yesterday, the Russian side insisted on holding a 51-percent stake,"
Stanishev said. He said Putin himself deserved most of the credit for the
progress in the late-night negotiations. But despite the concession, the
imminent deal was a victory for Putin and Russia, which is already Europe's
dominant gas and oil supplier and is seeking to increase its control over
westward routes for its energy supplies from the former Soviet Union. "It's very
important that the parties have shown their ability to compromise, and the draft
that has been was prepared reflects a balance of interests," Gazprom chairman
Dmitry Medvedev, who is likely to succeed Putin after the March 2 presidential
election, said after meeting with Stanishev. He said agreements on South Stream
"will work for decades and make it possible to ensure stable conditions for
future energy deliveries for Bulgaria, Russia and EU nations."
Gazprom has set up a parity joint venture with Italy's ENI SpA to develop a
feasibility study for the 900-kilometer (550-mile), $10 billion pipeline. The
project is a direct rival to the Nabucco pipeline, sponsored by the United
States and the European Union, which would also come through Bulgaria. Taking
advantage of the clashing pipeline offers, Bulgaria has bargained with the
Kremlin. On Thursday, Bulgarian President Georgi Parvanov underlined his
nation's support for the EU's efforts to diversify energy supply routes -- and
for Nabucco -- in a speech at a ceremony marking the opening of a Russian
cultural festival in Bulgaria. After Parvanov had spoken, a clearly annoyed
Putin, standing next to him, said Bulgaria was free to chose its direction but
warned it to make sure it "works to its benefit." ENI CEO Paolo Scaroni played
down the rivalry between South Stream and Nabucco following meetings with
Gazprom CEO Alexei Miller, saying both would be needed because of growing
demand. But South Stream would undercut Nabucco and dash the European Union's
hopes of reducing its growing reliance on Russia, which now supplies up to 40
percent of Europe's gas and up to a third of the oil imports of some European
countries. South Stream would have an estimated annual capacity of 30 billion
cubic meters (1.15 trillion cubic feet), roughly equivalent to 60 percent of the
natural gas consumed annually in The Netherlands. The Kremlin's plans have upset
opposition parties and non-governmental organizations in Bulgaria, who fear the
former Soviet satellite's increasing dependence on Russian energy supplies and
criticize Moscow's human rights record. With Putin and Parvanov looking on,
officials also signed a $5.9 billion contract to build Bulgaria's second nuclear
plant near the northern town of Belene.
Also signed was an agreement for a joint company, also including Greece, to
build the Burgas-Alexandroupolis oil pipeline, which will channel Russian oil
from the Black Sea to the Aegean, bypassing Turkey's busy Bosporus. As part of
its energy blitz, Russia has promised to extend South Stream into Serbia and
build a huge gas storage facility there -- moves that would turn the Balkan
nation into a major hub for Russian energy supplies to Europe. Miller said
Gazprom and Serbian officials were close to a final agreement on a deal that
would envisage a South Stream branch reaching Serbia, and would also foresee
Gazprom taking a controlling stake Serbia's state oil company NIS. Belgrade has
turned increasingly away from the West and toward Russia, which has supported
Serbia in the debate over independence for Serbia's Kosovo province.
With the official launch of the Chinese Investment Corp, China's new financial
juggernaut will be both a formidable opportunity and challenge for the west. The
Chinese Investment Corp. (CIC) has been officially launched, and with an initial
endowment of US$200 billion the new state-controlled company is tasked to invest
abroad China's huge foreign reserves. In the shopping bag there will be natural
resources from developing countries as well as foreign technologies, research
and development (R&D) establishments and brand names from developed economies.
For the west, China's new financial juggernaut will be a formidable opportunity,
and a formidable challenge. After various announcements, on 27 September, the
Chinese authorities officially unveiled the CIC. Under the direct supervision of
the State Council, the nation's cabinet, the CIC is mandated to invest abroad
the huge reserves accumulated by Beijing over the last years. China's forex
topped US$1.33 trillion at the end of June and are expected to reach US$1.5
trillion by the end of the year, the largest in the world. Lou Jiwei, a
deputy-secretary general of the State Council and former finance minister, will
be the director of the new company.
China's investment corporation has been under preparation for some time. At the
conclusion of the annual session of the National People's Congress in March, the
Chinese government announced that it would set up a State Foreign Exchange
Investment Company (SFEIC) aimed at improving the yield of the country's foreign
exchange reserves and generating the largest returns possible. In May, the new
company, while still in preparation, invested US$3 billion of its reserves in
non-voting shares of the Blackstone Group, the New York-based private equity
firm that recently went public. With the establishment of the CIC at the end of
September, the contours of China's investment strategy have become clearer. The
CIC strategy
The CIC is modeled on the Singapore investment company, Temasek Holdings.
Temasek is an investment firm incorporated in 1974 and headquartered in
Singapore. Its portfolio spans various industries including telecommunications
and media, financial services, real estate, transportation and logistics, energy
and resources, infrastructure, engineering and technology as well as bioscience
and healthcare. The Chinese sovereign wealth fund will also be a private equity
vehicle, operating on a flexible investment horizon with the option of taking
concentrated risks. Lou Jiwey, the CIC's director, declared that the new company
would "invest, manage and add value to the Chinese portfolio" as an owner of its
assets and investments. Beijing currently holds its reserves in US treasury
bonds and other safe but low-yielding, instruments. According to Chinese
sources, the CIC will likely be "equity-heavy." Analysts at Morgan Stanley also
expect the Chinese company to hold a substantial share of its assets in
equities, not sovereign bonds. "The company's principal purpose is to make
profits," Li Yang, director of the finance research institute at the Chinese
Academy of Social Sciences (CASS), told ISN Security Watch. The CIC has an
initial capital of US$ 200 billion, but presumably the amount will be increased
according to the investments that the company will support. In practice, the CIC
will issue RMB-denominated bonds and sell these bonds on the market to buy
foreign exchange funds from the central bank. It will then use the foreign
exchange funds for investment. In June, China's legislature approved a special
issuance of RMB 1.55 trillion (US$200 million) in treasury bonds for the new
investment company. The CIC will operate in both the domestic and global
markets. Internally, the investment channels of the new vehicle will include
another Chinese state-owned company founded in 2003, the Central Huijin
Investment Corp., which has been merged into the CIC as a wholly owned
subsidiary company. Central Huijin holds shares in China's four leading
commercial banks and in 2005 injected US$60 billion into three of them. While
Central Huijin will be one of the financial vehicles adopted as the central
bank's investment arm to improve the balance sheets of Chinese state-owned
banks, the CIC will be more of a strategic investment fund focused on industry
and private equity. Internationally, the CIC will be Beijing's investment arm in
a range of sectors and countries. Its initial endowment and future prospects
make it one of the biggest in the world.
According to a report by Chatham House published in September, the CIC soon will
be the number two in the world, behind the Adia, the sovereign wealth fund of
the United Arab Emirates, but ahead of both the Gic, the Singaporean fund, and
the Norwegian Government Pension Fund. The central question is therefore where
and in which sectors the CIC will invest its capital. According to sources,
China's international investment strategy will take two directions. One the one
hand, it will invest in natural resources in developing countries. On the other
hand, it will concentrate on the acquisition of foreign technologies, R&D
establishments and brand names in advanced economies. According to Li Rongrong,
director of the China State Asset Management Commission (the agency that
oversees government assets), the CIC may also help major state-owned companies
expand overseas.
Taking the world by investment
Since the mid-1990s, the search for natural resources has continued to gain
momentum as a result of China's high economic growth, with increasing emphasis
on oil and industrial raw materials. In its 2006 World Investment Report, the
United Nations Conference on Trade and Development (UNCTAD) indicated that
China's outward foreign direct investment had more than quintupled in the first
half of this decade, to reach US$11.3 billion in 2005. South-East Asia, Latin
America and Africa have become the prime targets. For instance, in 2002, the
China National Offshore Oil Corporation became the largest foreign oil producer
in Indonesia after its takeover (for US$585 million) of Repsol Indonesia. In
Africa, China's investment strategy has been directed mainly at sourcing natural
resources, including oil. Moreover, increasing numbers of Chinese companies have
recently established production bases to supply local markets with cheap
products highly compatible with local demand and purchasing power. As a result,
total trade between China and Africa nearly quadrupled in six years, from
US$10.8 billion in 2000 to nearly US$40 billion in 2006. China is today Africa's
biggest trading partner and the second most important investor. China's new
investment company will further boost these trends. At the same time, China will
invest more and more in developed countries, where its presence is often
welcomed for the jobs, cash and infrastructure that it brings. In Australia, for
example, China has become the biggest foreign investor in the mining sector. The
CIC will place more emphasis on the acqui¬sition of advanced technologies, R&D
establishments, managerial know-how, distribution networks and brand names.
