U.S.Pakistan Shipwreck:China Cleans Up-Again

The killing of 24 Pakistan troops by NATO forces is just the latest disastrous chapter in U.S. Pakistan relations. As affairs go from bad to catastrophic, it’s not just the Taliban who will benefit, but also China.

For several years now the Pakistanis have found China a very willing and increasingly powerful counterweight to the Americans and their often strident—you could call it arrogant--political demands.   

Toeing Washington’s line, in other words, is no longer the only game in town. And the pragmatic Chinese, as always, seem willing to work with whomever holds power.

Take for instance, the outrage in both the U.S. and Pakistan after American troops secretly entered Pakistan last May 2, to kill Osama Bin Laden. The day after the killing, as Americans officials in Washington intimated that top duplicitous Pakistani military had been harboring the Al Qaeda leader, and fulminating U.S. congressmen were demanding immediate cuts in aid, a foreign ministry spokesperson in Beijing lept to Pakistan’s defense.  He declared that "The Pakistani government is firm in resolve and strong in action when it comes to counterterrorism -- and has made important contributions to the international counterterrorism efforts."  America should respect Pakistan’s sovereignty the Chinese said.

 

As U.S.-Pakistani relations continued to curdle, the Chinese and Pakistanis only tightened their embrace. .Pakistani Prime Minister Yousuf Raza Gilani, on an official visit to China told Chinese state radio, "We appreciate that in all difficult circumstances China stood with Pakistan -- therefore we call China a true friend and a time-tested and all-weather friend."

During that trip China’s Premier proved that friendship by announcing that China would supply Pakistan with 50 JF-17 fighter jets equipped with sophisticated avionics, the planes to be paid for by China.

Pakistan’s nuclear program provoked a similar flurry. The U.S. very upset by Pakistan’s clandestine development of nuclear weapons, had been looking at Pakistan’s program with a baleful eye. Not the Chinese, who raised hackles in Washington when they sold the Pakistanis two new nuclear reactors, supposedly to be used only for civilian purposes. The deal, the Chinese insisted, was peaceful. [The Pakistanis are quick to point out that the U.S. has been much more willing to forgive India—America’s ally--for also developing clandestine nukes.]

In fact, for years now, China has been the major supplier of military hardware to Pakistan. The two countries also have arms manufacturing co production deals, and  carryout joint military exercises.

But military links are just for starters. While the U.S. has spent billions on military bases in the Persian Gulf, the Chinese have been funding a sophisticated deepwater commercial port in Gwadar, Pakistan near the Persian Gulf. Just as important, they’re also rehabilitating a 1300 kilometer long highway to connect that Gwadar to China through Pakistan. You may never have heard of Gwadar, but you will in the future. “Come back in a decade and this place will look like Dubai,” a developer recently said.”

Trade between China and Pakistan has soared from $2 billion in 2002 to $7 billion in 2009.  After a flurry of new agreements, they are hoping to hit $18 billion by 2015. Those agreements target everything from agriculture to heavy machinery, to space and upper atmosphere research, alternative energy projects, power plants, and urban security.

The Chinese are also aiming to increase investment in Pakistan from the present $2 billion a year, to more than $3bn a year by 2012. That’s double the annual $1.5bn in economic assistance from the United States that supposedly has kept the Pakistani military in line all these years.

Indeed, since 9/11 2001, the United States has provided Pakistan with some $20 billion in aid, mostly military--in effect pay-offs for Pakistan’s cooperation in fighting terrorism. But that aid —more like mercenary payments—has done little to prevent the disastrous decline in relationship between the two countries.

The basic reason is simple:  China and Pakistan have more interests in common than do America and Pakistan. Looking to the future, powerful elements in Pakistan’s military have long viewed America’s enemies in Afghanistan, the Taliban, as valuable allies against India when America inevitably pulls out of Afghanistan. China, like Pakistan, also regards India as a regional rival to be harassed and thwarted.

By working together China and Pakistan will be able to challenge not just India, but also the United States and with its claims to hegemony in the area—particularly since President Obama’s recent announcement that 2500 U.S. marines would be stationed in Australia as part of America’s determination to increase its presence in the Pacific. 

