Pipelineistan

Hot off Brexit, Vladimir Putin goes to China

gc2smFrom the keyboard of Pepe Escobar
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Putin Xi

Originally published in RT on June 24, 2016

 


As the whole planet attempts to digest the implications of Brexit, the real heart of 21st century action once again shifts to Beijing, where President Vladimir Putin on Saturday pays a visit to Chinese President Xi Jinping.

Business will include clinching a $6.2 billion high-speed rail deal; increased supply of Russian wheat to China – by building a Trans-Baikal grain terminal; and steps towards deeper military cooperation. They are already cooperating on an engine that will power the new Russia-China airliner.

Everything connected to the Russia-China partnership spells out Eurasia integration. It starts with the New Silk Roads, a.k.a. One Belt, One Road (OBOR), which will progressively interplay with the Eurasia Economic Union (EEU), as Putin emphasized at the St. Petersburg forum. It involves the expansion of the Shanghai Cooperation Organization (SCO); the immediate future of BRICS, including the New Development Bank (NDB); projects to be financed by the Asian Infrastructure Investment Bank (AIIB); and Russia-China coordination inside the G20.

OBOR and the EEU naturally merge as Eurasia will be slowly but surely fashioned into a massive emporium – an interlocking trade and infrastructure network stretching from Russia’s Far East and the Chinese east coast to Western Europe, including the Middle East and Africa on the way.

Geopolitically, the expansion of OBOR-EEU is Eurasia’s response to the lame duck Obama administration-peddled Trans-Pacific Partnership (TPP), which excludes both Russia and China. Xi Jinping has visited Central Asia and Eastern Europe recently – from Serbia to Uzbekistan – selling OBOR. Moscow, considering its influence over Balkan states, will add extra support.

One just needs to look at some numbers to gauge the power of the multi-pronged Chinese offensive. Beijing is rolling out up to $100 billion to the NDB; between $50 billion and $100 billion to the AIIB; $40 billion to the Silk Road Fund; $40 billion to the China-Pakistan Economic Corridor (CPEC). These multilateral financial investments will roll out in stages – and can be easily paid out of the yearly surplus in cash of Beijing's myriad current operations.

Additionally, Beijing has as much as a $4 trillion pile of cash to be used at the discretion of Xi and the collective leadership. This is the reality – not the usual US ‘Think Tankland’ blabbering about China’s imminent implosion. Compare it with the Fed printing so many new US dollars, about $60 billion a month, as the US would have a really hard time committing to any possible financial investment (apart from war) in the $100 billion range.

Supply chain geopolitics, anyone?

Beijing and Moscow inevitably would have come to the conclusion that their strategic partnership creates leverage and thus increases its value as it translates into multi-vector supply chain geopolitics.

‘Pipelineistan’ – with those humongous 2014 Siberian deals – is an essential node of the whole package, as Russia will ensure the supply of natural gas to China bypassing the dreaded Strait of Malacca, which Beijing well knows the US Navy could easily block at will. The interpenetration also translates, for instance, into Gazprom offering CNPC a stake in the monster Vankor gas field.

Moscow for its part does not need to rely exclusively on the West for foreign investment – on top of it controlled/sanctioned by Washington. Chinese investment will be key, as under OBOR-EEU synergy, Russia should be well on its way of developing its full potential as a global supplier of energy and agriculture and a privileged transit corridor across the whole of Eurasia.

Russia may even profit from climate change. Few may know that Russia – with permafrost fast retreating – is warming up faster than any other nation. That opens the vista of new fertile soils that could allow poultry and fish to be exported to – where else – China. Not to mention torrential amounts of freshwater. Chinese companies are buying large stakes in Russian fertilizer companies such as Uralkali as well as becoming partners of Singapore-based companies to go all out into food processing in Russia.

Contrary to what US ‘Think Tankland’ never ceases to parrot, the Russia-China strategic partnership goes way beyond a mere supply-demand alliance of convenience. Were the Kremlin to take the fateful decision, Chinese companies could certainly rebuild creaking parts of Russian infrastructure in only a few years.


PepePepe Escobar  is an independent geopolitical analyst. He writes for RT, Sputnik and TomDispatch, and is a frequent contributor to websites and radio and TV shows ranging from the US to East Asia. He is the former roving correspondent for Asia Times Online. Born in Brazil, he's been a foreign correspondent since 1985, and has lived in London, Paris, Milan, Los Angeles, Washington, Bangkok and Hong Kong. Even before 9/11 he specialized in covering the arc from the Middle East to Central and East Asia, with an emphasis on Big Power geopolitics and energy wars. He is the author of "Globalistan" (2007), "Red Zone Blues" (2007), "Obama does Globalistan" (2009) "Empire of Chaos" (2014),and "2030" (2015), all published by Nimble Books. 

The Empire of Chaos Strikes Back

empire or-37243gc2smFrom the keyboard of Pepe Escobar
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Brazilian Coupmeisters: Minister Moreira Franco, Vice President Michel Temer, and President Eduardo Cunha

Originally published in Strategic Culture on April 26, 2016

 


Soon after the impeachment motion against President Dilma Rousseff was approved in the Brazilian Congress by what I chose to call Hybrid War hyenas, President-in-Waiting Michel «Brutus» Temer, one of the coup’s articulators, dispatched a senator to Washington as special paperboy to deliver the news on the coup in progress. The senator in question was not on an official mission for the Senate Foreign Relations Committee.

Brutus Temer was alarmed by global media reaction, which is increasingly interpreting what he’s doing – allied with Brutus Two, notoriously corrupt head of the lower house Eduardo Cunha – for what it is: a coup. 

The senator’s mission was allegedly to launch a PR offensive to counter the coup narrative, which is, according to Brutus One, «demoralizing Brazilian institutions».

Nonsense. The paperboy senator was sent to tell the US State Department that everything is proceeding according to plan.

In Washington, the paperboy senator mumbled, «we will explain that Brazil is not a banana republic». Well, it was not, but now, thanks to the Hybrid War hyenas, it is.

When you have a man holding 11 illegal bank accounts in Switzerland, listed in the Panama Papers, and already under investigation by the Supreme Court controlling the political destiny of a whole nation, you have a banana republic.

When you have a self-righteous provincial judge threatening to imprison former President Lula for a modest apartment and a ranch that he does not own, but at the same time is incapable of laying a finger on Brutus Two, alongside largely pompous Supreme Court judges, you have a banana republic.

Now compare Washington’s non-reaction with Moscow’s. The Russian Foreign Ministry, via the irrepressible Maria Zakharova, stressed the crucial BRICS partnership as well as the common Brazil-Russia positions within the G20. And Moscow made it clear that Brazil’s problems should be solved within «the constitutional legal framework and without any external interference».

Everyone knows what «external interference» means. 

Full Spectrum Dominance reloaded

I have been following the Brazilian coup-in-progress with a special emphasis on the US-backed/driven Hybrid Warfare bent on destroying «the neo-developmentalist project for Latin America – uniting at least some of the local elites, invested in developing internal markets, in association with the working classes». The key Hybrid War objective in this case is to install a neoliberal restoration.

Obviously the key target had to be Brazil, a BRICS member and the 7th largest economy in the world.

Imperial hacks go straight to the point when listing the Hybrid War tools and aims of what the Pentagon defined as Full Spectrum Dominance way back in 2002. So, «US power flows from our unmatched military might, yes. Anything that expands the reach of US markets – such as the Trans-Pacific Partnership in trade, for example – adds to the arsenal of US power. But in a deeper way, it’s a product of the dominance of the US economy».

Yet the US economy is far from dominant. What matters now is what drives «business away from America, or allow other nations to build a rival financial architecture that’s less encumbered by a smorgasbord of sanctions». 

«Rival financial architecture» has BRICS written all over it. And a «smorgasbord of sanctions» was not enough to make Iran cry uncle; Tehran will continue to practice a «resistance economy». Not by accident, two of the BRICS – Russia and China – as well as Iran, feature as the Pentagon’s top five existential threats, alongside nuclear-armed North Korea and, as the last lowly priority, «terrorism».

Cold War 2.0 is essentially about Russia and China – but Brazil is also a key player. Edward Snowden revealed how NSA spying was centered on Petrobras, whose proprietary technology was responsible for the largest oil discovery of the young 21st century; the pre-salt deposits. US Big Oil is excluded from its exploitation. That’s anathema; and that requires deployment of Hybrid War techniques inbuilt in Full Spectrum Dominance.

Brazilian comprador elites have been gleefully playing the game. Over two years ago JP Morgan analysts were already conducting seminars with neoliberal macro-economy enforcers preaching how to destabilize the Rousseff government. 

Industry, commerce, banking and agribusiness lobbies have ostensibly favored impeachment, as representing the end of the Lula-Dilma social democracy experiment. So it’s no wonder President-in-Waiting Brutus Temer made a comprehensive deal with Big Capital – including no limits for interests on public debt (way above the international norm); the relation between debt and GDP bound to go up; more expensive credit; and the corollary being cuts on health and education.

As far as Washington is concerned, and that’s bipartisan, it’s absolutely out of the question to allow an autonomous regional power in the South Atlantic, blessed with unrivalled eco-wealth (think the Amazon rainforest and all that water, coupled with the Guarani aquifer) and on top of it closely linked to key BRICS members Russia-China, which have their own strategic partnership.

The pre-salt factor is the cherry in the tropical cake. Out of the question for US Big Oil to allow Petrobras to have the monopoly of exploitation. And just in case, if need be, the US 4th Fleet is already in position in the South Atlantic.

One BRICS down, two to go

The Cheney regime-declared «war on terra» distracted the Empire of Chaos for too long. Now finally comes a – coordinated, global – chaos offensive. From Southwest Asia to South Asia, the Hybrid War dream would be some sort of Iraqi chaos to replace the governments of Saudi Arabia, Iran, Pakistan and Egypt – as the leading-from-behind Empire of Chaos is trying hard in Syria even though the Assad dynasty was a «secret» US ally for decades.

The Masters of the Universe above paperboy Obama decided to stab the House of Saud in the back – not necessarily a bad thing – over Iran; the prevailing wishful thinking was to have Iranian natural gas replacing Russian natural gas going to Europe, thus collapsing the Russian economy. Major fail.

Yet there’s still another option; the Qatari natural gas pipeline through Saudi Arabia and Syria, also replacing Russian natural gas to Europe. That remains the CIA chief goal in Syria – no matter what; Daesh, the phony Caliphate – this is all just propaganda.

The CIA is also keen on Saudi Arabia destroying the Russian economy through an oil price war – and they do not want that to stop; thus holding over the Saudis those famous 28 pages on 9/11 to keep the oil price war going.

The CIA has also been trying like mad to lure Moscow into a Syrian trap as in 1980s Afghanistan, and as they did with the Kiev coup, even to the extent of ordering the Turkish military, which is their agent, to shoot down a Russian Su-24. The «problem» is that the Kremlin did not bite the poisoned apple.

Way back in the 1980s, the mix of House of Saud unleashing their reserves along with the GCC petrodollar gang, driving the price of oil to $7 a barrel in 1985, together with the Afghanistan Vietnam op, ended up driving the USSR bankrupt. Arguably, the whole op was brilliant – in conception and execution; a Hybrid War of economics plus Vietnam. Now, «leading from behind», Dr. Zbig «Grand Chessboard» Brzezinski – Obama’s foreign policy mentor – is trying to pull off a similar trick.

But oops, we got a problem. The Beijing leadership, already preoccupied with tweaking the Chinese development model, clearly saw the Empire of Chaos’s effort to Divide and Rule (and Conquer) the entire world. If Russia went down, China would be next.

It was only, virtually yesterday, around 2010, when US intel regarded China as their major military threat, and were starting to move against the Middle Kingdom via the «pivoting to Asia». But suddenly the CIA realized that Moscow had spent a trillion dollars jumping two generations ahead in defensive and offensive missiles – not to mention submarines; the weapons of choice for WWIII.

That is when Russia was enthroned as the major threat. Carefully surveying the chessboard, the Beijing leadership then accelerated the alliance with Russia and the BRICS as an alternative force, creating an earthquake in Washington of absolutely devastating proportions.

Now, Beijing has deftly engineered the BRICS into play as a serious alternative power structure – with their own IMF, SWIFT payment system, and World Bank.

Beware the wrath of an Empire of Chaos scorned. That’s what’s in play now against the BRICS; Brazil under siege, the fall of South Africa, the weakness of India, China and Russia progressively surrounded. Hybrid War variations from Ukraine to Brazil, mounting pressure in Central Asia, the «Syraq» powder keg, all point to a concerted Full Spectrum Dominance offensive to break up the BRICS, the Russian-Chinese strategic partnership, and ultimately the New Silk Roads uniting Eurasia. Oil price wars, the ruble collapse, the refugee flood in the EU (caused by «erratic» Sultan Erdogan), 21st century Operation Gladio remixes all over, distract the masses against imaginary enemies while terrorism of the phony Daesh variety is manipulated as a sophisticated diversionist tactic.

It may be brilliant, even masterful, in its conception and in its execution, and it’s so flashy in a cinematic sense. But make no mistake; there will be blowback.


PepePepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

Is There a US-Russia Grand Bargain in Syria?

Jetsgc2smFrom the keyboard of Pepe Escobar
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Jets

Originally published in Sputnik on March 17, 2016

 


It’s spy thriller stuff; no one is talking. But there are indications Russia would not announce a partial withdrawal from Syria right before the Geneva negotiations ramp up unless a grand bargain with Washington had been struck.

Some sort of bargain is in play, of which we still don’t know the details; that's what the CIA itself is basically saying through their multiple US Think Tankland mouthpieces. And that's the real meaning hidden under a carefully timed Barack Obama interview that, although inviting suspension of disbelief, reads like a major policy change document.

Obama invests in proverbial whitewashing, now admitting US intel did not specifically identify the Bashar al-Assad government as responsible for the Ghouta chemical attack. And then there are nuggets, such as Ukraine seen as not a vital interest of the US – something that clashes head on with the Brzezinski doctrine. Or Saudi Arabia as freeloaders of US foreign policy – something that provoked a fierce response from former Osama bin Laden pal and Saudi intel supremo Prince Turki.

Tradeoffs seem to be imminent. And that would imply a power shift has taken place above Obama — who is essentially a messenger, a paperboy. Still that does not mean that the bellicose agendas of both the Pentagon and the CIA are now contained.

