better than bankster bailouts: The New Silk Road?

[lektrode]

"New Silk Road" Could Change Global Economics Forever, Part 1

Submitted by Robert Berke via OilPrice.com,


Part 1: The New Silk Road
Beginning with the marvelous tales of Marco Polo’s travels across Eurasia to China, the Silk Road has never ceased to entrance the world. Now, the ancient cities of Samarkand, Baku, Tashkent, and Bukhara are once again firing the world’s imagination.


China is building the world’s greatest economic development and construction project ever undertaken: The New Silk Road.

[don]

Re: better than bankster bailouts: The New Silk Road?

Finding the ‘silk thread’ in China’s rail projects


Author: Asia Unhedged May 19, 2015

Finally, the mystery of the 33.2% jump in April’s fiscal spending has been solved. We’re not saying it was a mystery keeping us up at night, but you have to admit, the Ministry of Finance’s news of April’s jump, compared with the 4.4% rise seen in March, left a lot of unanswered questions.

It turns out that China has given the green light to about 250 billion yuan ($40.30 billion) of railway and subway projects, the country’s top economic planner said on Monday, Reuters reported. China’s National Development and Reform Commission (NDRC) said on its website it had approved six projects. Five were approved in January and February, while the final one received approval this month, according to the NDRC.

Reuters also missed a nuance in reporting the big jump in China’s rail spending. It merely characterized the huge rail outlay as an attempt by Beijing to boost economic growth amid a wider slowdown.

Rather than just busy work to spark China’s economy, Asia Unhedged sees some of this rail spending as laying the groundwork for the country’s ambitious Silk Road project.

If you consider the new projects as building transportation infrastructure to bring China’s goods and services to central Asia and Europe, instead of just putting people to work, you can appreciate the investment China is making in its future. It would be nice if the U.S. could pull its head out its butt and make a similar investment in its railroad, which the recent Amtrak tragedy in Philadelphia proves is desperately needed.

With a 46.7 billion yuan subway system in Chengdu, this bolsters the ability of the largest city in southwest China to move and accommodate workers at a key industrial caravanserai of the Silk Road. New rail connections are also planned between cities in Inner Mongolia.

The New Silk Road has a maritime leg that links China by sea with western markets. So Asia Unhedged sees more than one angle in a 60 billion yuan rail project that will connect the coastal cities of Qingdao and Jinan. The existing Beijing-Shenyang high-speed railway will get another infusion of cash.

Building new rail lines also dovetails with government plans to boost development in more rural parts of China and encourage people to move away from congested urban centers like Beijing.

[don]

Re: better than bankster bailouts: The New Silk Road?

What are China’s top economic weaknesses?

Author: Francesco Sisci May 27, 2015
Asia Times News & Features, China,

What are China’s vulnerabilities? What are the top economic risks for this huge country that drives global growth and is running ahead of the pack of developing nations?

Recently, Andrew Sheng[1], a fellow at Fung Global Institute, wisely noted that China is preparing for a great transformation that will propel the Chinese state out of the shadow of Deng’s reforms and allow it to enter a new dimension. It sounds almost like a sci-fi novel. In fact, it’s possibly the closest thing on earth that combines space and time travel.

However, there are some speed bumps in the present Chinese system that have to be resolved before China can embark on this great journey. We shall only dwell briefly here on the reasons for these bumps, as well as possible solutions. The stakes are great in any event.

The problems could be so huge that they bog down, stall, and eventually kill Chinese growth. The flip side that solving them could bring a huge new boost to China’s economic performance.

The potential problems:

1) Financial costs are many times higher than the international market. Money now costs 6-7% a year in China and in reality it can cost at least three times as much even without notable inflation. The reason is basically that the financial system is primitive, cumbersome. It’s also overloaded with the debts of local governments and state-owned enterprises can cannot be simply erased. This creates a huge, useless burden on the economy, which could grow much faster without this burden. The solution lies in nothing short of a complex overhaul of the banking system along with some real privatization efforts. State officials must also carefully monitor the changes. Recent statements by Finance Minister Lou Jiwei[2] indicate the determination to move in this direction.

2) There are enormous inefficiencies in internal logistics. Things have improved in the last decade, thanks to the huge investments in railways and roads. But moving coal from Shanxi to Shanghai can still be more expensive than shipping it from Shanghai from the U.S. Experts estimate that the logistic costs of moving goods within China can be three times more than, say, moving them within EU.

The problem stems from many hidden fees. Logistics management is also and fragmented into too many phases, with little or no integrated management. Despite these problems, the time required to move freight in China is still much faster than in India. Sending stuff from Mumbai to Chennai can take three months.

But this is scant consolation since the loopholes in China’s transport system could dramatically slow and even unwind many efforts of the new “One Belt One Road” initiative. If you can’t ship merchandise cheaply enough to Kashgar, what’s the use of trying to move it to Berlin? The key is bringing in companies that can provide an integrated logistic service.

3) Prices for land development in many Chinese cities are higher or murkier than those in comparable cities in Europe and U.S. This is because in the past decade over 50% of municipal tax revenues came from land sales for real estate. Land was auctioned to the highest bidder — or it was given for free to projects that promised bigger investments in the city or a brighter limelight.

The root problem lay with the soaring overhead costs of the Chinese bureaucracy. This doesn’t mean that official salaries were too high. It means that the system has far more employees than necessary and much bigger and more luxurious offices and perks (restaurants, cars, etc.) than almost anywhere else in the world. It’s possible the central government has no clear idea of how much this bureaucracy costs or how much office space it occupies. One short-term solution might be the fire-sale of much of the excessive office space concentrated in the provinces. This would recover some money and cow greedy officials. A longer-term solution would be to keep an accurate balance sheet of state assets.

Previously, developing an alternative to this system was useless because the state owned everything. Now that private enterprises, small and large, are expanding and it clear that some officials have abused of their positions by treating state property as personal possessions, taking action is key. This, in a nutshell, is the focus of the present anti-corruption campaign. State assets must also be clearly accounted for.

This will allow the government to know exactly what it owns. It also allows officials to draw up rules on what localities, SOEs, or the military, central ministries, and other departments can do with what they possess. Currently, there’s no reliable information. Everything is confused or confusing. Another downside is that there’s plenty of room for businessmen and local officials to exchange favors and money in return for state assets.

Tackling the above would alleviate the financial cost and local debt problems alluded to in the first point. The central government, SOEs, or others could sell assets or bonds based on the assets. This would create the financial resources to clear China’s mountain of outstanding debts.

4) Government expenditures and financial reform also pale in comparison to the consumption issue. Consumption still needs to reach full fruition in China. The solution here may not lie in focusing on any specific economic sector. Rather, it may be better to consider cities as pulsing centers of growth, consumption, and distribution.

However, there are two problems. a) Too many key cities are located along China’s coast. The coastal phenomenon reflects a groundbreaking strategy launched by economist Wang Jian in the mid-1980s. But many of the cities on China’s east coast are now bursting with people and the demands that they create. Many cities in the center and the west of the country still suffer from the diversion of population and resources. b) Services within the eastern coastal cities are poor, while general living costs are as high or higher than in many western cities. The combination of these two problems are objective blocks to consumption, which doesn’t move inland and is slow to trickle down beyond an explosion of sales of luxury goods.

The problem is that the most attractive places for ordinary people and youth to live are these eastern cities. One way could be to follow the American or German model of dispersing state functions to different cities. For instance big, important universities from Beijing could be moved to the western provinces of Xinjiang, Gansu or Qinghai. Government offices could be moved to the smallest most needy towns in each province. With these simple decisions, growth would migrate. Of course, these measures would meet with opposition from officials or professors. But right now, an authoritarian China can still enforce such solutions. But in a few years, this might become more difficult.