China's investment strategy will likely take the form of profitable
participation in private equity funds as well as strategic participation in
foreign investment companies running businesses considered of importance for
China. While normally in the first case, the CIC would hold a minority stake or
give up voting rights for the entitlement of a higher return (as in the
Blackstone investment fund), in the event of acquisitions of strategic assets,
China's investment company would presumably detain the majority of shares or in
any case full control of the company. It is in this scenario that questions of
corporate governance, transparency and strategic considerations will be
unavoidable.
Eye on Europe: challenge and opportunity
While in the US protectionist tendencies may create difficulties for China
investing in key strategic sectors, Europe is emerging as the most attractive
place for China's technology-seeking shopping spree. China is eyeing Europe's
IT, aerospace and defense sectors as investment opportunities, both in terms of
profitable returns on its foreign reserves and in terms of acquisition of
advanced technologies needed for China's industrial (and military)
modernization. Chinese investments in European companies would be helped by the
fact that EU-China relations are characterized by the conspicuous absence of
issues that could provoke a confrontation between the two sides - such as the
Taiwan question. Unlike the US and Japan, Europeans look at China almost
exclusively in terms of business opportunities and not as a possible military
competitor. Some EU policy makers - such as the Italian minister for the
economy, Tommaso Padoa-Schioppa - have openly invited the CIC to invest in
Europe. At the same time, French President Nicolas Sarkozy and German Chancellor
Angela Merkel have called for a European "golden share" to protect industrial
strategic assets from unwanted takeovers from sovereign wealth funds (SWFs). EU
Economy Commissioner Joaquin Almunia added that "the EU might restrict
investments by government funds unless they disclose more about what they invest
in and why." The CIC will thus be, on the one hand, a great opportunity for some
industrial sectors, as it will offer fresh money into tight markets after the
sub-prime mortgage crisis. On the other hand, the Chinese investment vehicle
could well succeed in gaining control of western assets and advanced technology
that could be turned into military might in a situation where there could be
future tensions in US-China relations, especially over Taiwan. In sum, for the
west, the new Chinese investment corporation will be a great economic
opportunity, but also a formidable strategic challenge to watch.
Extracting oil from sand is still a laborious, time-consuming task although improved technology has significantly lowered costs. From his perch behind the wheel of a heavy-hauler truck in Fort McMurray, Alberta, Lucas Crisby peers out over a seemingly limitless moonscape of black, sticky sand. Oil has been good to Crisby. With his US$62,000 (HK$483,600) annual salary, he has bought a US$338,000, four-bedroom house a few doors from where he grew up. That's a significant achievement for a 20-year-old without a college degree and only a few years of work experience.Now, with Chinese companies pouring hundreds of millions of dollars into the vast northern Alberta oil sand deposits, Crisby and others at Fort McMurray - a former Hudson Bay trading post - believe the good days have just begun.
Crisby says he doesn't care who harvests the oil sands, as long as the paychecks keep rolling in.''It's a free market,'' said Crisby, who rocks out to country tunes while hauling 400-tonne truckloads of unprocessed sand for Syncrude, a giant Canadian oil producer.To power its factories and fleets of new cars, China has intensified its search for oil in Asia and Africa. But Beijing's expansion into the United States' back yard demonstrates the risks the Asian economic giant is taking to secure energy supplies.China's venture into Canada has triggered unease in Washington, where some fear it could threaten US energy security and set the stage for clashes.Under the 1994 North American Free Trade Agreement, Canada ensured its role as the dominant supplier for the United States by guaranteeing it would send a portion of its energy south of the border.
Today, Canada provides 17 percent of US oil imports, 16 percent of its natural gas and nearly all its imported hydroelectric power.Karen Harbert, assistant secretary for policy and international affairs at the US Energy Department, said Washington didn't believe it should tell other countries where - or with whom - they could do business.``Is China's investment into Canada's energy sector good for the North American energy market? Ultimately, it will be up to the Canadians to figure out which way they want to go and what's in their best interest economically and security-wise,'' she said.In the past two months, China's three largest oil firms have struck major deals in Canada, including a 40 percent stake in a US$3.6 billion pipeline project.The promise of a big new player in Alberta's oil sands has intensified a boom in the province. Since 2002, Fort McMurray's population has expanded by 20 percent to 56,000, mostly young Canadian men seeking their fortunes.
Oil companies are beginning to import labor from as far away as Venezuela and China, which has sparked job-loss concerns among labor unions and indigenous leaders. But many Canadians, including Crisby, simply view China as another major player in an industry that has long been a global game.Although the Canadian government owns the vast majority of the country's energy resources, more than half of Alberta's oil deposits are being developed by US companies, including Chevron, Exxon Mobil and Oklahoma City-based Devon Energy. The French, Dutch and Japanese have also invested in the oil sands.Thanks in part to aggressive marketing by its political leaders, Canada has also been a big beneficiary of China's economic growth.
China is now Canada's second-largest trading partner, and Chinese is the third-most widely spoken language in Canada, after English and French. More than a million people of Chinese descent have immigrated to Canada in the last century.The latest influx of Chinese funds into energy and mining has prompted the Canadian government to look more closely at the national-security effects of foreign investment. Canada is closely watching the debate in Washington over competing bids for Unocal by Chevron and China's CNOOC, a majority of whose stock is held by government-owned China National Offshore Oil Corp. US critics say a Chinese buyout of the California company would put scarce energy resources in the hands of a potentially hostile government.
Wenran Jiang, a China expert at the University of Alberta, said a US rejection of the CNOOC bid would make Canadians more cautious about striking energy deals with the Chinese.Energy analysts say Canada must balance its desire for investments from China with the need to satisfy its best customer, the United States, which buys 80 percent of Canada's total exports. When Alberta Energy Minister Greg Melchin visited Capitol Hill recently, he was questioned repeatedly about China's new role in Canada.Melchin said he reassured US officials and others that Canada's oil sands were a ``sunrise industry'' with lots of room for development, and that the United States would remain his province's ``best customer, friend and neighbor.''But many Canadians also view the issue as a way of reminding their powerful neighbor not to take them for granted.
``Our message is it would be in the best interest of the US to pay attention to your largest and best opportunity for long-term energy supply,'' Melchin said. ``You shouldn't take for granted that it will automatically happen.''Oil-industry executives and analysts differ on what China's entry into the Canadian market will mean for the United States. Some say it will have little effect on the price Americans pay for Canadian energy because oil supplies can be acquired elsewhere.But Wilfred Gobert, vice president of Peters & Co, a Calgary investment firm, thinks greater competition for Canada's oil could push up prices, especially if the Chinese are willing to pay more to secure a stable supply.Analysts say an infusion of Chinese funds would speed up development of Canada's oil sands, allowing the extraction of more oil for the United States, as well as China.Although improved technology has significantly lowered costs, extracting the oil from sand is still a laborious, time-consuming task, requiring two tonnes of sand to produce a barrel of oil.
Critics say the process is one of the most environmentally destructive ways to squeeze oil from the earth, in part because it emits large amounts of greenhouse gases.To reach the oil, giant pits as deep as 250 feet are being carved out of the northern Alberta forests. The sticky sands are fed through a series of machines that crush and separate out bitumen, which is processed into crude oil.If Canada's output more than doubles by 2010, as projected, the oil sand producers will need new pipelines to get the crude to their customers. That's why China is a key factor in the competition between Calgary-based Enbridge and another Calgary firm, Terasen Pipelines, to develop a pipeline from northern Alberta to the coast of British Columbia in the west.Whichever company secures a Chinese commitment for long-term contracts will have the edge in financing its pipeline, said Steven Paget, a research analyst for FirstEnergy Capital, a Calgary-based investment bank.