Russian intel cannot possibly trust a US administration infested with warmongering neocon cells. Moreover, the Brzezinski doctrine has failed – but it’s not dead. Part of the Brzezinski plan was to flood oil markets with shut-in capacity in OPEC to destroy Russia.

That caused damage, but the second part, which was to lure Russia into an war in Ukraine for which Ukrainians were to be the cannon fodder in the name of “democracy”, failed miserably. Then there was the wishful thinking that Syria would suck Russia into a quagmire of Dubya in Iraq proportions – but that also failed miserably with the current Russian time out. 

The Kurdish factor

A Kurdish man waves a large flag of the Democratic Union Party (PYD)

© AFP 2016/ DELIL SOULEIMAN

Kurds Sign Declaration on Creating Federal Region in Northern Syria

Convincing explanations for the (partial) Russian withdrawal from Syria are readily available. What matters is that the Khmeimim air base and the naval base in Tartus remain untouched. Key Russian military advisers/trainers remain in place. Air raids, ballistic missile launches from the Caspian or the Mediterranean – everything remains operational. Russian air power continues to protect the forces deployed by Damascus and Tehran. 

As much as Russia may be downsizing, Iran (and Hezbollah) are not. Tehran has trained and weaponized key paramilitary forces – thousands of soldiers from Iraq and Afghanistan fighting side by side with Hezbollah and the Syrian Arab Army (SAA). The SAA will keep advancing and establishing facts on the ground.

As the Geneva negotiations pick up, those facts are now relatively frozen. Which brings us to the key sticking point in Geneva – which has got to be included in the possible grand bargain.

The grand bargain is based on the current ceasefire (or "cessation of hostilities") holding, which is far from a given. Assuming all these positions hold, a federal Syria could emerge, what could be dubbed Break Up Light.

Essentially, we would have three major provinces: a Sunnistan, a Kurdistan and a Cosmopolistan.

Sunnistan would include Deir ez-Zor and Raqqa, assuming the whole province may be extensively purged of ISIS/ISIL/Daesh.

Kurdistan would be in place all along the Turkish border – something that would freak out Sultan Erdogan to Kingdom Come.

And Cosmopolistan would unite the Alawi/ Christian/ Druze/ secular Sunni heart of Syria, or the Syria that works, from Damascus up to Latakia and Aleppo.

 

Kurdish people carry flags as they march during a protest in the city of al-Derbasiyah, on the Syrian-Turkish border, against what the protesters said were the operations launched in Turkey by government security forces against the Kurds, February 9, 2016

© REUTERS/ RODI SAID

Syrian Kurds are already busy spinning that a federal Syria would be based on community spirit, not geographical confines.

Ankara’s response, predictably, has been harsh; any Kurdish federal system in northern Syria represents not only a red line but an “existential threat” to Turkey. Ankara may be falling under the illusion that Moscow, with its partial demobilizing, would look the other way if Erdogan orders a military invasion of northern Syria, as long as it does not touch Latakia province.

And yet, in the shadows, lurks the possibility that Russian intel may be ready to strike a deal with the Turkish military – with the corollary that a possible removal of Sultan Erdogan would pave the way for the reestablishment of the Russia-Turkey friendship, essential for Eurasia integration.

What the Syrian Kurds are planning has nothing to do with separatism. Syrian Kurds are 2.2 million out of a remaining Syrian population of roughly 18 million. Their cantons across the Syria-Turkey border —Jazeera, Kobani and Afrin – have been established since 2013. The YPG has already linked Jazeera to Kobani, and is on their way to link them to Afrin. This, in a nutshell, is Rojava province. 

The Kurds across Rojava – heavily influenced by concepts developed by imprisoned PKK leader Abdullah Ocalan — are deep into consultations with Arabs and Christians on how to implement federalism, privileging a horizontal self-ruled model, a sort of anarchist-style confederation. It’s a fascinating political vision that would even include the Kurdish communities in Damascus and Aleppo.

Moscow – and that is absolutely key – supports the Kurds. So they must be part of the Geneva negotiations. The Russian long game is complex; not be strictly aligned either with Damascus or with the discredited “opposition” supported and weaponized by Turkey and the GCC. Team Obama, as usual, is on the fence. There’s the “NATO ally” angle — but even Washington is losing patience with Erdogan.

The geopolitical winners and losers

Only the proverbially clueless Western corporate media was caught off-guard by Russia’s latest diplomatic coup in Syria. Consistency has been the norm.

Russia has been consistently upgrading the Russia-China strategic partnership. This has run in parallel to the hybrid warfare in Ukraine (asymmetric operations mixed with economic, political, military and technological support to the Donetsk and Lugansk republics); even NATO officials with a decent IQ had to admit that without Russian diplomacy there’s no solution to the war in Donbass.

In Syria, Moscow accomplished the outstanding feat of making Team Obama see the light beyond the fog of neo-con-instilled war, leading to a solution involving Syria’s chemical arsenal after Obama ensnared himself in his own red line. Obama owes it to Putin and Lavrov, who literally saved him not only from tremendous embarrassment but from yet another massive Middle East quagmire.

 

Russian Aerospace Forces aircraft leave Hmeimim airbase in Syria

RUSSIAN DEFENSE MINISTRY

Farewell to Arms: Real Results of Russia's Air Campaign in Syria

The Russian objectives in Syria already laid out in September 2015 have been fulfilled. Jihadists of all strands are on the run – including, crucially, the over 2,000 born in southern Caucasus republics. Damascus has been spared from regime change a la Saddam or Gaddafi. Russia’s presence in the Mediterranean is secure.

Russia will be closely monitoring the current “cessation of hostilities”; and if the War Party decides to ramp up “support” for ISIS/ISIL/Daesh or the “moderate rebel” front via any shadow war move, Russia will be back in a flash. As for Sultan Erdogan, he can brag what he wants about his “no-fly zone” pipe dream; but the fact is the northwestern Syria-Turkish border is now fully protected by the S-400 air defense system.

Moreover, the close collaboration of the “4+1” coalition – Russia, Syria, Iran, Iraq, plus Hezbollah – has broken more ground than a mere Russia-Shi’te alignment. It prefigures a major geopolitical shift, where NATO is not the only game in town anymore, dictating humanitarian imperialism; this “other” coalition could be seen as a prefiguration of a future, key, global role for the Shanghai Cooperation Organization.

As we stand, it may seem futile to talk about winners and losers in the five-year-long Syrian tragedy – especially with Syria destroyed by a vicious, imposed proxy war. But facts on the ground point, geopolitically, to a major victory for Russia, Iran and Syrian Kurds, and a major loss for Turkey and the GCC petrodollar gang, especially considering the huge geo-energy interests in play.

It’s always crucial to stress that Syria is an energy war – with the “prize” being who will be better positioned to supply Europe with natural gas; the proposed Iran-Iraq-Syria pipeline, or the rival Qatar pipeline to Turkey that would imply a pliable Damascus.

Other serious geopolitical losers include the self-proclaimed humanitarianism of the UN and the EU. And most of all the Pentagon and the CIA and their gaggle of weaponized “moderate rebels”. It ain’t over till the last jihadi sings his Paradise song. Meanwhile, “time out” Russia is watching.

 


PepePepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

Will Chess, Not Battleship, Be the Game of the Future in Eurasia?

battleshipgc2smOff the keyboard of Pepe Escobar
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chessbattleship

Originally published in Tom Dispatch on November 22, 2015

Silk Roads, Night Trains, and the Third Industrial Revolution in China


The U.S. is transfixed by its multibillion-dollar electoral circus. The European Union is paralyzed by austerity, fear of refugees, and now all-out jihad in the streets of Paris. So the West might be excused if it’s barely caught the echoes of a Chinese version of Roy Orbison’s “All I Have to Do Is Dream.” And that new Chinese dream even comes with a road map.

The crooner is President Xi Jinping and that road map is the ambitious, recently unveiled 13th Five-Year-Plan, or in the pop-video version, the Shisanwu. After years of explosive economic expansion, it sanctifies the country’s lower “new normal” gross domestic product growth rate of 6.5% a year through at least 2020.

It also sanctifies an updated economic formula for the country: out with a model based on low-wage manufacturing of export goods and in with the shock of the new, namely, a Chinese version of the third industrial revolution. And while China’s leadership is focused on creating a middle-class future powered by a consumer economy, its president is telling whoever is willing to listen that, despite the fears of the Obama administration and of some of the country’s neighbors, there’s no reason for war ever to be on the agenda for the U.S. and China.

Given the alarm in Washington about what is touted as a Beijing quietly pursuing expansionism in the South China Sea, Xi has been remarkably blunt on the subject of late. Neither Beijing nor Washington, he insists, should be caught in the Thucydides trap, the belief that a rising power and the ruling imperial power of the planet are condemned to go to war with each other sooner or later.

It was only two months ago in Seattle that Xi told a group of digital economy heavyweights, “There is no such thing as the so-called Thucydides trap in the world. But should major countries time and again make the mistakes of strategic miscalculation, they might create such traps for themselves.”

A case can be made — and Xi’s ready to make it — that Washington, which, from Afghanistan to Iraq, Libya to Syria, has gained something of a reputation for “strategic miscalculation” in the twenty-first century, might be doing it again.  After all, U.S. military strategy documents and top Pentagon figures have quite publicly started to label China (like Russia) as an official “threat.”

To grasp why Washington is starting to think of China that way, however, you need to take your eyes off the South China Sea for a moment, turn off Donald Trump, Ben Carson, and the rest of the posse, and consider the real game-changer — or “threat” — that’s rattling Beltway nerves in Washington when it comes to the new Great Game in Eurasia.

Xi’s Bedside Reading

Swarms of Chinese tourists iPhoning away and buying everything in sight in major Western capitals already prefigure a Eurasian future closely tied to and anchored by a Chinese economy turbo-charging toward that third industrial revolution. If all goes according to plan, it will harness everything from total connectivity and efficient high-tech infrastructure to the expansion of green, clean energy hubs. Solar plants in the Gobi desert, anyone?

Yes, Xi is a reader of economic and social theorist Jeremy Rifkin, who first conceived of a possible third industrial revolution powered by both the Internet and renewable energy sources.

It turns out that the Chinese leadership has no problem with the idea of harnessing cutting-edge Western soft power for its own purposes. In fact, they seem convinced that no possible tool should be overlooked when it comes to moving the country on to the next stage in the process that China’s Little Helmsman, former leader Deng Xiaoping, decades ago designated as the era in which “to get rich is glorious."

It helps when you have $4 trillion in foreign currency reserves and massive surpluses of steel and cement.  That’s the sort of thing that allows you to go “nation-building” on a pan-Eurasian scale. Hence, Xi’s idea of creating the kind of infrastructure that could, in the end, connect China to Central Asia, the Middle East, and Western Europe.  It’s what the Chinese call “One Belt, One Road”; that is, the junction of the Silk Road Economic Belt and the Twenty-First Century Maritime Silk Road.

Since Xi announced his One Belt, One Road policy in Kazakhstan in 2013, PricewaterhouseCoopers in Hong Kong estimates that the state has ploughed more than $250 billion into Silk Road-oriented projects ranging from railways to power plants. Meanwhile, every significant Chinese business player is on board, from telecom equipment giant Huawei to e-commerce monster Alibaba (fresh from its Singles Day online blockbuster). The Bank of China has already provided a $50 billion credit line for myriad Silk Road-related projects. China’s top cement-maker Anhui Conch is building at least six monster cement plants in Indonesia, Vietnam, and Laos. Work aimed at tying the Asian part of Eurasia together is proceeding at a striking pace.  For instance, the China-Laos, China-Thailand, and Jakarta-Bandung railways — contracts worth over $20 billion — are to be completed by Chinese companies before 2020.

With business booming, right now the third industrial revolution in China looks ever more like a mad scramble toward a new form of modernity.

A Eurasian “War on Terror”

The One Belt, One Road plan for Eurasia reaches far beyond the Rudyard Kipling-coined nineteenth century phrase “the Great Game,” which in its day was meant to describe the British-Russian tournament of shadows for the control of Central Asia. At the heart of the twenty-first century’s Great Game lies China’s currency, the yuan, which may, by November 30th, join the International Monetary Fund’s Special Drawing Rights reserve-currency basket. If so, this will in practice mean the total integration of the yuan, and so of Beijing, into global financial markets, as an extra basket of countries will add it to their foreign exchange holdings and subsequent currency shifts may amount to the equivalent of trillions of U.S. dollars.

Couple the One Belt, One Road project with the recently founded, China-ledAsian Infrastructure Investment Bank and Beijing’s Silk Road Infrastructure Fund ($40 billion committed to it so far).  Mix in an internationalized yuan and you have the groundwork for Chinese companies to turbo-charge their way into a pan-Eurasian (and even African) building spree of roads, high-speed rail lines, fiber-optic networks, ports, pipelines, and power grids.

According to the Washington-dominated Asian Development Bank (ADB), there is, at present, a monstrous gap of $800 billion in the funding of Asian infrastructure development to 2020 and it’s yearning to be filled. Beijing is now stepping right into what promises to be a paradigm-breaking binge of economic development.

And don’t forget about the bonuses that could conceivably follow such developments. After all, in China’s stunningly ambitious plans at least, its Eurasian project will end up covering no less than 65 countries on three continents, potentially affecting 4.4 billion people.  If it succeeds even in part, it could take the gloss off al-Qaeda- and ISIS-style Wahhabi-influenced jihadism not only in China’s Xinjiang Province, but also in Pakistan, Afghanistan, and Central Asia. Imagine it as a new kind of Eurasian war on terror whose “weapons” would be trade and development. After all, Beijing’s planners expect the country’s annual trade volume with belt-and-road partners to surpass $2.5 trillion by 2025.

At the same time, another kind of binding geography — what I’ve long called Pipelineistan, the vast network of energy pipelines crisscrossing the region, bringing its oil and natural gas supplies to China — is coming into being.  It’s already spreading across Pakistan and Myanmar, and China is planning to double down on this attempt to reinforce its escape-from-the-Straits-of-Malacca strategy. (That bottleneck is still a transit point for 75% of Chinese oil imports.) Beijing prefers a world in which most of those energy imports are not water-borne and so at the mercy of the U.S. Navy. More than 50% of China’s natural gas already comes overland from two Central Asian "stans" (Kazakhstan and Turkmenistan) and that percentage will only increase once pipelines to bring Siberian natural gas to China come online before the end of the decade.

