Thursday, December 31, 2009

More Great Games

Below is the complete text of a NYT piece which asks why is Nato securing the peace for Chinese investment in Afghanistan? It's basically a follow up to Indian diplomat M Bhadrakumar's excellent analysis last week.

This is a telling comment on the voraciousness of China's economy which is subservient to, who else, the United States.

Afghanistan is not the only place where the United States and China find themselves so oddly juxtaposed in the post-9/11 world. China is investing more in extracting Iraqi oil than American companies are. It has reached long-term arrangements to buy gas from Iran, even as the government there comes under the threat of Western sanctions for its nuclear program. China has also become a dominant investor in Pakistan and volatile parts of Africa.

But it is in Afghanistan where China’s willingness to take risks for commercial and diplomatic gain are most striking.

It's in the US interest for Beijing's heavy industrial base to continue as long as China produces low cost goods for the rest of the world. Once that changes, things could change in their unequal partnership.

China Willing to Spend Big on Afghan Commerce

Published: December 29, 2009
KABUL, Afghanistan — Behind an electrified fence, blast-resistant sandbags and 53 National Police outposts, the Afghan surge is well under way.

Uneasy Engagement
A Global Hunt for Resources
This is the ninth in a series of articles examining stresses and strains of China’s emergence as a global power.
Uneasy Engagement: China Hunts for Art Treasures in U.S. Museums (December 17, 2009)

Uneasy Engagement: China’s Export of Labor Faces Scorn (December 21, 2009)

Enlarge This Image

Imaginechina, via Associated Press
The Beijing headquarters of the China Metallurgical Group Corporation, known as M.C.C.

The New York Times
Aynak's deposits were known in the time of Alexander the Great.
But the foot soldiers in a bowl-shaped valley about 20 miles southeast of Kabul are not fighting the Taliban, or even carrying guns. They are preparing to extract copper from one of the richest untapped deposits on earth. And they are Chinese, undertaking by far the largest foreign investment project in war-torn Afghanistan.

Two years ago, the China Metallurgical Group Corporation, a Chinese state-owned conglomerate, bid $3.4 billion — $1 billion more than any of its competitors from Canada, Europe, Russia, the United States and Kazakhstan — for the rights to mine deposits near the village of Aynak. Over the next 25 years, it plans to extract about 11 million tons of copper — an amount equal to one-third of all the known copper reserves in China.

While the United States spends hundreds of billions of dollars fighting the Taliban and Al Qaeda here, China is securing raw material for its voracious economy. The world’s superpower is focused on security. Its fastest rising competitor concentrates on commerce.

S. Frederick Starr, the chairman of the Central Asia-Caucasus Institute, an independent research organization in Washington, said that skeptics might wonder whether Washington and NATO had conducted “an unacknowledged preparatory phase for the Chinese economic penetration of Afghanistan.”

“We do the heavy lifting,” he said. “And they pick the fruit.”

The reality is more complicated than that. The Chinese bid far more for the mining rights to the Aynak project and promised to invest hundreds of millions more in associated infrastructure projects than other bidders. It is a risky venture that has not yet proved to be economical, and it has already been dogged by allegations of bribery.

But the Aynak investment underscores how China’s leaders, flush with money and in control of both the government and major industries, meld strategy, business and statecraft into a seamless whole. In a single move, Beijing strengthened its hold on a vital resource, engineered the single largest investment in Afghan history, promised to create thousands of new Afghan jobs and established itself as the Afghan government’s pre-eminent business partner and single largest source of tax payments.

An Odd Global Pairing

Afghanistan is not the only place where the United States and China find themselves so oddly juxtaposed in the post-9/11 world. China is investing more in extracting Iraqi oil than American companies are. It has reached long-term arrangements to buy gas from Iran, even as the government there comes under the threat of Western sanctions for its nuclear program. China has also become a dominant investor in Pakistan and volatile parts of Africa.

But it is in Afghanistan where China’s willingness to take risks for commercial and diplomatic gain are most striking.

China Metallurgical Group, often called M.C.C., will build a 400-megawatt generating plant to power both the copper mine and blackout-prone Kabul. M.C.C. will dig a new coal mine to feed the plant’s generators. It will build a smelter to refine copper ore, and a railroad to carry coal to the power plant and copper back to China. If the terms of its contract are to be believed, M.C.C. will also build schools, roads, even mosques for the Afghans.

The sweeping agreement has some experts rubbing their eyes in disbelief. “It’s almost as if the Chinese promised too much,” said one international expert who, like some others interviewed, refused to be identified for fear of alienating the Afghans or the Chinese.