But getting there won't be easy, said Richard Bird, group vice president of Enbridge. He said China's big energy firms aren't ``willing to buy long-term supply without more direct investment into the oil sands,'' meaning they want to help produce oil and share in profits.Canadian executives said Chinese firms were more willing than Western companies to invest ``patient capital'' in projects that might not reap immediate profits, to gain a foothold in promising markets.With the surge in oil prices, the biggest Canadian oil sand producers are being courted heavily and can afford to be choosy about their partners.Thomas d'Aquino, chief executive of the Canadian Council of Chief Executives, a group of Canada's leading firms, said he opposed any efforts to restrict China's participation in the North American energy market, as long as its acquisitions are legal and transparent.But he said Washington and Ottawa should think about what they would do if there was a global energy shortage and Beijing controlled a large share of Canada's oil.``What would it mean if China owns those resources and said, `No, we need them for us, we can't send them to you'?''
China says nine countries have offered it financial incentives to invest in oil and gas projects as it continues its global hunt for energy resources. Government officials said Kuwait, Qatar, Oman, Morocco, Libya, Niger, Norway, Ecuador and Bolivia would offer China tax breaks and other sweeteners. China already has a similar arrangement with 20 other countries. China is increasingly dependent on imported oil and gas as it tries to sustain its rapid economic growth.
Beijing has agreed a host of energy deals with other countries in the past year, including Venezuela and Malaysia, and is currently negotiating with Iran over gas imports. China has been particular active in Africa, prompting criticism that it is exploiting the continent's resources for its own benefit and setting aside concerns about poverty reduction and human rights abuses. Chinese oil companies already have interests in Niger, while Libya is looking for external partners as it opens up its energy sector to foreign investment. China imported 47% of its oil supplies last year as its domestic supplies dwindled. New supplies are regarded as vital if the country is to continue its swift economic expansion. Separately, a government official said China would continue to rely on domestic coal production for most of its energy needs but was also looking to step up investment in renewable industries. Zhao Xiaoping, head of the National Development and Reform Commission's energy bureau, told Money China magazine its goal was to source 10% of energy from renewable sources by 2010. Beijing is under pressure to embrace more environmentally-friendly energy supplies to reduce pollution levels across the country and set a lead in the global fight against climate change.
One hacker says he is a former computer operator in the PLA another is a marketing graduate; and Xiao Chen says he is a self-taught programmer."First, you must know about the Web site you want to attack. You must know what program it is written with," says Xiao Chen. "There is a saying, 'Know about both yourself and the enemy, and you will be invincible.'"WE decided to withhold the address of these hackers' Web site, but Xiao Chen says it has been operating for more than three years, with 10,000 registered users. The site offers tools, articles, news and flash tutorials about hacking.Private computer experts in the United States from iDefense Security Intelligence, which provides cybersecurity advice to governments and Fortune 500 companies, say the group's site "appears to be an important site in the broader Chinese hacking community."Arranging a meeting with the hackers took weeks of on-again, off-again e-mail exchanges. When they finally agreed, SOMEONE was told to meet them on the island of Zhoushan, just south of Shanghai and a major port for China's navy.The apartment has cement floors and almost no furniture. What they do have are three of the latest computers. They are cautious when it comes to naming the Web sites they have hacked.
But eventually Xiao Chen claims two of his colleagues -- not the ones with him in the room -- have hacked into the Pentagon and downloaded information, although he wouldn't specify what was gleaned. "They would not publicize this," he says of someone who hacks the U.S. Defense Department. "It is very sensitive."This week, the Pentagon said ULTRA TOP SECRET PENTIGON COMPUTERS in the United States, Germany, Britain and France were hit last year by what they call "multiple intrusions," many of them originating from China.At a congressional hearing in Washington last week, administration officials testified that the government's cyber initiative has fallen far short of what is required. Most alarming, the officials said, there has never been a full damage assessment of federal agency networks."We are here today because we must do more," said Robert Jamison, a top official in the U.S. Department of Homeland Security. "Defending the federal system in its current configuration is a significant challenge."U.S. officials have been cautious not to directly accuse the Chinese military or its government of hacking into its network.
But David Sedney, the deputy assistant secretary of defense for East Asia, says, "The way these intrusions are conducted are certainly consistent with what you would need if you were going to actually carry out cyber warfare."Beijing hit back at that, denying such an allegation and calling on the United States to provide proof. "If they have any evidence, I hope they would provide it. Then, we can cooperate on this issue," Qin Gang, a spokesman for the Chinese Foreign Ministry, said during a regular press briefing this week.But Xiao Chen says after the alleged Pentagon attack, his colleagues were paid by the Chinese government. Again, CNN has no way to independently confirm if that is true.His allegations brought strenuous denials from Beijing. "I am telling you honestly, the Chinese government does not do such a thing," Qin said.But if Xiao Chen is telling the truth, it appears his colleagues launched a freelance attack -- not initiated by Beijing, but paid for after the fact. "These hacker groups in my opinion are not agents of the Chinese state," says James Mulvenon from the Center for Intelligence Research and Analysis, which works with the U.S. intelligence community."They are sort of useful idiots for the Beijing regime."
He adds, "These young hackers are tolerated by the regime provided that they do not conduct attacks inside of China."One of the biggest problems experts say is trying to prove where a cyber attack originates from, and that they say allows hackers like Xiao Chen to operate in a virtual world of deniability.And across China, there could be thousands just like him, all trying to prove themselves against some of the most secure Web sites in the world.
"A geostrategic issue of crucial importance is posed by China's emergence as a major power. The most appealing outcome would be to co-opt a democratizing and flee-marketing China into a larger Asian regional framework of cooperation. But suppose China does not democratize but continues to grow in economic and military power? A "Greater China" may be emerging, whatever the desires and calculations of its neighbors, and any effort to prevent that from happening could entail an intensifying conflict with China. Such a conflict could strain American-Japanese relations -- for it is far from certain that Japan would want to follow America's lead in containing China -- and could therefore have potentially revolutionary consequences for Tokyo's definition of Japan's regional role, perhaps even resulting in the termination of the American presence in the Far East.
In 1997, Zbigneiw Brzezinski, wrote "The Grand Chessboard - American Primacy and it's Geostrategic Imperatives", which called for the American Dominance over Eurasia. As it is believed, "Those who control Eurasia control the Planet", and to accomplish this, the US would have to Prevent China from Acquiring Supremacy in Eurasia...... which means War......
In 1998, Two senior PLA Air Force colonels, Qiao Liang and Wang Xiangsui, wrote "Unrestricted Warfare" in Direct response to The Grand Chessboard. Throughout this book, it is described how it would be feasible for Low Tech to Overcome High Tech, which could be used to Destroy America. .... and Unrestricted Warfare, goes as far as mentioning Bin laden and the World Trade Center in the same Sentence. After 9-11-01, Qiao Liang and Wang Xiangsui were hailed as Hero's in China. On the Anniversary of 9-11, this book was given new cover art...... a Snapshot of 9-11(on a little side note, Chinese Premier Zhu Rongji jokes publicly about the September 11 attacks)
I know that many of you are already thinking that "just because it's in a book, doesn't make it true"..... which is why I ask that you try reading them before dismissing this whole theory I'm about to type.... I also Tried to reference everything I could with Documents from the most Reliable Sources I could Find
It is Inevitable that the US and China would fight each other
Within these 2 books, is a basic format of how to acquire the goal of being the Hegemonic Country that carries the Planet through the 21st Century....... and it seems these books are being followed quite closely.The Grand Chessboard, states that the only way America would be able to be the Dominant Power in Eurasia, would require a "Pearl Harbor Styled Attack" to give the US Government the ability to change it's Foreign Policy towards Dominance...... which is Exactly what happened with George Bush's National Security Strategy for the United States it states that "as a matter of common sense and self-defense, America will act against such emerging threats before they are fully formed' and `to forestall or prevent such hostile acts by our adversaries, the United States will, if necessary, act preemptively"
and according to the CHINA SECURITY REVIEW COMMISSION - REPORT TO CONGRESS OF THE U.S. - JULY 2002, in -Chapter 7 - Proliferation and Chinese Relations with Terrorist-Sponsoring States......... (China, is Considered a Threat)
....... The Axis of Evil......