China’s swollen coffers now also enable it to use foreign aid in the way that America did in Washington’s plusher days. After the disastrous floods in Pakistan last summer, for instance, China announced its biggest-ever humanitarian aid program including $250 million in donations. It also included a $400 million loan to help Pakistan tackle the financial impact of the flooding, and a cash grant of $10m towards a fund to compensate people rendered homeless.

--As part of this new “hearts-and-minds” policy the Chinese offered 500 university scholarships over the next three years for Pakistani students, with programs focusing on technological areas of expertise not taught in Pakistan. The two countries will also exchange high-school students, young entrepreneurs, and voluntary social workers.  Meanwhile, Chinese surgeons are being dispatched to Pakistan to perform cataract operations on 1,000 blind patients.

Such efforts are obviously paying off. It turns out the Pakistanis are now also proselytizing for the Chinese.

According to the New York Times earlier this year, “At a key meeting on April 16 in the Afghan capital, Kabul, top Pakistani officials suggested to Afghan leaders that they, too, needed to look to China, a power on the rise, rather than tie themselves closely with the United States, according to Afghan officials. 

“You couldn’t tell exactly what they meant, whether China could possibly be an alternative to the United States, but they were saying it could help both countries,” an Afghan official said afterward.”

 And all that was before this last catastrophic weekend.

Egypt's Military: State within a State

On Friday, Washington added its voice to Egyptians demanding that the Egyptian military give way to civilian rule. It’s instructive, however, to consider why the Egyptian brass are so reluctant.

Their resistance stems not just from a fear of an ultimate takeover by radical Muslims. There is also the fact that real civilian rule could spell an end to the system of massive military corruption and patronage that has gone on for decades in Egypt, a system that has given the military unimpeded control over a huge sector of the Egyptian economy:  “a state within a state” as a well-informed Egyptian friend of mine puts it.

That’s the state that’s now being challenged.

For years, Egypt’s top military ranks have enjoyed a pampered existence in sprawling developments such as Cairo’s Nasr City, where officers are housed in spacious, subsidized condominiums. They enjoy other amenities the average Egyptian can only dream of, such as nurseries, bonuses, new cars, schools and military consumer cooperatives featuring domestic and imported products at discount prices. In other areas, top officers are able to buy luxurious apartments on generous credit for 10% of what those apartments are actually worth.

But we’re not just talking about sensational official perks. Many of Egypt’s brass are notoriously corrupt. Vast swathes of military land, for instance, were sold by the generals to finance some major urban developments near Cairo-with little if any accounting.

Other choice military property ran on the Nile Delta and Red Sea coast boasted idyllic beaches, and exquisite coral reefs. In return for turning the land over to private developers, military officers became key shareholders in a slew of gleaming new tourist developments. 

The reason Egypt’s military became so involved in non-military activities was because, after peace was signed with Israel in 1975, the military lost much of its raison d’etre, as did its military factories. The problem, though, was how to keep those factories going and employ the hundreds of thousands of young men who would otherwise flood the domestic market?

The answer was the military would also produce for the civilian market. Thus the generals came to preside over 16 enormous factories that turn out not just weapons, but an array of domestic products from dishwashers to heaters, clothing, doors, stationary pharmaceutical products, and microscopes. Most of these products are sold to military personnel through discount military stores, but large amount are also sold commercially.

The military also builds highways, housing developments, hotels, power lines, sewers, bridges, schools, telephone exchanges, often in murky arrangements with civilian companies. 

The military are also Egypt’s largest farmers, running a vast network of dairy farms, milk processing facilities, cattle feed lots, poultry farms, fish farms. They’ve plenty left from their huge output to sell to civilians through a sprawling distribution network.  

The justification for all this non-military activity is that the military are just naturally more efficient that civilians. Hard not to be “more efficient” when you are able to employ thousands of poorly paid military recruits for labor.

Many civilian businessmen complain that competing with the military is like trying to compete with the Mafia. And upon retiring, top military officers are often rewarded with plum positions running everything from factories and industries to charities.

Whatever the number, Robert Springborg, who has written extensively on Egypt, says officers in the Egyptian military are making "billions and billions and billions" of dollars.”