5) The fifth problem is the trickiest. There is an internal and external lack of long-term confidence in China. This, in turn, stifles long-term investments, and thus, consumption.

The situation has improved somewhat because most Chinese now own their homes due to the cheap sale of state apartments to their assignees in the late 1990s. This makes new home-owners active stakeholders in the stability and welfare of the country. Things are also improving because insurance policies (taking care of health care expenses or retirement benefits) are spreading. This frees disposable income for spending.

However, even these improvements fall short of what is needed. As I wrote, there are no short- and medium-term reasons to worry about China’s stability. But in the long term (about 10 years), there will be many question marks. These questions basically center on the internal and global long-term trust in the stability of the Chinese political system. Democracy, though highly unstable day to day, is very stable over time. This is just the opposite of the Chinese system. The present anti-corruption campaign and the bitter power struggles every decade or so are a painful reminder of this inherent systemic weakness in the Chinese system. Solving this challenge is pivotal to cracking the other four challenges. But here is the conundrum: Xi Jinping needs a high concentration of power to address the first four challenges in the short and medium term. But he needs a different system to cope with the long-term implications China is facing. There is no clear way to address both needs. The practical Chinese solution would be to rely on a tyrant (no matter how enlightened) for now and then bring a liberal leader onstage, in ten years or so.

The question then is: Will Chinese and the rest of the world believe that such a transformation is possible? Xi cannot offer much clarity on this point since it would undermine his present anti-corruption and overhaul efforts. Yet, without a deeper trust in this metamorphosis, anything Xi wants to accomplish will be more difficult for him to achieve in the short and long term.

^[1] “China’s Next Massive Transformation,” May 9, 2015,
[2] China risks fall into middle-income trap Global Times, 2015-4-29 18:08:02

[don]

Re: better than bankster bailouts: The New Silk Road?

Mis-underestimating China

Author: David P. Goldman May 27, 2015


Scratch Carly Fiorina from the list of viable presidential candidates. She doesn’t have a clue. Specifically:

Former Hewlett-Packard CEO and 2016 Republican presidential candidate Carly Fiorina said earlier this year that the Chinese aren’t “terribly imaginative” and must resort to stealing the intellectual property of Americans.

Fiorina’s comments were made on Jan. 24 during an interview about the Common Core with Iowa political blog, Caffeinated Thoughts, video of which was surfaced by BuzzFeed News on Tuesday.

“I also think the argument for Common Core is frequently, ‘Oh, we have to compete with the Chinese,’” Fiorina told the blog.
Fiorina cited her overseas business experience in China.

“I’ve been doing business in China for decades, and I will tell you that yeah, the Chinese can take a test, but what they can’t do is innovate,” Fiorina said. “They’re not terribly imaginative. They’re not entrepreneurial, they don’t innovate, that’s why they’re stealing our intellectual property.”

What Nobel Laureate Edmund Phelps calls “mass flourishing,” the explosive propagation of productivity enhancements, has nothing to do with what we usually think of as “innovation.” All the science that went into the Industrial Revolution was discovered in the 17th century and settled in the 18th, Phelps observed, and all the inventions that made it possible were in place by the last third of the 18th century. But it wasn’t until 1815 that the real revolution in output and living standards began. It isn’t the science or the technology or the invention that brings about economic revolutions, but the readiness of the whole population to embrace innovation and change behavior. As Phelps writes:

The advent of the modern economy brought a metamorphosis: a modern economy turns people who are close to the economy, where they are apt to be struck by new commercial ideas, into the investigators and experimenters who manage the innovation process from development and, in many cases, adoption as well. In a role reversal, scientists and engineers are called in to assist on technical matters. In fact, it turns all sorts of people into ‘idea-men,’ financiers into thinkers, producers into marketers, and end-users into pioneers.

Whether the Chinese are more innovative on average than others is beside the point; coming from behind, they found it was cheaper to copy than to invent. But anyone who doubts China’s ability to innovate should spend a few hours at the exhibition hall of Huawei, China’s big communications equipment producer, in Shenzhen. Huawei spends as much on R&d as Apple, and employs thousands of Western scientists and engineers at research facilities around the world. Even that is beside the point.

What matters is that 500 million Chinese have moved from countryside to city in the past 35 years–the equivalent of the whole population of Europe from the Ural Mountains to the Atlantic. Uprooted from traditional life and placed in new and more promising circumstances, the Chinese as a people are more prepared to embrace change than any people in the history of the world.

Meanwhile, once-disruptive American tech companies have turned into stable consumer franchises run by patent lawyers rather than engineers. They trade like stable consumer franchises. Back in the disruptive 1990s, the volatility of the S&P tech subsector index was double that of the S&P 500. Now it’s roughly the same. In the meantime, China’s Shenzhen exchange is in an IPO frenzy, with tech companies achieving fantastic pricing. Call it a bubble, but that’s irrelevant: the Chinese are betting massively on innovation, the way Americans did 20 years ago, but don’t any more.




We Americans (to paraphrase my old boss, Ace Greenberg), have come to mistake our own body odor for perfume. To dismiss the Chinese as a nation of copycats incapable of innovation is just plain stupid. Carly Fiorina should find something better to do with her time than run for president.

[dcarrigg]

Re: better than bankster bailouts: The New Silk Road?

Carly Fiorina said earlier this year that the Chinese aren’t “terribly imaginative” and must resort to stealing the intellectual property of Americans.

Dido explains why the Romans will never outshine Carthage, "They just copy our boats, they're not terribly imaginative..."

[don]

Re: better than bankster bailouts: The New Silk Road?

Dido explains why the Romans will never outshine Carthage, "They just copy our boats, they're not terribly imaginative..."

but they sure could build roads . . .

[GRG55]

Re: better than bankster bailouts: The New Silk Road?

And what was Carly Fiorina trying to do when HP "merged" with Compaq? Copy Dell?

[jk]

Re: better than bankster bailouts: The New Silk Road?

carly should keep running for president. she can't do any harm thus occupied.

[don]

Re: better than bankster bailouts: The New Silk Road?

Beating Uncle Sam at His Own Game?

by MIKE WHITNEY

“Washington is not looking for peace or war. They’re looking for domination. If they can achieve domination peacefully – that’s fine. If they can’t, they’ll use war. It’s that simple.” William Blum, Interview with Russia Today

“The U.S. is frantically surrounding China with military weapons, advanced aircraft, naval fleets and a multitude of military bases from Japan, South Korea and the Philippines through several nearby smaller Pacific islands to its new and enlarged base in Australia…. The U.S. naval fleet, aircraft carriers and nuclear submarines patrol China’s nearby waters. Warplanes, surveillance planes, drones and spying satellites cover the skies, creating a symbolic darkness at noon.” Jack A. Smith, Hegemony Games: USA vs. PRC, CounterPunch

The vast build up of military assets in the Asia-Pacific signals a fundamental change in U.S. policy towards China. Washington no longer believes that China can be integrated into the existing US-led system. Recent actions taken by China– particularly the announcement that it planned to launch an Asian Infrastructure Investment Bank (AIIB) that would compete head-to-head with the World Bank and IMF— have set off alarms in the Capital where behind-the-scenes powerbrokers and think tank pundits agree that a more “robust” policy is needed to slow China’s ascendency. The current confrontation in the South China Sea–where the US has demanded that China immediately cease all land reclamation activities–indicates that the new policy has already been activated increasing the prospects of a conflagration between the two nuclear-armed adversaries.

There’s no need to go over the details of China’s land reclamation activities in the Spratly Islands since reasonable people can agree that Washington has no real interest in a few piles of sand heaped up on reefs 10,000 miles from the United States. The man-made islands pose no threat to US national security or to freedom of navigation. The Obama administration is merely using the Spratlys as a pretext to provoke, intimidate and harass Beijing. The Spratly’s provide a justification for escalation, for building an anti-China coalition among US allies in the region, for demonizing China in the media, for taking steps to disrupt China’s ambitious Silk Roads economic strategy, and for encircling China to the West with US warships that threaten China’s access to critical shipping lanes and vital energy supplies. This is the ultimate objective; to bring China to its knees and to force it to comply with Washington’s diktats. This is what Washington really wants.