Of course, the concept behind all this, which might be sloganized as “to go west (and south) is glorious” could induce a tectonic shift in Eurasian relations at every level, but that depends on how it comes to be viewed by the nations involved and by Washington.

Leaving economics aside for a moment, the success of the whole enterprise will require superhuman PR skills from Beijing, something not always in evidence. And there are many other problems to face (or duck): these include Beijing’s Han superiority complex, not always exactly a hit among either minority ethnic groups or neighboring states, as well as an economic push that is often seen by China’s ethnic minorities as benefiting only the Han Chinese. Mix in a rising tide of nationalist feeling, the expansion of the Chinese military (including its navy), conflict in its southern seas, and a growing security obsession in Beijing. Add to that a foreign policy minefield, which will work against maintaining a carefully calibrated respect for the sovereignty of neighbors. Throw in the Obama administration’s “pivot” to Asia and its urge both to form anti-Chinese alliances of “containment” and to beef up its own naval and air power in waters close to China.  And finally don’t forget red tape and bureaucracy, a Central Asian staple. All of this adds up to a formidable package of obstacles to Xi’s Chinese dream and a new Eurasia.

All Aboard the Night Train

The Silk Road revival started out as a modest idea floated in China’s Ministry of Commerce. The initial goal was nothing more than getting extra “contracts for Chinese construction companies overseas.” How far the country has traveled since then.  Starting from zero in 2003, China has ended up building no less than 16,000 kilometers of high-speed rail tracks in these years — more than the rest of the planet combined.

And that’s just the beginning. Beijing is now negotiating with 30 countries to build another 5,000 kilometers of high-speed rail at a total investment of $157 billion. Cost is, of course, king; a made-in-China high-speed network (top speed: 350 kilometers an hour) costs around $17 million to $21 million per kilometer. Comparable European costs: $25 million to $39 million per kilometer. So no wonder the Chinese are bidding for an $18 billion project linking London with northern England, and another linking Los Angeles to Las Vegas, while outbidding German companies to lay tracks in Russia.

On another front, even though it’s not directly part of China’s new Silk Road planning, don’t forget about the Iran-India-Afghanistan Agreement on Transit and International Transportation Cooperation. This India-Iran project to develop roads, railways, and ports is particularly focused on the Iranian port of Chabahar, which is to be linked by new roads and railways to the Afghan capital Kabul and then to parts of Central Asia.

Why Chabahar? Because this is India’s preferred transit corridor to Central Asia and Russia, as the Khyber Pass in the Afghan-Pakistani borderlands, the country’s traditional linking point for this, remains too volatile. Built by Iran, the transit corridor from Chabahar to Milak on the Iran-Afghanistan border is now ready. By rail, Chabahar will then be connected to the Uzbek border at Termez, which translates into Indian products reaching Central Asia and Russia.

Think of this as the Southern Silk Road, linking South Asia with Central Asia, and in the end, if all goes according to plan, West Asia with China. It is part of a wildly ambitious plan for a North-South Transport Corridor, an India-Iran-Russia joint project launched in 2002 and focused on the development of inter-Asian trade. 

Of course, you won’t be surprised to know that, even here, China is deeply involved. Chinese companies have already built a high-speed rail line from the Iranian capital Tehran to Mashhad, near the Afghan border. China also financed a metro rail line from Imam Khomeini Airport to downtown Tehran. And it wants to use Chabahar as part of the so-called Iron Silk Road that is someday slated to cross Iran and extend all the way to Turkey. To top it off, China is already investing in the upgrading of Turkish ports.

Who Lost Eurasia?

For Chinese leaders, the One Belt, One Road plan — an “economic partnership map with multiple rings interconnected with one another” — is seen as an escape route from the Washington Consensus and the dollar-centered global financial system that goes with it. And while “guns” are being drawn, the “battlefield” of the future, as the Chinese see it, is essentially a global economic one.

On one side are the mega-economic pacts being touted by Washington — the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership — that would split Eurasia in two. On the other, there is the urge for a new pan-Eurasian integration program that would be focused on China, and feature Russia, Kazakhstan, Iran, and India as major players. Last May, Russia and China closed a deal to coordinate the Russian-led Eurasian Economic Union (EEU) with new Silk Road projects. As part of their developing strategic partnership, Russia is already China’s number one oil supplier.

With Ukraine’s fate still in the balance, there is, at present, little room for the sort of serious business dialogue between the European Union (EU) and the EEU that might someday fuse Europe and Russia into the Chinese vision of full-scale, continent-wide Eurasian integration. And yet German business types, in particular, remain focused on and fascinated by the limitless possibilities of the New Silk Road concept and the way it might profitably link the continent.

If you’re looking for a future first sign of détente on this score, keep an eye on any EU moves to engage economically with the Shanghai Cooperation Organization.  Its membership at present: China, Russia, and four "stans" (Kazakhstan, Uzbekistan, Kyrgyzstan, and Tajikistan). India and Pakistan are to become members in 2016, and Iran once U.N. sanctions are completely lifted. A monster second step (no time soon) would be for this dialogue to become the springboard for the building of a trans-European “one-belt” zone.  That could only happen after there was a genuine settlement in Ukraine and EU sanctions on Russia had been lifted. Think of it as the long and winding road towards what Russian President Vladimir Putin tried to sell the Germans in 2010: a Eurasian free-trade zone extending from Vladivostok to Lisbon.

Any such moves will, of course, only happen over Washington’s dead body.  At the moment, inside the Beltway, sentiment ranges from gloating over the economic “death” of the BRICS nations (Brazil, Russia, India, China, and South Africa), most of which are facing daunting economic dislocations even as their political, diplomatic, and strategic integration proceeds apace, to fear or even downright anticipation of World War III and the Russian “threat.”

No one in Washington wants to “lose” Eurasia to China and its new Silk Roads. On what former National Security Adviser Zbigniew Brzezinski calls “the grand chessboard,” Beltway elites and the punditocracy that follows them will never resign themselves to seeing the U.S. relegated to the role of “offshore balancer,” while China dominates an integrating Eurasia.  Hence, those two trade pacts and that “pivot,” the heightened U.S. naval presence in Asian waters, the new urge to “contain” China, and the demonization of both Putin’s Russia and the Chinese military threat.

Thucydides, Eat Your Heart Out

Which brings us full circle to Xi’s crush on Jeremy Rifkin. Make no mistake about it: whatever Washington may want, China is indeed the rising power in Eurasia and a larger-than-life economic magnet. From London to Berlin, there are signs in the EU that, despite so many decades of trans-Atlantic allegiance, there is also something too attractive to ignore about what China has to offer. There is already a push towards the configuration of a European-wide digital economy closely linked with China. The aim would be a Rifkin-esque digitally integrated economic space spanning Eurasia, which in turn would be an essential building block for that post-carbon third industrial revolution.

The G-20 this year was in Antalya, Turkey, and it was a fractious affair dominated by Islamic State jihadism in the streets of Paris. The G-20 in 2016 will be in Hangzhou, China, which also happens to be the hometown of Jack Ma and the headquarters for Alibaba. You can’t get more third industrial revolution than that. 

One year is an eternity in geopolitics. But what if, in 2016, Hangzhou did indeed offer a vision of the future, of silk roads galore and night trains from Central Asia to Duisburg, Germany, a future arguably dominated by Xi’s vision.  He is, at least, keen on enshrining the G-20 as a multipolar global mechanism for coordinating a common development framework. Within it, Washington and Beijing might sometimes actually work together in a world in which chess, not Battleship, would be the game of the century.

Thucydides, eat your heart out.


PepePepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

Pipelineistan — the Iran-Pak-China Connection

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Originally published in Asia Times on August 14, 2015

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Iranian Foreign Minister Javad Zarif has just been to Islamabad to talk serious business with Pakistani Prime Minister Nawaz Sharif. And the serious business had to be Pipelineistan – as in what next for the Iran-Pakistan (IP) gas pipeline.

Zarif essentially said that IP is a go – again – as soon as sanctions against Iran start to melt, by late 2015 or early 2016. Iran has already invested $2 billion in the Iranian stretch of IP, and China will finance the Pakistani stretch.

This is a major Pipelinestan gambit, as Asia Times has previously reported. And as a side note, as soon as IP goes online, all those years of incessant harassing by successive Bush and Obama administrations will finally come down to nought.

China West-East Gas Pipeline

 

China West-East Gas Pipeline

Even before Zarif hit Pakistan something serious was going on in … Karamay. You may have not heard of Karamay, but this town in Xinjiang is right at the center of the Eurasian action; it has just hosted the 2015 China-Pakistan Economic Corridor Forum.

As we all know, the China-Pakistan Economic Corridor (CPEC) is an absolutely key component, worth $46 billion, of the China-driven New Silk Roads. CPEC will link Kashgar in Xinjiang to the Arabian Sea port of Gwadar via highways (essentially an upgrade of the fabled Karakoram Highway), railways, industrial parks, fiber optic networks and – eventually – a pipeline.

And that pipeline will be no less than an extension up north of IP.

As part of CPEC, for instance, last month TBEA Xinjiang SunOasis — a Chinese company — finished the biggest solar power plant in Pakistan, for $215 million, in only three months.

At Karamay, China and Pakistan signed 20 CPEC-related cooperation agreements. They even issued a Karamay manifesto, stressing the political/economic importance of the Silk Road Economic Belt and the 21st-Century Maritime Silk Road. CPEC is the largest China-Pakistan joint project since the construction of the Karakoram highway in 1979. And CPEC is only one among six economic corridors to be developed as part of the New Silk Roads.

Yet the full impact of CPEC will only be noted by the next decade. That’s when the New Silk Road for the bulk of China’s energy imports from the Middle East will be cut short by no less than 12,000 kilometers.

Ashgabat wakes up

Meanwhile, Turkmengaz — Turkmenistan’s national gas company — has taken a 51% stake in a consortium still seeking to build the perennially troubled TAPI (Turkmenistan-Afghanistan-Pakistan-India) gas pipeline, a serious competitor to IP if it ever gets built.

That’s a game-changer because the Turkmen will now be in charge of the construction and operation of TAPI Ltd. The cost is a whopping $10 billion (IP will cost three times less); investment to the tune of $4 billion and $6 billion in debt.

Still it all comes back to the same problem; who wants to invest in a steel umbilical cord prone to all sorts of sabotage traversing a war zone — western Afghanistan all the way to Kandahar? In theory, “host countries” should be responsible for TAPI’s security; in the case of Afghanistan, that qualifies as black humor.

For the moment, Turkmengaz can only count on the Manila-based but Japan/US-controlled Asian Development Bank (ADB). That’s not much. The notoriously opaque regime in Ashgabat says it’s seeking other backers — but no one knows where and how.

TAPI is still a pipe dream. Pakistan and India are not seriously considering it viable even in the medium term. So it’s back to IP.

Even after sanctions are lifted, Iran will need to find an ocean of investment — at least $180 billion — to upgrade its energy infrastructure and be able to start exporting natural gas to Europe, in competition with Gazprom.

So Iran’s privileged Pipelineistan play for the near future will be Asia – from Southwest Asia (Iraq and Oman) to South Asia (Pakistan). With China ready to instantly capitalize on every surge of Iran’s natural gas production.


Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

Reshuffling Eurasia’s energy deck — Iran, China and Pipelineistan

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Originally published in Asia Times on July 31, 2015

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Pipelineistan – the prime Eurasian energy chessboard — never sleeps. Recently, it’s Russia that has scored big on all fronts; two monster gas deals sealed with China last year; the launch of Turk Stream replacing South Stream; and the doubling of Nord Stream to Germany.

Now, with the possibility of sanctions on Iran finally vanishing by late 2015/early 2016, all elements will be in place for the revival of one of Pipelineistan’s most spectacular soap operas, which I have been following for years; the competition between the IP (Iran-Pakistan) and TAPI (Turkmenistan-Afghanistan-Pakistan-India) gas pipelines.

The $7.5-billion IP had hit a wall for years now – a casualty of hardcore geopolitical power play. IP was initially IPI – connected to India; both India and Pakistan badly need Iranian energy. And yet relentless pressure from successive Bush and Obama administrations scared India out of the project. And then sanctions stalled it for good.

Now, Pakistan’s Minister of Petroleum and Natural Resources Shahid Khaqan Abbasi swears IP is a go. The Iranian stretch of the 1,800-kilometer pipeline has already been built. IP originates in the massive South Pars gas fields – the largest in the world – and ends in the Pakistani city of Nawabshah, close to Karachi. The geopolitical significance of this steel umbilical cord linking Iran and Pakistan couldn’t be more graphic.

Enter – who else? – China. Chinese construction companies already started working on the stretch between Nawabshah and the key strategic port of Gwadar, close to the Iranian border.

China is financing the Pakistani stretch of IP. And for a very serious reason; IP, for which Gwadar is a key hub, is essential in a much larger long game; the $46 billion China-Pakistan economic corridor, which will ultimately link Xinjiang to the Persian Gulf via Pakistan. Yes, once again, we’re right into New Silk Road(s) territory.

Workers in Kazakhstan complete a section of a pan-Central Asian gas pipeline

 

Workers in Kazakhstan complete a section of a pan-Central Asian gas pipeline

And the next step regarding Gwadar will be essential for China’s energy strategy; an IP extension all the way to Xinjiang. That’s a huge logistical challenge, implying the construction of a pipeline parallel to the geology — defying Karakoram highway.

IP will continue to be swayed by geopolitics. The Japan-based and heavily US-influenced Asian Development Bank (ADB) committed a $30 million loan to help Islamabad build its first LNG terminal. The ADB knows that Iranian natural gas is a much cheaper option for Pakistan compared to LNG imports. And yet the ADB’s agenda is essentially an American agenda; out with IP, and full support to TAPI.

This implies, in the near future, the strong possibility of Pakistan increasingly relying on the China-driven Asian Infrastructure Development Bank (AIIB) for infrastructure development, and not the ADB.

Recently, the IP field got even more crowded with the arrival of Gazprom. Gazprom also wants to invest in IP – which means Moscow getting closer to Islamabad. That’s part of another key geopolitical gambit; Pakistan being admitted as a full member, alongside India, of the Shanghai Cooperation Organization (SCO), something that will happen, soon, with Iran as well. For the moment, Russia-Pakistan collaboration is already evident in an agreement to build a gas pipeline from Karachi to Lahore.

