Free Markets, Free People

China


Korea heats up

South Korea has determined it’s ship, the Cheonan, was torpedoed by a North Korean submarine.  46 South Korean sailors died.  In most people’s minds, that was an overt act of war.

Yesterday, NoKo severed all ties with South Korea.  Of course, technically, they’re still in a state of war, but this is a significant step in the wrong direction.  Said NoKo:

“The Committee for the Peaceful Reunification of Korea… formally declares that from now on it will put into force the resolute measures to totally freeze the inter-Korean relations, totally abrogate the agreement on non-aggression between the North and the South and completely halt the inter-Korean cooperation,” KCNA reported.

That certainly ratchets up the tensions between the two countries. It makes you wonder, as if anyone could figure him out, what the Elvis-loving tin pot dictator of NoKo is up too.  As mentioned, these are significant steps in the direction of war, and you have to be wondering what is going on internally in NoKo to drive this sort of provocation.

South Korea and the US will be holding some naval exercises off the coast to emphasize their unified position and status as allies, but other than that, there’s not much that can be done but wait and see what Kim Il Jung has up his sleeve.  In the meantime, this is about all SoKo has available to it:

South Korea has also said it will drop propaganda leaflets into the North to tell people about the sinking, as well as setting up giant electronic billboards to flash messages.

I’m not sure how it intends to drop leaflets, but the giant electronic billboards will only be seen by those NoKo trucks in every morning to work the model farms that can be observed from the DMZ.  South Korea is also resuming propaganda broadcasts to the North and using loudspeakers on the DMZ. 

It has also said it will take its case to the UN Security Council where China has a veto.  Any action (not that long time observers would expect much more than a strongly worded resolution) therefore is dependent on convincing the Chinese to go along with whatever the rest have planned.

Analysts say China’s attitude is key, because it holds a veto in the Security Council and has in the past been reluctant to impose tough measures on Pyongyang.

So – State Department – you mission  is to get China to the table and on the team.  Additionally, seeing that NoKo seems to be on a path to some sort of military action, whatever is decided should be aimed at lessening tensions, not heightening them.  It would be nice if you remembered we have 28,000 American troops there, and their fondest desire is not to be involved in the third simultaneous US war.  And trust me, if NoKo decides “to hell with it” and launches across the South Korean border, we’re not talking about casualty counts trickling in – we’re looking at a flood.

~McQ


Nice – lectures on fiscal responsibility from … China

Who would have ever thought to see the day the US was lectured on its economic policy by the Red Chinese?  Even worse, who would have believed the Chinese would be right?

Sovereign debt troubles in Europe underscore how important it is for the United States to control its own borrowing as its indebtedness reaches concerning levels, a senior Chinese official said on Thursday.

With China facing criticism for holding its currency in a de facto dollar peg, assistant finance minister Zhu Guangyao shifted attention to Beijing’s own worries about U.S. policies, especially its soaring deficit, ahead of high-level bilateral meetings next week.

[...]

China will look to coordinate its economic policies with the United States as a buffer against the turbulence and would also like the G20 group of nations to play a role in strengthening the global response, Zhu said.

But the United States needs to take a hard look at its own fiscal situation in the light of what has happened in Europe, he said.

We continue to hear from those like Paul Krugman that debt is fine in conditions like this, that in fact, we haven’t spent enough.  Obviously that’s not worked out too well, has it?  And, as we’re seeing in Europe, especially Greece, when debt reaches a certain proportion of GDP, it becomes unsustainable.  Guess what China, a country holding almost a trillion dollars of our debt, is worried about?

“We hope that the U.S. deficit will fall as a proportion of GDP as the economy recovers and reach a sustainable level,” Zhu said.

Well, Mr. Zhu, if you look at the projected 10 years of budgeting the Obama administration has forecast, you’re not going to get a very warm and fuzzy feeling about that. 

But here’s a promise – you will get all the lip service to that end that you can stomach.  And, as most Americans are learning, this administration considers talking about something akin to doing something about it.  In the meantime watch closely as they continue to spend us into oblivion and eventually erode the value of the treasury holdings you hold.

All the while they’ll continue to say to anyone who will listen – “we’ve got to address this debt, it is unsustainable” all as trillions in borrowed money continue to go flying out the door.  

~McQ


When are sanctions not sanctions?

When enforcement is an option, I suppose.  Tell me how brilliant this is:

The Obama administration is pressing Congress to provide an exemption from Iran sanctions to companies based in “cooperating countries,” a move that likely would exempt Chinese and Russian concerns from penalties meant to discourage investment in Iran.

[...]

The “cooperating countries” language that the White House is pressing would allow the executive branch to designate countries as cooperating with the overall strategy to pressure Iran economically.