In a recent speech at the Shangri La Dialogue in Singapore, US Secretary of Defense Ashton Carter said that “there is no military solution to the South China Sea disputes.” Just moments later, and without a trace of irony, Carter rattled off a long list of military assets the Pentagon plans to deploy to the Asia-Pacific to shore up US offensive capability. The list includes “the latest Virginia-class [nuclear] submarines, the Navy’s P-8 Poseidon surveillance aircraft, the newest stealth destroyer, the Zumwalt, and brand-new carrier-based E-2D Hawkeye early-warning-and-control aircraft.” The Pentagon is also going to add “new unmanned systems for the air and sea, a new long-range bomber, (an) electromagnetic railgun, lasers, and new systems for space and cyberspace, including a few surprising ones.”

For someone who doesn’t believe in a military solution, Carter is certainly adding a lot of lethal hardware to his arsenal. The question is: Why? Is Washington preparing for war?

Probably not. The United States does not want a war with China. What Washington wants is to be the dominant player in this century’s most promising and prosperous market, Asia. But China’s meteoric growth has put Washington’s plan at risk, which is why Obama is wheeling out the heavy artillery. The anti-China coalition, the China-excluding trade agreements (TPP) and the unprecedented military build up are all aimed at preserving Washington’s dominant role without actually starting a war. The administration thinks that the show of force alone will precipitate a change in behavior. They think China will back down rather than face the awesome military power of the American empire. But will it? Here’s another clip from Carter’s speech at Shangri La:

The United States will continue to protect freedom of navigation and overflight – principles that have ensured security and prosperity in this region for decades. There should be no mistake: the United States will fly, sail, and operate wherever international law allows, as U.S. forces do all around the world.
America, alongside its allies and partners in the regional architecture, will not be deterred from exercising these rights – the rights of all nations. After all, turning an underwater rock into an airfield simply does not afford the rights of sovereignty or permit restrictions on international air or maritime transit.

Who is Carter kidding? China poses no threat to freedom of navigation or overflight. The real threat is China’s participation in the $100 billion BRICS Development Bank which is set to finance some of the “largest projects of the modern history (including) the construction of new Eurasian infrastructure from Moscow to Vladivostok, in South China and India.” The so called BRICS (Brazil, Russia, India, China and South Africa) “represent 56% of world economic output, and account for 85% of world population. They control about 70% of the world’s foreign exchange reserves. They grow annually by an average of 4% —5%.” (Sputnik News) In other words, US-backed institutions are going to lose their exalted role as “underwriter for the global economy” because the world’s biggest infrastructure projects are going to be funded by China and its allies. Naturally, this doesn’t sit well with Washington where policy bigwigs are worried that US influence will gradually erode as global power inevitably shifts eastward.

US hegemony is also threatened by China’s Sino-centric economic policy which author Robert Berke sums up in an article on Oil Price.com titled “New Silk Road Could Change Global Economics Forever”. Here’s an excerpt from the article:

China is building the world’s greatest economic development and construction project ever undertaken: The New Silk Road. The project aims at no less than a revolutionary change in the economic map of the world…The ambitious vision is to resurrect the ancient Silk Road as a modern transit, trade, and economic corridor that runs from Shanghai to Berlin. The ‘Road’ will traverse China, Mongolia, Russia, Belarus, Poland, and Germany, extending more than 8,000 miles, creating an economic zone that extends over one third the circumference of the earth.

The plan envisions building high-speed railroads, roads and highways, energy transmission and distributions networks, and fiber optic networks. Cities and ports along the route will be targeted for economic development.

An equally essential part of the plan is a sea-based “Maritime Silk Road” (MSR) component, as ambitious as its land-based project, linking China with the Persian Gulf and the Mediterranean Sea through Central Asia and the Indian Ocean. When completed, like the ancient Silk Road, it will connect three continents: Asia, Europe, and Africa. The chain of infrastructure projects will create the world’s largest economic corridor, covering a population of 4.4 billion and an economic output of $21 trillion…

For the world at large, its decisions about the Road are nothing less than momentous. The massive project holds the potential for a new renaissance in commerce, industry, discovery, thought, invention, and culture that could well rival the original Silk Road. It is also becoming clearer by the day that geopolitical conflicts over the project could lead to a new cold war between East and West for dominance in Eurasia. The outcome is far from certain. (“New Silk Road Could Change Global Economics Forever”, Robert Berke, Oil Price)

China is perfectly situated to take advantage of Asia’s explosive growth. They’ve paid their dues, built up their infrastructure and industrial capability, and now they’re in the catbird seat fully prepared to benefit from the fact that “Half of humanity will live in Asia by 2050″ and that “more than half of the global middle class and its accompanying consumption will come from that region.” US corporations will be welcome to compete in these new markets, but they won’t do nearly as well as businesses located in China. (This is why the Pentagon has been asked to intervene by powerful members of the corporate establishment.)

Washington’s gambit in the Spratly’s is an attempt to reverse the tide, derail China’s current trajectory and insert the US as the regional kingpin who writes the rules and picks the winners. As Sec-Def Carter said in an earlier speech at the McCain Institute in Arizona, “There are already more than 525 million middle class consumers in Asia, and there will be 3.2 billion in the region by 2030.” US corporations want the lion’s-share of those customers so they can peddle their widgets, goose their stock prices and pump up their quarterly profits. Carter’s job is to help them achieve that objective.

Another threat to US global rule is the aforementioned Asian Infrastructure Investment Bank (AIIB). The danger of the AIIB is not simply that it will fund many of the infrastructure projects that will be needed to integrate Europe, Asia and Africa into one giant free trade zone, but that the bank will replace key US-backed financial institutions (The IMF and World Bank) which have helped maintain Washington’s iron-grip on the global system. As that grip progressively loosens, there will be less need for cross-border transactions to be carried out in US dollars which, in turn, will threaten the dollar’s role as the world’s reserve currency. As author Bart Gruzalski notes in his excellent article at Counterpunch, “China and Russia are creating alternatives that threaten the dollar’s status as the sole dominant international currency. By instituting trade alternatives to the dollar, they challenge the value of the dollar and so threaten the US economy.” (“An Economic Reason for the US vs. China Conflict”, Bart Gruzalski, CounterPunch)

Former Treasury Secretary Larry Summers offered a particularly bleak assessment of the AIIB flap in an editorial that appeared in April in the Washington Post. He said:

This past month may be remembered as the moment the United States lost its role as the underwriter of the global economic system. True, there have been any number of periods of frustration for the United States before and multiple times when U.S. behavior was hardly multilateralist, such as the 1971 Nixon shock ending the convertibility of the dollar into gold. But I can think of no event since Bretton Woods comparable to the combination of China’s effort to establish a major new institution and the failure of the United States to persuade dozens of its traditional allies, starting with Britain, to stay out. (Washington Post)

Summers goes on to acknowledge the threat that political dysfunction (on Capitol Hill) poses to “the dollar’s primary role in the international system”. It’s clear that Summers grasps the gravity of what has unfolded and the challenge the AIIB poses to US hegemony. Readers should note that Summers ominous warnings were delivered just months before Washington dramatically revamped its China policy which suggests that the announcement of the AIIB was the straw that broke the camel’s back. Shortly after, the Obama administration made “crucial changes” to the existing policy. Containment and integration were replaced with the current policy of intimidation, incitement and confrontation. Beijing was elevated to Public Enemy Number 1, America’s primary strategic rival.