Talk to the (new) Mullah

So where do all these movements leave TAPI?

The $10 billion TAPI is a soap opera that stretches all the way back to the first Clinton administration. This is what the US government always wanted from the Taliban; a deal to build a gas pipeline to Pakistan and India bypassing Iran. We all know how it all went horribly downhill.

The death of Mullah Omar – whenever that happened – may be a game changer. Not for the moment, tough, because there is an actual Taliban summer offensive going on, and “reconciliation” talks in Afghanistan have been suspended.

Whatever happens next, all the problems plaguing TAPI remain. Turkmenistan – adept of self-isolation, idiosyncratic and unreliable as long as it’s not dealing with China – is a mystery concerning how much natural gas it really holds (the sixth largest or third largest reserves in the world?)

And the idea of committing billions of dollars to build a pipeline traversing a war zone – from Western Afghanistan to Kandahar, not to mention crossing a Balochistan prone to separatist attacks — is nothing short of sheer lunacy.

Energy majors though, remain in the game. France’s Total seems to be in the lead, with Russian and Chinese companies not far behind. Gazprom’s interest in TAPI is key – because the pipeline, if built, would certainly be connected in the future to others which are part of the massive, former Soviet Union energy grid.

To complicate matters further, there is the fractious relationship between Gazprom and Turkmenistan. Until the recent, spectacular Chinese entrance, Ashgabat depended mostly on Russia to market Turkmen gas, and to a lesser extent, Iran.

As part of a nasty ongoing dispute, Turkmengaz accuses Gazprom of economic exploitation. So what is Plan B? Once again, China. Beijing already buys more than half of all Turkmen gas exports. That flows through the Central Asia-China pipeline; full capacity of 55 billion cubic meters (bcm) a year, only used by half at the moment.

China is already helping Turkmenistan to develop Galkynysh, the second largest gas field in the world after South Pars.

And needless to add, China is as much interested in buying more gas from Turkmenistan – the Pipelineistan way – as from Iran. Pipelineistan fits right into China’s privileged “escape from Malacca” strategy; to buy a maximum of energy as far away from the U.S. Navy as possible.

So Turkmenistan is bound to get closer and closer, energy-wise, to Beijing. That leaves the Turkmen option of supplying the EU in the dust – as much as Brussels has been courting Ashgabat for years.

The EU pipe dream is a Pipelineistan stretch across the Caspian Sea. It won’t happen, because of a number of reasons; the long-running dispute over the Caspian legal status – Is it a lake? Is it a sea? – won’t be solved anytime soon; Russia does not want it; and Turkmenistan does not have enough Pipelineistan infrastructure to ship all that gas from Galkynysh to the Caspian.

Considering all of the above, it’s not hard to identify the real winner of all these interlocking Pipelineistan power plays – way beyond individual countries; deeper Eurasia integration. And so far away from Western interference.

 


Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

St. Petersburg in the heart of the action: SPIEF

Off the keyboard of Pepe Escobar
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Originally published in Asia Times on June 20, 2015

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The dogs of western fear and sanctions bark, while the Eurasian caravan passes.

And no caravanserai could possibly compete with the 19th edition of the St. Petersburg International Economic Forum (SPIEF). Thousands of global business leaders – including Europeans, but not Americans; after all, President Putin is “the new Hitler” – representing over 1,000 international companies/corporations, including the CEOs of BP, Royal Dutch Shell and Total, hit town in style.

Fascinating panels all around – including discussions on the BRICs; the Shanghai Cooperation Organization (SCO); the New Silk Road(s); the Eurasian Economic Union (EEU); and of course the theme of all themes, “The Making of the Asia-Pacific Century: Rebalancing East,” with former Australian Prime Minister Kevin Rudd.

Predictably, there’s been plenty of anticipation regarding the BRICs New Development Bank, with big news coming next month at the BRICs summit in Ufa. Brazilian Paulo Nogueira Batista, the new vice-president of the bank, looks forward to the first meeting of the governors.

And on another key theme — bypassing the US dollar — it was up to Anatoliy Aksakov, chairman of the Duma Committee on Economic Policy, Innovative Development and Entrepreneurship, to cut to the chase; “We need to transition to conducting mutual settlements in national currencies, and we believe that all the conditions are already in place for this.”

The action was not only rhetorical. Here’s just a fraction of the deals clinched at SPIEF. Predictably, it’s been a Pipelineistan show all around.

– The pipes for the Turkish Stream pipeline under the Black Sea will start to be laid down this month, or at latest by July, according to Russian Energy Minister Alexander Novak.

– Gazprom’s CEO Aleksey Miller and Greek Energy Minister Panagiotis Lafazanis practically clinched the extension of Turkish Stream to Greece. They are “preparing an appropriate intergovernmental memorandum,” according to Gazprom.

– Gazprom also announced it will build a new double pipeline from Russia to Germany, across the Baltic Sea, in partnership with Germany’s E.ON, Anglo-Dutch Shell and Austria’s OMV.

In another crucial Eurasian front, India signed a framework agreement to create a free trade zone with the Eurasian Economic Union. Indian Minister of Commerce Nirmala Sitharaman was euphoric: “The two regions are big, anything done together should naturally lead to bigger outcomes.”

Oh, and those were the days of Bandar Bush threatening to unleash jihadis on Russia.

Instead, a remarkable meeting took place, between Putin and Mohammad bin Salman, the Saudi deputy crown prince and defense minister (the actual conductor of the war on Yemen). This was the logical conclusion of Putin being in touch, for weeks, with the new master of the House of Saud, King Salman.

The House of Saud politely spun it as a discussion on “relations and aspects of cooperation between the two friendly countries.” Facts on the ground included Russia and Saudi Arabia’s oil ministers discussing a broad cooperation agreement; the signing of six nuclear technology agreements; and the Supreme Imponderable; Putin and the deputy crown prince discussing oil prices. Could this be the end of the Saudi-led oil price war?

If that was not enough, on the Asian front the superstar executive chairman of Alibaba Group, Jack Ma, went no holds barred to say: “It is high time for market players to invest in Russia.” Beijing, by the way, currently estimates the value of signed and almost signed agreements with Russia at a whopping $1 trillion. Russian Deputy Prime Minister Igor Shuvalov preferred to hold a “humbler” estimate.

Well, if only other sanctioned and “isolated” nations – because of their “aggression” – could be capable of such a business performance.

And where were the Masters?

Before the St. Petersburg forum, Putin was delivering an invariable message every time he met a western leader. He would talk about bilateral trade, and then remark things could be way, way better. At the forum, it’s beyond evident that the EU’s policy of sanctioning Russia is a disaster – whatever the European Council decides next week.

Those masters of Kafkaesque bureaucracy at the European Commission (EC) keep swearing Europe is not suffering. Who’re you going to believe? EC bureaucrats who only care about their fat retirement pensions, or this Austrian study?

And then there was The Big Meeting on the sidelines of SPIEF: Putin with Greek Prime Minister Alexis Tsipras. The question here is not Greece becoming a BRICs member tomorrow, for instance. Yves Smith at her Naked Capitalism blog may have succinctly nailed it; “The objective risk of a new Greece-Russia alliance … is whether Europeans are worried enough about this risk to change course.”

There’s no evidence – yet – there will be a change of course. Iron Chancellor Merkel is now openly brandishing the Russia card – as in Moscow getting a foothold in the EU — to keep other EU nations in tune with the German austerity obsession.

As for the Last Word at the forum, it was hard to beat Tsipras; Europe “should stop considering itself the centre of the universe, it should understand that the center of world economic development is shifting to other regions.”

So were there any real Masters of the Universe present at SPIEF?

In the real world, there are a number of institutions and conferences that serve as the basis for “coordination” policies. But the Masters of the Universe are not there. They pull the strings of the marionettes that attend the meetings — and then whatever they decided is coordinated below.

Putin did not miss anything by being snubbed at the G7 in the Bavarian Alps (actually G1 + “junior partners”). He would be meeting with figureheads, anyway.

The Bank for International Settlements (BIS), featuring the key central bankers, they meet once a month for “coordination purposes.” The Bilderberg group, the Trilateral Commission, and Davos also meet for coordination purposes. A case can be made that SPIEF is now the key coordination forum for Eurasia. Masters of the Universe – real or self-perceived – may snub it at their own peril.


Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

Pakistan enters the New Silk Road

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Originally published in Asia Times on April 24, 2015


 

Now how do you top this as a geopolitical entrance? Eight JF-17 Thunder fighter jets escorting Chinese President Xi Jinping on board an Air China Boeing as he enters Pakistani air space. And these JF-17s are built as a China-Pakistan joint project.

Silk Road? Better yet; silk skyway.

Just to drive the point home – and into everyone’s homes – a little further, Xi penned a column widely distributed to Pakistani media before his first overseas trip in 2015.

He stressed, “We need to form a ‘1+4′ cooperation structure with the Economic Corridor at the center and the Gwadar Port, energy, infrastructure and industrial cooperation being the four key areas to drive development across Pakistan and deliver tangible benefits to its people.”

Quick translation: China is bringing Pakistan into the massive New Silk Road(s) project with a bang.

The Chinese Foreign Ministry, also on cue, stressed that Pakistan would be in the frontline to benefit from the $40 billion Silk Road Fund, which will help to finance the Silk Road Economic Belt and Maritime Silk Road projects; or, in Chinese jargon, “One Belt, One Road”, that maze of roads, high-speed rail, ports, pipelines and fiber optics networks bound to turbo-charge China’s links to Europe through Russia, Central Asia and the Indian Ocean.

The Silk Road Fund will disburse funds in parallel with the new Asian Infrastructure Investment Bank (AIIB), which has already enticed no less than 57 countries. China’s assistant foreign minister, Liu Jianchao, has not delved into detailed numbers, but he assures China “stands ready to provide financing.”

So no wonder Pakistani media was elated. A consensus is also fast emerging that China is becoming “Pakistan’s most important ally” from either West or East.

Beijing’s carefully calibrated commercial offensive mixing Chinese leadership concepts such as harmonious society and Chinese dream with a “win-win” neighborhood policy seduces by the numbers alone: $46 billion in investment in Pakistan ($11 billion in infrastructure, $35 billion in energy), compared to a U.S. Congress’s $7.5 billion program that’s been in place since 2008.

The meat of the matter is that Washington’s “help” to Islamabad is enveloped in outdated weapons systems, while Beijing is investing in stuff that actually benefits people in Pakistan; think of $15.5 billion in coal, wind, solar and hydro energy projects bound to come online by 2017, or a $44 million optical fiber cable linking China and Pakistan.

According to the Center for Global Development, between 2002 and 2009 no less than 70% of U.S. aid was about “security” –  related to the never-ending GWOT (global war on terror). As a Pakistani analyst wrote me, “just compare Xi’s vision for his neighbors and the history of America in Latin America. It is like the difference between heaven and hell.”

That “X” factor

At the heart of the action is the China-Pakistan Economic Corridor (CPEC), whose embryo had already been discussed when Prime Minister Nawaz Sharif visited Beijing in the summer of 2013. The economic corridor, across 3,000 km, will link the port of Gwadar, in the Arabian Sea, not far from the Iranian border, with China’s Xinjiang.

China is already in Gwadar; China Overseas Port Holding Company is operating it for two years now, after helping to build the first phase. Gwadar formally opens before the end of the month, but a first-class highway and railway linking it to the rest of Pakistan still need to be built (mostly by Chinese companies), not to mention an international airport, scheduled to open by 2017.

All this action implies a frenzy of Chinese workers building roads, railways – and power plants. Their security must be assured. And that means solving the “X” factor; “X” as in Xinjiang, China’s vast far west, home to only 22 million people including plenty of disgruntled Uyghurs.

Beijing-based analyst Gabriele Battaglia has detailed how Xinjiang has been addressed according to the new guiding principle of President Xi’s ethnic policy. The key idea, says Battaglia, is to manage the ethnic conflict between Han Chinese and Uyghurs by applying the so-called three “J”: jiaowangjiaoliujiaorong, that is, “inter-ethnic contact”, “exchange” and “mixage”.

Yet what is essentially a push towards assimilation coupled with some economic incentives is far from assured success; after all the bulk of Xinjiang’s day-to-day policy is conducted by unprepared Han cadres who tend to view most Uyghurs as “terrorists”.

Many of these cadres identify any separatist stirring in Xinjiang as CIA-provoked, which is not totally true. There is an extreme Uyghur minority which actually entered Wahhabi-driven jihadism (I met some of them in Masoud’s prisons in the Panjshir valley before 9/11) and has gone to fight everywhere from Chechnya to Syria. But what the overwhelming majority really wants is an economic shot at the Chinese dream.

The Pakistani counterpart to Xinjiang is Balochistan, inhabited by a little over 6 million people. There have been at least three different separatist factions/movements in Balochistan fighting Islamabad and what they call “Punjabis” with a vengeance. Former provincial minister Jaffar Khan Mandokhel, for instance, is already warning there will be a “strong reaction” across Balochistan to changes in the corridor’s routes, which, he says, “are meant to give maximum benefit to Punjab, which is already considered the privileged province.” Islamabad denies any changes.

The corridor is also bound to bypass most of the key, northwestern province of Khyber Pakhtunkhwa. Opposition political star Imran Khan – whose party is on top in Khyber – has already condemned it as an injustice.

Beijing, for its part, has been very explicit to Islamabad; the Pakistani Taliban must be defeated, or at least appeased. That explains why since June 2014 the Pakistani army has been involved in a huge aerial bombing campaign – Zarb-e Azb – againt the Haqqani network and other hardcore tribals. The Pakistani army has already set up a special division to take care of the corridor, including nine battalions and the proverbial paramilitary forces. None of this though is a guarantee of success.

Karakoram or bust

It will be absolutely fascinating to watch how China and Pakistan, simultaneously, may be able to keep the peace in both Xinjiang and Balochistan to assure booming trade along the corridor. Geographicaly though, this all makes perfect sense.

Xinjiang is closer to the Arabian Sea than Shanghai. Shanghai is twice more distant from Urumqi than Karachi. So no wonder Beijing thinks of Pakistan as a sort of Hong Kong West, as I examined in some detail here.

This is also a microcosm of East and South Asia integration, and even Greater Asia integration, if we include China, Iran, Afghanistan, and even Myanmar.

