China: Tiananmen Square In The Tropics

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December 6, 2018: Since early 2018, the economy has been declining. This is measured by numerous aspects of economic activity (production, orders for raw materials, finished goods or construction and so on) and sentiments (of people running the economy and consumers). At the same, just the opposite is happening with the American economy. During a recent meeting of world leaders, the Chinese and American leaders agreed to a 90-day truce in their trade war. The Americans are doing it to test the sincerity of new Chinese trade measures that are supposed to make it easier for some American products to be sold in China. Until now the Chinese would often flagrantly cheat and then deny that they had done any such thing. This has been going on for decades and the recent American trade war is meant to deal with this long festering issue. China is seen as vulnerable because its economy is overheated, unbalanced and at risk of partial collapse. Chinese leaders need some time to consider their options. The Americans openly reminded the Chinese that there would be prompt retaliation if China reneged on any of these agreements.

For the last three months, Chinese media have been operating under orders from the government to exercise care in reporting economic data. In other words, the economy is not doing well and the government wants to prevent a financial panic, especially in light of the trade war with the United States and the sanctions on Iran (a major source of oil). This media manipulation can moderate the widespread unease about the economy in China but not eliminate it. The government still lacks total control over the Internet and cell phone users. Bad news still gets around and when it has to do that despite government censorship the news has more impact. While some of this bad news comes from outside China most of it is generated internally. Chinese have learned not to trust government supplied economic data. Chinese can see for themselves indicators of economic slowdown and a rapidly mutating slang is used on the Internet to get the news past the censors.

The government knows it can slow the spread of bad news, not stop it and tries to come up with new distractions to divert public attention. The mess in North Korea helps, especially since South China Sea headlines don’t distract as well as they used to. Moreover Chinese, especially the growing number who travel abroad for business or pleasure, note that China is not well liked by its neighbors. China is seen as a bully and a threat economically and militarily. This can be seen by the eagerness of Chinese neighbors to side with the United States in its trade war with China. Many of these nations have similar disputes with China and see the American efforts as beneficial for everyone but China. “Attack while the enemy is weak” is a classic strategy and one especially favored by those who study Chinese history, as most Chinese leaders do. When playing defense against this ancient Chinese wisdom advices use of deceptions and delay until the situation changes. In this conflict, the American and Chinese leaders seem to be using the same moves but from different playbooks.

The Chinese were surprised at the American trade war as they believed the West, especially the Americans, would not risk such a move. Unfortunately, the current American leader is a career businessman and expert at the use of mass media. Most Chinese noted this change and became even more disillusioned at their own government which is still seen as corrupt and self-serving by most Chinese. The newly acquired Chinese prosperity rather fragile compared to the Western models. The Chinese government prefers to play down this but at the moment most Chinese are well aware of the fragility and terrified at where it may lead.

Korea

China is still seen as the deciding factor in getting North Korea to give up its nuclear weapons. But the Americans have also noted that China has loosened up on its enforcement of North Korean sanctions since early 2018. Despite that Chinese trade with North Korea fell 57 percent during the first ten months of 2018 (compared to 2017). At the same time, satellite photos show that China has used the reduction in trade (and road use) with North Korea to upgrade and expand the infrastructure along the North Korean border. This would enable much more trade with North Korea once sanctions are lifted.

The Americans say they will negotiate with North Korea, and China, as long as it takes to achieve denuclearization but only if there are no more nuclear tests. The economic sanctions will remain in force until a denuclearization deal is achieved. That means verification, something the north is very much against. North Korea is trying to get around that by persuading South Korea and/or China to press for the gradual lifting of sanctions as progress is made. The Americans are not eager to try that because in the past the North Koreans have extracted what benefits they could with that approach and then let negotiations collapse. China is willing to be flexible, but only if it is good for China; like putting pressure on the Americans about some other issue, like the current trade war and accusations of rampant Internet based espionage. Meanwhile, China has been willing to see North Korea suffer from the sanctions that even China is now enforcing.