What happens next, should be fairly obvious to anyone who has followed US meddling in recent years. The US is now at war with China, which means that it will use all of its resources and capabilities, except it’s military assets, to defeat the enemy. The United States will not militarily engage an enemy that can fight back or inflict pain on the US. That’s the cardinal rule of US military policy. While that precludes a nuclear conflagration, it does not exclude a hyperbolic propaganda campaign demonizing China and its leaders in the media (the comparisons to Hitler and the Kaiser have already started), asymmetrical attacks on Chinese markets and currency, excruciating economic sanctions, US-NGO funding for Chinese dissidents, foreign agents and fifth columnists, intrusions into China’s territorial waters and airspace, strategic denial of critical energy supplies, (80 percent of China’s oil supplies are delivered via the Malacca Strait to the South China Sea) and, finally, covert support for “moderate” jihadis who are committed to toppling the Chinese government and replacing it with an Islamic Caliphate. All of these means and proxies will be employed to defeat Beijing, to derail its ambitious Silk Roads strategy, to curtail its explosive growth, and to sabotage its plan to be the preeminent power in Asia.

Washington has thrown down the gauntlet in the South China Sea. If Beijing wants to preserve its independence and surpass the US as the world’s biggest economy, it’s going to have to meet the challenge, prepare for a long struggle, and beat Uncle Sam at his own game.

[vt]

Re: better than bankster bailouts: The New Silk Road?

Russia Today is more of a propaganda arm of Putin. Blum has been rightly critical of U.S. foreign policy in Vietnam and Iraq.

Fortunately here he is talking about China and not Russia. At least the publication did not try to get Blum to somehow endorse Russia's incursion into Ukraine.

China and the U.S. have been at cyberwar for some time, but China is not yet a military threat. However, you don't want to fight them in Asia. Hopefully economic interests will keep both nations in a cooperative move.

Economically China's currency is exceptionally strong, but they will at some point have to allow it to float. The west has placed itself into dire straits by not promoting growth to support a failing welfare state. China too will have to adjust to a more consumer oriented economy and gradually allow more freedoms, but in a manner that doesn't cause loss of political control.

The Asian infrastructure bank is a decent idea to grow trade in the region, as is our Pacific trade pact. We'll see how this plays out in coming years, hopefully peacefully.

[Woodsman]

Re: better than bankster bailouts: The New Silk Road?

...Washington has thrown down the gauntlet in the South China Sea. If Beijing wants to preserve its independence and surpass the US as the world’s biggest economy, it’s going to have to meet the challenge, prepare for a long struggle, and beat Uncle Sam at his own game.

From the esteemed Alfred McCoy at UW Madison on how the Chinese might play that game.