Using September 11th, the United States began their conquest of the Middle East, starting with Afghanistan, Iraq, and soon to be Iran...... as these three countries are necessary for holding a Geostrategic Influence over the Middle East. (which, if you read the link to "the Grand Chessboard" you'll understand)
Each of these, Important to China..... will China let America threaten it's National Interests? Such as..... Iraq being the Biggest Supplier of Oil to China (refer to 1997 China-Iraq Oil deal)
In comes North Korea
N. Korea is a Chinese Wild Card...... a country that's nuclear capable, ICBM's that can potentially reach Chicago, and has a leader that's threatened to Nuke America. China uses N. Korea to Launch Nukes at America....or American Interests, like Japan, S. Korea, Taiwan, Guam...... Who would America retaliate against...... N. Korea or China?
Then there's the "List of 60+ other countries" that the President Bush considers as "Terrorist Harboring or Sponsoring States" (though the full list has never been disclosed)
but it would almost be safe to say that Within the "List of 60", America has created a Half Circle around China........ leaving the Russian Border Open...... Russia will be the deciding factor, and I believe whoever allows a blind eye to be turned to the expansion into some of their old Satellite Countries, will be who Russia sides with...... and as it stands, Russia is against this War in Iraq.... to the point, they were giving Iraq Military Equipment after America had already been in Iraq for Days. So, it's not looking good, if America wants Russia as an Ally, for a War against China....... read the Russia page if you want to know more..... now back to China China, more then any other country since 9-11-01, has remained fairly silent in the World of Politics, they've just been sitting back watching what America does......even after the US has repeatedly tried "Provoking" China..... the EP-3 Spy Plane Incident, the Bombing of the Chinese Embassy, the "Spy Bugs" on President Zemin's Boeing..... and now PreEmptiveness against many of China's Economic Partners? China's response to each incident?...... China disassembled the EP-3 Plane and shipped it back to America...... China, though did nothing through action, they refuse to believe any excuse we have to offer, for the Bombing of their Embassy....... and Silence upon the Bugged Plane incident (which almost prevented the Bush-Zemin meeting in February of 2002)......... China asked the United States to Halt the War against Iraq Immediately.So far, China has shown that they are taking a Passive Route, but that could very easily change
.... and we think that their efforts will bear no fruit, if they attempt anything......
"Since the 7 May 1999 bombing of China’s embassy in Belgrade, China’s leaders reportedly have been discussing ways to offset US power, to include accelerating military modernization, pursing strategic cooperation with Russia, and increasing China’s proliferation activities abroad. However, none of these options is likely to improve fundamentally Beijing’s position." - China Report to Congress - Pursuant to the FY2000 National Defense Authorization Act
China's Offensive Move against the United States would be Taiwan and the N. Korean Wild Card, but Taiwan, would be a Last Resort, as "Unrestricted Warfare" offers a Variety of ways to Destroy America without a Serious Military Match Up, but does not leave that subject undiscussed. Which China has been Preparing for, within the past 5 years, according to their "Stated Budget Reports"
China is already a significant regional power and is likely to entertain wider aspirations, given its history as a major power and its view of the Chinese state as the global center.
The choices China makes are already beginning to affect the geopolitical distribution of power in Asia, while its economic momentum is bound to give it both greater physical power and increasing ambitions. The rise of a "Greater China" will not leave the Taiwan issue dormant, and that will inevitably impact on the American position in the Far East.
"The exercise of
American global primacy must be sensitive to the fact that political geography
remains a critical consideration in international affairs. Napoleon reportedly
once said that to know a nation's geography was to know its foreign policy. Our
understanding of the importance of political geography, however, must adapt to
the new realities of power.
For most of the history of international affairs, territorial control was the
focus of political conflict. Either national self-gratification over the
acquisition of larger territory or the sense of national deprivation over the
loss of "sacred" land has been the cause of most of the bloody wars fought since
the rise of nationalism. It is no exaggeration to say that the territorial
imperative has been the main impulse driving the aggressive behavior of
nation-states. Empires were also built through the careful seizure and retention
of vital geographic assets, such as Gibraltar or the Suez Canal or Singapore,
which served as key choke points or linchpins in a system of imperial control"
China, knowing that attacking Taiwan prematurely, will bring a repercussion of massive US Military Force, they will watch America for awhile.....
"The Blind Man and the Elephant"Bush Administration already pledged to do "whatever it takes" to defend Taiwan, in accordance to the Taiwan Relations Act
With the US Military Occupied in the Middle East, Trying to Protect Taiwan, and Dealing with the N. Korean Wild Card, China has a variety of options that open for them.
Try to use Diplomatic Processes to halt the US War...... Assist (Arms & Finances) those that the US is Attacking (Proxy Wars)....... Take Taiwan, and go to War with America.
Through the Diplomatic Process, China could use a Call for Peace, as a way to unite the world to pressure the United States to Stop their Conquest, which could have extremely positive effects for China, if they play their cards right.
Assisting those that the US are Fighting, could allow China to increase their Military Industrial Complex on an Exponential Factor, which would obviously hinder the US War Plans and create a US vs China style Vietnam, that many are expecting this war to eventually come to........
While, "Unrestricted Warfare" Supports the creation of a Vietnam Styled Conflict, it is questionable if it would be the best route to take, unless China is wanting a Mass Population Reduction.....which, could be very possible, as they have a population of 1.4 Billion people..... and we already know America's up for Population Reduction...... (or at least some in Congress want "H. CON. RES. 70" passed)
Which brings us to the Option of actually Confronting the US War machine, via Taiwan..... which in all essence would be World War Three.
Now, as I stated earlier, Russia is going to be the deciding Factor in who is the winner for the position of "the Lone Hyper-Power"..... yea, there's some who claim the US is a Lone Super Power, but it is impossible to claim that 1/5th of the World's Population is Not a Super Power. The Difference between a Super Power and a Hyper Power, is the Super Power has a relatively close Rival to some aspect of the Sphere of Influence of a Nation, be it Military, Economic, Social, or Political....... the Hyper Power has no Rival.
George Bush's National Security Strategy, calls for the US to have No Rivals
Since the Rise of Communism in the bitterness of the Cold War, one of America's Greatest Fear was a Russian-Chinese total peace agreement, and them attacking America...... after the Fall of Soviet Russia, this fear has been close to forgotten, yet is closer then it has ever been. (High-Level Political/Military Visits Between Beijing and Moscow Strengthen "Strategic Alliance" Against U.S./NATO ----- United States Security Strategy for Europe and NATO)
With the US on the path of Conquest, it is Imperative in the National Security interests of China and Russia to have the Presence of the US removed from their Sphere of Influence ....... the question is, as I asked earlier.... what Path to take.
Any Option that is Chosen, means an inevitable end to the US quest for the Status of Hyper Power.
........ The Peace Process.......
If the Diplomatic process is used, this could grant the UN the ability to become effective in their Role as "Peace Keepers" and Strengthen their ability to uphold their Resolutions and position as International Body of Law...... which could in all essence, be the creation of a World Governing Body.
There are many who claim that the UN has shown their Irrelevance and Inefficiencies, which will lead to their demise within the next 10 years, but this could easily not be the case...... This is just the belief that the UN is no longer Relevant to the USA, towards their quest towards Hyper Power Status.
If this were to happen, it would be very possible that the US could lose their position on the Security Council, which I see the US attempting to pull out of the UN if the UN tries to stop it's Quest........ This would obviously cause some havoc in the UN which could destroy the UN, but China, Russia, and the EU could easily make up for the loss of the US and it's Obligations towards the UN.
For the US to block the UN Peace Process and continue the Road to Hyper Power, would require the destruction of the UN, but in a show of Good Faith, the US will wait till the UN acts against them.
Back to the Peace process......
