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China’s foreign aid

April 30, 2011 Leave a comment

Internal reporting on China’s foreign aid has been released for the first time, out this April 21, 2011. In brief, China has mostly invested its funds in infrastructure projects such as transport, power supply, and telecommunications.

The aid comes in the form of grants, and various types of loans. About 41%, by capital investment, of the aid is grants. Of the loans, a little over half are interest free. The interest on concession loans is current indicated as 2% to 3%, and the majority of these types of loans support transportation, communication, and electricity infrastructure.

The Chinese report introduces the subject of foreign aid by plainly indicating the country`s status as a developing country. This is an interesting choice of emphasis, threading the report with a narrative that presents China`s foreign aid as altruistic due to their sharing in spite of domestic difficulties. It also frames the country as part of the club of developing counties rather than as an external philanthropist. I think that the narrative arc of the report, backed by the statistics made available strives to express at least a limited form of solidarity.

You can read the full report, published in English, at Xinhua.

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Russia’s presidential tag team continues, the U.S. plans to build new military sites in Central Asia and China’s growth hastens

The expected has happened, which somehow has stirred a lot of speculation about the future of Russia. Prime Minister Vladimir Putin said he would consider taking back the country’s presidency during the 2012 elections.

“Naturally, I am already thinking about this issue with President Medvedev but have decided not to make much fuss about it, not to let ourselves be distracted by this problem,” Putin said to French media.

It appears that the Medvedev-Putin duo are working out plans for the next round of elections and are likely not going to run against each other but manage a deal in which they can together govern Russia as they have been doing after Putin stepped down from the presidency in 2008 and picked Medvedev as his favoured successor.

And it seems that Russia is playing with both Iran and the U.S. by sending mixed messages on its sale of anti-aircraft missiles. Iran wants what is called a S-300 missile defence system from Russia. The order has long been placed, and delayed. Shortly after UN Security Council sanctions were passed against Iran, a Russian arms supplier was quoted saying the missiles would never be delivered.

Russia’s Foreign Minister, on Thursday, responsed to Iran’s complaint and publicly gave hollow assurances. So the official line is that there are no legal constraints holding Russia back from selling S-300 milles (the fourth round of sanctions against Iran really didn’t add much that is new). But, this is a far cry from saying that Russia is prepared to complete delivery. So, it seems the ball is still in play on this one, and Russia is likely using this in negotiations with the U.S. and perhaps to make sure the U.S. keeps its end of any bargain in the long term.

Just a reminder, the U.S. is still set to implement and expand covert military activity inside and around Iran. A directive signed by General Petraeus in September 2009 is still in play, deepening related plans that began under the Bush administration and continue under President Obama.

“The seven-page directive appears to authorize specific operations in Iran, most likely to gather intelligence about the country’s nuclear program or identify dissident groups that might be useful for a future military offensive,” writes Mark Mazzetti in the New York Times.

More recently, it was revealed that the U.S. is indulging in a small building binge: it will be setting up new military facilities in all Central Asian countries. There seems to be a jostling for such facilities between both the U.S. and Russia.

China, meanwhile, is stamping its presence in the same Central Asian countries economically instead, such as by taking majority shares in a Kazakh oil venture in exchange for a US$10 billion line of credit to Kazakhstan. This sort of lavish spending and economic investment is made possible by its fast growing economy, and, maybe, we might also say that its fast growing economy is a little aided by its economic investments.

Numbers just came out: China’s exports have risen by almost 50% over the past year (no that’s not a typo). It rakes in US$1.2 trillion in export revenues in a year. The economy as a whole has grown at a rate of 11.9% in the first quarter, and all this heat is pushing up housing prices very rapidly which could be leading to a real estate bubble in China. Workers have been increasingly demanding that they get a fair share of all of these profits and have staged various actions including strikes. The most famous case, in a Honda plant, has seen wage levels for its workers rise by between 24% and 33%.