The Geopolitics of American Global Decline
Washington Versus China in the Twenty-First Century
By Alfred W. McCoy
For even the greatest of empires, geography is often destiny. You wouldn’t know it in Washington, though. America’s political, national security, and foreign policy elites continue to ignore the basics of geopolitics that have shaped the fate of world empires for the past 500 years. Consequently, they have missed the significance of the rapid global changes in Eurasia that are in the process of undermining the grand strategy for world dominion that Washington has pursued these past seven decades.
A glance at what passes for insider “wisdom” in Washington these days reveals a worldview of stunning insularity. Take Harvard political scientist Joseph Nye, Jr., known for his concept of “soft power,” as an example. Offering a simple list of ways in which he believes U.S. military, economic, and cultural power remains singular and superior, he recently argued that there was no force, internal or global, capable of eclipsing America’s future as the world’s premier power.
For those pointing to Beijing’s surging economy and proclaiming this “the Chinese century,” Nye offered up a roster of negatives: China’s per capita income “will take decades to catch up (if ever)” with America’s; it has myopically “focused its policies primarily on its region”; and it has “not developed any significant capabilities for global force projection.” Above all, Nye claimed, China suffers “geopolitical disadvantages in the internal Asian balance of power, compared to America.”
Or put it this way (and in this Nye is typical of a whole world of Washington thinking): with more allies, ships, fighters, missiles, money, patents, and blockbuster movies than any other power, Washington wins hands down.
If Professor Nye paints power by the numbers, former Secretary of State Henry Kissinger’s latest tome, modestly titled World Order and hailed in reviews as nothing less than a revelation, adopts a Nietzschean perspective. The ageless Kissinger portrays global politics as plastic and so highly susceptible to shaping by great leaders with a will to power. By this measure, in the tradition of master European diplomats Charles de Talleyrand and Prince Metternich, President Theodore Roosevelt was a bold visionary who launched “an American role in managing the Asia-Pacific equilibrium.” On the other hand, Woodrow Wilson’s idealistic dream of national self-determination rendered him geopolitically inept and Franklin Roosevelt was blind to Soviet dictator Joseph Stalin’s steely “global strategy.” Harry Truman, in contrast, overcame national ambivalence to commit “America to the shaping of a new international order,” a policy wisely followed by the next 12 presidents.
Among the most “courageous” of them, Kissinger insists, was that leader of “courage, dignity, and conviction,” George W. Bush, whose resolute bid for the “transformation of Iraq from among the Middle East’s most repressive states to a multiparty democracy” would have succeeded, had it not been for the “ruthless” subversion of his work by Syria and Iran. In such a view, geopolitics has no place; only the bold vision of “statesmen” and kings really matters.
And perhaps that’s a comforting perspective in Washington at a moment when America’s hegemony is visibly crumbling amid a tectonic shift in global power.
With Washington’s anointed seers strikingly obtuse on the subject of geopolitical power, perhaps it’s time to get back to basics. That means returning to the foundational text of modern geopolitics, which remains an indispensible guide even though it was published in an obscure British geography journal well over a century ago.
Sir Halford Invents Geopolitics
On a cold London evening in January 1904, Sir Halford Mackinder, the director of the London School of Economics, “entranced” an audience at the Royal Geographical Society on Savile Row with a paper boldly titled “The Geographical Pivot of History.” This presentation evinced, said the society’s president, “a brilliancy of description... we have seldom had equaled in this room.”
Mackinder argued that the future of global power lay not, as most British then imagined, in controlling the global sea lanes, but in controlling a vast land mass he called “Euro-Asia.” By turning the globe away from America to place central Asia at the planet’s epicenter, and then tilting the Earth’s axis northward just a bit beyond Mercator’s equatorial projection, Mackinder redrew and thus reconceptualized the world map.
His new map showed Africa, Asia, and Europe not as three separate continents, but as a unitary land mass, a veritable “world island.” Its broad, deep “heartland” -- 4,000 miles from the Persian Gulf to the Siberian Sea -- was so enormous that it could only be controlled from its “rimlands” in Eastern Europe or what he called its maritime “marginal” in the surrounding seas.
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Mackinder’s Concept of the World Island, From The Geographical Journal (1904)
The “discovery of the Cape road to the Indies” in the sixteenth century, Mackinder wrote, “endowed Christendom with the widest possible mobility of power... wrapping her influence round the Euro-Asiatic land-power which had hitherto threatened her very existence.” This greater mobility, he later explained, gave Europe’s seamen “superiority for some four centuries over the landsmen of Africa and Asia.”
Yet the “heartland” of this vast landmass, a “pivot area” stretching from the Persian Gulf to China’s Yangtze River, remained nothing less than the Archimedean fulcrum for future world power. “Who rules the Heartland commands the World-Island,” went Mackinder’s later summary of the situation. “Who rules the World-Island commands the world.” Beyond the vast mass of that world island, which made up nearly 60% of the Earth’s land area, lay a less consequential hemisphere covered with broad oceans and a few outlying “smaller islands.” He meant, of course, Australia and the Americas.
For an earlier generation, the opening of the Suez Canal and the advent of steam shipping had “increased the mobility of sea-power [relative] to land power.” But future railways could “work the greater wonder in the steppe,” Mackinder claimed, undercutting the cost of sea transport and shifting the locus of geopolitical power inland. In the fullness of time, the “pivot state” of Russia might, in alliance with another power like Germany, expand “over the marginal lands of Euro-Asia,” allowing “the use of vast continental resources for fleet-building, and the empire of the world would be in sight.”
For the next two hours, as he read through a text thick with the convoluted syntax and classical references expected of a former Oxford don, his audience knew that they were privy to something extraordinary. Several stayed after to offer extended commentaries. For instance, the renowned military analyst Spenser Wilkinson, the first to hold a chair in military history at Oxford, pronounced himself unconvinced about “the modern expansion of Russia,” insisting that British and Japanese naval power would continue the historic function of holding “the balance between the divided forces... on the continental area.”
Pressed by his learned listeners to consider other facts or factors, including “air as a means of locomotion,” Mackinder responded: “My aim is not to predict a great future for this or that country, but to make a geographical formula into which you could fit any political balance.” Instead of specific events, Mackinder was reaching for a general theory about the causal connection between geography and global power. “The future of the world,” he insisted, “depends on the maintenance of [a] balance of power” between sea powers such as Britain or Japan operating from the maritime marginal and “the expansive internal forces” within the Euro-Asian heartland they were intent on containing.
Not only did Mackinder give voice to a worldview that would influence Britain’s foreign policy for several decades, but he had, in that moment,created the modern science of “geopolitics” -- the study of how geography can, under certain circumstances, shape the destiny of whole peoples, nations, and empires.
That night in London was, of course, more than a long time ago. It was another age. England was still mourning the death of Queen Victoria. Teddy Roosevelt was president. Henry Ford had just opened a small auto plant in Detroit to make his Model-A, an automobile with a top speed of 28 miles per hour. Only a month earlier, the Wright brothers’ “Flyer” had taken to the air for the first time -- 120 feet of air, to be exact.
Yet, for the next 110 years, Sir Halford Mackinder’s words would offer a prism of exceptional precision when it came to understanding the often obscure geopolitics driving the world’s major conflicts -- two world wars, a Cold War, America’s Asian wars (Korea and Vietnam), two Persian Gulf wars, and even the endless pacification of Afghanistan. The question today is: How can Sir Halford help us understand not only centuries past, but the half-century still to come?
Britannia Rules the Waves
In the age of sea power that lasted just over 400 years -- from 1602 to the Washington Disarmament Conference of 1922 -- the great powers competed to control the Eurasian world island via the surrounding sea lanes that stretched for 15,000 miles from London to Tokyo. The instrument of power was, of course, the ship -- first men-o’-war, then battleships, submarines, and aircraft carriers. While land armies slogged through the mud of Manchuria or France in battles with mind-numbing casualties, imperial navies skimmed over the seas, maneuvering for the control of whole coasts and continents.
At the peak of its imperial power circa 1900, Great Britain ruled the waves with a fleet of 300 capital ships and 30 naval bastions, bases that ringed the world island from the North Atlantic at Scapa Flow through the Mediterranean at Malta and Suez to Bombay, Singapore, and Hong Kong. Just as the Roman Empire enclosed the Mediterranean, making it Mare Nostrum (“Our Sea”), British power would make the Indian Ocean its own “closed sea,” securing its flanks with army forces on India’s Northwest Frontier and barring both Persians and Ottomans from building naval bases on the Persian Gulf.
By that maneuver, Britain also secured control over Arabia and Mesopotamia, strategic terrain that Mackinder had termed “the passage-land from Europe to the Indies” and the gateway to the world island’s “heartland.” From this geopolitical perspective, the nineteenth century was, at heart, a strategic rivalry, often called “the Great Game,” between Russia “in command of nearly the whole of the Heartland... knocking at the landward gates of the Indies,” and Britain “advancing inland from the sea gates of India to meet the menace from the northwest.” In other words, Mackinder concluded, “the final Geographical Realities” of the modern age were sea power versus land power or “the World-Island and the Heartland.”