The impact of China enforcing all the UN trade sanctions against North Korea has, since it began in early 2018, caused serious shortages of foreign currency. This is how you measure the true impact of any sanctions on North Korea and you know the sanctions are bad when Chinese exporters of consumer goods for the North Korean ruling class (two or three percent of the population, including immediate family, who run the government, universities, research centers and security forces) are now demanding cash in advance. China is the main access point for the thousands of luxury items North Korea imports each month to keep their ruling class content and willing to do what it takes to keep the Kim dynasty in power. There are numerous reports from China about exporters losing sales of these goods to North Korea because bills are not being paid. So suppliers are demanding cash in advance and the North Koreans don’t have it. The Chinese suppliers are complaining to anyone who will listen because this trade with North Korea is big business in some Chinese cities on the border.

Iran

China has set up a system of banks to avoid sanction restrictions on customers paying Iran for the oil. The Americans have not gone after this Chinese system in the past but Iranians fear that this time might be different. The Chinese only do this for themselves and consider that makes it more difficult for the Americans to intervene. Unlike during the last Iran oil embargo (2012-15) China is now involved in a trade war with the Americans and that may well interfere with Chinese efforts to assist Iran in evading sanctions.

India

The Chinese/Indian border has been much less active, and not very violent at all. India reports that so far in 2018 border violations by Chinese troops are down 20 percent compared to 2017. But that still means there were 137 illegal border incursions by Chinese troops so far in 2018. In September China agreed to establish multiple hotlines along their mutual border and also between the defense ministries of both nations. This revives previous efforts to establish a hotline. In 2016 China and India have worked out and agreed to details of a hotline for commanders on both sides of the LAC (Line of Actual Control). Also known as the MacCartney-MacDonald Line the LAC is the unofficial border between India and China. The LAC is 4,057 kilometers long and is found in the Indian States of Ladakh, Kashmir, Uttarakhand, Himachal, and Arunachal. On the Chinese side, it is mostly Tibet. China claims much territory that is now considered part of India. There have been hundreds of armed confrontations over the last few years as one side or the other accuses “foreign troops” of crossing the LAC. The agreement fell apart when India went ahead, despite Chinese protests, and expanded its military ties with the United States.

Venezuela

Government control in Venezuelan is collapsing along with the economy and much else. At the end of 2018 GDP is down to about a third of what it was in 2013. It cannot fall much further because Chinese cash and technical assistance are keeping some oil production going. This is done because over 90 percent of oil produced goes to China or Russia to repay debts that were specifically made to be repaid with Venezuelan oil. China could take all of the oil production (Venezuela is currently several million barrels behind in repaying this debt) but China is aware that Venezuela requires some income so that the key government employees and security forces can be fed and otherwise compensated for their loyalty and service and encouraged to remain where they are.

This reduction in oil income was made worse by socialist economic policies that destroyed the non-oil economy and eventually helped make it more difficult for the oil industry to revive production. The government has brought in some foreign contractors (mainly Chinese) to help repair the damage to the oil industry but the Chinese have discovered that the economic infrastructure, in general, is collapsing and operating in Venezuela is even more dangerous and difficult than in chaotic and violent parts of Africa, Southeast Asia and Afghanistan where the Chinese have succeeded (some of the time) to adapt to a violent neighborhood and minimal local infrastructure.

China is staying in Venezuela because its assistance for PDVSA operations gives China control of the main revenue producer in Venezuela. China feels that a more effective government will eventually emerge and allow businesses to operate efficiently (and profitably) once more. China is positioning itself as a friend of Venezuela, not the deranged socialist currently in charge. China is still working on many development projects in Venezuela and has plenty of experience doing so in lawless regions (especially Africa and northern Burma) it currently operates in. The situation in Venezuela is familiar to the Chinese and they expect to come out of this with strong economic ties to the post-chaos Venezuela.

Given the success Maduro had in suppressing any significant opposition he still has a problem with his senior officials and the thousands of “middle management” followers running the security forces and key state-owned enterprises (oil, power, communications and so on). A growing number of these people are quietly slipping away from Venezuela and Maduro. More worrisome are the Maduro officials who remain and quietly discuss their options. The most popular option is to replace Maduro with someone more effective in dealing with the economy and better able to make the most of the advice and experience Cuba, Russia, Iran and China have to offer. This would keep the “Bolivarian Socialist Republic” going using China as a model (a communist dictatorship with a compliant free market economy). The problem is Maduro and his cronies know about this and are still willing to kill to keep Maduro in power. The belief is that there is no other government (“Bolivarian”) official with the name recognition to pull off a coup. That is no accident because Maduro may be inept in many areas but so far his self-preservation skills have been up to the task. But as Venezuela slides more and more into mass starvation things will change and not for the better.

