When Corrupt Frenemies Encircle: Race to the Finish

Transparency International Corruption Index 2015 http://www.transparency.org/cpi2015#map-container

Transparency International Corruption Index 2015
http://www.transparency.org/cpi2015#map-container

China is moving strongly into Iran and Central Asia — and showing signs of planning bold moves into the middle east. China is also investing in Ukraine, Turkey, several Baltic nations, and Central Europe. An economic encirclement of Russia by China is well under way.

While China is experiencing an economic crisis of significant dimensions at home, its leaders are currently engaged in a global economic putsch in search of foreign investment, economic alliances, and other economic opportunities.

Conventional wisdom suggests that China’s strong moves toward a broad economic diplomacy are meant as a way to improve Beijing’s global standing vis a vis the US. But China’s more immediate obstacles to expanding its influence comprise its neighbors to the South and East, and its resource-rich neighbor to the North.

China is reaping the results of decades of capital misallocation, which is causing hardship to many resource-exporting nations, including Russia and several other nations.

But China’s economic slowdown also presents a domestic threat to Xi and his subordinates in the CPC. The credibility and hold on power of China’s leadership will begin to sway alarmingly, unless they can show the elites, the military, and the masses that China’s leadership is still strong and in control.

How Is Russia Reacting to Being Encircled by its Frenemy?

Russia is aware of the danger of becoming overly-dependent upon China — of in fact becoming encircled by China politically, economically, and geographically — but there is virtually nothing that the Kremlin can do about it under current conditions in Russia Today.

Putin has made occasional moves to strengthen alliances with North Korea, Vietnam, India, Japan, and other nations on China’s periphery But China’s moves into Iran, the middle east, Central Asia, Turkey, and Eastern Europe are far stronger moves of encirclement than Putin is capable of, with the very weak hand he holds.

China has agreed to construct two nuclear power plants in Iran and import Iranian oil on a long-term basis. Such cooperation could threaten Russian positions, since Moscow had earlier announced that it would simultaneously be building eight nuclear plants in Iran. Russia’s place in the Chinese oil market, which for the last years has been squeezing out the Arabic countries, could also be affected.

__ http://rbth.com/international/2016/01/28/a-new-era-in-iranian-chinese-relations-threatens-russian-interests_563003

Moscow once enjoyed equally good relations with Tehran and Riyadh. But in plunging into the civil war in Syria, Russia — despite the fact that most of its Muslim population is Sunni — entangled itself with the Shiite camp, and can no longer be trusted by the Sunnis. With the United States and Russia no longer able to hold the balance between Iran and Saudi Arabia, China, which has solid relations with both, is increasingly tempted to fill the vacuum. __ http://foreignpolicy.com/2016/01/26/chinas-new-middle-east-grand-strategy-iran-saudi-arabia-oil-xi-jinping/

China is using its strong relationships with oil & gas suppliers in Central Asia and the middle east to twist Russia’s arm. By stalling cooperative economic ventures that the Kremlin desperately need to proceed, China’s leverage over Russia expands enormously.

Power of Siberia’s image is being shaped by tender flip-flops, postponements, cancelled purchases, new purchases and single-tender purchases,” said the report.

Delays have caused contractors to miss much of the winter construction season in the Siberian wilderness, when the terrain is frozen and more stable. Construction costs per kilometer are several times higher than in western Russia, it said.

But external conditions facing the project may be even more challenging.

Export gas prices have plunged nearly 50 percent since the 30-year export deal was signed, making it unlikely to still be worth U.S. $400 billion. Peak volumes under the contract would reach 38 billion cubic meters (1.3 trillion cubic feet) a year.

Reports of the start-up date for deliveries have gradually slipped from 2018 to 2019 to 2021 and beyond. __ China’s Leverage over Russia Grows

China can afford to shop around for the best deal on oil & gas, in today’s markets. And if it can wrench concessions from the Kremlin over a broad range of issues — including control of Siberian resources and access to all of Russia’s military systems — all the better. We are seeing encirclement on a grand scale, in multiple dimensions. Putin can do nothing to counter it. But he tries.

A Natural Relentless Ongoing Incursion by China Into the Former Russia

A Natural Relentless Ongoing Incursion by China Into the Former Russia

Beneath all the maneuvering, the Russian Far East is undergoing a stealthy invasion by Chinese workers and business interest, who already control much of the Far East.