There's close to 200 Countries on this Planet, and in the "Coalition of the Willing" (there has never been a straight and definite number given) is made up of somewhere between 30-45 Countries, which leaves 140+ that don't seem to be "Willing" to assist America's War ( I use 140, since some countries are probably helping the US behind the scenes)
So, these 140 countries that are left, Pressure the US to stop their War and Quest for Hyper Power Status, the US can not survive in it's current state, if it's cut off from the world......... and the US falls like the Soviet Union... but the National Security Strategy will not allow for that...... for us, it's either World Domination or Total Destruction......"We will not tire, we will not falter, and we will not fail" - George Bush Jr.
Already, a few countries have started boycotting American Goods..... Germany, Russia, France...... what if this were to catch on?....... What would happen if the US was cut off from the rest of the world, outside of Pax Americana?
...... The American-Chinese "Vietnam".........
With the Peace Process, seemingly Failed, every possible scenario I could think of, Leads me to wonder what China would do, if they didn't want to Fight the US at first, but instead let them wear out their resources, fatigue their military, and strain their nation (with assistance from potential world wide sanctions from an attempted peace process)
This could cause the Chinese Military Industrial Complex a chance to catch up to the US technologically, as they could just sit back and support guerillas in Iraq, Iran, Afghanistan, Syria, N. Korea ........ which of course, is going to increase their Economy and their "Middle Eastern" Sphere of Influence
If this were to happen, "Terrorism" would increase a thousand fold, throughout the Middle East and the Coalition Countries, pulling the Coalition Countries into a long drawn out War.
During the drawn out war, inevitably the Arabic World would unite, as they will see the Coalition as Occupiers and not Liberators
This war, if it were to happen, it would most likely follow the Unrestricted Warfare's Words, as it has already done before.
300 short range missiles face Taiwan
China controls the Panama Canal
Secretary Rumsfeld Outlines Space Initiatives
Annual Report to the President and the Congress, from the Dept. of Defense
The United States Security Strategy for the East Asia - Pacific Region 1998
East Asia Strategy Report 1995
United States Security Strategy for Europe and NATO
A geostrategy for Eurasia by Zbigniew Brzezinski
CHINA - A Country Study (Library of Congress)
King Khan - Alternate Futures for 2025
Defense Issues: Volume 10, Number 109-- U.S. Strategy: Engage China, Not Contain It
Russia-China Deal Makes NASA Uneasy
United States Security Strategy for the Middle East - 1995
Pentagon warns of China threat - July 17, 2002 - CNN
PRC to quadruple nuke missiles aimed at US by 2015; China helped Pakistan develop nuclear weapons
Chinese military White Paper calls for an "Electronic Pearl Harbor"
Iran-Russia-China axis seeks to limit US power
Beijing Threatens to Attack US Pacific Fleet, Launch Nuke Strikes on US Policy
Pentagon Assessment Warns of China-Dominated Asia in 2025
China's "Western" Sphere of Influence
PLA Electromagnetic Pulse Bombs Can Destroy US Fleets; PLA Telecommunications Corporations Described
Pentagon Study: PRC Preparing for War vs US (DoD Report from defenselink.mil coming soon)
Chinese Defense Minister in Moscow Forges Anti-US Alliance
China's new ICBM carries decoys to defeat future U.S. missile defense
Defense Minister: PLA preparing for war with U.S
Lax Security Enabled China to Build Neutron Bomb with U.S. Data
China Receives Advanced Kilo-Class Submarine from Russia
China restructures military industries
Jiang Tells PLA of U.S. "Hegemonists" Threat
China plans long-range missile test in late July; PLA commissions "stealth" warship
Moscow Sells 72 Advanced Sukhoi-30 Fighter-Bombers to Beijing
China to Build New Communications Spy Base in Cuba
China sells WMD's to Iran and Pakistan
Pentagon: elite U.S. Special Forces seek to train Chinese commando
China readies for future U.S. fight (CNN - Tuesday, March 25, 2003 )
CHINA'S MILITARY STRATEGY TOWARD THE US
Budget boost for China's military
China's Military Strategy and Security in the Taiwan Strait
CHINA'S MILITARY POTENTIAL: Foreword and Summary
China: Military Imports From the United States and the European Union
China's military starts war games near Taiwan -- The Washington Times
Senator Kyl Remarks on China's Military Policy
Halt Encryption Software Sales To China's Military
US Dept. of State - IIP: The United States and China
Pravda.RU Beijing waiting for US-Iraq war?
Selected Military Capabilities of the People's Republic of China
China and the United States: From Hostility to Engagement
Is China a Military Threat? Video
MILITARY CAPABILITIES OF THE PEOPLE'S REPUBLIC OF CHINA
Military Laws of the People's Republic of China
IV. Military Exchanges Between China and the US
US Military Technology That China Is Believed to Have Acquired
China Condemns US Congressional Acts on Military Cooperation With Taiwan
China Reaffirms Military Ties with DPRK
Ten Obstacles to China Becoming A Strong Military Power
The House Policy Committee - China Report
Three Chinese banks in world's top four: study
Three Chinese institutions were among the world's top four banks at the end of 2007 at a time when the market capitalisation of Western banks was suffering from a global financial crisis, a study showed Wednesday. The number one spot in the rankings, compiled by the Boston Consulting Group, was occupied by the Industrial and Commercial Bank of China, with market capitalisation of nearly 340 billion dollars (218 billion euros). In second place was China Construction Bank, followed by HSBC of Britain, Bank of China, Bank of America and Citigroup of the United States. The study found that banks in North America and Western Europe had suffered a loss of 695 billion dollars in market capitalisation at the end of 2007 while their counterparts in emerging market countries Brazil, Russia, China and India had seen their market capitalisation increase by 753 billion dollars. Major US and European banks have suffered losses and asset writedowns stemming from the near collapse of US subprime -- high risk -- mortgage sector, which undermined the value of billions of dollars' worth of their mortgage-backed securities.
An analysis of the world's 25 largest companies by market value provides some
telling insights into the tectonic shifts shaping global markets. The United
States continues to dominate the ranks of the world's biggest companies, but to
a much lesser degree than it did even a decade ago. It now accounts for nine of
the Top 25, followed closely by Europe with eight.
Here are the Top 10 companies by market value:
1. Petro China, China, $524 billion *
2. Exxon Mobil, USA, $460 billion
3. General Electric, USA, $339 billion
4. Gazprom, Russia, $310 billion
5. China Mobile, China, $290 billion *
6. Microsoft, USA, $266 billion
7. Ind. & Comm. Bank, China, $264 billion *
8. Petrobas, Brazil, $231 billion
9. Royal Dutch Shell, Netherlands, $221 billion
10. AT&T, USA, $214 billion
While the world was riveted by news from the latest subprime fallout on July 23, few investors noticed that a leap in the share price of Industrial & Commercial Bank of China (ICBC) made it the world's biggest bank by market capitalization. On that day, the Chinese bank exceeded the $251 billion capitalization of Citigroup for the first time. Since then, the gap has only widened.Chinese banks are arguably the single-best example of successful rebranding in recent financial memory. And the transformation has been both swift and impressive. As recently as 2005, the Chinese chairman for Citigroup Global Markets Asia observed at the Wharton China Business Forum, that: "The four major state-owned banks (in China) are technically insolvent... they have weak governance, bureaucratic cultures and staggering levels of non-performing loans." He could not have guessed that within 24 months, the largest of these 'technically insolvent' banks –- ICBC -- would have not only launched the largest IPO in history ($22 billion), but also would have a market capitalization larger than Citibank itself.
Chinese Banks: A Reality Check
Eye-popping market capitalizations and slick rebranding notwithstanding, Chinese
state-owned banks are a financial disaster that makes the U.S. current subprime
sector look like a rounding error. Estimates of bad loans on the books of
China's banks by the leading rating agencies in the world range from 40% to 60%
of China's current GDP. That would be the equivalent of about $5.6 to $8.4
trillion of bad loans in the U.S. banking system in a $14 trillion economy. By
way of comparison, the U.S. Savings & Loan scandal of the early 1990s cost the
U.S government less than 3% of GDP. No wonder that Moody's Global Credit
Research rated the average bank financial strength rating of E+ for Chinese
banks, one of the lowest on Moody's global scale. Yet the irony of the focus on
Chinese banks' exposure to U.S. subprime loans, which Moody's estimates to be a
mere $13.5 billion, has eluded the mainstream media.