China has approved a deal with Venezuela which allows a Chinese tech firm (ZDE) to develop an ID card that would include biometric information and also serve as a banking card (for private and government transactions.) Called the Venezuelan “Fatherland Card” it would be mandatory and essential for anyone working for the government or receiving government aid. China is the ideal supplier of the Fatherland Card because China has taken the lead in developing tech that provides a government with more intrusive and complete control of its citizens.

The details of Chinese financial dealings with Venezuela have become known because so many Venezuelan officials have left and provided information in return for sanctuary (and reducing or eliminating jail time for corruption and other crimes). China has paid several hundred million dollars in bribes to get the contracts for all these projects. China invests some of the money and much of the manpower required. Most of these investments have been energy (oil, gas and energy) related and even with the current economic collapse these are the projects that the government seeks to keep going. If anyone is going to keep the Venezuelan economy going it will be China. Losing over $30 billion in investments is seen as an acceptable risk given the potential payoff.

China is the only country willing to put up cash and personnel to fix the problem but that is mainly because Venezuela still owes China over billion dollars and most of it is supposed to be repaid in oil. China is not optimistic but apparently believes Maduro is desperate enough to give the Chinese a free hand to bring in their own engineers, management and skilled workers. Maduro may not agree with all the Chinese terms (like a priority in paying off Chinese debt via increased production and giving China a percentage of Venezuelan oil assets), but he has to realize that no one else is willing to do the job and there are few countries that can. China has already coerced Maduro to pay off most of the Chinese debt.

In mid-2018 China agreed to invest as much as $5 billion in an effort to repair and restore oil production but has only delivered about ten percent of that and more cash is dependent on how cooperative Maduro and his associates are. Apparently, China is not optimistic but sees the situation as worth a try. China has worked with a lot of dysfunctional governments and rulers worldwide and knows how to measure the odds. Venezuela appears to be a longshot, even though it has the largest oil reserves in the world.

Economists and those with experience in similar large-scale catastrophes in Africa note that what is left of the Venezuelan state could last another year or two. At that point, the country would dissolve into local fiefdoms who could ask for and receive foreign aid. But one unique thing about Venezuela is all that oil wealth, concentrated in the north, near the coast. That will also be up for grabs and that battle would involve a mélange of lawyers, bankers, diplomats and the risk that many of the oil facilities might literally go up in flames as chaos, no matter how brief, breaks out in areas where the oil and all the pumps, pipelines and port facilities are. However, this ends it won’t end well for Venezuelans. The Chinese Fatherland Card would make it easier for Maduro and China to control the key parts of Venezuela (the oilfields and the northern coast) and regulate who has access to the most valuable thing the country has.

China knows it could also lead a call for an international peacekeeping force for Venezuela if the Maduro government collapsed and it was unclear what new government was going to emerge. China could then volunteer to supply most of the peacekeepers and ignore UN orders to be gentle and restore order the Chinese way (think Tiananmen Square in the tropics.) This would avoid violating the Monroe Doctrine (which the U.S. has enforced for two centuries to prevent foreign nations from bringing in military force to collect debts).

December 1, 2018: Canada, at the request of the United States, arrested a senior executive of the Chinese electronics firm Huawei while she was at the airport transferring from an arriving flight to a connecting one. The Americans have been investigating Huawei for illegally exporting smartphones to Iran. The arrested Huawei CFO will be extradited to the U.S. for prosecution. China did not believe the Americans would pursue the Huawei smuggling charge this seriously. China may retaliate by arresting senior American executives who are in China. It would not be the first time China had arrested American citizens on flimsy charges, but these victims were usually Han Chinese who were American citizens (naturalized or born in the U.S.). China considers Han Chinese, no matter where they were born or currently live to be subject to Chinese law despite their current citizenship. Most other nations do not agree with this although some do because they employ similar logic. Huawei has close ties with the Chinese and many Western nations are refusing to use any Huawei equipment in their networks.

