Archive for ‘GeoPolitics’

22/09/2017

China ahead of schedule on construction of hydropower plant in Pakistan | South China Morning Post

Facility in disputed Kashmir could be completed nine months before its December 2021 deadline

China is racing to finish one of the biggest hydropower projects in Pakistan ahead of schedule, yet its location in the long-contested region of Kashmir will draw ire from India.

Construction of the 720MW Karot power station on the Jhelum river began in December and looked set to finish nine months ahead of its December 2021 completion date, a first for a Pakistan hydro-project, said Qin Guobin, chief executive officer of the state-owned China Three Gorges South Asia Investment Ltd.

The company has put in place an aggressive strategy to cut the project’s financing costs.“For us, Pakistan is a strategic market,” Qin said at the site. “If we managed to complete it earlier we can save financing costs and make it more competitive.”

China pips US in race to start the world’s first meltdown-proof nuclear power plant

Pakistan’s energy demand is expected to grow by 6 per cent to 35,000MW by 2024 as its population of more than 200 million people grows along with the economy. For more than a decade, it has been struggling to overcome daily power shortages that have left industry and residents in the dark.

China has stepped in to meet some of those shortages, financing projects worth more than US$50 billion in an economic corridor that runs through Pakistan. The route is part of Chinese President Xi Jinping’s “Belt and Road Initiative” to connect Asia with Europe and Africa with a web of ports, railways and motorways links for trade.

Three Gorges’ focus in Pakistan is clean energy and it has a US$6 billion portfolio in three hydro and three solar power plants. The Karot project is in the Pakistan-administrated part of Kashmir, which India and Pakistan both claim and have fought two wars over since independence in 1947.

The ‘Belt and Road’ projects China doesn’t want anyone talking about

India’s foreign ministry said its views on “Pakistan’s illegal occupation” of Kashmir was “a matter of record”.

“We have objected, they have proceeded nevertheless,” said G. Parthasarathy, a former Indian high commissioner to Pakistan. “This has been going on since the 1960s and 1970s, when they built the Karakoram highway” that links Pakistan with China through the disputed territory, he said.

China has a neutral stance on the Kashmir dispute, said Zhao Gancheng, director of the Centre for South Asia Studies at the Shanghai Institute for International Studies.

“The ‘Belt and Road Initiative’ cannot be delayed or sidetracked by the territorial disputes,” he said.

Relations between China and India hit a recent low during a dispute between a three-way junction between Bhutan, China’s Tibet and India’s Sikkim, which was resolved with both sides standing down in August.

China, Pakistan and the challenges of Silk Road connectivity

More broadly, New Delhi is wary of Chinese investments in neighbouring countries such as Pakistan and Sri Lanka, while Beijing is irked by India’s lack of support for its infrastructure and trade initiative.

India’s concern did not bother Qin. “It’s a political issue and not the concern of a private investor,” he said.

Pakistan considers the hydropower site a national security priority. It is dotted with army pickets and plain clothes security officials. None of the Chinese staff can leave the camp office without registering his or her name at the main gate. Of the 2,070 workers at the site, 750 are Chinese.

The concern is being taken seriously by both sides. Pakistan had created a special force of 15,000 troops to defend the Chinese projects and that number might be doubled, according to people with direct knowledge of the plans, who asked not to be identified as they were not authorised to speak to the media.

Chinese social media users fume over Indian magazine’s omission of Tibet and Taiwan from ‘map’

Yet risks remain after two Chinese nationals were killed in southwestern Balochistan in June. Islamic State claimed their murders.

The stakes are high for Pakistan, with the planned power generation projects potentially adding US$13 billion to its economy in the next seven years, according to an International Monetary Fund report published in July.

Pakistan’s hydropower generation potential is an estimated 40,000MW, although the existing installed capacity was only 7,116MW in the 2015-16 financial year, according to the National Electric Power Regulatory Authority’s latest report.

Three Gorges is now eyeing the contract for the construction of a 4,500MW Diamir-Bhasha power project in northern Gilgit-Baltistan and northwestern Chillas district.

“Pakistan’s total installed capacity is equal to one big Chinese city, like Shanghai,” Qin said. “That’s not enough.”