As for Turkey, it seems to expect to reap some economic rewards from the sanctions against Iran. Today’s Zaman writes:

“Strategic Thought Institute (SDE) President Professor Yasin Aktay said the sanctions bring advantages that outweigh any damage that they could present for Turkish-Iranian trade. ‘The sanctions are more concerned with weapons and [Iran’s] Revolutionary Guards; there’s not much activity between [Iran and Turkey] in these fields. Our trade with Iran is concentrated in oil, natural gas, industry and consumer products,’ Aktay said. He further commented that sanctions had above all a strong psychological effect and that this could lead to increased trade with Turkey in fields not covered by the sanctions. ‘It’s an important position to be in when you are a country that can say ‘no’ and remain on its feet; there’s no better public diplomacy than this,’ he said.”

Currently, a natural gas pipeline delivers US$1.5 to US$2 billion of energy from Iran to Turkey each year, and there is talk of more such ventures. In various statements in the early part of this year, Turkish leaders have suggested significantly multiplying trade with Iran, which is at the moment focused on transfers of energy.

(First published at Rabble.ca)

Israel threatens China; Iran barred from the SCO; Israeli document calls Gaza blockade ‘economic warfare’; US to display captured war documents

Israeli officials have said they threatened war against Iran in order to try and convince China to vote in support of economic sanctions at the UN Security Council.

The New York Times broke this story: “In February, a high-level Israeli delegation traveled to Beijing to present alleged evidence of Iran’s atomic ambitions. Then they unveiled the ostensible purpose of their visit: to explain in sobering detail the economic impact to China from an Israeli strike on Iran.”

One Israeli official they interviewed said that “the Chinese didn’t seem too surprised by the evidence we showed them, but they really sat up in their chairs when we described what a pre-emptive attack would do to the region and on oil supplies they have come to depend on.”

Essentially Israeli officials boast that they tried to threaten China by showing how they could undermine its energy security and damage its economy.

China imports some 15% of its oil from Iran and is reported to have more than $80 billion invested in that country’s energy sector.

Iranian president Mahmud Ahmadinejad will be traveling to China this week, this very day in fact, officially to take part in the Expo 2010 in Shanghai. It is expected that he will meet with Chinese officials to discuss the newly minted sanctions against it.

Meanwhile, no surprises for the Shanghai Cooperation Organization (SCO) meeting , it is will not be giving Iran permanent membership just yet.

The SCO, which has become one of Asia’s most prestigious multilateral organizations, has Russia, China, Tajikistan, Kazakhstan, Uzbekistan and Kyrgyzstan as members. Iran, Pakistan, India, and Mongolia are observers, and it will have Afghanistan as an honoured guest this time around.

Iran, Pakistan, and India have been interested in becoming full members. There is jostling for whether Pakistan or India, or both could become full members. But Iran is essentially barred for now. The SCO is to adopt a new document outlining admission rules. The secretary general of the SCO, Muratbek Imanaliyev, has said that “the document contains a very important thesis that states under UN sanctions cannot become SCO members yet.” So, there, Iran can only watch for now.

Apparently Tajikistan lobbied in Iran’s favour, asking that the restriction based on UN sanctions not be included. Interestingly, president Ahmadinejad was just in Tajikistan, this very Wednesday. He was there for a UN-sponsored water security conference but was supposed to have met with the Tajik president to discuss regional security, and I suppose also push for support on SCO membership.

Meanwhile, back in Israel, there’s more fallout from the commando attack on the Gaza flotilla that saw 9 people die. An Israeli human rights organization, Gisha, has legally forced the government to explain its motives for a blockade of Gaza. Apparently the blockade is not for security reasons after all, though that is what is publicly stated to garner international support. The Israeli government document attained by Gisha says that the blockade is in fact economic warfare.

“A country has the right to decide that it chooses not to engage in economic relations or to give economic assistance to the other party to the conflict, or that it wishes to operate using ‘economic warfare’.” says the government document.

And in the US, some of the spoils of war from Iraq and Afghanistan will be on display. The Conflict Research Center will allow researchers to view archived digital copies of documents captured from Saddam Hussein’s government as well as some that were captured from al Qaeda and its affiliates. The facility boasts that it has a database of “1.5 million captured records.”