November 27, 2018: China is again offering to fund the construction of the 135 kilometer Kra Canal in Thailand. This would cost $30 billion and connect the Gulf of Thailand and the Andaman Sea. The canal through the narrowest part of Thailand has been proposed for centuries but the expense and lack of sufficient economic incentive thwarted all earlier efforts. The emergence of major economies in East Asia (China, Japan, South Korea and Taiwan) have changed that calculation. A canal that would shorten voyages between East Asia and point west by 2,200 kilometers (two days at sea) compared to going through the Malacca Strait makes it worthwhile for about 30 percent of the current Malacca traffic (especially large tankers or container ships) to pay a large canal transit fee (over $100,000 for a large vessel). It works for the Panama and Suez canals, although those two save ships much larger amounts of time (to go around the southern tips of South America or Africa). But the Malacca Strait handles a much larger percentage (about half and two-thirds of all tanker traffic) of world sea transport traffic. China is especially eager to incorporate the Kra Canal into its Obor (One Belt, One Road) project that has China financing and building roads, railroads, pipelines, ports and canals and ease travel via Eurasia and adjacent waterways. Nations who benefit by being next to the Malacca Strait always opposed the Kra Canal but now Malacca is becoming crowded to the point to overload. There are shortcomings for Thailand. The canal would greatly reduce the roads connecting the four southernmost provinces with the rest of the country. Bridges over the canal are expensive (they must be high enough to let the largest ships pass) so there would be few of them. Panama only has two bridges (with one more being built) and Suez also has two (one for rail traffic) and a tunnel. With the Chinese bridge construction would probably be part of the canal project. Thailand needs the bridges because most of the very lucrative tourist resorts are on those four southern provinces. Most of the Kra Canal income would go to Thailand, which would have to pay off construction loans to guarantee its permanent ownership of the canal. Thailand is considering the offer.

November 26, 2018: An American cruiser carried out the fifth American FONOP (freedom of navigation operation) in the South China Sea for 2018. This one was near several of the Chinese occupied islands in the Paracels. These islands had long belonged to (and been occupied) by Vietnamese. China took the Paracels by force in the 1970s. In 2012 one of the Paracel islands (Woody Island) was declared the center of Sansha, a new Chinese municipality (city). Sansha is actually Woody Island and dozens of smaller bits of land (some of them shoals that are under water all the time) in the Paracels and the Spratly Islands to the south. In fact, the new "city" lays claim to two million square kilometers of open sea (57 percent of the South China Sea). China did not interfere with this FONOP although it did send a warship to follow the American cruiser. Two days later another two U.S. Navy ships (a destroyer and a replenishment ship) passed through the Taiwan Strait (the waters between Taiwan and the Chinese mainland) as a form of FONOP. This was the second Taiwan Strait FONOP since October where the passage was publicized. Until the October FONOP such trips through the Taiwan Strait (which American warships do regularly) were not publicized, something the U.S. had been doing since 2007. The renewal of publicizing these movements annoys China which responded by having their own warships following American warships passing through the Taiwan Strait and increasing Chinese naval ship patrols around Taiwan.

November 25, 2018: China agreed to invest $6 billion in Algeria for the construction of a phosphate extraction facility near the Tunisian border (Tebessa province, 650 kilometers east of the capital). The plant is to be operating by 2022 and will provide 3,000 jobs and generate nearly two billion dollars in revenue a year. Algeria will own 51 percent of the phosphate plant. Currently, Algeria exports 1.5 million tons of phosphates a year and the new planet will increase that to more than 10 million tons. This is part of the Algerian effort to grow and diversify the economy, especially for items that can be exported. Currently, over 95 percent of export revenue comes from oil and gas.

November 24, 2018: The Philippines, Japan, South Korea and other East Asian nations are complaining to China about the increase in illegal Chinese workers showing up in their territory. These illegals come in as tourists or business visitors and stay behind when their visa expires. China is believed to be deliberately tolerating this as part of some espionage effort.