How did Chinese banks get into this mess? Investors forget that China is a
Communist, centrally planned economy -- complete with five-year plans. As in all
centrally planned economies, China's state-owned banks' role is to bankroll the
government's massive infrastructure projects and to keep otherwise bankrupt,
state-owned enterprises afloat. That's why state-owned enterprises account for
25% of gross domestic product, but receive 65% of loans. Credit management
problems, a lack of qualified staffers and deep-rooted corruption are more
characteristic of China's banks than world-beating financial savvy.
Chinese Banks: Smart Money's Big Bet
Yet despite their more than cosmetic defects, Chinese banks have attracted many
eager suitors over the last two years. The Royal Bank of Scotland paid $3
billion for a 10% stake in the Bank of China just last year. Other banks rolling
the dice in the China bank craps table include Bank of America, Citigroup,
Goldman Sachs, and UBS. The initial public stock offerings (IPOs) of ICBC, Bank
of China, China Construction Bank Corp., Bank of Communications Ltd., and China
Merchants Bank Co. have raised more than $47 billion from share sales since June
2005. It turns out that many Western banks bought these stakes as an option on
Chinese growth, regardless of the underlying asset quality. Operating in the
midst of a four-year investment boom that has powered annual economic expansion
of 10+% meant that Chinese banks have never had it so good. Breakneck economic
growth covers a multitude of sins. Indeed, the growth in profits of Chinese
banks is impressive. ICBC's first-half net profit rose 62% from a year earlier
to US$5.4 billion, boosted by higher interest income and an expansion of its
fee-based businesses. Bank of China's net profit for January-June rose 52% to
$3.9 billion. And those who have invested early have seen their original stakes
double or even triple in value. It's always hard to argue with a skyrocketing
share price.
Chinese Banks: Looking Below the Hood
China bulls will argue that -- thanks to a combination of capital injections and
improved operations -- a bank like ICBC has cut its non-performing loan ratio to
about 4% from a high of 34%. Yet the ability of the Chinese banks to change
their stripes so quickly and emerge as global powerhouses virtually overnight is
doubtful. Moody's notes that many former non-performing loans have been simply
re-classified as "special mention" and often represent a huge part of Chinese
banks' borrowing activity. Record profits are fueled by record loan growth. New
loans totaling 3.08 trillion yuan (409.6 billion U.S. dollars) were approved in
the first eight months of this year, a figure that already almost matches 2006's
total level of 3.18 trillion yuan (422.9 billion U.S. dollars). Of course,
making bad loans only increases the level of bad debt. And the bailout money
pumped into banks to dress them up for IPOs is a classic moral hazard. Jawboning
from the Chinese authorities aside, there is little incentive for Chinese banks
to avoid lending to state-owned businesses that show scant regard for risk or
return.
Chinese Banks: Danger Ahead
The reality is that once the Chinese locomotive slows, the risk of bad loans
skyrockets. The rating agency Fitch estimates that even in a moderate economic
slowdown, 10% of loans could turn bad. A severe slowdown -- say, if China's GDP
growth slumps to 3-4% a year -- would send the entire banking sector into a
tailspin. And the repercussions are likely to be much worse -- and the bailout
much more expensive than after the last bust. Loans to the Chinese private
sector and non-financial government enterprises now are clocking nearly 160% of
gross domestic product versus about 120% in 2000. A back-of-the envelope
calculation shows that much of China's $1.3 trillion in reserves could be eaten
up by banking bailouts.
As one analyst put it, "China's leaders make loud and frequent noises about how
they are pushing ahead with the reform of the country's government-controlled
banking system. But many Western bankers say that it could take as long as 15 to
20 years before the banks develop a Western-style credit culture and efficient
operations." Here's the problem. This analysis was published in the
International Herald Tribune on April 22, 1995 and it's now close to 15
years later. The world's #1 subprime problem won't disappear overnight.
Chinese President Hu Jintao began a Latin America tour with the launch of free
trade talks with Costa Rica on Monday, just over a year after the country gave
up six decades of ties with Taiwan. Hu's stopover was the highest-level visit by
a Chinese official to Costa Rica and came as China expands its diplomacy and
investment on the whole continent, with an eye on natural resources and
developing markets for manufactured goods and even weapons. Hu arrived in San
Jose Sunday, from a G20 summit in Washington, and headed Monday for his second
visit to communist ally Cuba, before attending an Asia-Pacific summit in Peru on
November 22. "The development of cooperation and friendship between China and
Costa Rica meets the fundamental interests of our people and will also support
different sectors of our societies," Hu said after announcing the free trade
deal with President Oscar Arias. Talks were due to start January 19, 2009, in
San Jose and end before Arias leaves office in May 2010. Hu and Arias, who
visited China last year, oversaw the signing of 11 cooperation deals, from
setting up a Chinese language institute to opening a line of 40 million dollars
in credit from China. They agreed to set up a joint venture including China's
National Petroleum Corporation to help modernize Costa Rica's state-owned oil
refinery, with an investment of up to 1.2 billion dollars. Hu's symbolic visit
made the point that Central America was no longer a Taiwanese stronghold, after
Costa Rica became the first country in the region to establish diplomatic ties
with China on June 1, 2007. Both Taiwan -- a democratic self-ruled island that
Beijing considers part of its territory awaiting reunification -- and China have
been accused of using so-called "dollar diplomacy" to get nations to ally with
them. But Taiwan has lost allies in recent years. Part of China's incentives for
Costa Rica's recognition came from its enormous foreign exchange reserves with
an offer to buy 300 million dollars in bonds. It also donated more than 100
million dollars to build a new national stadium. Costa Rica is only the third
Latin American country to negotiate a free trade deal with China, after Chile
and Peru, which may conclude its accord during Hu's visit later this month. A
major exporter of computer components, Costa Rica has dismissed fears of an
invasion of Chinese products into the country as it seeks to diversify ties amid
worldwide financial woes. Its main trade partner is the United States. Arias, a
Nobel Peace Prize winner, said the two leaders had not touched on China's widely
criticized human rights record. "I used the opportunity to speak of things that
are important and urgent for Costa Rica," Arias said. Hu headed to Cuba late
Monday, less than two weeks before the arrival of Russian President Dmitry
Medvedev. China offered key support to former Cuban leader Fidel Castro when
Cuba fell into dire economic straits after the 1991 breakup of the former Soviet
Union, forging a divide with Russia.
A Chinese-born physicist Monday pleaded guilty before a US court to illegally
exporting American military space know-how to China, US officials said.
Naturalized US citizen Shu Quan-Sheng, admitted handing over to Beijing
information on the design and development of a fueling system for space launch
vehicles between 2003 and 2007, the Justice Department said. Shu, 68, pleaded
guilty to violating the Arms Export Control Act by helping Chinese officials
based at the space facility on southern Hainan island to develop manned space
flight and future missions to the Moon. He also acknowledged he had sent them in
December 2003 a specific military document detailing the design of liquid
hydrogen tanks crucial to launching vehicles into space, the Justice Department
said in a statement. Shu, who is the head of a high-tech company, AMAC
International, based in Newport News, Virginia, with offices in Beijing,
admitted a third charge of bribing Chinese officials to the tune of some 189,300
dollars. The bribes helped him to secure for an unidentified French company a
four-million dollar contract for the development of a liquid hydrogen tank
system, awarded to the French firm in January 2007. Beijing is developing a
liquid-propelled heavy payload launch facility at Hainan which will eventually
send spacecraft into orbit carrying the material needed to build space stations
and stallites. Shu bribed three Chinese officials from Beijing's 101st Research
Institute, which works at Hainan, along with other bodies including the People's
Liberation Army armaments department, the Justice Department said. China sent
its first man into space in 2003, followed by a two-man mission in 2005. The
Shenzhou VII, China's third manned foray into space, blasted off from Jiuquan
Satellite Launch Centre in northwest China in late September. One of the three
astronauts on board, Zhai Zhigang, became the first Chinese astronaut to
successfully complete a space walk, and the crew was feted with a hero's welcome
on its return to Earth. Premier Wen Jiabao told the Chinese mission control's
dozens of technicians the mission was "a victory for China's space and
technological" programs. "Your historical feat will be remembered by the country
and the people," he said. China is now planning to launch two more unmanned
craft by 2010, as well as another manned spaceship with a crew of three to start
work on a Chinese lab or space station. The charges against Shu arise out of a
probe led by the Federal Bureau of Investigation with US trade and customs
officials. Sentencing in Shu's case has been set for April 6, 2009. He faces a
maximum of 10 years in prison and a million-dollar fine for each of the two
violations of the Arms Control Act. He could also be sentenced to a further five
years in prison for bribery.