According to three congressional staffers familiar with the White House proposal, once a country is on that list, the administration wouldn’t even have to identify companies from that country as selling gasoline or aiding Iran’s refinement industry.

Even if, as current law allows, the administration can waive the penalties on named companies for various reasons, the “cooperating countries” language would deprive the sanctions of their “name-and-shame” power, the staffers said.

The bill in committee now doesn’t have this provision.  Essentially what this amounts to is the administration saying “if you’ll sign on to the sanctions (against the importation of gasoline), we won’t enforce them” to “cooperating countries”.  Pure symbolism over substance.

“We’re pushing for a ‘cooperating-countries’ exemption,” the White House official said. “It is not targeted to any country in particular, but would be based on objective criteria and made in full consultation with the Congress.”

Mrs. Ros-Lehtinen, however, said the exemption “is aimed at China and Russia specifically.”

“The administration wants to give a pass to countries for merely supporting a watered-down, almost do-nothing U.N. resolution,” she said.

This isn’t coherent foreign policy – this is pure politics mostly designed for domestic consumption.  This is about the ability to claim to have made progress against Iran by rallying the rest of the world to our side and imposing “tough new sanctions” via the UN when the intent is to never enforce them.

Of course Iran hasn’t been idle either.  They’re not doing “in-kind” bartering with regional neighbors which circumvents any sanction regime.  Swap oil for refined petroleum products and they’re not liable to such sanctions.  And of course Hugo Chavez and others in the socialist South American cabal have also said they’d ignore such sanctions anyway.

Last, but certainly not least, a gasoline sanction hits those that can’t afford it the most the hardest in Iran.  The regime?  It will always have plenty of gasoline.  The poor Iranian trying to feed his family – not so much.

Instead of playing these sorts of games, which are clearly doomed to failure (or irrelevance), maybe it’s time to reconsider putting back on the table some of the options the administration unilaterally took off the table last year.

~McQ



 


Mission Impossible

Yesterday, in the New York Times and other media outlets:

President Barack Obama secured a promise from President Hu Jintao of China on Monday to join negotiations on a new package of sanctions against Iran, administration officials said, but Hu made no specific commitment to backing measures that the United States considers severe enough to force a change in direction in Iran’s nuclear program.

In a 90-minute conversation before the opening of a summit meeting on nuclear security, Obama sought to win more cooperation from China by directly addressing one of the main issues behind Beijing’s reluctance to confront Iran: its concern that Iran could retaliate by cutting off oil shipments to China. The Chinese import nearly 12 percent of their oil from Iran.

Obama assured Hu that he was “sensitive to China’s energy needs” and would work to make sure that Beijing had a steady supply of oil if Iran cut China off in retaliation for joining in severe sanctions.

U.S. officials portrayed the Chinese response as the most encouraging sign yet that Beijing would support an international effort to ratchet up the pressure on Iran and as a sign of “international unity” on stopping Iran’s nuclear program before the country can develop a working nuclear weapon.

Today in the Jerusalem Post, via AP:

A state-owned Chinese refiner plans to ship 30,000 metric tons of gasoline to Iran after European traders halted shipments ahead of possible new UN sanctions, according to Singapore ship brokers.

[...]

A deputy Chinese foreign minister, Cui Tiankai, said Tuesday that China is ready to discuss all ideas that UN Security Council members put forward to deal with Iran’s nuclear program. But he said any agreement on Iran must involve all parties, not just one or two countries.

Cui said Iran’s legitimate right to have energy trade with other countries should not be undermined as the world pursues a settlement of the nuclear standoff.

Your mission, should you decide to accept it, is explain how today’s actions by China reconcile with the claim Obama made yesterday.

~McQ


Who’s “optimal” are we talking about here?

Thomas Friedman is at it again. He finds our method of governance just too cumbersome and one which mostly yields “sub-optimal” results. I mean, look at the Chi-coms:

TOM BROKAW: Tom, are we at a kind of turning point in America in terms of being able to make this a functioning country again, or are we dysfunctional?

TOM FRIEDMAN: Well this is what worries me. I’ve been saying for awhile Tom, there’s only one thing worse than one-party autocracy, the Chinese form of government, and that’s one-party democracy. In China, if the leadership can get around to an enlightened decision it can order it from the top down, OK. Here when you have one-party democracy, one party ruling, basically the other party just saying no, every solution is sub-optimal. And when your chief competitor in the world can order optimal and you can only produce sub-optimal? Because what happens, whether it’s health care or the energy bill, votes one-through-fifty cost you a lot. Fifty to fifty-nine cost you a fortune. And vote sixty: his name’s Ben Nelson! And by the time you’ve made all those compromises, you end up with the description David [Brooks] had of the health care bill, which is this Rube Goldberg contraption. I really hope, I hope personally it passes. I hope it works. But I can’t tell you I think it’s optimal.