November 23, 2018: In Pakistan, Baluchi separatists attacked the heavily guarded Chinese consulate in the port city of Karachi. The three attackers used bombs and guns and were all killed. But during the attack, two policemen died along with two civilian bystanders. There were also several people wounded. Last month in southwest Pakistan Baluchi separatists killed five Chinese who were building a housing complex for more Chinese workers. A week later a local Baluchi separatist group took credit for the killing. Pakistan said it would catch the killers. Last August Pakistan also agreed to build a walled and restricted residential area near the port of Gwadar to house half a million Chinese working in Pakistan. The Chinese construction work on the new Pakistani Gwadar port facilities are visible to anyone on the ground or flying by and in 2017 it was noticed that some features of the new port and airport facilities are clearly intended for military use. India has long accused China (despite denials) was planning to use Gwadar as a base for Chinese warships and naval aircraft. Pakistan never had a problem with Chinese military using Gwadar as it helps keep local troublemakers out. Pakistan has assured China that there would be no terrorist violence against Chinese working on upgrading the port of Gwadar and land links north to China. Pakistan is willing to pay a high price to get CPEC (China-Pakistan Economic Corridor) done because it means Pakistan has an ally against Iran and even Western powers that might have some violent disagreement with Pakistan. Best of all China is picking up most of the $55 billion cost. In early 2017 China and Pakistan finally signed the agreement that granted China a 40 year lease on new facilities China is building in the southwestern port of Gwadar. The lease grants China most (over 80 percent) of the revenue brought in by port and free trade zone operations. China usually imports its own workers from China to do most of the work on projects like this. By 2022 China expects to have about half a million Chinese in Pakistan, some of them with their families. The easiest way to provide protection is to have most of them live in a heavily guarded and restricted access area. Gwadar is a key part of CPEC and it has the misfortune of being in a province (Baluchistan) that does not want to be part of Pakistan. China and the Pakistanis try to ignore this by not reporting on non-Islamic terror attacks on CPEC construction projects. The government has long been accused of suppressing news of tribal separatists in Baluchistan attacking government targets and especially those related to CPEC. The separatists claim they regularly carry out attacks on CPEC construction projects, but most of their attacks are still directed at Pakistani security forces and government facilities.

November 22, 2018: Commercial satellite photos confirm that two new Chinese 094 class SSBNs (ballistic missile carrying nuclear subs) were recently (late October) launched and are now docked for months of additional work before they are completed and ready for sea trials. Currently, only four 094s are available for duty and those are still crippled by SLBMs (sub launched ballistic missile) that does not work. In addition, there are still problems with basic 094 design, which is considered too noisy to stay hidden from American efforts to locate and follow. Two more 094s are under construction with a number of improvements. The second four are being called the 094A class and the existing 094s are apparently being upgraded. For the moment, though, China still does not have an operational SSBN force and after decades of trying, won’t have one until the 2020s. For China, this is how it works. That was also why China, for a long time, played down its efforts to build and operate nuclear-powered subs. Back in 2013, China featured its nuclear subs in the Chinese media for the first time. The theme for this media promotion was that in 42 years of operation no Chinese nuclear sub has ever suffered a nuclear reactor accident. This was an indirect dig at the Russians, who are the only nation with nuclear subs to have suffered nuclear accidents. Moreover, since the 1950s several hundred billion dollars has been spent on developing and building nuclear-powered submarines. Some 300 have been built so far, most of them Russian. Nuclear subs have been used in combat only once (in 1982, when a British SSN sank an Argentinean cruiser.) When the Cold War ended, Russia began scrapping its large nuclear sub fleet, which included dozens of older boats that were more trouble than they were worth to maintain. Now China has joined this club and retired it’s first “nuke.” With the demise of the Russian sub fleet, the U.S. Navy submarine force, which peaked at 100 boats at the end of the Cold War, shrank to about 65 today. China currently has about a dozen nuclear subs in operation (8 SSNs and four SSBNs) and their track record in the last half century has been dismal. The Chinese SSNs are noisy (easy for Western sensors to detect) and unreliable. Chinese SSNs rarely go to sea, which is one reason they have had no nuclear accidents. Chinese SSBNs are basically enlarged SSNs and have never been on a combat patrol, just brief training missions.