The spectacular Karakoram highway, from Kashgar to Islamabad, a feat of engineering completed by the Chinese working alongside the Pakistan Army Corps of engineers, will be upgraded, and extended all the way to Gwadar. A railway will also be built. And in the near future, yet another key Pipelineistan stretch.

Pipelineistan is linked to the corridor also in the form of the Iran-Pakistan (IP) gas pipeline, which Beijing will help Islamabad to finish to the tune of $2 billion, after successive U.S. administrations relentlessly tried to derail it. The geopolitical dividends of China blessing a steel umbilical cord between Iran and Pakistan are of course priceless.

The end result is that early in the 2020s China will be connected in multiple ways practically with the mouth of the Persian Gulf. Large swathes of massive China-Europe trade will be able to avoid the Strait of Malacca. China will be turbo-charging trade with the Middle East and Africa. China-bound Middle East oil will be offloaded at Gwadar and transported to Xinjiang via Balochistan – before a pipeline is finished. And Pakistan will profit from more energy, infrastructure and transit trade.

Talk about a “win-win”. And that’s not even accounting for China’s thirst for gold. Balochistan is awash with gold, and there have been new discoveries in Punjab.

New Silk Road action is nothing short than frantic. The Bank of China is already channeling $62 billion of its immense foreign exchange reserves to three policy banks supporting New Silk Road(s) projects; $32 billion to China Development Bank (CDB) and $30 billion to Export-Import Bank of China (EXIM). The Agricultural Development Bank of China (ADBC) will also get its share.

And it’s not only Pakistan; the five Central Asian “stans” – rich in oil, gas, coal, agricultural land, gold, copper, uranium – are also targeted.

There’s a new highway from Kashgar to Osh, in Kyrgyzstan, and a new railway between Urumqi and Almaty, in Kazakhstan. We may be a long way away from the new high-speed Silk Rail, but trade between, for instance, the megacities of Chongqing or Chengdu in Sichuan with Germany now moves in only 20 days; that’s 15 days less than the sea route.

So it’s no wonder a “special leading group” was set up by Beijing to oversee everything going on in the One Road, One Belt galaxy. The crucial action plan is here. Those who’re about to go silk, we salute you.


Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

Russia, China, Iran: In sync

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S-300 (RIA Novosti / Alexey Danichev)

Originally published in RT on April 16, 2015


Over past decades, the pre-fabricated myth of an elusive “Iranian bomb” was never the real issue between the US and Iran; the issue was how to subdue – or “isolate” – a powerful, independent nation that refused to toe the exceptionalist line.

Now that the “rehabilitation” of Iran – at least for some exceptionalists and their minions – may be imminent, pending a nuclear deal to be clinched in June, various Washington factions still can’t get their act together.

The Pentagon has all but admitted the perennial wet dream of neocons and corporate media remains on the table; the military option.

The US Congress will go no holds barred in trying to scotch the deal. The US Senate Foreign Relations Committee unanimously passed a bill that would give Congress the right to interfere with anything related to the removal of sanctions.

Iranian Foreign Minister Mohammad Javad Zarif faces an even more uphill battle as the “fact sheet” the Obama administration insisted it needed to release to make the case in Washington complicates how the nuclear deal may be received in Iran. To top it off, “fact sheet” or not, the case was not made in Washington after all.

And now the usual suspects – from the State Department to Congress and the Israel lobby – are predictably going bonkers on a demented “Putin selling missiles to the ayatollahs” narrative.

Got “S”, will sell

What Russian President Vladimir Putin has just done is to get back to business as usual; even before sanctions are lifted, he signed a decree lifting Moscow’s own ban on the delivery of the S-300 surface-to-air anti-missile system to Tehran, following an $800 million 2010 contract that was not fulfilled due to relentless US pressure. Tehran expects to receive the S-300 by the end of the year.

Moscow’s official line has always been that the arms embargo on Iran must be lifted as soon as a final nuclear deal is clinched. The Obama administration insists that sanctions must be removed gradually. Tehran, from Supreme Leader Ayatollah Khamenei on down, is adamant that sanctions must be lifted“on the day of the deal”, in Khamenei’s words.

The Supreme Leader had added a conciliatory note though, remarking that, “if the other side avoids its ambiguity in the [nuclear] talks, it’ll be an experience showing it’s possible to negotiate with them on other issues.” That remains a galaxy-sized “if”.

Russian Foreign Minister Sergei Lavrov (R) shows the way to his Iranian counterpart Javad Zarif during a meeting in Moscow (Reuters / Maxim Zmeyev)

Russian Foreign Minister Sergei Lavrov (R) shows the way to his Iranian counterpart Javad Zarif during a meeting in Moscow (Reuters / Maxim Zmeyev)

Meanwhile, and in sync, the director-general of Russia’s top weapons exporting company Rosoborobexport, Anatoly Isaykin, confirmed China has just bought S-400 missile defense systems from Russia. Beijing is the first in a long list of foreign buyers – as the Russian defense industry is obliged to give priority on the S-400s to the Russian Defense Ministry

Each S-400 is capable of launching up to 72 missiles, engaging up to 36 targets simultaneously, and shield territory from air strikes, strategic, cruise, tactical and operating tactical ballistic missiles, and medium-range ballistic missiles. It’s been operational since 2007, replacing the S-300 systems now sold to Iran.

The crucial issue is that the S-300s will render Iran’s air defenses virtually secure against anything the Pentagon may throw at them, except fifth-generation stealth fighters. And these – the S-300 and S-400 – are not even Russian state-of-art; that would be the S-500 system, which I’ve referred to here, capable of definitely sealing Russian – and any other – territory from anything the Pentagon may come up with.

Strategically in sync

The simultaneous rolling out of the S-300s and S-400s to Iran and China are yet one more graphic example of the strategic partnership involving the three Eurasian nations that actively contest the hyperpower’s hegemony. They are certainly in sync.

In parallel, discreetly, Moscow has already started, in practice, a $20 billion oil-for-goods swap with Tehran – exchanging grain, equipment and construction materials for up to 500,000 barrels of Iranian crude a day. According to Deputy Foreign Minister Sergei Ryabkov, “this is not banned or limited under the current sanctions regime.”

Ryabkov only stated the obvious; “It takes two to tango. We are ready to provide our services and I am sure they will be pretty advantageous compared to other countries…We never gave up on Iran in a difficult situation…”

Tehran responded in sync, via the Chairman for the Committee for Foreign Policy and National Security of the Islamic Consultative Assembly of Iran, Alaeddin Boroujerdi; Iran is ready to expand cooperation with Russia in all spheres at the highest level. Crucially, “this is also the opinion of our supreme religious leader Ayatollah Ali Khamenei about development of relations with Russia.”

The usual suspects, as usual, are clinging to any argument that “proves” Russia-Iran cooperation is doomed. For instance, “rehabilitated” Iran will doom Russia’s energy industry because of the “serious impact” on the oil market from Iran’s increased supply and competition with gas exporter Gazprom.

Ryabkov dismissed it by going straight to the point; “I am not confident as yet that the Iranian side would be ready to carry out supplies of natural gas from its fields quickly and in large quantities to Europe. This requires infrastructure that is difficult to build.”

This infrastructure upgrade is costly and will take years; it may happen, but with help from – once again – the Russians and the Chinese. Russia will be back in play in full force in Iran’s energy sector, as Gazprom, its oil arm, Gazprom Neft, and Lukoil had to put on hold many projects because of sanctions. Rosatom, for its part, will be able to clinch further contracts at the Bushehr nuclear power plant.

The EU – and especially the US – are betting on Iran’s “rehabilitation” as an economic/political bonanza; the first real benefit would be Tehran becoming a supplier to yet another troublesome ‘Pipelineistan’ gambit, the Trans-Anatolian (TAP) gas pipeline, which may – or may not – be finished by 2018. TAP will supply gas to the EU via Turkey, but it’s still unclear how much gas potential suppliers – Azerbaijan or Iran – are able to commit.

TAP coming online does not mean Gazprom’s exports to the EU must be cut down. In fact, what Russian and Iranian officials have been discussing for a while now is how profitable exporting to the EU may be for both nations. Besides, Russia has still another key ‘Pipelineistan’ card to play – Turkish Stream, which will channel Russian gas to Turkey and Greece.

And yes, Gazprom is getting ready to be a key provider to two essential markets at the same time. Here’s what Gazprom’s CEO Alexei Miller told Rossiya-24: “The resource base of Western Siberia is a resource that is used for delivering gas for exports to Europe. In other words, at this point we are on the cutting edge when actual competitiveness will begin for our energy resources between two mega-markets: Asian and European.”

SWIFT business

Beijing, meanwhile, has also been on the offensive. As a top energy supplier – of both oil and gas – Iran is a matter of Chinese national security. So even with sanctions after sanctions, the US government was always forced to renew waivers for China, as Beijing kept importing energy from Iran at will.

Reuters / Petar Kujundzic

Reuters / Petar Kujundzic

Iran is an absolutely key node of the Chinese-led New Silk Road(s) – be it as part of the land route or as part of the Maritime Silk Road, which will touch the port of Chabahar. And the China-Iran partnership does not span only close ties on energy and trade/commerce; it also includes advanced Chinese defense technology, and Chinese input in Iran’s ballistic missile program.

China created a parallel SWIFT system to pay Iran for energy; Tehran, after the nuclear deal, will be free to access these funds in yuan. Iranian energy executives have already been to Beijing to discuss Chinese investment in the Iranian energy industry. Sinopec and CNPC will be instrumental in developing projects in the South Pars gas fields – the largest in the world – and in the monster Yadavaran and North Azadegan oil fields.

For Iran, all this will happen in parallel with European energy giants investing in liquefied natural gas (LNG) development and technology.

Investing in multiple fronts, China will also be instrumental in its push to finally help complete the much-troubled Iran-Pakistan (IP) pipeline, which in the future may even include an extension to Xinjiang.

Xi does Tehran

The icing in this vast energy cake is how both Russia and China are deeply committed to integrating Iran into their Eurasian vision. Iran may finally be admitted as a full member of the Shanghai Cooperation Organization (SCO) at the upcoming summer summit in Russia. That implies a full-fledged security/commercial/political partnership involving Russia, China, Iran and most Central Asian’stans’.

Iran is already a founding member of the Chinese-led Asian Infrastructure Investment Bank (AIIB); that means financing for an array of New Silk Road-related projects bound to benefit the Iranian economy. AIIB funding will certainly merge with loans and other assistance for infrastructure development related to the Chinese-established Silk Road Fund.

And last but not least, the China-Iran strategic partnership will be discussed in detail as Chinese President Xi Jinping visits Tehran next month.

It’s easy to remember how Iran was relentlessly derided as “isolated” by the exceptionalist crowd only a few months ago. Yet the fact is it was never isolated – but painstakingly building blocks towards Eurasian integration.

European firms are of course itching to unleash an avalanche of investment in the Iranian market post-sanctions, and most of all the energy giants badly yearn to lessen EU’s dependency on Gazprom. But they’ll be facing formidable competition, as it was up to Moscow and Beijing to identify, a long time ago, which way the wind was blowing; the inevitable (re)emergence of Iran as a key Eurasian power.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.


Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

Iran is ready to crash Pipelineistan

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03_TURKMEN-PIPELINE (2)

Originally published in Asia Times on March 20, 2015

Way beyond an Iran nuclear deal, and way beyond the end of a nasty economic siege that’s been in place for 35 years since the Islamic Revolution, the coming Western embrace means above all that Iran is now ready to crash the chessboard I call Pipelineistan.

By the mid-2000s, one of the top mantras of energy analysts in Iran and across Asia was what was known as the Asian Energy Security Grid. Translation: a pan-Asian integration via energy flows of the region’s oil and gas. Pipelineistan connected these relevant dots in the Eurasian chessboard.

Washington was always set on stopping Pipelineistan in its tracks. Case in point: the Baku-Tblisi-Ceyhan (BTC) pipeline, a Dr. Zbig “Grand Chessboard” Brzezinski brainchild that was built for almost $6 billion as an explicit geopolitical weapon to bypass Iran’s energy exports.

Another example is frantic efforts by both the Bush junior and Obama administrations to derail the former Iran-Pakistan-India (IPI) pipeline, also known as “peace pipeline”, which may eventually be built and named  IP – for Iran-Pakistan.

Now it’s a completely different story. Even U.S. Big Oil is salivating at the prospect of doing business with Iran on energy.

Beijing, for its part, already is.  Iran is invariably among China’s top three energy sources. Not by accident, Chinese President Xi Jinping will soon visit Tehran; Foreign Minister Wang Yi has already promised “dramatic” announcements – and China’s Foreign Ministry is not exactly prone to hyperbole. For Beijing, the energy relationship with Tehran is no less than a matter of national security.

China also remains a top client of Saudi oil. But buying oil from the Persian Gulf and having it shipped via the vulnerable Strait of Malacca is not exactly Beijing’s idea of a bright future.

The vastly complex Chinese energy strategy, bent on diversification of sources, could be summarized as “escape from Malacca”. And now, with ISIS/ISIL/Daesh holding large – though mostly empty – parts of “Syraq”, the Middle East as a whole becomes even more of a problem.

Beijing is alarmed at the growing possibility of a demented Caliphate export contaminating large swathes of Xinjiang – the key Chinese node of the upcoming, overland New Silk Road.

The key branch of the overland New Silk Road – the other one will be via the Trans-Siberian – links China via Xinjiang to Central Asia, Iran and Turkey.

So Beijing needs to maintain excellent relations with both Iran and Turkey. At the same time, it must avoid antagonizing the House of Saud. In energy terms, the ideal solution would be massive investment in gas pipelines originating from Iran and linked to Turkmenistan, which is already linked to Western China via pipelines built by the Chinese.

Even during the Ahmadinejad years – via a “Look East” policy – Iran was already going into overdrive to make Pipelineistan a reality. This involved courting China, India and Pakistan, by keeping steady relations with Turkey.

The anticipated Asian Energy Security Grid, in many aspects, is already a go. Yet the big prize is, of course, the EU. There is talk about forming a Eurasia Security Grid.

For years, I’ve heard the same mantra in Brussels: If only we could buy loads of oil and gas from Iran to escape the grip of Russia’s Gazprom – but the Americans won’t let us.