But there’s no way to know how efficient or inefficient the military are, nor how much money their vast enterprises make, nor how many millions or billions get skimmed off since the military’s operations are off the nation’s books. No real published accountings. No oversight. Just as there is no civilian oversight of the entire military budget, and that’s the way the current military regime have said they aim to keep things

Of course none of the above is a surprise to U.S. officials who dole out some 1.3 billion dollars a year in military aid to the Egyptian Army, and hope that sum and the neat weapons it provides will keep the army in line. [One of the most detailed studies of the military’s non-military activities was done by a U.S. military researcher at Fort Leavenworth.]

A perceptive look into all this comes via a 2008 U.S.diplomatic cable released by WikiLeaks. The writer in the U.S. Embassy in Cairo ticked off the various businesses the military was involved in, and considered how the military might react if Egypt's then president, Hosni Mubarak, were to lose power.

The military would almost certainly go along with a successor, the cable's author wrote, as long as that that successor didn't interfere in the military's business arrangements. But, the cable continued, "in a messier succession scenario, it becomes more difficult to predict the military's actions."

Thus, the messier scenario today.

China and the Gulf: Learning from a Lab Rat: Part Two

In my previous blog, I cited the old chestnut: What’s the difference between a laboratory rat and a human being? Answer: The lab rat finally ceases scurrying through a maze when he realizes there is no cheese at the end. Human beings, on the other hand, never stop trying.

Confronted with the maze that is the Arabian Gulf, the Chinese are the lab rats. To make that point, in the previous blog, I discussed how China, while resisting calls for sanctions against Iran for its alleged nuclear weapons program, has actually benefited from those sanctions: Iranian oil becoming more important to China than Saudi’s oil is to the United States.

China’s activities in the Gulf, however, are not restricted to Iran. Just as American troops and bases have spread along the Gulf, so have China’s businessmen, eager to exploit the vital resources that the U.S. military is thoughtfully protecting.

The surprising twist is that the Gulf is far more vital to China than to the United States. China gets 58% of its oil from the region. Estimates are that by 2015, that dependence will soar to 70% .  [By comparison, the U.S. gets only18.2% from the Gulf. ]

Another irony: while China has developed close ties with America’s prime enemy in the region, Iran, Beijing has been even more successful in wooing Washington’s major Arab ally in the Gulf , the Saudis.

Mao’s revolutionary China decried the Saudis and the feudal sheikdoms of the Gulf. But that’s then and now’s now. The Saudis currently provide China with 20% of its crude oil imports—and Saudi leaders have assured Beijing they will furnish all the crude China will need over the coming decades.

China has also offered to sell the Saudis intercontinental ballistic missiles. But in deference to Washington, the Saudis have so far turned down such proposals. Meanwhile, business is booming: China’s annual trade with Saudi Arabia totals $60 billion, the Saudis selling not just petroleum but chemicals for China’s surging manufacturing sector.

The Saudi’s new found ties with China, also enable Riyadh to pay less heed to  annoying calls out of Washington for democratic reforms—an issue that never bothers the Chinese.

Iraq’s relations with China represent another bitter paradox: You’d think that America’s huge sacrifice of treasure and blood in Iraq would have brought the U.S. some benefit--the inside track, for instance on the development of Iraq’s massive petroleum reserves. That’s what Dick Cheney and his friends were supposedly after. But in Iraq, as in Iran, the Chinese have been willing to take risks few American firms were willing or able to take.

As a result, China winds up as one of the largest oil beneficiaries of the Iraq War.

In fact, the first major deal for oil exploration signed by the new Iraqi government with foreigners  was with a couple of Chinese companies: a 23 year agreement for $3 billion in 2008 to pump oil from the Al Adhab field.  In 2009 PetroChina teamed up with Britain’s BP to win a 20 year contract to boost output from Iraq’s largest oil field, Rumaila—the only contract awarded in Iraq’s first post Saddam auction of oil licenses.

Earlier this year, Iraq President Maliki journeyed to China hoping to convince  more Chinese companies to invest in Iraq—in everything from energy, oil, transport, housing, telecommunication and agriculture.  He even welcomed Chinese military aid.

With China’s commercial successes in mind, it might be instructive to compare the size of China’s Embassy in Baghdad with the sprawling American compound, the largest U.S. Embassy in the world, staffed by 16,000 employees,  protected in turn by an army of  5,000 “independent contractors”. 