Well, of course mandating one child and one child only was certainly considered to be “optimal” by the leadership. The polity didn’t agree. And now the mostly male generation which has since grown up and is experiencing a vast shortage of women doesn’t either. Damn law of unintended consequences – it always tends to screw up “optimal” top-down decisions, doesn’t it?

And as I recall, they certainly considered the “Great Leap Forward” to be “optimal”, didn’t they? What are a few million, er 14 to 20 million deaths, when the “top down” solution is so, uh, “optimal”. Indeed, with those 14 to 20 million deaths, the plan ended up working rather well – except for those cases of cannibalism – because there was more for those who were left.

Very “optimal”.

And the “Cultural Revolution” was pretty “optimal” as well, wasn’t it?

It was certainly “optimal” for Stalin to declare the Kulaks “enemy of the people” wasn’t it? It allowed him to essentially steal their farms and “collectivize” them while deliberately starving millions of those “enemies” of his “optimal” plan to death in 1933. Yup, very “optimal” if you’re Joe Stalin and you get to make those “top down” decisions, isn’t it?

I assume Hugo Chavez thought it was an “optimal” solution to nationalize the oil industry Venezuela. None of that sloppy law and democracy stuff for him, by George.  And that’s worked out so well, hasn’t it?

Optimal.

Would someone buy Mr. Friedman a one-way ticket to China please?  There he can forever bask in the goodness of top-down “optimal” decisions and glory in them like so many millions have already done there since the imposition of “optimal” top-down decisions. 

That would be an “optimal” result for me.

~McQ


The Future Consequences Of Energy Stupidity

I’m not sure how else to characterize this in a strategic and national security sense:

Canada, faced with growing political pressure over the extraction of oil from its highly polluting tar sands, has begun courting China and other Asian countries to exploit the resource.

The pressure is coming from the United States. The “pollution” is carbon. But the bottom line is the tar sands are going to continue to be exploited in Canada. The question is, to whom will the oil extracted go?

With the US backing away, the answer, apparently, is China.

In the most significant deal to date, the Canadian government recently approved a C$1.9bn (£1.5bn) investment giving the Chinese state-owned oil company Petro­China a majority share in two projects. Prime minister Stephen Harper said: “Expect more Chinese investment in the resource and energy sectors … there will definitely be more.” China’s growing investment in the tar sands is seen in Canada as a useful counter to waning demand for tar sands oil from the US, its biggest customer. The moves, which have largely gone unnoticed outside north America, could add further tension to efforts to try to reach a global action plan on climate change.

[...]

The projects, which will begin coming on line over the next decade, are seen as crucial to a long term strategy of finding new sources of energy as China’s economy continues to expand.

How about that … a country with a “long term strategy” in which it seeks sources of new energy for future growth. Not so in the US where Ken Salazar’s Interior Department seems to be using every means available to it to slow down the possibility of finding and bringing new carbon based resources on line for future consumption:

The Interior Department has informed Congress that it will take over two years to complete an environmental study needed to allow major seismic surveys of Atlantic coast oil-and-gas resources – a timeline that industry groups allege is too slow.

In an early February letter to House and Senate appropriators, Interior provides a timeline for completing a “programmatic environmental impact statement” on the effects of seismic testing and other assessment techniques.

It anticipates a “record of decision” – which is the final agency sign-off – in mid-April of 2012.

If I’m not mistaken, that will put us 4 years into the decision to allow drilling in the OCS. And, of course, seismic surveys and their effects are well known and have been for decades. The seismic surveys would update decades old surveys.

The point, of course, is these new Interior requirements completely derail the timeline established by the Interior Department in 2007:

Interior’s 2007-2012 offshore leasing plan calls for a lease sale off Virginia’s coast in 2011, although the sale could be delayed.

No company is going to bid on leases until those seismic surveys are complete.

The long range consequences for the US of these sorts of short sited policies should be obvious. And I don’t expect them to get any better any times soon despite the promises President Obama made in his State of the Union address.

~McQ


Quote Of The Day – Debt Edition

Has anyone ever considered the fact that so much debt and borrowing is a national security problem?

“From 1789 through 2008, the U.S. government borrowed a total of $5.8 trillion. In 2009, the federal budget deficit exceeded $1.4 trillion. The administration now expects the 2010 deficit to break that record, topping $1.6 trillion. And in 2011, it would only fall to about $1.3 trillion. Thus, in just three years, the debt will have jumped an astonishing $4.2 trillion.” – James Capretta, a Fellow at the Ethics and Public Policy Center

Those to whom we own money – especially as much as we do – hold some pretty powerful leverage. The Chinese military has been stomping around all week urging their government to use it. They want China to sell some US bonds to deliver a little “economic punch” to get our attention, apparently.