A spy at the heart of Nato may have passed secrets on the US missile shield and
cyber-defence to Russian Intelligence, it has emerged. Herman Simm, 61, an
Estonian defence ministry official who was arrested in September, was
responsible for handling all of his country's classified information at Nato,
giving him access to every top-secret graded document from other alliance
countries. He was recruited by the Russians in the late 1980s and has been
charged in Estonia with supplying information to a foreign power. Several
investigation teams from both the EU and Nato, under the supervision of a US
officer, have flown to the Estonian capital Tallinn to assess the scope of what
is being seen as the most serious case of espionage against Nato since the end
of the Cold War. “The longer they work on the case, the more obvious it becomes
how big the impact of the suspected treachery really is,” according to Der
Spiegel magazine. A German official described the Russian penetration of Nato as
a "catastrophe". Comparisons are being drawn with the case of Aldrich Ames, the
former head of the CIA counter-intelligence department who was in effect
Russia's top agent in the US. "Simm became a proper agent for the Russian
government in the mid-1990s," says the Estonian deputy Jaanus Rahumaegi who
heads the country's parliamentary control commission for the security services.
On the face of it, the Simm case resembles the old-fashioned Cold War spy story.
He used a converted radio transmitter to set up meetings with his contact,
apparently someone posing as a Spanish businessman. As in the 1950s and 1960s,
it seems that the operation was a husband-and-wife team. His wife Heete – who
previously worked as a lawyer at the national police headquarters – has also
been detained on charges of being an accessory to treason. Mr Simm was ensnared
because of blunders that have dogged modern espionage ever since the KGB first
pitted itself against the West. First, he bought up several pieces of valuable
land and houses including a farmhouse on the Baltic Sea and a grand
white-painted villa outside Tallinn. Second, his contact officer got careless
and tried to recruit a second agent – who reported the incident to the security
authorities. That is when the Estonian mole-hunters began to reconstruct the
movements of the supposed Spaniard and followed the thread back to the agent
inside Nato. But Mr Simm was not some relic from the days of Kim Philby or other
notorious deep-cover agents. He was at the cutting edge of one of Nato’s most
important new strategic missions: to defend the alliance against cyber-attack.
Mr Simm headed government delegations in bilateral talks on protecting secret
data flow. And he was an important player in devising EU and Nato information
protection systems. Estonia – described by NATO Secretary General Jaap de Hoop
Scheffer as "Nato's most IT-savvy nation" – conducts much of its government and
commercial business online. People vote and pay their taxes online, government
meetings involve almost no paperwork. As a result, when it angered Russia in
2007, by removing a Soviet war memorial, it became the target of hostile attacks
on the internet. Estonia has been lobbying hard to put cyber-defence on the Nato
agenda, and has set up a Cyber Defence centre in Tallinn which is supposed to
help the Alliance as a whole. Now that project could be compromised. The other
important question in the Simm case is whether he was operating alone. A senior
Estonian police officer claimed asylum in Britain in the 1990s reportedly
telling the authorities that he was trying to escape pressure from the Russian
secret service to sell secrets. The Russians, it seems, were keen to buy as many
place-men as they could: the prospect of Nato forces hard up against the
northern Russian border was too alarming for the Kremlin. Moreover, Mr Simm was
for many years in charge of issuing security clearance: he could have nodded
through other Russian agents. Mr Simm is likely to be formally arraigned at the
beginning of next year after the damage control teams from Nato have completed
their work. If found guilty he could face between three and fifteen years in
prison. Neither the Simms, nor their defence lawyer, have commented on the
charges. Nato too has refused to say anything. But there is no doubting that the
case is a serious embarrassment. And though Russia may have lost an agent – "a
gold card operative" according to one Estonian newspaper – it has achieved a
tactical victory by sewing suspicion between western Nato members and the new
east and central European entrants.
China is stealing sensitive information from American computer networks and
stepping up its online espionage, according to a US congressional panel.
Beijing's investment in rocket technology is also accelerating the
militarisation of outer space and lifting it into the "commanding heights" of
modern warfare, the advisory group claims. The strident warning, which may have
a chilling effect on relations between the two Pacific powers, comes in the
annual report of the US-China economic and security review commission due today.
A summary of the study, released in advance, alleges that networks and databases
used by the US government and American defence contractors are regularly
targeted by Chinese hackers. "China is stealing vast amounts of sensitive
information from US computer networks," says Larry Wortzel, chairman of the
commission set up by Congress in 2000 to investigate US-China issues. The
commission, consisting of six Democrats and six Republicans, says in its
unanimous report that China's military modernisation and its "impressive but
disturbing" space and computer warfare capabilities "suggest China is intent on
expanding its sphere of control even at the expense of its Asian neighbors and
the United States." The commission recommends that the US upgrade its
intelligence and homeland security systems protecting computer networks. It
quotes the Chinese military strategist, Wang Huacheng, as describing US
dependence on space assets and information technology as its "soft ribs". There
are 250 hacker groups in China, the report says, including some whose members
have been trained at Chinese military academies.
"China is aggressively pursuing cyber warfare
capabilities that may provide it with an asymmetric advantage against the United
States," the commission says. "In a conflict situation, this advantage would
reduce current US conventional military dominance ... in 2007 the 10 most
prominent US defense contractors, including Raytheon, Lockheed Martin, Boeing,
and Northrop Grumman, were victims of cyber espionage through penetrations of
their unclassified networks." China's space programme is "steadily increasing
the vulnerability of US assets", the report says. Technical improvements in
satellite imagery enable China to locate US aircraft carrier battle groups more
accurately, faster and from further away. The People's Liberation Army officer
and author Cai Fengzhen is quoted as saying that the "area above ground,
airspace and outer space are inseparable and integrated. They are the strategic
commanding height of modern informationalised warfare". "If this becomes Chinese
policy," the report says, "it could set the stage for conflict with the United
States and other nations that expect the right of passage for their spacecraft."
"China could use laser technology to blind temporarily a US reconnaissance
satellite operating over international waters. This action could be viewed by
many as purely defensive. However, China also could use its ASAT capability to
destroy a US satellite operating over its territory." "China has significant
anti-satellite capabilities. The capabilities go far beyond those demonstrated
in the January 2007 'test' that destroyed an obsolete Chinese weather satellite.
They include co-orbital direct attack weapons and directed energy weapons for
dazzling or damaging satellites, both of which currently are under development."
Relations between China and the United States are businesslike and have not been
under severe strain recently. During the presidential election campaign, Barack
Obama said: "China is rising, and it's not going away," adding that Beijing was
"neither our enemy nor our friend; they're competitors". Allegations that
Chinese hackers penetrate US defence computers have been made before, including
reports of attacks on the Pentagon supposedly backed by China's army. US
intelligence gave the assaults the codename Titan Rain. In Britain last year,
Chinese hackers were said to have breached networks used by the foreign office,
the House of Commons and Whitehall departments. China has said it is not trying
to undermine other countries' interests and wants to maintain good relations
with the US.
Computer spies have repeatedly breached the Pentagon's costliest weapons
program, the $300billion (£206billion) Joint Strike Fighter project. The
intruders - who may have been Chinese - were able to copy and siphon data
related to design and electronics systems on the F-35 Lightning II fighter
plane. That could make it easier to defend against the plane, according to the
Wall Street Journal. The spies could not access the most sensitive material,
which is kept on computers that are not connected to the Internet, the paper
added. Attacks like these - or U.S. awareness of them - appear to have escalated
in the past six months, said one former official. 'There's never been anything
like it,' the official said. 'It's everything that keeps this country going.'