Beijing however, would probably favor a continued U.S. combat presence in Iraq. Many of the Chinese companies now operating there are afraid to expand further because of the on-going danger of terrorist attacks.

Not that the Chinese are uninterested in strategic facilities of their own.

China has contributed $200 million to construct a deep-sea port in the Baluchistan Province of Pakistan, only 250 miles from the key Strait of Hormuz.  Nearby is the port of Salalah in Oman, where Chinese navy escort force now dock to resupply; not to mention the Chinese warships that have docked in Abu Dhabi.                                            

But there’s no way the Chinese military presence will ever challenge the U.S. in the Gulf. Nor is there any evidence they want to. The hulking American bases have their own obvious downside: Remember, it was the huge inflow of American “infidel” troops into Saudi Arabia in 1990 following Saddam’s invasion of Kuwait, that provoked Osama Bin Laden’s outrage and provided him with thousands of similarly inflamed recruits.

Concern about continued opposition to U.S. troops in Saudi lay behind the decision to move the American centre of operations to nearby Qatar. As a result, since the drawdown in Iraq, the vast new air base of Al Udeid in Qatar has become a lynchpin for the U.S. buildup in the Gulf. 

But Qatar also boasts the third-largest reserves of gas in the world, and the Chinese are thus very present. 

In May 2010, CNPC  (the China National Petroleum Corporation) signed a 30-year deal for gas exploration and production in Qatar. That was just for starters. CNPC, Shell and Qatar have also put together a joint venture to build a 10 billion dollar petrochemical complex in Eastern China.

Nearby Abu Dhabi also has huge oil reserves, and in 2009 a Chinese firm for the first time won a service contract to supply oil rigs for onshore drilling. The deal came after a visit to China by Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi. The goal: to foster strategic co-operation with Beijing. The Crown Prince was also Deputy Supreme Commander of the UAE Armed Forces.

Oil-rich Kuwait, of course, was the country that the U.S. went to war to “save” in 1991 after Saddam’s troops invaded. In 2009, a Chinese state-controlled oil company, Sinopec, won a $140m contract to supply drilling rigs to the Kuwait Oil Company after Kuwait promised to export 500,000 barrels per day of oil to China by 2015. Kuwait Oil and Sinopec have also agreed to build a $9 billion oil refinery in China.

But it’s not just oil. Trade between China and the Gulf is a two-way affair. In 2009, the same year that China became the largest importer of oil from the Gulf, it also passed the United as the largest single importer to the region.

Remarkably, there are now more Middle Eastern visitors to Yiwu, a city in China that houses tens of thousands of retailers, than there are to the entire United States. Cross-border investment from the Middle East in Chinese financial institutions also represents a new mode of exchange. By 2020 annual trade between China and the Gulf will top $350 billion,

And perhaps that’s how things will continue to go: a strange symbiosis: American bases and Chinese markets.

Or maybe not. As  Jon B. Alterman at the Centre for Strategic and International Studies observes  “there is something inherently unstable about a region that relies on the West for security and the East for prosperity.”

China and Iran. Lessons from a Lab Rat

Remember the old chestnut? What’s the difference between a laboratory rat and a human being? The lab rat finally ceases scurrying through a maze when it realizes there is no cheese at the end. Human beings, on the other hand, never stop trying.

Confronted with the maze that is the Middle East and Central Asia these days, the Chinese are the lab rats. Take Iran, for instance.

Though careful not to directly challenge the Americans, China’s diplomats and businessmen have followed a sinuous route, publicly urging Iran to back away from plans to produce nuclear weapons, but refusing to support American and European calls for tougher sanctions.

True to form, the Americans have been pushing trade sanctions in various degrees of severity ever since American diplomats were taken hostage in Tehran back in 1979.

The Chinese argue the current stiff sanctions won’t convince the Iranians to stop their nuclear program. However, those sanctions have certainly helped the Chinese gain a remarkable foothold in Iran.

So much so, that today 15% of China’s petroleum and gas imports come from Iran, which makes Iran more vital to China than Saudi Arabia is to the United States [the Saudis provide 11% of U..S. petroleum imports].

At one time or another, all the great powers have had their eyes on Iran’s oil and gas reserves, the second largest in the world. But, because of the U.S. embargo, Iran suffered from a woeful lack of modern technology, engineering expertise, and capital.