“Bush made me do it” won’t work when piling up this much debt.  The GOP’s ready-made economic and national security issue is found within the quote.  That assumes they don’t just placidly go along with the mammoth increase in the debt.  And that’s never a safe assumption.

~McQ


New Cold War? About Those Improving Relations With China …

I certainly wouldn’t put much confidence in the claim that relations have improved between the US and China.  In fact, despite Obama’s claims, it appears they’re much worse.  Recent actions by the US have riled the Chinese to the point that they’re being anything but subtle about their feelings and certainly not  keeping those feelings out of state sanctioned publications.  According to the UK’s Sunday Times, 55% of Chinese agree that “a cold war will break out between the US and China”.

What has spurred this turn of events?

The finding came after battles over Taiwan, Tibet, trade, climate change, internet freedom and human rights which have poisoned relations in the three months since President Barack Obama made a fruitless visit to Beijing.

You’ll most likely remember how the administration touted the visit as one which significantly improved out relations with China. Apparently the administration was the only one which saw it that way:

During Obama’s visit, the US ambassador to China, Jon Huntsman, claimed relations were “really at an all-time high in terms of the bilateral atmosphere … a cruising altitude that is higher than any other time in recent memory”, according to an official transcript.

The ambassador must have been the only person at his embassy to think so, said a diplomat close to the talks.

“The truth was that the atmosphere was cold and intransigent when the president went to Beijing yet his China team went on pretending that everything was fine,” the diplomat said.

In reality, Chinese officials argued over every item of protocol, rigged a town hall meeting with a pre-selected audience, censored the only interview Obama gave to a Chinese newspaper and forbade the Americans to use their own helicopters to fly him to the Great Wall.

President Hu Jintao refused to give an inch on Obama’s plea to raise the value of the Chinese currency, while his vague promises of co-operation on climate change led the Americans to blunder into a fiasco at the Copenhagen summit three weeks later.

Diplomats say they have been told that there was “frigid” personal chemistry between Obama and the Chinese president, with none of the superficial friendship struck up by previous leaders of the two nations.

And, if you can believe it, it has gone downhill from there.

An independent survey of Chinese-language media for The Sunday Times has found army and navy officers predicting a military showdown and political leaders calling for China to sell more arms to America’s foes. The trigger for their fury was Obama’s decision to sell $6.4 billion (£4 billion) worth of weapons to Taiwan, the thriving democratic island that has ruled itself since 1949.

“We should retaliate with an eye for an eye and sell arms to Iran, North Korea, Syria, Cuba and Venezuela,” declared Liu Menxiong, a member of the Chinese people’s political consultative conference.

He added: “We have nothing to be afraid of. The North Koreans have stood up to America and has anything happened to them? No. Iran stands up to America and does disaster befall it? No.”

Apparently they’re on to the new but unspoken motto of the Obama administration “speak a lot, but do nothing”. What is being sensed by these military leaders in China is weakness. And such weakness is never left alone or ignored in international politics – it is always, in some way, shape or form exploited. While some may see this as nothing more than saber rattling, knowing the Chinese, it’s much more than that.  It signals a significant change in our relationship:

Chinese analysts think the leadership, riding a wave of patriotism as the year of the tiger dawns, may go further.

“This time China must punish the US,” said Major-General Yang Yi, a naval officer. “We must make them hurt.” A major-general in the People’s Liberation Army (PLA), Luo Yuan, told a television audience that more missiles would be deployed against Taiwan. And a PLA strategist, Colonel Meng Xianging, said China would “qualitatively upgrade” its military over the next 10 years to force a showdown “when we’re strong enough for a hand-to-hand fight with the US”.

Chinese indignation was compounded when the White House said Obama would meet the Dalai Lama, the exiled spiritual leader of Tibet, in the next few weeks.

“When someone spits on you, you have to get back,” said Huang Xiangyang, a commentator in the China Daily newspaper, usually seen as a showcase for moderate opinion.

If that’s the moderate opinion, you can imagine what the more hawkish among China’s opinion makers are saying.

This is what happens when amateurs play at foreign policy and those they’re dealing with sniff out weak (or non-existent) leadership. As I mentioned quite some time ago, 2009 would be a year of relative calm as other nations took the measure of the new administration and what they could expect. Once that was done, 2010 would most likely be the year when they’d act – and frankly, given this from China, it’s most likely not going to be a pleasant year for US foreign policy.

Oh, and if you think China is willing to back the US on new sanctions against Iran – as the administration has been claiming – I’d be willing to take that bet and give odds that no such backing will ever be given by China.

~McQ