These records “consist of a wide range of files, including everything from al Qaeda “pocket litter” to financial records, theological and ideological documents, strategic plans, operational guidebooks, and histories of individual operations from the Afghan war in the 1980s through the early 2000s.”

The original Iraqi documents are supposed to be returned to Iraq after digital copies are made.

Why China supports sanctions on Iran: not much content but full of political implications

June 9, 2010 1 comment

The UN Security Council is to impose sanctions against Iran today.

These sanctions are being billed by the US as tough, effective, and the most severe Iran has yet faced.

The new sanctions, actually, add very little that is new. The passage of sanctions is opportunity for tough talk but little tangible difference is offered over previous sanctions (see the new sanctions document here).

Flynt Leverett and Hillary Mann Leverett pick the document apart on their site, The Race for Iran:

In the main body of the resolution, there are, literally, no sanctions limiting the capacity of the Islamic Republic to produce and export hydrocarbons.

[…]Likewise, there are no sanctions barring the extension of financial services, insurance, reinsurance, etc. to Iranian individuals and entities.

China and Russia will support this resolution since the situation will not substantially change for them in regard to their dealings with Iran. Russia will still be able to deliver sales of S300 anti-aircraft missiles, and China can still invest in Iranian business, import energy, maintain its existing financial dealing via Iranian banks (I think China often trades in hard cash anyway when it comes to purchase of oil from Iran), and maintain its growing trade with Iran.

The Race for Iran adds that:

Among the entities “involved in nuclear or ballistic missile activities”, the United States was able to win the agreement of China and other Council members to include only one bank that had not been previously listed—and that bank is a subsidiary to Bank Mellat, which had been previously designated by the United Kingdom and the United States.

[…]Ostensibly, there are 15 entities listed as “owned, controlled, or acting on behalf of the Islamic Revolutionary Guard Corps”.  But this is seriously misleading.  There is, in fact, only one Revolutionary Guard-affiliated entity captured in the annex—the Khatam al-Anbiya construction company.  The other 14 entities are all either subsidiaries of Khatam al-Anbiya or subsidiaries of subsidiaries of Khatam al-Anbiya.

What the sanctions do embody is politics rather than economics. It hardens the political and diplomatic division between Iran and the US and Europe because of the rhetoric and symbolic quality attached to the application of sanctions as championed by the West. So, the rhetoric will make it more difficult for the West to conduct diplomatic dialogue and engage in economic transactions with Iran not because of new legal barriers but from political ones.

This will support and probably hasten the growing economic ties between Iran and China as well as other non-Western countries. This is to China’s advantage since it can deal with Iran while facing decreased international, mainly Western, competition; permitting it to more easily position itself as a vital economic and political entity to Iran. Essentially, the West is cutting itself out of the picture and giving China competition free access to Iran, which is geostrategically important: it can serve as a gateway to the Middle East and Central Asia, has access to the Persian Gulf and the Straight of Hormuz, has some of the largest deposits of oil and natural gas in the world, and has the potential to serve as an energy route to transit fuels from nearby countries that are also rich in hydrocarbons.

In 2009, China beat out the EU to become Iran’s largest trading partner. Trade with China amounted to some $36.5 billion while trade with the EU totaled $35 billion. Iran’s foreign minister indicated that trade with China had risen from $400 million in 1994 to $29 billion in 2008, growing at an average annual rate of 40% in the tail end of that period. In May 2009, China’s ambassador spoke at an Iran-China trade cooperation conference, stating that “The Chinese Embassy in Tehran will continue working with Iranian companies in order to expand cooperation between the two countries.”

China’s Ministry of Foreign Affairs indicates that its important economic projects with Iran include: “energy, transportation, machinery, building material, mining, coal, chemicals, nonferrous metal, etc. The main projects are subway in Teheran, multi-functional vessels, building of oil tanker, production line of cement plant, 4*32.5 thousand KW thermal power electrical machinery units in Arak, hydroelectric generation equipment, etc.”

More than “100 Chinese state companies” operate it Iran, according to Press TV. China is said to have more than $80 billion invested in the country’s energy sector, and Iran has, since 2009, opened five trade centres in China in Shanghai, Urumqi, Beijing, Hong Kong and Guan ju.