As part of the Chinese nuclear submarine media campaign, it was confirmed that it had dismantled one of its SSNs (nuclear attack sub). In fact, the decommissioned sub was China’s first SSN. It took nearly a decade of planning, construction and tinkering to get this boat, the Type 091 Long March No. 1 into service back in 1974. The first SSN was definitely a learning experience, not entering service until the mid-1980s. The Hans are small (4,100 tons) as SSN’s go, and have a crew of about 75 sailors. French sonar was installed, and a lot of the other electronics came from foreign suppliers. In the 1980s it was thought the Chinese would just scrap this class, but they kept repairing and updating them. The Hans were always hopelessly out of date but were the only SSNs China had until the new 093 class SSNs begin to appear in 2002. This class was also obsolete at birth and the first of the new Type 095 class was launched in 2010 and is expected to enter service in 2015. China will be playing catchup in the nuclear submarine area for at least another decade or two.

November 21, 2018: In the northwest (Xinjiang province), it has been no secret that the extreme security measures have been mainly directed at Uighur, Kazakh and Kyrgyz Moslems. Nearly a million of these Moslems have been sent to re-education camps and that has become an international issue. China has restricted journalist (Chinese and foreign) access to Xinjiang but that has not completely kept news of what is going on there from getting out. Thus when it became known that at least 50,000 Kyrgyz Chinese Moslems were also in the re-education camps there was outrage in and other Central Asian nations that had people they could identify within those camps. Since the 1990s China has been more of a presence in Kyrgyzstan and the other former Soviet stans of Central Asia (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan) because these nations wanted someone to help with the economy and discourage the Russians from trying to dominate the region as they have done since the 19th century. The stans were very receptive to Chinese diplomatic and economic cooperation. But now the stans are reconsidering their relationships with China in light of the anti-Moslem crackdown in Xinjiang. This is a problem for China which has a growing number of economic investments in the stans, including the massive OBOR effort. To make matters worse the U.S. is threatening to impose sanctions over the Xinjiang detention camps and there is growing agitation in the UN for sanctions, or at least censure.

November 20, 2018: The Philippines agreed to a number of economic deals with China, including allowing China to take the lead exploring for oil and natural gas in Filipino offshore waters. This was not popular with many Filipinos but the government feels it has no other choice in the face of Chinese threats in the South China Sea.

November 17, 2018: The Indian prime minister visited the Maldive Islands (just south of India) to attend the swearing in of Ibrahim Solih, the newly elected (in September) president of the Maldives. His predecessor was more of a dictator and pro-China fellow who made himself very unpopular with his police state ways and willingness to accept large construction loans from China. Solih was known to be pro-India and pro-West and has requested help from India and the United States to deal with the large Chinese debts his predecessor had incurred. China saw this coming and earlier this year failed to halt the decline in their influence. During the first few months of 2017, China and India were threatening each other over who should do what in the Maldives. This conflict heated up at the end of 2017 when China and the Maldives signed an agreement that allowed China to build and operate a “Joint Ocean Observation Station”. This monitoring station would be built on an atoll that is the closest part of the Maldives to India. Opposition politicians in the Maldives claim China has already taken possession of sixteen small islands and that China has been investing heavily in the Maldives economy and influential politicians.

This agreement was apparently obtained by Chinese bribes and assurances that there would be more Chinese investments. Meanwhile, the Maldives government was in chaos over elected officials and the Supreme Court judges disagreeing about who should actually be in charge. The tiny (248 square kilometers spread over 1,192 coral atolls spread over 90,000 square kilometers of water off the southern coast of India) nation has a mostly Moslem (98 percent) population of 430,000 plus 100,000 foreign workers (a third of them illegals). Most of the population is concentrated on about 15 percent of the islands. The per capita income is about $10,000 and most of it is based on tourism followed by fishing. Many young men have been attracted to Islamic terrorism but there is not much religious violence in the Maldives. While a democracy the religious parties and military have kept the government in turmoil by asserting decidedly non-democratic powers.