Citing people briefed on the matter, it said the intruders entered through
vulnerabilities in the networks of two or three of the contractors involved in
building the fighter jet. The Journal said Pentagon officials declined to
comment directly on the matter, but the paper said the Air Force had begun an
investigation. The identity of the attackers and the amount of damage to the
project could not be established, the paper said. The Journal quoted former U.S.
officials as saying the attacks seemed to have originated in China, although it
noted it was difficult to determine the origin because of the ease of hiding
identities online. Today Chinese officials reacted angrily to the accusation.
'China has not changed its stance on hacking,' a Foreign Ministry spokesman was
quoted as saying. 'China has always been against hacking and we have cracked
down very hard on hacking. This is not a Chinese phenomenon. It happens
everywhere in the world.' A Pentagon report issued last month said that the
Chinese military has made 'steady progress' in developing online-warfare
techniques. The Chinese Embassy said China 'opposes and forbids all forms of
cyber crimes,' the Journal said. The officials added there had also been
breaches of the U.S. Air Force's air traffic control system in recent months.
The Chinese vessels "shadowed and aggressively maneuvered in dangerously close proximity" to the USNS Impeccable, an unarmed ocean surveillance vessel, with one ship coming within 25 feet, a U.S. Defense Department statement said. Tropical Hainan, less than 100 km (60 miles) south of the mainland, hosts a Chinese naval base that houses ballistic missile submarines, according to independent analysts. An unnamed spokesman for the Chinese embassy in Washington earlier denied the Chinese ships had violated maritime rules and said U.S. ships had been conducting illegal surveying, the website of Hong Kong-based Phoenix Television (news.ifeng.com) reported. It said the incident happened 120 km (70 miles) south of the island. Ma said there were laws about scientific research in Chinese waters. The U.S. ship "violated the relevant international laws and Chinese laws and regulations," he said, urging the United States to halt such action. U.S. defense officials said the incident followed days of increasingly aggressive Chinese conduct in the area, including fly-bys by Chinese maritime surveillance planes. It comes just weeks after the two sides resumed military talks, postponed in November after a U.S. announcement of arms sales to Taiwan, a self-ruled island China claims as its own. And it echoes a stand-off in 2001 between U.S. and Chinese military forces after a U.S. spy plane made an emergency landing on Hainan after a collision with a Chinese fighter jet.
China
released 24 crew after a U.S. expression of regret. China's national parliament, now in annual session, is set to approve a military
budget increase of 14.9 percent more than spending in 2008, bringing announced
People's Liberation Army funds to 480.7 billion yuan ($70 billion). Many foreign
experts believe its real budget is much higher. Some of that extra money may go
to developing China's first aircraft carrier -- the trophy ship of an ambitious
sea power -- senior naval officers have recently suggested. "Go and ask the
Americans, ask their embassy," Vice Admiral Jin Mao, former Navy vice commander
in chief, told Reuters on the sidelines of parliament when asked about the
incident. "Ask their officials what their ship was doing in Chinese waters." The
Impeccable is one of five ocean surveillance ships that serve with the U.S. 7th
Fleet, based in Yokosuka, Japan. The ships use low-frequency sound to search for
undersea threats including submarines, a U.S. military official said. A U.S.
Defense Department spokesman said the Chinese vessels had surrounded the
Impeccable, waving Chinese flags and telling the U.S. ship to leave. The
Pentagon also described accounts of half a dozen other incidents dating back to
March 4. Oil prices rose on news of the jostling on Monday and stayed high on
Tuesday, although analysts said it was hard to see how the tension could
threaten oil supplies or inflate prices. "I can see the geopolitical risk
between two producing countries. But the U.S. and China are two major consumers.
I don't know why oil prices would rise on that," said Tony Nunan, risk
management manager at Tokyo-based Mitsubishi Corp. The confrontation coincides
with two sensitive anniversaries in Tibet, making China especially sensitive to
outside scrutiny. Analyst Shi said the seas off Hainan were important to China's
projection of its influence with a modern naval fleet. "The change is in China's
attitude. This reflects the hardening line in Chinese foreign policy and the
importance we attach to the strategic value of the South China Sea."
Chinese ships surrounded and harassed a Navy mapping ship in international
waters off China, at one point coming within 25 feet of the American boat and
strewing debris in its path, the Defense Department said Monday. The Obama
administration said it would continue naval operations in the South China Sea,
most of which China considers its territory, and protested to China about what
it called reckless behavior that endangered lives. At one point during the
incident Sunday the unarmed USNS Impeccable turned fire hoses on an approaching
Chinese ship in self defense, the Pentagon said. At another point a Chinese ship
played chicken with the Americans, stopping dead in front of the Impeccable as
it tried to sail away, forcing the civilian mariners to slam on the brakes. "We
view these as unprofessional maneuvers" and a violation of international law,
Pentagon spokesman Bryan Whitman said. The incident had overtones of spycraft,
but the U.S. ship is not, strictly speaking, a spy ship. It maps the ocean floor
with sonar, compiling information the Navy can use to steer its own submarines
or track those of other nations. The Impeccable was specifically designed to
augment the Navy's anti-submarine capability, although military spokesmen would
not be specific about the ship's duties when it was surrounded. A Pentagon
accounting of the confrontation documents the actions of the startled and
cornered American crew as a Chinese vessel closed to within 25 feet. Pictures
released by the Navy give a sense of the surreal scene: The Chinese mariners had
stripped to their underwear following the blast by the Impeccable's fire hoses.
Whitman called that "immature," and said the confrontation was the most aggressive of a series of incidents recently in the same area. Impeccable's crew radioed to tell the Chinese ships that it was leaving the area and requested a safe path to navigate, the Pentagon said. But two of the Chinese ships stopped directly ahead of the Impeccable, forcing it to an emergency stop, the U.S. account said. The Chinese also dropped pieces of wood in the water in Impeccable's path. The incident came just a week after China and the U.S. resumed military-to-military consultations following a five-month suspension over U.S. arms sales to Taiwan. And it came as Chinese Foreign Minister Yang Jiechi was due in Washington to meet with U.S. officials. "We're going to continue to operate in those international waters, and we expect the Chinese to observe international law around that," White House press secretary Robert Gibbs said. A protest was lodged with the Chinese government by the U.S. Embassy in Beijing over the weekend and was repeated to a Chinese defense attache at a Pentagon meeting Monday. In Beijing, Chinese officials did not immediately respond to voicemail messages and e-mail regarding the U.S. allegations. Pentagon officials said the incident followed "increasingly aggressive" acts by Chinese ships against the Impeccable on Wednesday and Saturday and against the USNS Victorious surveillance ship on Thursday while it operated in the Yellow Sea.
The Chinese ships included a Chinese Navy intelligence collection ship, a Bureau of Maritime Fisheries Patrol Vessel, a State Oceanographic Administration patrol vessel and two small Chinese-flagged trawlers, officials said. China views almost the entirety of the South China Sea as its territory. China's claims to small islets in the region have put it at odds with five governments - the Philippines, Vietnam, Malaysia, Brunei and Taiwan. Pentagon officials said the close encounter followed these other incidents last week: _On Wednesday, a Chinese Bureau of Fisheries Patrol vessel used a high-intensity spotlight to illuminate the Victorious, an ocean surveillance ship, as it operated in the Yellow Sea, about 125 nautical miles from China's coast, the Pentagon said. The next day, a Chinese Y-12 maritime surveillance aircraft conducted 12 fly-bys of Victorious at an altitude of about 400 feet and a range of 500 yards. _On Thursday, a Chinese frigate approached USNS Impeccable without warning and crossed its bow at a range of approximately 100 yards, the Pentagon said. This was followed less than two hours later by a Chinese Y-12 aircraft conducting 11 fly-bys of Impeccable at an altitude of 600 feet and a range from 100-300 feet. _On Saturday, a Chinese intelligence collection ship challenged Impeccable over bridge-to-bridge radio, calling her operations illegal and directing Impeccable to leave the area or "suffer the consequences." Sunday's incident near Hainan Island is reminiscent of a much more dramatic foreign policy crisis with China that played out in the same area.











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