Kremlin Propagandists Unable to Acknowledge Russia’s Real Threat

Helplessly dependent upon China at this stage, the Kremlin cannot publicly acknowledge the real threat the Bear faces from the Dragon and particularly from itself. It is not politically correct in Russia to point to Kremlin leadership as the source of most of Russia’s current problems, or to confess that the nation that is supposed to be Moscow’s most steadfast friend is actually taking advantage of Russia’s precarious situation — and systematically increasing pressure on Moscow in several ways.

Whose blind spot is at fault? Certainly not Beijing’s. Xi is methodically increasing China’s advantage on all fronts. Moscow is aware of the threat but is unable to respond. The blindness inflicts all those who take Kremlin propaganda and obfuscation seriously — the Russian masses, Russophiles in the west, and others with private emotional reasons for wanting to see a strong Eurasian power rise as a foil against the freer and less corrupt powers of the world.

Putting one’s hope on a rapidly degrading Muscovy is not a sign of mental astuteness, given its “frenemy-on-the-spot” that sits on Russia’s many doorsteps in grand encirclement.

More: Russia’s “ace in the hole” foreign legion
Collapse of Putin

Russia is on the edge of a perfect storm, as destabilizing forces converge. Under conditions such as these, mass disturbances are highly probable. Revolutions, palace coups, and violence will be increasingly likely. The result could be the collapse of the regime or the break-up of the state. Whatever the scenario, Putin is unlikely to survive.

And China will be standing behind Putin the whole way down, cheering him on — a “friend to the end.”

China’s strong global moves rest on a shaky foundation.

As noted above, China is making some very strong moves in the financial world — including the recent opening of the Asian Infrastructure Investment Bank in Beijing.

We know that the answer to the question: “When is a politician lying?” is:  “When his lips are moving.”   One can make similar assumptions whenever a badly mismanaged economy makes grand economic plans and pronouncements, while its underlying debt and demographic situations experience rapid and accelerating decay.

China is becoming more a source of risk than resilience. The number to look at is not Chinese GDP, which is almost certainly a political statement. The country’s imports have collapsed. This is troubling because it is the epicentre of global trade. Shockwaves from China can test all the global fault lines, making it a potent source of financial turbulence.

Only China can undo its excesses. Its vast industrial overcapacity and ghost real estate developments must be wound down. As that happens, large parts of the financial system will be knocked down. The resulting losses will need to be distributed through a fierce political process. Even if the country’s governance structure can adapt, the required deep-rooted change could cause China’s slowdown to persist for years. __   Pay Attention to Underlying Signals

It is easy to ignore the danger signs. While China is projecting a sense of wealth, power, finesse, and total control, the underlying picture is quite different. Xi’s radical shifting of the PLA power structure giving himself close and total control of China’s land, sea, air, and space weaponry, is only a small part of China’s massive and largely secret re-organisation onto a quasi-wartime footing. The large division of PLA service members devoted to cyber espionage, cyber sabotage, and cyber warfare, are not being funded on a whim. Desperation is in the air for those whose sense of smell has not deserted them. Xi is playing for keeps.

These desperate actions by Xi amount to a postponing of China’s financial reckoning. Xi and the leadership are betting that they can turn their crisis into a triumph, without paying any significant cost.

What do you think?

China would have to defy decades of history to avoid being crushed by its mountain of debt. Research firm Capital Economics analyzed 30 years of emerging-market crises and concluded that “no country has experienced an increase in its private debt-to-GDP ratio of 30 [percentage points] within the space of a decade and not experienced problems.” At best such countries endured significant, and often protracted, slowdowns in growth. China has seen an 80 percentage point jump in that ratio over the past decade, to more than 200 percent. A reckoning seems inevitable. __ Bloomberg 2016 1 29 China Can Postpone a Financial Crisis But Not the Cost

The worst that could happen when nuclear-armed tyrannies are in danger of collapse, is that they move beyond intimidation, stealing resources and technologies, and illegal expansion of territories — and move to more violent actions. A nuclear war is possible, although not likely at this stage. If China can take what it needs to allow its current form of government to survive and expand its influence — using other means than massively destructive warfare and its aftermath — that would not be necessary.

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