The time is now. Euro Big Energy is dying to hit the road to do business with Tehran. The figure from eight years ago, given to me by an Iranian energy analyst, hasn’t changed much. Iran needs roughly $200 billion to upgrade its energy industry and start re-exporting oil en masse.

So it’s no wonder Tehran’s already holding close talks with Switzerland and the EU to work out the initial details of selling more gas to Europe. Hiking oil exports – from currently 1.1 million barrels a day to roughly 2 million – may also be feasible. But to go beyond that would take years and a veritable tsunami of investment.

At the same time, the major European players are willing  and able to make a geopolitical shift when it comes to oil and gas. All (energy) roads now lead to Tehran.

 

Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

Words US ‘think-tank-land’ dare not speak

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BRICS 2014

Published in Asia Times on March 9, 2015

Winston Churchill once said, “I feel lonely without a war.” He also badly missed the loss of empire. Churchill’s successor – the ‘Empire of Chaos’ – now faces the same quandary. Some wars – as in Ukraine, by proxy – are not going so well.

And the loss of empire increasingly manifests itself in myriad moves by selected players aiming towards a multipolar world.

So no wonder US ‘Think Tankland’ is going bonkers, releasing wacky CIA-tinted “forecasts” where Russia is bound to disintegrate, and China is turning into a communist dictatorship. So much (imperial) wishful thinking, so little time to prolong hegemony.

The acronym that all these “forecasts” dare not reveal is BRICS (Brazil, Russia, India, China, and South Africa). BRICS is worse than the plague as far as the ‘Masters of the Universe’ that really control the current – rigged – world system are concerned. True, the BRICS are facing multiple problems. Brazil at the moment is totally paralyzed; a long, complex, self-defeating process, now coupled with intimations of regime change by local ‘Empire of Chaos’ minions. It will take time, but Brazil will rebound.

That leaves the “RIC” – Russia, India and China – in BRICS as the key drivers of change. For all their interlocking discrepancies, they all agree they don’t need to challenge the hegemon directly while aiming for a new multipolar order.

The BRICS New Development Bank (NDB) – a key alternative to the IMF enabling developing nations to get rid of the US dollar as a reserve currency – will be operative by the end of this year. The NDB will finance infrastructure and sustainable development projects not only in the BRICS nations but other developing nations. Forget about the Western-controlled World Bank, whose capital and lending capacity are never increased by the so-called Western “powers.” The NDB will be an open institution. BRICS nations will keep 55 percent of the voting power, and outside their domain no country will be allowed more than 7 percent of votes. But crucially, developing nations may also become partners and receive loans.

Damn those communists

A tripartite entente cordiale is also in the making. Indian Prime Minister Narendra Modi will be in China next May – and ‘Chindia’ will certainly engage in a breakthrough concerning their bitter territorial disputes. As much as Delhi has a lot to benefit from China’s massive capital investment and exports, Beijing wants to profit from India’s vast market and technology savvy. In parallel, Beijing has already volunteered economic help to Russia – if Moscow asks for it – on top of their evolving strategic partnership.

The US “pivoting to Asia” – launched at the Pentagon – is all dressed up with no place to go. Bullying Southeast Asia, South Asia and, for that matter, East Asia as a whole into becoming mere ‘Empire of Chaos’ vassals – and on top of it confronting China – was always a non-starter. Not to mention believing in the fairy tale of a remilitarized Japan able to “contain” China.

Isolating the “communist dictatorship” won’t fly. Just watch, for instance, the imminent high-speed rail link between Kunming, in Yunnan province, and Singapore, traversing a key chunk of a Southeast Asia which for Washington would never qualify to be more than a bunch of client states. The emerging 21st century Asia is all about interconnection; and the inexorable sun in this galaxy is China.

As China has embarked in an extremely complex tweaking of its economic development model, as I outlined here, China’s monopoly of low-end manufacturing – its previous industrial base – is migrating across the developing world, especially around the Indian Ocean basin. Good news for the Global South – and that includes everyone from African nations such as Kenya and Tanzania to parts of Southeast Asia and Latin America.

Of course the ‘Empire of Chaos’, business-wise, won’t be thrown out of Asia. But its days as an Asian hegemon, or a geopolitical Mob offering “protection”, are over.

The Chinese remix of Go West, Young Man – in fact go everywhere – started as early as 1999. Of the top 10 biggest container ports in the world, no less than 7 are in China (the others are Singapore, Rotterdam, and Pusan in South Korea). As far as the 12th Chinese 5-year plan – whose last year is 2015 – is concerned, most of the goals of the seven technology areas China wanted to be in the leading positions have been achieved, and in some cases even superseded.

The Bank of China will increasingly let the yuan move more freely against the US dollar. It will be dumping a lot of US dollars every once in a while. The 20-year old US dollar peg will gradually fade. The biggest trading nation on the planet, and the second largest economy simply cannot be anchored to a single currency. And Beijing knows very well how a dollar peg magnifies any external shocks to the Chinese economy.

Sykes-Picot is us

 A parallel process in Southwest Asia will also be developing; the dismantling of the nation-state in the Middle East – as in remixing the Sykes-Picot agreement of a hundred years ago. What a stark contrast to the return of the nation-state in Europe.

There have been rumblings that the remixed Sykes is Obama and the remixed Picot is Putin. Not really. It’s the ‘Empire of Chaos’ that is actually acting as the new Sykes-Picot, directly and indirectly reconfiguring the “Greater Middle East.” Former NATO capo Gen. Wesley Clark has recently “revealed” what everyone already knew; the ISIS/ISIL/Daesh fake Caliphate is financed by “close allies of the United States,” as in Saudi Arabia, Qatar, Turkey and Israel. Compare that with Israeli Defense Minister Moshe Yaalon admitting that ISIS “does not represent a threat to Israeli interests.” Daesh does the unraveling of Sykes-Picot for the US.

The ‘Empire of Chaos’ actively sought the disintegration of Iraq, Syria and especially Libya. And now, leading the House of Saud, “our” bastard in charge King Salman is none other than the former, choice jihad recruiter for Abdul Rasul Sayyaf, the Afghan Salafist who was the brains behind both Osama bin Laden and alleged 9/11 mastermind Khalid Sheikh Mohammad.

This is classic ‘Empire of Chaos’ in motion (exceptionalists don’t do nation building, just nation splintering). And there will be plenty of nasty, nation-shattering sequels, from the Central Asian stans to Xinjiang in China, not to mention festering, Ukraine, a.k.a Nulandistan.

Parts of Af-Pak could well turn into a branch of ISIS/ISIL/Daesh right on the borders of Russia, India, China, and Iran. From an ‘Empire of Chaos’ perspective, this potential bloodbath in the “Eurasian Balkans” – to quote eminent Russophobe Dr. Zbig “Grand Chessboard” Brzezinski – is the famous “offer you can’t refuse.”

Russia and China, meanwhile, will keep betting on Eurasian integration; strengthening the Shanghai Cooperation Organization (SCO) and their own internal coordination inside the BRICS; and using plenty of intel resources to go after The Caliph’s goons.

And as much as the Obama administration may be desperate for a final nuclear deal with Iran, Russia and China got to Tehran first. China’s Foreign Minister Wang Yi was in Tehran two weeks ago; stressing Iran is one of China’s “foreign policy priorities” and of great “strategic importance.” Sooner rather than later Iran will be a member of the SCO. China already does plenty of roaring trade with Iran, and so does Russia, selling weapons and building nuclear plants.

 

Berlin-Moscow-Beijing?

And then there’s the German question.

Germany now exports 50 percent of its GDP. It used to be only 24 percent in 1990. For the past 10 years, half of German growth depended on exports. Translation: this is a giant economy that badly needs global markets to keep expanding. An ailing EU, by definition, does not fit the bill.

German exports are changing their recipient address. Only 40 percent – and going down – now goes to the EU; the real growth is in Asia. So Germany, in practice, is moving away from the eurozone. That does not entail Germany breaking up the euro; that would be interpreted as a nasty betrayal of the much-lauded “European project.”

What the trade picture unveils is the reason for Germany’s hardball with Greece: either you surrender, completely, or you leave the euro. What Germany wants is to keep a partnership with France and dominate Eastern Europe as an economic satellite, relying on Poland. So expect Greece, Spain, Portugal and Italy to face a German wall of intransigence. So much for European “integration,” it works as long as Germany dictates all the rules.

The spanner in the works is that the double fiasco Greece + Ukraine has been exposing. Berlin as an extremely flawed European hegemon – and that’s quite an understatement. Berlin suddenly woke up to the real, nightmarish possibility of a full blown, American-instigated war in Europe’s eastern borderlands against Russia. No wonder Angela Merkel had to fly to Moscow in a hurry.

Moscow – diplomatically – was the winner. And Russia won again when Turkey – fed up with trying to join the EU and being constantly blocked by, who else, Germany and France – decided to pivot to Eurasia for good, ignoring NATO and amplifying relations with both Russia and China.

That happened in the framework of a major ‘Pipelineistan’ game-changer. After Moscow cleverly negotiated the realignment of South Stream towards Turk Stream, right up to the Greek border, Putin and Greek Prime Minister Tsipras also agreed to a pipeline extension from the Turkish border across Greece to southern Europe. So Gazprom will be firmly implanted not only in Turkey but also Greece, which in itself will become mightily strategic in European ‘Pipelineistan’.

So Germany, sooner or later, must answer a categorical imperative – how to keep running massive trade surpluses while dumping their euro trade partners. The only possible answer is more trade with Russia, China and East Asia. It will take quite a while, and there will be many bumps on the road, but a Berlin-Moscow-Beijing trade/commercial axis – or the “RC” in BRICS meet Germany – is all but inevitable.

And no, you won’t read that in any wacky US ‘Think Tankland’ “forecast.”

Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

Germany’s future lies East

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THE ROVING EYE

Reuters / Ueslei Marcelino

Reuters / Ueslei Marcelino 

Originally published in Asia Times on March 3, 2015
Discuss this article here in the Diner Forum.

What the BRICS plus Germany are really up to?

Winston Churchill once said, “I feel lonely without a war.” He also badly missed the loss of empire. Churchill’s successor – the ‘Empire of Chaos’ – now faces the same quandary. Some wars – as in Ukraine, by proxy – are not going so well.

And the loss of empire increasingly manifests itself in myriad moves by selected players aiming towards a multipolar world.

So no wonder US ‘Think Tankland’ is going bonkers, releasing wacky CIA-tinted “forecasts” where Russia is bound to disintegrate, and China is turning into a communist dictatorship. So much (imperial) wishful thinking, so little time to prolong hegemony.

The acronym that all these “forecasts” dare not reveal is BRICS (Brazil, Russia, India, China, and South Africa). BRICS is worse than the plague as far as the ‘Masters of the Universe’ that really control the current – rigged – world system are concerned. True, the BRICS are facing multiple problems. Brazil at the moment is totally paralyzed; a long, complex, self-defeating process, now coupled with intimations of regime change by local ‘Empire of Chaos’ minions. It will take time, but Brazil will rebound.

That leaves the “RIC” – Russia, India and China – in BRICS as the key drivers of change. For all their interlocking discrepancies, they all agree they don’t need to challenge the hegemon directly while aiming for a new multipolar order.

The BRICS New Development Bank (NDB) – a key alternative to the IMF enabling developing nations to get rid of the US dollar as a reserve currency – will be operative by the end of this year. The NDB will finance infrastructure and sustainable development projects not only in the BRICS nations but other developing nations. Forget about the Western-controlled World Bank, whose capital and lending capacity are never increased by the so-called Western “powers.” The NDB will be an open institution. BRICS nations will keep 55 percent of the voting power, and outside their domain no country will be allowed more than 7 percent of votes. But crucially, developing nations may also become partners and receive loans.

Russia's President Vladimir Putin delivers a speech as he attends the VI BRICS Summit in Fortaleza July 15, 2014.(Reuters / Paulo Whitaker )

Russia’s President Vladimir Putin delivers a speech as he attends the VI BRICS Summit in Fortaleza July 15, 2014.(Reuters / Paulo Whitaker )

Damn those communists

A tripartite entente cordiale is also in the making. Indian Prime Minister Narendra Modi will be in China next May – and ‘Chindia’ will certainly engage in a breakthrough concerning their bitter territorial disputes. As much as Delhi has a lot to benefit from China’s massive capital investment and exports, Beijing wants to profit from India’s vast market and technology savvy. In parallel, Beijing has already volunteered economic help to Russia – if Moscow asks for it – on top of their evolving strategic partnership.

The US “pivoting to Asia” – launched at the Pentagon – is all dressed up with no place to go. Bullying Southeast Asia, South Asia and, for that matter, East Asia as a whole into becoming mere ‘Empire of Chaos’ vassals – and on top of it confronting China – was always a non-starter. Not to mention believing in the fairy tale of a remilitarized Japan able to “contain” China.

Isolating the “communist dictatorship” won’t fly. Just watch, for instance, the imminent high-speed rail link between Kunming, in Yunnan province, and Singapore, traversing a key chunk of a Southeast Asia which for Washington would never qualify to be more than a bunch of client states. The emerging 21st century Asia is all about interconnection; and the inexorable sun in this galaxy is China.

As China has embarked in an extremely complex tweaking of its economic development model, as I outlined here, China’s monopoly of low-end manufacturing – its previous industrial base – is migrating across the developing world, especially around the Indian Ocean basin. Good news for the Global South – and that includes everyone from African nations such as Kenya and Tanzania to parts of Southeast Asia and Latin America.

Of course the ‘Empire of Chaos’, business-wise, won’t be thrown out of Asia. But its days as an Asian hegemon, or a geopolitical Mob offering “protection”, are over.

The Chinese remix of Go West, Young Man – in fact go everywhere – started as early as 1999. Of the top 10 biggest container ports in the world, no less than 7 are in China (the others are Singapore, Rotterdam, and Pusan in South Korea). As far as the 12th Chinese 5-year plan – whose last year is 2015 – is concerned, most of the goals of the seven technology areas China wanted to be in the leading positions have been achieved, and in some cases even superseded.

The Bank of China will increasingly let the yuan move more freely against the US dollar. It will be dumping a lot of US dollars every once in a while. The 20-year old US dollar peg will gradually fade. The biggest trading nation on the planet, and the second largest economy simply cannot be anchored to a single currency. And Beijing knows very well how a dollar peg magnifies any external shocks to the Chinese economy.