Israeli spy station in Turkey aimed at Iran; the Gaza aid flotilla; and China benefits from Iran sanctions

Following the operation in which nine civilians on an aid flotilla were killed by Israeli commandos, relations between Israel and Turkey have continued to take a dive. Most interestingly, The Times Online has this to say (found via Friday Lunch Club):

Israel has rejected much of the criticism of Operation Sky Winds, but the Israeli defence establishment, long friendly with the Turkish military, is extremely worried. Turkey’s government, itself religiously based, has aligned itself with public anger. Reports to the Israeli defence ministry indicated that it might close down an Israeli intelligence station based on Turkish soil, not far from the Iranian border.

“If that happens,” said a well-informed Israeli source, “Israel will lose its ears and nose, which watch and sniff the Iranians’ back garden.”

The same article also explains that the military team that confronted the aid flotilla was unused to such policing activities against civilians, and that it is more at ease with covert military missions. The example given by The Times was of an assassination it says was successfully conducted against a Syrian general.

Ehud Barak is supposed to have personally managed the flotilla operation from IDF headquarters in Tel Aviv, and was watching events live through military feeds. Currently the Israeli defence minister, Barak was once the commander of an elite force that had the current prime minister, Binyamin (Bibi) Netanyahu under him.

The relationship between Bibi and Ehud goes back more than 40 years. Barak was a commander of Israel’s equivalent of the SAS and Bibi was one of his young officers. In 1972 they were among the commandos who stormed a hijacked Sabena jet at Tel Aviv airport. Bibi was injured by a bullet in his hand. Barak went untouched. Ever since, Netanyahu has regarded him as his mentor.

After they went into politics, Netanyahu became leader of Likud and Barak leader of the Labour party. (From the Times Online article linked above)

Iran has accused Israel of increased covert activity against it. The Iranian Press TV in January 2010 reported that “Sources in Turkey’s ruling party told Russia’s Mignews that Israeli spy agents ran an advanced electronic monitoring station from the Ankara military headquarters to keep tabs on communication networks in Iran and Syria.”

I am not certain how this allegation might be related to the Times Online revelation of an Israeli listening post in Turkey aimed at Iran.

Iran feels that the espionage is intended for use in sabotage and assassinations to slow or stop its uranium enrichment activity.

Flynt Leverett and Hillary Mann Leverett have some great analysis on China’s approach to sanctions on Iran. They indicate that China has refused to fully oppose US-led sanctions in order to keep the US engaged within the UN Security Council and not have it be freed from the international body to go it alone. By refusing to use its veto in the Security Council, China has avoided a confrontational approach with the US and simultaneously been successful in negotiating for significant changes to each round of sanctions.

The sanctions have so far excluded any measures that would harm China’s trade and energy investments relationship with Iran.

From Race for Iran:

China succeeded in extracting extensive concessions from the Obama Administration with respect to the content of the specific measures contained in the draft sanctions resolution.  Since 2006, Beijing’s approach to the Iranian nuclear issue has been to give Washington just enough on sanctions in the Security Council to keep the United States in the Council with the issue, while watering down the actual sanctions approved so that they would not impede the development of Sino-Iranian relations.  Fundamentally, China is continuing that approach now.

[…]Not only does China buy a significant portion of its oil imports from Iran; as we have written previously, Chinese energy companies have, since the end of 2007, concluded a growing number of investment contracts for Iranian projects.  Beijing was determined that a new sanctions resolution that would not impede the implementation of those contracts or the conclusion of new contracts by Chinese companies, and the Obama Administration predictably caved on the issue.  Moreover, Beijing appears to have extracted a commitment from the Obama Administration that U.S. secondary sanctions will not be imposed on Chinese energy companies or other entities doing business in Iran. Chinese diplomats also negotiated the Obama Administration down with regard to the specific Iranian individuals and entities to be identified in the “annexes” accompanying a new sanctions resolution, to ensure that no individual or entity is included that Chinese companies might need to deal with in pursuing their activities in the Islamic Republic.