Over the last decade, India has become alarmed at growing Chinese investment in neighboring countries (like Sri Lanka, Maldives and Bangladesh). Chinese firms are more experienced and effective at arranging these foreign investments and India’s smaller neighbors feel more comfortable with investment from distant China rather than neighbor (and sometimes big bully) India. The Chinese economic investments often have military implications, like China building satellite ground stations in Sri Lanka, a major port in Pakistan and now an “Ocean Observation Station” in the Maldives. China had earlier persuaded the Maldives to join its OBOR project. The Maldives would be part of the “maritime road” going from Chia, through the newly annexed South China Sea and into the Indian Ocean and sea routes to the Persian Gulf the Suez Canal and East Africa and beyond. That was not a wise move because the Maldives government has always been unstable and Islamic radicalism is still an issue there. Islamic terrorists were never able to establish themselves in the Maldives, although they tried. In 2007 three men were sentenced to 15 years in prison for carrying out a terror bombing attack three months earlier that wounded a dozen tourists. The Islamic radicals were intent on destroying the tourist industry, which is the main source of income in the Maldives because they saw it as un-Islamic. Most people on the Maldives did not agree with that, and justice was swift. However, ten Islamic radicals responsible for planning the bombings fled the country the day before the attack and fled to Pakistan.

Most voters in the Maldives saw what was happening in the South China Sea and agreed with India that there are islands in the Indian Ocean that may be next. The impact this had in the Maldives was made clear during the September presidential election. For the moment China is unwelcome in the Maldives and isn’t doing much better in Sri Lanka. The new president quickly set about dismantling economic and political links with China. This included a Free Trade Agreement that many believed was one-sided in favor of China.

November 11, 2018: China and Burma finally signed the agreement for a new deepwater port on the west coast (Bay of Bengal). It took 18 months of negotiations before Burma and China reached an agreement on how to finance and manage the new port China wants to build in northwestern Burma (Rakhine State). The original proposal was for China to take an ownership share of 85 percent of the new port being built at Kyaukpyu. The Chinese have agreed to reduce their share to 70 percent and expand the capacity of Kyaukpyu in line with demand, not all at once. Burma would be able to control the growth of the Kyaukpyu economic zone and this prevents Burma from getting stuck with more debt than it can handle. The Chinese are financing and building the port facilities there and offered to convert what was originally a $9 billion loan into an ownership stake. This would give China control of yet another newly built port near India. This proposal was not unexpected and became more likely after the completion (in 2015) of a 770 kilometer oil pipeline from China. The pipeline can move about 4.5 million barrels of oil a day. Back in 2013 a 2,500 kilometer natural gas pipeline from Burmese gas fields into China was completed and began operation. About a third of the pipeline is in Burma, the rest is in China. This pipeline delivers 10 billion cubic meters of natural gas a year. This is equivalent (in terms of energy) to 15 million barrels of oil. The Burmese gas replaces the more expensive liquefied natural gas in three provinces of southwest China as well as eliminates the need for 30 million tons of coal a year (a major source of air pollution). The success of the pipeline deal led to a January 2016 agreement that had Chinese firms investing over $9 billion to develop an SEZ (Special Economic Zone) around the pipeline terminal that will include the Kyaukpyu deepwater port and a huge (1,000 hectare/2,500 acre) industrial park. This facility and the port will provide over 100,000 jobs for local Burmese and lots of tax revenue for the government. China offered an additional inducement to allow the port ownership. If this was permitted China would abandon construction of an unpopular dam in Kachin State. This dam destroyed much land long used by local tribes and sends over 80 percent of the electricity generated to China. Burma was willing to negotiate and now there is a deal.

November 9, 2018: Chinese officials attended a Russian hosted Afghan peace conference began in Moscow. In addition to the Taliban (which prefer to be called the Islamic Emirate of Afghanistan at these talks) eleven countries were invited (including Iran). The Taliban do not consider the elected government of Afghanistan as legitimate and insist on negotiating the United States first to ensure that all foreign troops are withdrawn. The Taliban also want all military aid for the Afghan government halted. Meanwhile, Iranian ally Qatar hosts a Taliban headquarters where the Taliban can, in effect, meet with anyone to discuss anything. The Russian peace talks attracted delegations from Russia, India, Iran, China, Pakistan and five former Soviet republics in Central Asia as well as non-government groups from Afghanistan and some Americans as observers. Technically the Taliban cannot be in Russia because Russia recognizes the international designation of the Taliban as a terrorist organization. Nevertheless, the Taliban insisted they would make peace only if all foreign troops left and there were international guarantees to keep the Americans from returning or aiding Afghans fighting the Taliban.

 

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