Sykes-Picot is us

A parallel process in Southwest Asia will also be developing; the dismantling of the nation-state in the Middle East – as in remixing the Sykes-Picot agreement of a hundred years ago. What a stark contrast to the return of the nation-state in Europe.

There have been rumblings that the remixed Sykes is Obama and the remixed Picot is Putin. Not really. It’s the ‘Empire of Chaos’ that is actually acting as the new Sykes-Picot, directly and indirectly reconfiguring the “Greater Middle East.” Former NATO capo Gen. Wesley Clark has recently “revealed” what everyone already knew; the ISIS/ISIL/Daesh fake Caliphate is financed by “close allies of the United States,” as in Saudi Arabia, Qatar, Turkey and Israel. Compare that with Israeli Defense Minister Moshe Yaalon admitting that ISIS “does not represent a threat to Israeli interests.” Daesh does the unraveling of Sykes-Picot for the US.

The ‘Empire of Chaos’ actively sought the disintegration of Iraq, Syria and especially Libya. And now, leading the House of Saud, “our” bastard in charge King Salman is none other than the former, choice jihad recruiter for Abdul Rasul Sayyaf, the Afghan Salafist who was the brains behind both Osama bin Laden and alleged 9/11 mastermind Khalid Sheikh Mohammad.

This is classic ‘Empire of Chaos’ in motion (exceptionalists don’t do nation building, just nation splintering). And there will be plenty of nasty, nation-shattering sequels, from the Central Asian stans to Xinjiang in China, not to mention festering, Ukraine, a.k.a Nulandistan.

Parts of Af-Pak could well turn into a branch of ISIS/ISIL/Daesh right on the borders of Russia, India, China, and Iran. From an ‘Empire of Chaos’ perspective, this potential bloodbath in the “Eurasian Balkans” – to quote eminent Russophobe Dr. Zbig “Grand Chessboard” Brzezinski – is the famous “offer you can’t refuse.”

Russia and China, meanwhile, will keep betting on Eurasian integration; strengthening the Shanghai Cooperation Organization (SCO) and their own internal coordination inside the BRICS; and using plenty of intel resources to go after The Caliph’s goons.

And as much as the Obama administration may be desperate for a final nuclear deal with Iran, Russia and China got to Tehran first. China’s Foreign Minister Wang Yi was in Tehran two weeks ago; stressing Iran is one of China’s “foreign policy priorities” and of great “strategic importance.” Sooner rather than later Iran will be a member of the SCO. China already does plenty of roaring trade with Iran, and so does Russia, selling weapons and building nuclear plants.

Germany's Chancellor Angela Merkel.(Reuters / Eric Vidal)

Germany’s Chancellor Angela Merkel.(Reuters / Eric Vidal)

Berlin-Moscow-Beijing?

And then there’s the German question.

Germany now exports 50 percent of its GDP. It used to be only 24 percent in 1990. For the past 10 years, half of German growth depended on exports. Translation: this is a giant economy that badly needs global markets to keep expanding. An ailing EU, by definition, does not fit the bill.

German exports are changing their recipient address. Only 40 percent – and going down – now goes to the EU; the real growth is in Asia. So Germany, in practice, is moving away from the eurozone. That does not entail Germany breaking up the euro; that would be interpreted as a nasty betrayal of the much-lauded “European project.”

What the trade picture unveils is the reason for Germany’s hardball with Greece: either you surrender, completely, or you leave the euro. What Germany wants is to keep a partnership with France and dominate Eastern Europe as an economic satellite, relying on Poland. So expect Greece, Spain, Portugal and Italy to face a German wall of intransigence. So much for European “integration,” it works as long as Germany dictates all the rules.

The spanner in the works is that the double fiasco Greece + Ukraine has been exposing. Berlin as an extremely flawed European hegemon – and that’s quite an understatement. Berlin suddenly woke up to the real, nightmarish possibility of a full blown, American-instigated war in Europe’s eastern borderlands against Russia. No wonder Angela Merkel had to fly to Moscow in a hurry.

Moscow – diplomatically – was the winner. And Russia won again when Turkey – fed up with trying to join the EU and being constantly blocked by, who else, Germany and France – decided to pivot to Eurasia for good, ignoring NATO and amplifying relations with both Russia and China.

That happened in the framework of a major ‘Pipelineistan’ game-changer. After Moscow cleverly negotiated the realignment of South Stream towards Turk Stream, right up to the Greek border, Putin and Greek Prime Minister Tsipras also agreed to a pipeline extension from the Turkish border across Greece to southern Europe. So Gazprom will be firmly implanted not only in Turkey but also Greece, which in itself will become mightily strategic in European ‘Pipelineistan’.

So Germany, sooner or later, must answer a categorical imperative – how to keep running massive trade surpluses while dumping their euro trade partners. The only possible answer is more trade with Russia, China and East Asia. It will take quite a while, and there will be many bumps on the road, but a Berlin-Moscow-Beijing trade/commercial axis – or the “RC” in BRICS meet Germany – is all but inevitable.

And no, you won’t read that in any wacky US ‘Think Tankland’ “forecast.”

 

Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

Year of the Sheep, Century of the Dragon?

Off the keyboard of Pepe Escobar
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New Silk Roads and the Chinese Vision of a Brave New (Trade) World…

Majority Of Flights In Eastern China Delayed By Red Alert

Published in Asia Times on February 22, 2015
Discuss this article here in the Diner Forum.

BEIJING — Seen from the Chinese capital as the Year of the Sheep starts, the malaise affecting the West seems like a mirage in a galaxy far, far away. On the other hand, the China that surrounds you looks all too solid and nothing like the embattled nation you hear about in the Western media, with its falling industrial figures, its real estate bubble, and its looming environmental disasters. Prophecies of doom notwithstanding, as the dogs of austerity and war bark madly in the distance, the Chinese caravan passes by in what President Xi Jinping calls “new normal” mode.

“Slower” economic activity still means a staggeringly impressive annual growth rate of 7% in what is now the globe’s leading economy. Internally, an immensely complex economic restructuring is underway as consumption overtakes investment as the main driver of economic development. At 46.7% of the gross domestic product (GDP), the service economy has pulled ahead of manufacturing, which stands at 44%.

Geopolitically, Russia, India, and China have just sent a powerful message westward: they are busy fine-tuning a complex trilateral strategy for setting up a network of economic corridors the Chinese call “new silk roads” across Eurasia. Beijing is also organizing a maritime version of the same, modeled on the feats of Admiral Zheng He who, in the Ming dynasty, sailed the “western seas” seven times, commanding fleets of more than 200 vessels.

Meanwhile, Moscow and Beijing are at work planning a new high-speed railremix of the fabled Trans-Siberian Railroad. And Beijing is committed to translating its growing strategic partnership with Russia into crucial financial and economic help, if a sanctions-besieged Moscow, facing a disastrous oil price war, asks for it. To China’s south, Afghanistan, despite the 13-year American war still being fought there, is fast moving into its economic orbit, while a planned China-Myanmar oil pipeline is seen as a game-changing reconfiguration of the flow of Eurasian energy across what I’ve long called Pipelineistan.

And this is just part of the frenetic action shaping what the Beijing leadership defines as the New Silk Road Economic Belt and the Maritime Silk Road of the twenty-first century. We’re talking about a vision of creating a potentially mind-boggling infrastructure, much of it from scratch, that will connect China to Central Asia, the Middle East, and Western Europe. Such a development will include projects that range from upgrading the ancient silk road via Central Asia to developing a Bangladesh-China-India-Myanmar economic corridor; a China-Pakistan corridor through Kashmir; and a new maritime silk road that will extend from southern China all the way, in reverse Marco Polo fashion, to Venice.

Don’t think of this as the twenty-first-century Chinese equivalent of America’s post-World War II Marshall Plan for Europe, but as something far more ambitious and potentially with a far vaster reach.

China as a Mega-City

If you are following this frenzy of economic planning from Beijing, you end up with a perspective not available in Europe or the U.S. Here, red-and-gold billboards promote President Xi Jinping’s much ballyhooed new tagline for the country and the century, “the Chinese Dream” (which brings to mind “the American Dream” of another era). No subway station is without them. They are a reminder of why 40,000 miles of brand new high-speed rail is considered so essential to the country’s future. After all, no less than 300 million Chinese have, in the last three decades, made a paradigm-breaking migration from the countryside to exploding urban areas in search of that dream.

Another 350 million are expected to be on the way, according to a McKinsey Global Institute study. From 1980 to 2010, China’s urban population grew by 400 million, leaving the country with at least 700 million urban dwellers. This figure is expected to hit one billion by 2030, which means tremendous stress on cities, infrastructure, resources, and the economy as a whole, as well as near-apocalyptic air pollution levels in some major cities.

Already 160 Chinese cities boast populations of more than one million. (Europe has only 35.) No less than 250 Chinese cities have tripled their GDP per capita since 1990, while disposable income per capita is up by 300%.

These days, China should be thought of not in terms of individual cities but urban clusters — groupings of cities with more than 60 million people. The Beijing-Tianjin area, for example, is actually a cluster of 28 cities. Shenzhen, the ultimate migrant megacity in the southern province of Guangdong, is now a key hub in a cluster as well. China, in fact, has more than 20 such clusters, each the size of a European country. Pretty soon, the main clusters will account for 80% of China’s GDP and 60% of its population. So the country’s high-speed rail frenzy and its head-spinning infrastructure projects — part of a $1.1 trillion investment in 300 public works — are all about managing those clusters.

Not surprisingly, this process is intimately linked to what in the West is considered a notorious “housing bubble,” which in 1998 couldn’t have even existed. Until then all housing was still owned by the state. Once liberalized, that housing market sent a surging Chinese middle class into paroxysms of investment. Yet with rare exceptions, middle-class Chinese can still afford their mortgages because both rural and urban incomes have also surged.

The Chinese Communist Party (CCP) is, in fact, paying careful attention to this process, allowing farmers to lease or mortgage their land, among other things, and so finance their urban migration and new housing. Since we’re talking about hundreds of millions of people, however, there are bound to be distortions in the housing market, even the creation of whole disastrous ghost towns with associated eerie, empty malls.

The Chinese infrastructure frenzy is being financed by a pool of investments from central and local government sources, state-owned enterprises, and the private sector. The construction business, one of the country’s biggest employers, involves more than 100 million people, directly or indirectly. Real estate accounts for as much as 22% of total national investment in fixed assets and all of this is tied to the sale of consumer appliances, furnishings, and an annual turnover of 25% of China’s steel production, 70% of its cement, 70% of its plate glass, and 25% of its plastics.

So no wonder, on my recent stay in Beijing, businessmen kept assuring me that the ever-impending “popping” of the “housing bubble” is, in fact, a myth in a country where, for the average citizen, the ultimate investment is property. In addition, the vast urbanization drive ensures, as Premier Li Keqiang stressed at the recent World Economic Forum in Davos, a “long-term demand for housing.”

Markets, Markets, Markets

China is also modifying its manufacturing base, which increased by a multiple of 18 in the last three decades. The country still produces 80% of the world’s air conditioners, 90% of its personal computers, 75% of its solar panels, 70% of its cell phones, and 63% of its shoes. Manufacturing accounts for 44% of Chinese GDP, directly employing more than 130 million people. In addition, the country already accounts for 12.8% of global research and development, well ahead of England and most of Western Europe.

Yet the emphasis is now switching to a fast-growing domestic market, which will mean yet more major infrastructural investment, the need for an influx of further engineering talent, and a fast-developing supplier base. Globally, as China starts to face new challenges — rising labor costs, an increasingly complicated global supply chain, and market volatility — it is also making an aggressive push to move low-tech assembly to high-tech manufacturing. Already, the majority of Chinese exports are smartphones, engine systems, and cars (with planes on their way). In the process, a geographic shift in manufacturing is underway from the southern seaboard to Central and Western China. The city of Chengdu in the southwestern province of Sichuan, for instance, is now becoming a high-tech urban cluster as it expands around firms like Intel and HP.

So China is boldly attempting to upgrade in manufacturing terms, both internally and globally at the same time. In the past, Chinese companies have excelled in delivering the basics of life at cheap prices and acceptable quality levels. Now, many companies are fast upgrading their technology and moving up into second- and first-tier cities, while foreign firms, trying to lessen costs, are moving down to second- and third-tier cities. Meanwhile, globally, Chinese CEOs want their companies to become true multinationals in the next decade. The country already has 73 companies in the Fortune Global 500, leaving it in the number two spot behind the U.S.

In terms of Chinese advantages, keep in mind that the future of the global economy clearly lies in Asia with its record rise in middle-class incomes. In 2009, the Asia-Pacific region had just 18% of the world’s middle class; by 2030, according to the Development Center of the Organization for Economic Cooperation and Development, that figure will rise to an astounding 66%. North America and Europe had 54% of the global middle class in 2009; in 2030, it will only be 21%.

Follow the money, and the value you get for that money, too. For instance, no less than 200,000 Chinese workers were involved in the production of the first iPhone, overseen by 8,700 Chinese industrial engineers. They were recruited in only two weeks. In the U.S., that process might have taken more than nine months. The Chinese manufacturing ecosystem is indeed fast, flexible, and smart — and it’s backed by an ever more impressive education system. Since 1998, the percentage of GDP dedicated to education has almost tripled; the number of colleges has doubled; and in only a decade, China has built the largest higher education system in the world.

Strengths and Weaknesses

China holds more than $15 trillion in bank deposits, which are growing by a whopping $2 trillion a year. Foreign exchange reserves are nearing $4 trillion. A definitive study of how this torrent of funds circulates within China among projects, companies, financial institutions, and the state still does not exist. No one really knows, for instance, how many loans the Agricultural Bank of China actually makes. High finance, state capitalism, and one-party rule all mix and meld in the realm of Chinese financial services where realpolitik meets real big money.

The big four state-owned banks — the Bank of China, the Industrial and Commercial Bank of China, the China Construction Bank, and the Agricultural Bank of China — have all evolved from government organizations into semi-corporate state-owned entities. They benefit handsomely both from legacy assets and government connections, or guanxi, and operate with a mix of commercial and government objectives in mind. They are the drivers to watch when it comes to the formidable process of reshaping the Chinese economic model.