But even if elements of the agreement fall through, the Chinese have already positioned themselves as generous, eager partners of the Afghan government and long-term players in the country’s future. All without firing a shot.

Nurzaman Stanikzai was a mujahedeen in the 1980s, using American-supplied arms to help drive the Red Army from his homeland. Today he is a contractor for M.C.C., building the Aynak mine’s electric fence, blast wall, workers’ dormitories and a road to Kabul.

“The Chinese are much wiser. When we went to talk to the local people, they wore civilian clothing, and they were very friendly,” he said recently during a long chat in his Kabul apartment. “The Americans — not as good. When they come there, they have their uniforms, their rifles and such, and they are not as friendly.”

American troops do not, in a narrow sense, protect the Chinese. The United States Army stations about 2,000 troops in Logar Province, where Aynak is located. But an Army spokesman said they generally patrolled well south of the mine area and had not provided direct security for Chinese investors or mine workers.

The Afghan National Police, which does protect the mine, was largely built and trained with American money. The 1,500 guards the police have posted in and around Aynak are special recruits not drawn from the main force, according to Maj. Gen. Sayed Kamal, who heads the National Police.

But the conclusion is inescapable: American troops have helped make Afghanistan safe for Chinese investment. And there is no sense that either government objects to that reality. As diplomats and soldiers alike stress, the war in Afghanistan was never motivated by commercial prospects. Had an American company won Aynak, some Afghans noted wryly, critics inevitably would have accused the United States of waging war to seize the country’s mineral wealth. Moreover, if China succeeds in developing Aynak and generating revenue for the Kabul government, that helps achieve an American goal.

“To the extent that the Chinese bring Afghanistan up to speed and start paying a billion dollars a year in royalties,” a Western government official who has followed the Aynak project said, “that would mean that Afghanistan is on a firmer ground to start paying for its own security.”

China Stays Out of War Effort

The Chinese, meanwhile, have rebuffed requests to join the Afghan war effort, saying that national policy forbids military action abroad except as part of a peacekeeping force. Instead, China’s foreign policy is based on commerce. Its state-owned companies have been snapping up energy and mineral resources worldwide for years now, often by overwhelming competitors with lavish offers.

In 2006, for example, another state-owned goliath known as C.M.E.C. swept bidding for one of the world’s largest known iron ore deposits, in Gabon, by offering to build a 360-mile railroad to the nearly inaccessible mine site, two hydroelectric dams to power the mine and a deepwater ocean port to export the mined ore.

Such splurges are both national strategy — China’s goal is to control long-term access to critical commodities — and a matter of necessity if Beijing is to keep its industrial empire running. With 700 to 1,000 steel mills to feed, China is the world’s largest importer of iron ore. Similarly, China already imports 40 percent of the world’s copper.

If the Aynak venture differs from those in the past, both international and Afghan experts say, it is because it appears to be as much a strategic coup as a commercial one.

Opportunity in Southwest Asia

The United States views Southwest Asia mostly as a security threat. China sees it as an opportunity. Decades of military cooperation with Pakistan, which shares India as a rival, have flowered into an economic alliance. A Chinese-built deepwater port in Gwadar, Pakistan, on the Gulf of Oman, is expected eventually to carry Middle Eastern oil and gas over the western Himalayas into China.

Afghanistan, which borders both Iran and Pakistan, drew scant attention from China until the middle of this decade.

Aynak’s riches had been known since Alexander the Great’s armies forged copper there 2,300 years ago. When the Soviet Union invaded Afghanistan in 1979, its geologists took core samples and mapped the Aynak deposit, but were never able to begin mining.

The Soviets were succeeded by Osama bin Laden, who used Aynak as a training camp while planning the Sept. 11, 2001, attacks on the United States. After the American-led invasion of Afghanistan, Afghan geologists rescued the Soviet surveys of Aynak and hid them until exploration could resume.

That exploration — a detailed overflight of much of the country by American surveyors in middecade — showed Afghanistan to be far richer in oil, natural gas, iron, copper and coal than anyone had imagined. Aynak, in particular, was judged a world-class copper deposit, not just huge but of unusually rich quality, and the government chose it as the first major mineral concession to be auctioned to developers.

To minimize corruption, the Afghan government decided, on the advice of American advisers, to ask the World Bank and a Colorado geological consulting firm to help oversee the bidding. A report last month in The Washington Post quoted an American official as charging that the Chinese swayed the bid with $20 million or more in bribes to the mining minister, Muhammad Ibrahim Adel, who was recently dismissed from the Afghan government in part because of the allegations. Mr. Adel has denied the charge.