What I think is interesting here is that the sanctions seem to actually give China an edge over the US. The US continues to make it difficult for itself and its close allies (such as Europe) to maintain healthy diplomatic and trade ties with Iran. This has left a vacuum that China is handily filling in. China is becoming Iran’s leading trade partner, beating out the likes of Germany. China is also investing heavily in Iran’s infrastructure, including its energy infrastructure, which will help it secure a greater share of the valuable and scarce energy resources.

“In late May, China offered a one billion Euro ($1.2 billion) loan to finance infrastructure projects in Tehran.  Last week, it was announced that China is negotiating to extend another $1.2 billion in credit to Iran for the construction of six liquefied natural gas (LNG) tankers,” according to the article posted on the Race for Iran.

China, the world’s second largest oil consumer, sources over 70% of its imported oil from the Middle East, according to the People’s Daily. According to CNN, 15% of China’s oil imports come from Iran.

With Iran and Pakistan moving ahead with a deal to run a US$7 billion natural gas pipeline into Pakistan’s Balochistan and Sindh provinces, there is talk of potential interest to set up a splinter line north and east from Pakistan to China to deliver gas to China. China, meanwhile, has heavily invested in and essentially led the construction of an energy processing and transit site in Gwadar, a significant Pakistani port city near the Persian Gulf.

Pakistan’s The News reports on the Iran-Pakistan gas pipeline:

Under a deal signed in March, Pakistan will be allowed to charge a transit-fee if the proposed pipeline is extended to India. Iran, which makes $18 billion annually from the sale of gas from South Pars, sees its income to surge to at least $96 billion per annum if trans-country pipeline extends to India.

China in the Middle East

May 14, 2010 5 comments

China’s influence in key Middle Eastern countries has increased thanks to its economic clout. It is becoming a primary export market for countries of the region (and much of the world in general), while also making significant and strategic investments in numerous regions.

From a FPIF/Asia Times article:

In the past five years, China has emerged as the major investor in Iran, with an estimated US$120 billion worth of energy investments. Despite the sanctions already in place, trade between the countries grew by 35% in 2008, to $27 billion. In 2009, China signed over $8 billion in new energy investments. Seemingly, there is an emerging China-Iran tandem.

Saudi Arabia and Iran are among China’s biggest suppliers of crude oil.

China is Saudi Arabia’s top export market. Trade between the two countries had increased to US$41.8 billion in 2008. 16,000 Chinese workers were employed in Saudi Arabia in 2009, representing 70 companies.

It is estimated that in 2010 China will be Egypt’s largest trade partner.

Iran’s former ambassador to China on China’s view of sanctions

January 22, 2010 Leave a comment
China's oil consumption (1980-2006)

China's oil consumption (1980-2006)

Mohammad Hossein Malaek, Iran’s former ambassador to China, has written a short article for Iranian Diplomacy on China’s strategic and tactical view of US-backed sanctions on Iran.

He mentions that China has in fact managed to take some advantage of sanctions against Iran by improving its own access to Iranian energy relative to competing consumers.

Punitive measures targeting Iran’s energy industry in recent years have been a blessing for Beijing. They have given it a rare opportunity to invest in Iran’s lucrative fields. China has now actually become Iranian Oil Ministry’s first option.

…In negotiations, Beijing tries to persuade Iranians replace Western technology with Chinese technology.

He mentions that China pays for its oil in cash:

In the recent years, China has purchased an annual estimated value of 9 billion dollars of oil from Iran, the price of which it in pays in cash.

The former ambassador briefly touches on the logistical and legal headache associated with cash payments, existing sanctions against Iran, and the possibility of future sanctions.

U.S-supported sanctions could not freeze the trade partnership between Iran and China, but they add to the already existing problems. Tehran can still supply its demands through cash purchase and Beijing won’t cut THE economic ties. Things will be the same, only with more courts and legal obstacles.

…To keep up their exchanges with American fiscal institutes, Chinese banks have agreed not to issue letters of credit for Iranian traders and organizations and stop dollar-based transactions. Nevertheless, the stronger economic ties between Iran and China, the more difficult it gets for them to carry out financial proceedings.

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