The Chinese, however, have been willing to offer Iran much of what it needs to develop--as well as sophisticated arms, anti ship-missiles and nuclear technology.

In return, of course the Chinese obtained access to Iran’s massive energy reserves. In 2004, for instance, Iran signed a $100 billion dollar deal for a Chinese company to develop Yadavaran, Iran’s largest undeveloped oil field. That concession in exchange for China’s receiving 10 million tons of Iranian liquified natural gas annually for a period of 25 years.

 That deal was followed by other huge gas and oil exploration contracts, as well as a plan to deliver Iranian oil from the Caspian Sea, through a pipeline from Kazakhstan to China.
 In another convoluted agreement, a Chinese company CNPC bought the Iranian subsidiary of Sheer Energy in Calgary, Alberta, thus winding up with a 49 percent stake in another Iranian oil field.

The flourishing Chinese-Iranian trade is not restricted to the energy sector.
Chinese companies have won contracts to build everything from broadband fiber optics, to television sets, to automobiles, not to mention a $680 million contract to expand the Tehran subway system.
 And all the while, Washington has continued to view Iran as THE menace looming over the Gulf.

Thus the Americans made an ally out of Saddam Hussein after he invaded Iran, and continued to back him despite his use of nerve gas and long range rockets against civilian targets.

Again, in 1991 when Iraq’s Shiites and Kurds rose against the Iraqi tyrant following the first Gulf War, the United States stood by as tens of thousands of Iraqis were slaughtered by Saddam—despite the fact that George W. Bush had himself called for the uprising. The reason for the betrayal:  Washington was afraid that an Iraq governed by its Shiite majority would open the doors to an Iranian takeover of Iraq.

Fast forward twenty years. After having spent literally trillions of dollars to oust Saddam, U.S. troops are withdrawing from Iraq, leaving the shattered country governed by---a Shiite majority. Many of those Shiites sympathetic to Iran and still deeply embittered by America’s betrayal in 1991.

But even as they withdraw from Iraq, America has been pouring hundreds of billions of dollars into Iraq’s neighbors to ensure a massive and enduring military presence in the oil-rich Gulf. Their major purpose again, a bulwark against Iran.

In addition, Washington has reportedly been funding and training opposition groups in Iran to carry out activities that, were they directed against American targets, would certainly be labeled as “terrorist.”

That American military build-up in the Gulf has long provided Iran’s leaders with a rationale for developing nuclear weapons: not to incinerate Israel, but to defend Iran against an American/Israel attack. For years now, American officials have calmly and openly discussed such military action as an on-going and viable option.

What American officials don’t like to discuss is the fact—repeatedly cited by Iran’s leaders hard-line and moderate --that Israel, which clamors most shrilly about the Iranian nuclear threat, possesses an “illegal” nuclear arsenal that American has never been officially willing to deal with.

However, despite enduring U.S. hostility, the regime in Tehran is still very much in place, its nuclear weapons program still apparently active. And while revolts are still roiling much of the Arab world, the iron-fisted mullahs in Tehran have managed to squelch internal opposition. Indeed, there are those who argue that the embargo and constant threat of an American cum Israel military attack have in fact strengthened the hands of Tehran’s often feckless and feuding leadership.

And as all this has been going on, the Chinese have been prospering.  Chinese/Iranian trade has mushroomed from $3.3 billion in 2001 to $30 billion in 2010, and is expected to hit $50 billion by 2015.  The prize, though is the gas and petroleum.

No wonder, then, that the Chinese are as solicitous of Tehran’s interests as the folks in Washington are of the Saudis.

Their interest is not just economic.

Like Russia, China views Iran as a quasi-ally in their effort to check American power and influence in the Middle East and Central Asia.  One particularly ironic blow came in July 2005, when Iran (along with India and Pakistan) was granted observer status in the Shanghai Co-operation Organization, a regional-security arrangement—established to combat separatism, extremism and terrorism.

China’s activities in the Gulf, however, are not restricted to Iran. While the U.S. continues its huge military expenditures, the Chinese are making impressive inroads throughout the region—which, ironically, in the end, may cause them to back off their stubborn support of Iran.

More of that in my next blog.