Foreign experts say that the possibility of bribery in Afghanistan, one of the world’s most corrupt nations, can hardly be ruled out. But they also say that the Chinese bid was so clearly superior to others that any bribe money may have been incidental to the outcome.

“This was not a backroom deal. This was not Adel, sitting in Beijing, cooking this up,” said one of several international experts interviewed for this article. “This was thoroughly vetted by the governments of the day.”

A. Rahman Ashraf is a veteran geologist and senior adviser on mining to Afghanistan’s president, Hamid Karzai. Mr. Ashraf intervened in 2002 to stop Aynak’s mining rights from being sold under the table to a Korean bidder.

“Our wish was that this process must be very transparent,” he said of Aynak, “because this is the first time. If it is not transparent, then nobody comes to the others.”

China won the bid, he said, for good reason: it offered a package deal, from power plants to railroads to smelters to coal mines, that no other bidder could match. And it promised to staff the entire venture with Afghan laborers and managers — many of whom must be trained from scratch in a country with little mining expertise.

“After five years, it’s only Afghan engineers,” he said. “Only in administration do the Chinese stay.”

Indeed, outside experts here say, the striking aspect of China’s Aynak venture is the degree to which it left competitors in the dust. Increasingly, the world’s richest remaining mineral deposits are in hostile territory — malarial jungles, combat zones, unstable nations that possess mineral riches but no realistic way to get them to market.

With government money and backing behind them, China’s state-run giants take risks in places that even the largest private behemoths will not tolerate, and they can add sweeteners — from railroads to mosques — that ordinary mining firms are ill equipped to provide.

“The Chinese have sort of raised the bar. They’ve taken it beyond the scope of just an extractive operation,” the Western official said. “The Chinese are willing to step up and take a long-term strategic approach. If it takes 5 or 10 years, at least they have a beachhead.”

The wild card, of course, is that no outsiders can know how much of China’s Aynak venture is in fact brilliant strategy, and how much is merely a potentially ruinous business deal by an overzealous corporation. Beijing’s corporate strategy is as opaque as it is overwhelming.

China Metallurgical, a Fortune Global 500 company that has so many subsidiaries that they are mostly identified by numbers, is a signal example. The corporation reports to the top level of the Chinese government. Big foreign investments like the one at Aynak require blessing at an equally high level. M.C.C. has huge and productive investments around the world.

Yet hardly all those ventures are successes. An M.C.C. copper mine in Pakistan is widely said to have serious environmental problems. A Pakistan lead mine has been dogged by conflict, including a suicide bombing that killed 29; residents accuse the company’s Chinese work force of stealing local jobs. In Papua New Guinea, 14 Chinese workers at an M.C.C. nickel mine were injured in May in a pitched battle with local people who rioted over what they called intolerable working conditions.

That bid in 2006 for the iron mine in Gabon? Four years after C.M.E.C. struck its deal, the bargain appears to be unwinding over hints of corruption and global objections to a dam that would destroy Kongou Falls, one of central Africa’s most treasured waterfalls.

Was Too Much Promised?

Not surprisingly, that record leads skeptics to suggest that in Afghanistan, M.C.C. may have overpromised and, later, will underdeliver.

In interviews here, some experts said that M.C.C.’s Aynak bid was so munificent that the company might be forced to renegotiate lavish payments of copper royalties to the Afghan government. Others predicted that the company would be forced to shift parts of the vast project, like the yet-to-be-built railroad, to international donors.

Still others said the company’s initial environmental efforts already badly lagged behind the promise in its winning bid to strictly adhere to the Equator Principles and World Bank benchmarks — the gold standards for environmentally sensitive projects.

China Metallurgical is not talking. Its officials not only refused to be interviewed for this article, but also sought to prohibit a journalist even from photographing the mine site from afar.

But the company clearly is undeterred. The Afghan government is seeking bids for its second great mineral project, a behemoth called Hajigak that is said to contain 60 billion tons of iron ore. There are seven finalists — all companies from India and China. M.C.C. is one of them.

Li Bibo contributed research from Beijing.

Thursday, December 24, 2009

Xmas Eve reading on Great Gaming in Asia

Amazing analysis by Indian diplomat and thinker M K Bhadrakumar on China's chess moves in Central Asia, which Obama officials describe as "at the fulcrum of key US security, economic, and political interests".

Western experts often speak in a dismissive tone that the Central Asians prefer the Chinese because they never raise difficult issues such as democracy and human rights. But this is far too simplistic a reading. Central Asian countries see Western discourse on democracy and human rights as doublespeak from countries that pander to authoritarian regimes without scruples when it suits their business interests.