Intense rivalries, first between England and France, then England and Germany, helped drive a relentless European naval arms race that raised the price of sea power to unsustainable levels. In 1805, Admiral Nelson’s flagship, the HMS Victory, with its oaken hull weighing just 3,500 tons, sailed into the battle of Trafalgar against Napoleon’s navy at nine knots, its 100 smooth-bore cannon firing 42-pound balls at a range of no more than 400 yards.
In 1906, just a century later, Britain launched the world’s first modern battleship, the HMS Dreadnought, its foot-thick steel hull weighing 20,000 tons, its steam turbines allowing speeds of 21 knots, and its mechanized 12-inch guns rapid-firing 850-pound shells up to 12 miles. The cost for this leviathan was £1.8 million, equivalent to nearly $300 million today. Within a decade, half-a-dozen powers had emptied their treasuries to build whole fleets of these lethal, lavishly expensive battleships.
Thanks to a combination of technological superiority, global reach, and naval alliances with the U.S. and Japan, a Pax Britannica would last a full century, 1815 to 1914. In the end, however, this global system was marked by an accelerating naval arms race, volatile great-power diplomacy, and a bitter competition for overseas empire that imploded into the mindless slaughter of World War I, leaving 16 million dead by 1918.
Mackinder’s Century
As the eminent imperial historian Paul Kennedy once observed, “the rest of the twentieth century bore witness to Mackinder's thesis,” with two world wars fought over his “rimlands” running from Eastern Europe through the Middle East to East Asia. Indeed, World War I was, as Mackinder himself later observed, “a straight duel between land-power and sea-power.” At war’s end in 1918, the sea powers -- Britain, America, and Japan -- sent naval expeditions to Archangel, the Black Sea, and Siberia to contain Russia’s revolution inside its “heartland.”
Reflecting Mackinder’s influence on geopolitical thinking in Germany, Adolf Hitler would risk his Reich in a misbegotten effort to capture the Russian heartland as Lebensraum, or living space, for his “master race.” Sir Halford’s work helped shape the ideas of German geographer Karl Haushofer, founder of the journal Zeitschrift für Geopolitik, proponent of the concept ofLebensraum, and adviser to Adolf Hitler and his deputy führer, Rudolf Hess.In 1942, the Führer dispatched a million men, 10,000 artillery pieces, and 500 tanks to breach the Volga River at Stalingrad. In the end, his forces suffered 850,000 wounded, killed, and captured in a vain attempt to break through the East European rimland into the world island’s pivotal region.
A century after Mackinder’s seminal treatise, another British scholar, imperial historian John Darwin, argued in his magisterial survey After Tamerlane that the United States had achieved its “colossal Imperium... on an unprecedented scale” in the wake of World War II by becoming the first power in history to control the strategic axial points “at both ends of Eurasia” (his rendering of Mackinder’s “Euro-Asia”). With fears of Chinese and Russian expansion serving as the “catalyst for collaboration,” the U.S. won imperial bastions in both Western Europe and Japan. With these axial points as anchors, Washington then built an arc of military bases that followed Britain’s maritime template and were visibly meant to encircle the world island.
America’s Axial Geopolitics
Having seized the axial ends of the world island from Nazi Germany and Imperial Japan in 1945, for the next 70 years the United States relied on ever-thickening layers of military power to contain China and Russia inside that Eurasian heartland. Stripped of its ideological foliage, Washington’s grand strategy of Cold War-era anticommunist “containment” was little more than a process of imperial succession. A hollowed-out Britain was replaced astride the maritime “marginal,” but the strategic realities remained essentially the same.
Indeed, in 1943, two years before World War II ended, an aging Mackinderpublished his last article, “The Round World and the Winning of the Peace,” in the influential U.S. journal Foreign Affairs. In it, he reminded Americans aspiring to a “grand strategy” for an unprecedented version of planetary hegemony that even their “dream of a global air power” would not change geopolitical basics. “If the Soviet Union emerges from this war as conqueror of Germany,” he warned, “she must rank as the greatest land power on the globe,” controlling the “greatest natural fortress on earth.”
When it came to the establishment of a new post-war Pax Americana, first and foundational for the containment of Soviet land power would be the U.S. Navy. Its fleets would come to surround the Eurasian continent, supplementing and then supplanting the British navy: the Sixth Fleet was based at Naples in 1946 for control of the Atlantic Ocean and the Mediterranean Sea; the Seventh Fleet at Subic Bay, Philippines, in 1947, for the Western Pacific; and the Fifth Fleet at Bahrain in the Persian Gulf since 1995.
Next, American diplomats added layers of encircling military alliances -- the North Atlantic Treaty Organization (1949), the Middle East Treaty Organization (1955), the Southeast Asia Treaty Organization (1954), and the U.S.-Japan Security Treaty (1951).
By 1955, the U.S. also had a global network of 450 military bases in 36 countries aimed, in large part, at containing the Sino-Soviet bloc behind an Iron Curtain that coincided to a surprising degree with Mackinder’s “rimlands” around the Eurasian landmass. By the Cold War’s end in 1990, the encirclement of communist China and Russia required 700 overseas bases, an air force of 1,763 jet fighters, a vast nuclear arsenal, more than 1,000 ballistic missiles, and a navy of 600 ships, including 15 nuclear carrier battle groups -- all linked by the world's only global system of communications satellites.
As the fulcrum for Washington’s strategic perimeter around the world island, the Persian Gulf region has for nearly 40 years been the site of constant American intervention, overt and covert. The 1979 revolution in Iran meant the loss of a keystone country in the arch of U.S. power around the Gulf and left Washington struggling to rebuild its presence in the region. To that end, it would simultaneously back Saddam Hussein’s Iraq in its war against revolutionary Iran and arm the most extreme of the Afghan mujahedeen against the Soviet occupation of Afghanistan.
It was in this context that Zbigniew Brzezinski, national security adviser to President Jimmy Carter, unleashed his strategy for the defeat of the Soviet Union with a sheer geopolitical agility still little understood even today. In 1979, Brzezinski, a déclassé Polish aristocrat uniquely attuned to his native continent’s geopolitical realities, persuaded Carter to launch Operation Cyclone with massive funding that reached $500 million annually by the late 1980s. Its goal: to mobilize Muslim militants to attack the Soviet Union’s soft Central Asian underbelly and drive a wedge of radical Islam deep into the Soviet heartland. It was to simultaneously inflict a demoralizing defeat on the Red Army in Afghanistan and cut Eastern Europe’s “rimland” free from Moscow’s orbit. “We didn’t push the Russians to intervene [in Afghanistan],” Brzezinski said in 1998, explaining his geopolitical masterstroke in this Cold War edition of the Great Game, “but we knowingly increased the probability that they would... That secret operation was an excellent idea. Its effect was to draw the Russians into the Afghan trap.”
Asked about this operation’s legacy when it came to creating a militant Islam hostile to the U.S., Brzezinski, who studied and frequently cited Mackinder, was coolly unapologetic. “What is most important to the history of the world?” he asked. “The Taliban or the collapse of the Soviet empire? Some stirred-up Moslems or the liberation of Central Europe and the end of the Cold War?”
Yet even America’s stunning victory in the Cold War with the implosion of the Soviet Union would not transform the geopolitical fundamentals of the world island. As a result, after the fall of the Berlin Wall in 1989, Washington’s first foreign foray in the new era would involve an attempt to reestablish its dominant position in the Persian Gulf, using Saddam Hussein’s occupation of Kuwait as a pretext.
In 2003, when the U.S. invaded Iraq, imperial historian Paul Kennedy returned to Mackinder’s century-old treatise to explain this seemingly inexplicable misadventure. “Right now, with hundreds of thousands of U.S. troops in the Eurasian rimlands,” Kennedy wrote in the Guardian, “it looks as if Washington is taking seriously Mackinder’s injunction to ensure control of ‘the geographical pivot of history.’” If we interpret these remarks expansively, the sudden proliferation of U.S. bases across Afghanistan and Iraq should be seen as yet another imperial bid for a pivotal position at the edge of the Eurasian heartland, akin to those old British colonial forts along India’s Northwest Frontier.
In the ensuing years, Washington attempted to replace some of its ineffective boots on the ground with drones in the air. By 2011, the Air Force and the CIA had ringed the Eurasian landmass with 60 bases for its armada of drones. By then, its workhorse Reaper, armed with Hellfire missiles and GBU-30 bombs, had a range of 1,150 miles, which meant that from those bases it could strike targets almost anywhere in Africa and Asia.
Significantly, drone bases now dot the maritime margins around the world island -- from Sigonella, Sicily, to Icerlik, Turkey; Djibouti on the Red Sea; Qatar and Abu Dhabi on the Persian Gulf; the Seychelles Islands in the Indian Ocean; Jalalabad, Khost, Kandahar, and Shindand in Afghanistan; and in the Pacific, Zamboanga in the Philippines and Andersen Air Base on the island ofGuam, among other places. To patrol this sweeping periphery, the Pentagon is spending $10 billion to build an armada of 99 Global Hawk dronesequipped with high-resolution cameras capable of surveilling all terrain within a hundred-mile radius, electronic sensors that can sweep up communications, and efficient engines capable of 35 hours of continuous flight and a range of 8,700 miles.
China’s Strategy