As for China’s debt-to-GDP ratio, it’s not yet a big deal. In a list of 17 countries, it lies well below those of Japan and the U.S., according to Standard Chartered Bank, and unlike in the West, consumer credit is only a small fraction of total debt. True, the West exhibits a particular fascination with China’s shadow banking industry: wealth management products, underground finance, off-the-balance-sheet lending. But such operations only add up to around 28% of GDP, whereas, according to the International Monetary Fund, it’s a much higher percentage in the U.S.

China’s problems may turn out to come from non-economic areas where the Beijing leadership has proven far more prone to false moves. It is, for instance, on the offensive on three fronts, each of which may prove to have its own form of blowback: tightening ideological control over the country under the rubric of sidelining “Western values”; tightening control over online information and social media networks, including reinforcing “the Great Firewall of China” to police the Internet; and tightening further its control over restive ethnic minorities, especially over the Uighurs in the key western province of Xinjiang.

On two of these fronts — the “Western values” controversy and Internet control — the leadership in Beijing might reap far more benefits, especially among the vast numbers of younger, well educated, globally connected citizens, by promoting debate, but that’s not how the hyper-centralized Chinese Communist Party machinery works.

When it comes to those minorities in Xinjiang, the essential problem may not be with the new guiding principles of President Xi’s ethnic policy. According to Beijing-based analyst Gabriele Battaglia, Xi wants to manage ethnic conflict there by applying the “three Js”: jiaowang, jiaoliu, jiaorong (“inter-ethnic contact,” “exchange,” and “mixage”). Yet what adds up to a push from Beijing for Han/Uighur assimilation may mean little in practice when day-to-day policy in Xinjiang is conducted by unprepared Han cadres who tend to view most Uighurs as “terrorists.”

If Beijing botches the handling of its Far West, Xinjiang won’t, as expected, become the peaceful, stable, new hub of a crucial part of the silk-road strategy. Yet it is already considered an essential communication link in Xi’s vision of Eurasian integration, as well as a crucial conduit for the massive flow of energy supplies from Central Asia and Russia. The Central Asia-China pipeline, for instance, which brings natural gas from the Turkmen-Uzbek border through Uzbekistan and southern Kazakhstan, is already adding a fourth line to Xinjiang. And one of the two newly agreed upon Russia-China pipelines will also arrive in Xinjiang.

The Book of Xi

The extent and complexity of China’s myriad transformations barely filter into the American media. Stories in the U.S. tend to emphasize the country’s “shrinking” economy and nervousness about its future global role, the way it has “duped” the U.S. about its designs, and its nature as a military “threat” to Washington and the world.

The U.S. media has a China fever, which results in typically feverish reports that don’t take the pulse of the country or its leader. In the process, so much is missed. One prescription might be for them to read The Governance of China, a compilation of President Xi’s major speeches, talks, interviews, and correspondence. It’s already a three-million-copy bestseller in its Mandarin edition and offers a remarkably digestible vision of what Xi’s highly proclaimed “China Dream” will mean in the new Chinese century.

Xi Dada (“Xi Big Bang” as he’s nicknamed here) is no post-Mao deity. He’s more like a pop phenomenon and that’s hardly surprising. In this “to get rich is glorious” remix, you couldn’t launch the superhuman task of reshaping the Chinese model by being a cold-as-a-cucumber bureaucrat. Xi has instead struck a collective nerve by stressing that the country’s governance must be based on competence, not insider trading and Party corruption, and he’s cleverly packaged the transformation he has in mind as an American-style “dream.”

Behind the pop star clearly lies a man of substance that the Western media should come to grips with. You don’t, after all, manage such an economic success story by accident. It may be particularly important to take his measure since he’s taken the measure of Washington and the West and decided that China’s fate and fortune lie elsewhere.

As a result, last November he made official an earthshaking geopolitical shift. From now on, Beijing would stop treating the U.S. or the European Union as its main strategic priority and refocus instead on China’s Asian neighbors and fellow BRICS countries (Brazil, Russia, India, and South Africa, with a special focus on Russia), also known here as the “major developing powers” (kuoda fazhanzhong de guojia). And just for the record, China does not consider itself a “developing country” anymore.

No wonder there’s been such a blitz of Chinese mega-deals and mega-dealings across Pipelineistan recently. Under Xi, Beijing is fast closing the gap on Washington in terms of intellectual and economic firepower and yet its global investment offensive has barely begun, new silk roads included.

Singapore’s former foreign minister George Yeo sees the newly emerging world order as a solar system with two suns, the United States and China. The Obama administration’s new National Security Strategy affirms that “the United States has been and will remain a Pacific power” and states that “while there will be competition, we reject the inevitability of confrontation” with Beijing. The “major developing powers,” intrigued as they are by China’s extraordinary infrastructural push, both internally and across those New Silk Roads, wonder whether a solar system with two suns might not be a non-starter. The question then is: Which “sun” will shine on Planet Earth?  Might this, in fact, be the century of the dragon?

Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

Obama’s ‘stupid stuff’ turned upside down

Off the keyboard of Pepe Escobar
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THE ROVING EYE

the-grand-chess-board

Originally published in Asia Times on September 18, 2014
Discuss this article here in the Diner Forum.

 

 

PARIS – I’ve been rovin’ around Europe for a while and the star of the show is definitely The Caliph. Former Abu Bakr al-Baghdadi has totally outstripped Vladimir Putin as Doctor Evil of the hour. Where’s a good ol’ Cold War 2.0 when you need it? Well, upstaged by the Pentagon’s “long war” – our familiar GWOT (Global War on Terror).

First Obama promised there would be no ground troops to fight The Caliph – as in a re-invasion of Iraq. Then General Martin Dempsey, chairman of the Joint Chiefs of Staff, said that if the current gambit of Obama’s self-defined “Don’t So Stupid Stuff” foreign policy doctrine does not work – and it won’t – he’ll go for ground troops, embedded or otherwise.

Right on cue, The Caliph went Hollywood, releasing the trailer of The Caliphate’s upcoming mega-production, Flames of War. Directed by Michael Bay (Fall, 2014). Will that go straight to Netflix?

You just can’t beat the Marvel Comics school of geopolitics.

Confide in me, baby 

Meanwhile, in Paris, President General Francois Hollande is itching to deploy his Rafales and get into a new war – considering that’s about the only thing that could lift the mood of a wretched president, whose administration has barely survived a “confidence” vote; compare that “confidence” with the nasty epithets with which his team is showered by largely unemployed, taxed to death or swamped by red tape Parisians.

Obama has already sent 475 extra military “advisers” to Baghdad and Iraqi Kurdistan. There are at least 1,600 US military already on the ground in Iraq. That’s how Vietnam started. The CIA, supported by unmatched ground intel, swears there are exactly 31.785 jihadis fighting for The Caliph. Well, roughly. Two-thirds of these are supposed to be in Syria. So the new war, in fact, is all across “Syraq”. Or what The Caliph calls IS, Islamic State, his own private emirate.

The no less meticulous Dempsey, for his part, is sure it will take up to five months to train and weaponize a new bunch of “moderate” rebels to fight the Caliph. Wait a minute; foolish global public opinion was supposed to believe the previous “moderate” rebels – supported by Qatar – would one day fulfill the “Assad must go” Obama mandate. Well, they didn’t.

“Our” bastards at the petrodollar racket known as GCC (Gulf Cooperation Council) have duly promised to help Obama’s new war, alongside Egypt, Jordan, Lebanon and Iraq. Turkey will only get involved in the “humanitarian” front – while allowing smuggled oil sold by The Caliph’s goons into its territory.

The members of the wretched Arab League have solemnly promised to be “determined” in cutting off the flux of weapons and cash to The Caliph show. Yet they would never have the balls of the Kurdish peshmerga, who have just killed the Mosul chief of IS. This kind of ground intel, plus following the money, as in the oil smuggling routes, would finish off the Caliphate in no time. But that’s not what endless GWOT is all about.

Caliph, give us a hand
With such an array of Hollywood thrills on show, who cares about Ukraine? Well, it may have been snuffed out of the news cycle after the latest nasty package of US/EU sanctions, but it’s back in the spotlight this Thursday, as Ukrainian oligarch turned president Petro Poroshenko visits The Caliph’s nemesis in Washington.

So expect a frantic rerun of Evil Empire rhetoric – plus ample indignation caused by the Russian “invasion” of Ukraine. That will last barely a day. “Don’t Do Stupid Stuff” changes its tune like surfing on iTunes. And the tune now is the “Syraq” offensive; yet another Obama “kinetic” operation, Billy Idol’s Rebel Yell remixed.

That leaves plenty of space for US Think Tankland to carp that Russia “aggression” will profit from the new tune to “advance” in Central and Eastern Europe, and the China “threat” will profit to “dominate” the Western Pacific. So what’s more crucial for the Empire of Chaos; Russia, China or “Syraq”? They don’t have a clue. They are just trying not to do “stupid stuff”.

For all that volcanic Beltway paranoia, the Big Picture in the long run spells out Moscow expanding its Pipelineistan nodes throughout Eastern Europe all the way to Western Europe, thus enlarging, commercially, its “soft” zone of influence. No “invasion” required.

On Ukraine, the Big Picture spells out the European Union mired in a horrendous crisis, under a third recession in five years, obviously without the cash, not to mention the will, to pay Ukraine’s humongous bills. Sooner – with negotiations starting this Saturday in Berlin – or later the EU will have to find an accommodation with Moscow to guarantee its precious gas supplies.

That leaves warmongering NATO – as in the EU under the Pentagon’s thumb. All rhetoric about that puny “rapid reaction force” aside, the fact is that the North Atlantic Treaty Organization won’t have the balls to confront Russia, via troops deployed in Ukraine. And there will be no Obama “Stupid Stuff” aerial bombing of federalists in Donbass – as if Russophones in Ukraine defending their land and their language against a form of slow motion ethnic cleansing could be compared to The Caliph’s multinational goons in “Syraq”. US public opinion very well knows – well, maybe not – that people in Donbass are not threatening to cross into El Paso tomorrow.

So much hard work to pivot from GWOT to the Big Boys in Eurasia. So little time – and competence. The Caliph’s goons have announced on the record they would go for beheading Putin. If only the Pentagon would subcontract the job.

 

Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

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Empire in Decline - Propaganda and the American Myth By Cognitive Dissonance     “Oh, what a tangled [...]

Meanderings By Cognitive Dissonance     Tis the Season Silly season is upon us. And I, for one, welc [...]

The Brainwashing of a Nation by Daniel Greenfield via Sultan Knish blog Image by ElisaRiva from Pixa [...]

A Window Into Our World By Cognitive Dissonance   Every year during the early spring awakening I qui [...]

Event Update For 2019-09-16http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2019-09-15http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

Event Update For 2019-09-14http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

Event Update For 2019-09-13http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

Event Update For 2019-09-12http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

With fusion energy perpetually 20 years away we now also perpetually have [fill in the blank] years [...]

My mea culpa for having inadvertently neglected FF2F for so long, and an update on the upcoming post [...]

NYC plans to undertake the swindle of the civilisation by suing the companies that have enabled it t [...]

MbS, the personification of the age-old pre-revolutionary scenario in which an expiring regime attem [...]

Daily Doom Photo

man-watching-tv

Sustainability

  • Peak Surfer
  • SUN
  • Transition Voice

The Trickster's Tale"Everyone has some wisdom, but no one has all of it." Come gather 'round my children [...]

Nothing Again - Naomi Klein Renews Her Climate Prescription"By now we should all be well aware by now of the havoc being caused by climate change." I [...]

Leaves of Seagrass"Seawater is the circulatory system of Gaia"In 1855, Walt Whitman penned the free verse, “ [...]

Treeplanting Olympics"Withdrawing 700 gigatons of carbon from the atmosphere could be accomplished by as early as mi [...]

The Dark Cloud"Skynet needs to send a terminator back to 1984 and take out Mark Zuckerberg’s mom before he ca [...]

The folks at Windward have been doing great work at living sustainably for many years now.  Part of [...]

 The Daily SUN☼ Building a Better Tomorrow by Sustaining Universal Needs April 3, 2017 Powering Down [...]

Off the keyboard of Bob Montgomery Follow us on Twitter @doomstead666 Friend us on Facebook Publishe [...]

Visit SUN on Facebook Here [...]

What extinction crisis? Believe it or not, there are still climate science deniers out there. And th [...]

My new book, Abolish Oil Now, will talk about why the climate movement has failed and what we can do [...]

A new climate protest movement out of the UK has taken Europe by storm and made governments sit down [...]

The success of Apollo 11 flipped the American public from skeptics to fans. The climate movement nee [...]

Today's movement to abolish fossil fuels can learn from two different paths that the British an [...]

Top Commentariats

  • Our Finite World
  • Economic Undertow

Thanks for the links! I don't agree with everything, but the charts are good. In particular, St [...]

By the way, thanks for your comments on the political orthodoxy during the 1970s and 1980s. I wasn [...]

I remember reading about the water problem for lithium extraction in Chile before. This is a fairly [...]

The farmers who worry about our phone batteries https://ichef.bbci.co.uk/news/624/cpsprodpb/130BB/pr [...]

Good point. It need coal both for making the concrete for the dams and for power 24/7/365. [...]

Hi Steve. I recently found what I believe is a little gem, and I'm quite confident you'd a [...]

The Federal Reserve is thinking about capping yields? I don't know how long TPTB can keep this [...]

As some one who has spent years trying to figure out what the limits to growth are. let me say that [...]

Peak oil definitely happened for gods sake. Just because it isn't mad max right now is no indic [...]

@Volvo - KMO says he made some life choices he regrets. Not sure what they were. And I don't th [...]

RE Economics

Going Cashless

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Simplifying the Final Countdown

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Bond Market Collapse and the Banning of Cash

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Do Central Bankers Recognize there is NO GROWTH?

Discuss this article @ the ECONOMICS TABLE inside the...

Singularity of the Dollar

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Kurrency Kollapse: To Print or Not To Print?

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SWISSIE CAPITULATION!

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Of Heat Sinks & Debt Sinks: A Thermodynamic View of Money

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Merry Doomy Christmas

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Peak Customers: The Final Liquidation Sale

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Collapse Fiction

Useful Links

Technical Journals

Barocaloric is a solid-state not-in-kind technology, for cooling and heat pumping, rising as an alte [...]

Terrestrial ecosystems and their vegetation are linked to climate. With the potential of accelerated [...]

The Antarctic Centennial Oscillation (ACO) is a paleoclimate temperature cycle that originates in th [...]