Central Asian countries draw satisfaction that eventually Washington is no more trampling on the region's sensitivities and ethos. The fashion in which Uzbekistan taught an enduring lesson to the European Union and the US regarding mutual respect and equitable relationship was widely noted in the region's capitals.

But that is only part of the story. The main thing is that China has reset the terms of the West's engagement with Central Asia. Western countries need to negotiate hard with Central Asian interlocutors squarely. Secondly, while they are under compulsion to abandon the cherry-picking approach they once took - touching the region's precious minerals and shying away from any further involvement such as in the manufacturing sector or agriculture

The piece's denouement is another level of Dante's Hell

China (and Russia) have reason to be on guard that Obama's Afghan surge and the new strategy as a whole essentially aim at pursuing longstanding US strategic interests of controlling Central Asia and containing Russia and China through "soft power" - methods different from those of the previous US administrations...

The specter of an open-ended US military presence in the region haunts China. After all, China was the US's accomplice against the Soviet Union in the Afghan jihad in the 1980s and should know that Washington has myriad ways to make use of radical and extremist elements as instruments of geopolitics.

Tuesday, December 8, 2009

I Love Japan... much I had my fingerprints surgically altered to dupe the immigration machines. It's true. Lin Rong, a 27-year-old Chinese woman, paid £9,000 to have her pads re-grafted so she could return to Japan. The story's here. Surveillance society? Phooey.

Monday, December 7, 2009

Economist blooper

Oh dear. The Economist on its video offering says the man opposite is India's environment minister, Jairam Ramesh. It's not. The goatee-ed one is Prodipto Ghosh, a spiky former top civil servant in the Indian environment ministry. Do they all look the same?

Sunday, December 6, 2009

The Reds and their Debs

Wonder when you might see a rabid Jacobinism rise from the ashes in China? The conspicuous consumption of today's Communist party princes and princesses might be the start. Here's a great piece on some of the antics of the communist royalty.

Their grandfathers are known as China's political elite, the men who led the socialist country out of poverty into a new economic era, (but they are now known for) their high profile debut at blue-blooded Paris balls.

Of course such aristocratic pretensions might not be enough to set off a revolt. The renmin would have to suffer a heavy financial burden - job losses and rising, high prices. No wonder the economy is the priority in Beijing.

Saturday, December 5, 2009

The Hindu newspaper: The press or The press release?

N Ram is the editor of the Hindu, one of India's most influential newspapers. He has very clear views on a number of subjects. He buys the Chinese line on Tibet and the Dalai Lama. He has a strong anti-Islamist line. He also has backed the Sri Lankan government to the hilt. There was nothing that appeared to convince Ram that Sri Lanka had destroyed the LTTE terror machine at a terrible cost. Anyone reading his newspaper would rarely chance upon arguments that might challenge the editor's opinion.

It got to a point where the HIndu published a number of interviews with Sri Lanka's president which must have left readers confused. Was this the press or the press release?

Most brazen was N Ram's take on what some described as "internment camps" where Tamil civilians were dumped in after the end of Sri Lanka's civil war. The headline in July on visiting the Vavuniya IDP camps was that the trip was "an uplifting experience".

So what a surprise to see this story titled Things not all that well in Sri Lanka camps: India in the HIndu's news pages. Tucked away but there none the less. Looks like the editor might be afraid of the light on this one.

Parting pariah

After six years I am leaving Delhi and as fine a send off that this city could give me, I think of no better eulogy than the words of Jay Landsman, the fictional sgt. in the Wire. I am not claiming anything on Det Jimmy McNulty but I can think of no reporter who would not, with some obvious modifications, wear the words below with pride.

"He was the black sheep, a permanent pariah. He asked no quarter of the bosses and none was given. He learned no lessons; he acknowledged no mistakes; he was as stubborn a Mick as ever stumbled out of the Northeast parish just to take up a patrolman's shield. He brooked no authority.

"He did what he wanted to do and he said what he wanted to say, and in the end he gave me the clearances. He was natural police. And I don't say that about many people, even when they're here on the felt. I don't say that often unless it happens to be true. Nat'ral po-lice. But Christ, what an asshole."

"And I'm not talking about the ordinary gaping orifice that all of us possess. I mean an all-encompassing, all-consuming, out-of-proportion-to-every-other-facet-of-his-humanity chasm — if I may quote Shakespeare — 'from whose bourn no traveler has ever returned.'

"He gave us thirteen years on the line. Not enough for a pension. But enough to know that he was, despite his negligible Irish ancestry, his defects of personality, and his inconstant sobriety and hygiene, a true murder police. Jimmy, I say this seriously. If I was laying there dead on some Baltimore street corner, I'd want it to be you standing over me catchin' the case. Because brother, when you were good, you were the best we had."