Washington’s moves, in other words, represent something old, even if on a previously unimaginable scale. But the rise of China as the world’s largest economy, inconceivable a century ago, represents something new and so threatens to overturn the maritime geopolitics that have shaped world power for the past 400 years. Instead of focusing purely on building a blue-water navy like the British or a global aerospace armada akin to America’s, China is reaching deep within the world island in an attempt to thoroughly reshape the geopolitical fundamentals of global power. It is using a subtle strategy that has so far eluded Washington’s power elites.
After decades of quiet preparation, Beijing has recently begun revealing its grand strategy for global power, move by careful move. Its two-step plan is designed to build a transcontinental infrastructure for the economic integration of the world island from within, while mobilizing military forces to surgically slice through Washington’s encircling containment.
The initial step has involved a breathtaking project to put in place an infrastructure for the continent’s economic integration. By laying down an elaborate and enormously expensive network of high-speed, high-volume railroads as well as oil and natural gas pipelines across the vast breadth of Eurasia, China may realize Mackinder’s vision in a new way. For the first time in history, the rapid transcontinental movement of critical cargo -- oil, minerals, and manufactured goods -- will be possible on a massive scale, thereby potentially unifying that vast landmass into a single economic zone stretching 6,500 miles from Shanghai to Madrid. In this way, the leadership in Beijing hopes to shift the locus of geopolitical power away from the maritime periphery and deep into the continent’s heartland.
“Trans-continental railways are now transmuting the conditions of land power,” wrote Mackinder back in 1904 as the “precarious” single track of the Trans-Siberian Railway, the world’s longest, reached across the continent for 5,700 miles from Moscow toward Vladivostok. “But the century will not be old before all Asia is covered with railways,” he added. “The spaces within the Russian Empire and Mongolia are so vast, and their potentialities in... fuel and metals so incalculably great that a vast economic world, more or less apart, will there develop inaccessible to oceanic commerce.”
Mackinder was a bit premature in his prediction. The Russian revolution of 1917, the Chinese revolution of 1949, and the subsequent 40 years of the Cold War slowed any real development for decades. In this way, the Euro-Asian “heartland” was denied economic growth and integration, thanks in part to artificial ideological barriers -- the Iron Curtain and then the Sino-Soviet split -- that stalled any infrastructure construction across the vast Eurasian land mass. No longer.
Only a few years after the Cold War ended, former National Security Adviser Brzezinski, by then a contrarian sharply critical of the global views of both Republican and Democratic policy elites, began raising warning flags about Washington’s inept style of geopolitics. “Ever since the continents started interacting politically, some five hundred years ago,” he wrote in 1998, essentially paraphrasing Mackinder, “Eurasia has been the center of world power. A power that dominates ‘Eurasia’ would control two of the world’s three most advanced and economically productive regions... rendering the Western Hemisphere and Oceania geopolitically peripheral to the world’s central continent.”
While such a geopolitical logic has eluded Washington, it’s been well understood in Beijing. Indeed, in the last decade China has launched the world’s largest burst of infrastructure investment, already a trillion dollars and counting, since Washington started the U.S. Interstate Highway System back in the 1950s. The numbers for the rails and pipelines it’s been building are mind numbing. Between 2007 and 2014, China criss-crossed its countryside with 9,000 miles of new high-speed rail, more than the rest of the world combined. The system now carries 2.5 million passengers daily at top speeds of 240 miles per hour. By the time the system is complete in 2030, it will have added up to 16,000 miles of high-speed track at a cost of $300 billion, linking all of China’s major cities.
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China-Central Asia Infrastructure Integrates the World Island (Source: Stratfor)
Simultaneously, China’s leadership began collaborating with surrounding states on a massive project to integrate the country’s national rail network into a transcontinental grid. Starting in 2008, the Germans and Russians joined with the Chinese in launching the “Eurasian Land Bridge.” Two east-west routes, the old Trans-Siberian in the north and a new southern route along the ancient Silk Road through Kazakhstan are meant to bind all of Eurasia together. On the quicker southern route, containers of high-value manufactured goods, computers, and auto parts started travelling 6,700 miles from Leipzig, Germany, to Chongqing, China, in just 20 days, about half the 35 days such goods now take via ship.
In 2013, Deutsche Bahn AG (German Rail) began preparing a third route between Hamburg and Zhengzhou that has now cut travel time to just 15 days, while Kazakh Rail opened a Chongqing-Duisburg link with similar times. In October 2014, China announced plans for the construction of the world’s longest high-speed rail line at a cost of $230 billion. According to plans, trains will traverse the 4,300 miles between Beijing and Moscow in just two days.
In addition, China is building two spur lines running southwest and due south toward the world island’s maritime “marginal.” In April, President Xi Jinpingsigned an agreement with Pakistan to spend $46 billion on a China-Pakistan Economic Corridor. Highway, rail links, and pipelines will stretch nearly 2,000 miles from Kashgar in Xinjiang, China’s westernmost province, to a joint port facility at Gwadar, Pakistan, opened back in 2007. China hasinvested more than $200 billion in the building of this strategic port at Gwadar on the Arabian Sea, just 370 miles from the Persian Gulf. Starting in 2011, China also began extending its rail lines through Laos into Southeast Asia at an initial cost of $6.2 billion. In the end, a high-speed line is expected to take passengers and goods on a trip of just 10 hours from Kunming to Singapore.
In this same dynamic decade, China has constructed a comprehensive network of trans-continental gas and oil pipelines to import fuels from the whole of Eurasia for its population centers -- in the north, center, and southeast. In 2009, after a decade of construction, the state-owned China National Petroleum Corporation (CNPC) opened the final stage of the Kazakhstan-China Oil Pipeline. It stretches 1,400 miles from the Caspian Sea to Xinjiang.
Simultaneously, CNPC collaborated with Turkmenistan to inaugurate the Central Asia-China gas pipeline. Running for 1,200 miles largely parallel to the Kazakhstan-China Oil Pipeline, it is the first to bring the region’s natural gas to China. To bypass the Straits of Malacca controlled by the U.S Navy, CNPC opened a Sino-Myanmar pipeline in 2013 to carry both Middle Eastern oil and Burmese natural gas 1,500 miles from the Bay of Bengal to China’s remote southwestern region. In May 2014, the company signed a $400 billion, 30-year deal with the privatized Russian energy giant Gazprom to deliver 38 billion cubic meters of natural gas annually by 2018 via a still-to-be-completed northern network of pipelines across Siberia and into Manchuria.
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Sino-Myanmar Oil Pipeline Evades the U.S. Navy in the Straits of Malacca (Source: Stratfor)
Though massive, these projects are just part of an ongoing construction boom that, over the past five years, has woven a cat’s cradle of oil and gas lines across Central Asia and south into Iran and Pakistan. The result will soon be an integrated inland energy infrastructure, including Russia’s own vast network of pipelines, extending across the whole of Eurasia, from the Atlantic to the South China Sea.
To capitalize such staggering regional growth plans, in October 2014 Beijing announced the establishment of the Asian Infrastructure Investment Bank. China’s leadership sees this institution as a future regional and, in the end, Eurasian alternative to the U.S.-dominated World Bank. So far, despite pressure from Washington not to join, 14 key countries, including close U.S. allies like Germany, Great Britain, Australia, and South Korea, have signedon. Simultaneously, China has begun building long-term trade relations with resource-rich areas of Africa, as well as with Australia and Southeast Asia, as part of its plan to economically integrate the world island.
Finally, Beijing has only recently revealed a deftly designed strategy for neutralizing the military forces Washington has arrayed around the continent’s perimeter. In April, President Xi Jinping announced construction of that massive road-rail-pipeline corridor direct from western China to its new port at Gwadar, Pakistan, creating the logistics for future navaldeployments in the energy-rich Arabian Sea.
In May, Beijing escalated its claim to exclusive control over the South China Sea, expanding Longpo Naval Base on Hainan Island for the region's first nuclear submarine facility, accelerating its dredging to create three new atolls that could become military airfields in the disputed Spratley Islands, and formally warning off U.S. Navy overflights. By building the infrastructure for military bases in the South China and Arabian seas, Beijing is forging the future capacity to surgically and strategically impair U.S. military containment.
At the same time, Beijing is developing plans to challenge Washington’s dominion over space and cyberspace. It expects, for instance, to complete its own global satellite system by 2020, offering the first challenge to Washington’s dominion over space since the U.S. launched its system of 26 defense communication satellites back in 1967. Simultaneously, Beijing isbuilding a formidable capacity for cyber warfare.
In a decade or two, should the need arise, China will be ready to surgically slice through Washington’s continental encirclement at a few strategic points without having to confront the full global might of the U.S. military, potentially rendering the vast American armada of carriers, cruisers, drones, fighters, and submarines redundant.
Lacking the geopolitical vision of Mackinder and his generation of British imperialists, America’s current leadership has failed to grasp the significance of a radical global change underway inside the Eurasian land mass. If China succeeds in linking its rising industries to the vast natural resources of the Eurasian heartland, then quite possibly, as Sir Halford Mackinder predicted on that cold London night in 1904, “the empire of the world would be in sight.”

[jk]

Re: better than bankster bailouts: The New Silk Road?

all the geopolitics and economics in the world won't avert the demographic disaster that china put in motion with its 1-child policy. the consequences include a potentially inverted population pyramid and a notable gender imbalance in the younger cohorts. let's see how that gets handled before buying into grand theories, or at least look for grand theories that somehow account for the demographic problems.

[don]

Re: better than bankster bailouts: The New Silk Road?

"Any future defense secretary who advises the president to again send a big American land army into Asia or into the Middle East or Africa should have his head examined." U.S. Secretary of Defense Robert Gates, speaking at West Point

China's land bridge strategy plays to its strengths, with a partial end around America's naval dominance. Regional naval force projection (South China Sea) is about the foreseeable limit for China. A similar strategy was envisioned by the Kaiser with the Berlin to Bagdad railroad, circumventing the British naval superiority. The Germans attempted to match that as well with their High Seas Fleet. Didn't work out.

[don]

Re: better than bankster bailouts: The New Silk Road?

Iran’s ‘Look East’ policy takes wings

BY M.K. BHADRAKUMAR on JULY 17, 2015 in ASIA TIMES NEWS & FEATURES

Most analysts blithely overlook that Iran also has a “Look East” dimension to its foreign policies and once it shakes off the shackles of the UN sanctions, it is that vector which is bound to become lively almost overnight, impacting the regional alignments in the South Asian region in a major way.

Few would have noted that amidst the preoccupations over the Vienna talks between Iran and the world powers last week, President Hassan Rouhani found time to make a quick dash to Ufa, Russia – although Iran is not a member of the BRICS and the Shanghai Cooperation Organization [SCO] is yet to take a decision on Iran’s membership. He was signaling the high importance Iran will attach to the “Look East” in its multi-vector foreign policies.

In the emergent context of the nuclear deal concluded at Vienna and the prospect of lifting of sanctions, Iran’s “Look East” will galvanize the country’s ties with Pakistan. Islamabad could anticipate this and within hours of the news coming in from Vienna, the Foreign Ministry had come out with a full-fledged statement, warmly welcoming the Iran deal and hailing it as auguring “well for peace and security in our region.”

Indeed, Pakistan has every reason to visualize itself as the biggest beneficiary of the lifting of sanctions on Iran in the immediate terms. The deck is now clear for the implementation of the Iran-Pakistan gas pipeline project, which has been stalling for years due to combined US-Saudi pressure on Pakistan.

Iran has already completed its part of the pipeline but American pressure prevented Pakistan from undertaking the construction of the pipeline on its side, costing $2 billion.

Pakistan’s petroleum minister Shahid Khaqan Abbasi stated on Wednesday that the Chinese-funded LNG terminal at Gwadar and the 700-kilometre long pipeline linked to it as part of the China-Pakistan Economic Corridor [CPEC], which is expected to be ready by end-2017, can actually double up as well and become the Iran-Pakistan gas pipeline as well.

Quite obviously, China and Pakistan neatly sidestepped the US opposition to the Iran-Pakistan gas pipeline project by instead planning a pipeline of their own as part of the CPEC, with Chinese funding to the tune of $2 billion, with the clear intent that it could eventually be dovetailed into the Iran-Pakistan pipeline project once the sanctions against Iran got lifted. That’s exactly what is happening.

All that Pakistan has to do now is to link Gwadar with the Iranian border, which is a distance of some 80 kms. The proposed Iran-Pakistan pipeline will then run from Asaluyeh in Iran to the Pakistani port of Gwadar (built by China), which is the “nerve centre” of the China-Pakistan Economic Corridor, and from there onward to Nawabshah in Sindh to the north of Karachi.

In reality, though, we are just about to realize that the Iran-Pakistan gas pipeline is easily extendable to China, since the CPEC connects Gwadar and Xinjiang not only through road and rail links but also multiple pipelines. Pakistan is about to become the transit country for an Iranian mega gas pipeline leading to China. It will be the shortest route connecting China with Iran’s fabulous gas fields.

Of course, the Chinese-funded LNG project at Gwadar, which will take 30 months to build and where construction work is slated to begin in October, will directly receive Iranian gas.

The geopolitical significance of these developments does not need much elaboration. Simply put, Pakistan is becoming the gateway for a profound Iran-China energy relationship. It cannot but signify the beginning of a new regional axis, which is reflected in the Pakistani statement on Tuesday that the Iran deal augurs well for peace and security in the region.

Of course, the US is keenly watching the startling development in regional politics. A VOA commentary on Thursday titled “Pakistan Hopes to benefit from Iran Deal, With Chinese Help” acknowledged rather sardonically that the Iran-Pakistan gas pipeline project is in effect a Chinese project. It said, “Now, with the prospect of sanctions on Iran lifting in the near future, Pakistan is hoping to become one of the early beneficiaries of a nuclear deal between Iran and six world powers by finally completing the Iran-Pakistan pipeline. But funding for the expensive project, expected to cost about $2 billion, is another problem for cash-strapped Pakistan. That is why it is trying to piggyback this project on another one funded mostly by its rich neighbor, China.”

The US has been promoting an alternate gas pipeline from Turkmenistan via Afghanistan and Pakistan to India known as the TAPI pipeline. It pinned hopes on the TAPI, sponsored by the Asian Development Bank, to help Big Oil get a toehold in Turkmenistan’s energy sector, which is dominated by China, and give some much-needed traction to the US’ Central Asia policies.

However, with the prospects of the Iran-Pakistan-China pipeline vastly improving, it remains to be seen how far Pakistan remains wedded to the TAPI project. The plain truth is that the hardline Indian policies have offended Pakistan to such an extent that it may not be inclined to join a regional project that involves India.

India is a big loser here in more ways than one, since traditionally Delhi has viewed Iran as a “second front” against Pakistan. On the other hand, the proposed Iran-Pakistan pipeline promises to give strong underpinning to the two countries’ bilateral cooperation and it will nudge Iran toward taking a neutral position in the India-Pakistan differences and disputes.

Pakistan has so far stubbornly refused to provide a direct access route for India to connect with Afghanistan and Central Asia. India has been fancying an alternate route via the Iranian port of Chabahar. Iran has welcomed India’s proposal to fund the development of Chabahar port as a container terminal. But then, both China and Pakistan cannot be happy about it, since Gwadar, which is also being developed as a naval base, is just about 80 kilometers from Chabahar.

There have been reports that Chinese companies have evinced interest in developing Chabahar port. It cannot be ruled out that Pakistan and China may work in tandem to discourage Iran from allowing an Indian presence in Chabahar region so close to the Gwadar naval base.

Clearly, the Iran-Pakistan-China energy cooperation and Iran’s link-up with the CPEC will also mean that there will be strong desire on the part of Islamabad and Tehran to harmonize their interests in Afghanistan, which can only work as a positive factor for the search for a settlement in Afghanistan (in which China is actively involved as well.)

Traditionally, India and Iran had cooperated closely with regard to the Afghan problem, which in effect neutralized to an extent Pakistan’s concerted strategy to curb the Indian desire to be an influential player in Kabul.

Suffice it to say, India may end up paying a heavy price of isolation in its region for having neglected its relations with Iran through the past decade.

In the emergent scenario, India is left with no options but to swallow the bitter pill and engage Pakistan despite the latter not having cared to fulfil any of the terrorism-related preconditions that Delhi had set before entering into any form of dialogue with Pakistan.

Washington has been urging Prime Minister Narendra Modi to rein in the hardline Hindu nationalists in his camp and get cracking on an India-Pakistan normalization without any further loss of time. Modi has heeded the American wish and has, in fact, gone the extra league to make the unprecedented announcement so much in advance that he is even willing to visit Pakistan next year.

It has been a remarkable retreat by the hardline Hindu nationalist leader who has been a strident exponent of pursuing a “tough” line toward Pakistan.

Indeed, the US’s own regional strategies depend vitally on the India-Pakistan normalization and Washington counts on Modi to deliver. But the catch here is that Pakistan may not have any real incentive to show mercy at this point toward the Modi government after all the bad blood that has been spilt in the past year. (The Indian Defence Minister Manohar Parrikar even threatened once that Delhi will let loose terrorist groups to teach Pakistan a lesson.)

Pakistan is well aware that it will be negotiating from a position of strength with India, especially with China solidly backing it, while India has been virtually isolated in its own region.

Be that as it may, the ground reality is that the pipelines from Iran heading to Europe will take time to develop, but in the meanwhile it is Tehran’s “Look East” energy export policy that are poised to take wings in the nearest future.

The regional politics in South Asia is set to get a dramatic makeover that few could have anticipated – except Pakistan and China, of course, which are all set to ride the wings of Iran’s “Look East” energy policy.