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Source: China ahead of schedule on construction of hydropower plant in Pakistan | South China Morning Post

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15/09/2017

China declares itself a global power

N RECENT days government employees across China, from postal officials in the north-east to tax auditors in the south-west, have been corralled into watching state television.

The Communist Party often orders bureaucrats to study propaganda. This time, however, the mandatory viewing has deviated from the usual themes of domestic politics and economic development. Instead, it has focused on China’s emergence as a global power, and the role of the president, Xi Jinping, in bringing this about.In late August and early September the state broadcaster aired six 45-minute programmes on this topic at peak viewing hours. The Chinese title could be rendered as “Great-Power Diplomacy”, but some state media prefer to call it “Major-Country Diplomacy”. That sounds a little more modest. Describing China’s growing global clout has long been a problem for propagandists. In 2003 they seemed to have settled on the term “peaceful rise”, only to abandon it a few months later in favour of “peaceful development”—the word “rise”, they thought, risked causing alarm abroad.

There is not a hint of reticence, however, in the series’ portrayal of China’s purported foreign-policy successes under Mr Xi, and his personal involvement in them. The programmes, made with the help of the party’s own Publicity Department, are peppered with fawning remarks by Chinese and foreigners alike. In a clip from a speech given in 2015, Zimbabwe’s leader, Robert Mugabe, says of the smiling Mr Xi: “We will say he is a God-sent person.” (China has long admired Mr Mugabe’s contempt for the West.) “I really liked him, we had a great chemistry, I think,” America’s president, Donald Trump, is shown telling an American television interviewer after meeting Mr Xi in Florida in April.

Must-Xi TV

The main message is that Mr Xi is responsible for crafting a new approach to foreign policy that has won China global admiration: “great-power diplomacy with Chinese characteristics”. Mr Xi emphasised the need for this in November 2014 in a speech on foreign affairs (official translations of which often used the words “major country” instead). Last year the term appeared for the first time in the government’s annual work report. Like Deng Xiaoping’s “socialism with Chinese characteristics”, the phrase serves more to obfuscate than enlighten.

The nub of it is said to be “win-win co-operation”. But its introduction marked a clear departure from Deng’s more reticent approach to foreign policy, which was often described in China as taoguang yanghui, or “hiding brightness, nourishing obscurity”. By contrast, in the television series, the narrator says: “Maintaining world peace and stability is the unshirkable responsibility and burden of a great power.” It shows Chinese troops evacuating Chinese (and others) from strife-torn Yemen in 2015, the Chinese navy on anti-piracy missions off the Horn of Africa and Chinese marines setting off in July to establish the country’s first overseas military base in Djibouti.

While the series was being aired, a party newspaper published an article by the foreign minister, Wang Yi, on Mr Xi’s “diplomatic thought”. It said the president’s approach to foreign affairs had “blazed new trails and gone beyond traditional Western international-relations theory of the past 300 years”. The programmes aim to show that, unlike other rising powers in history, China (thanks to Mr Xi) has managed to maintain stable relations with established powers. They gloss over huge underlying tensions with Japan and America. Time and again Mr Xi is shown standing still while foreign leaders walk towards him to shake his hand. “It’s the ancient Chinese tributary system re-enacted,” says a Chinese academic, referring to emissaries from neighbouring states who brought gifts to the Chinese emperor as a means of securing peace.

But for all the talk of Mr Xi’s skills as a global leader, he still shares Deng’s aversion to risk-taking abroad. The series skates over the crisis on the Korean peninsula (a day after the final episode was shown, North Korea tested what appeared to be a hydrogen bomb.) Mr Xi’s great-power diplomacy had clearly failed to avert a grave international crisis—one that has developed not least as a result of China sitting on its hands.

Source: China declares itself a global power

27/07/2017

Britain plans to send warship to South China Sea in move likely to irk Beijing

Britain plans to send a warship to the disputed South China Sea next year to conduct freedom of navigation exercises, Defence Minister Michael Fallon said on Thursday, a move likely to anger Beijing.

Britain would increase in presence in the waters after it sent four British fighter planes for joint exercises with Japan in the region last year, he said.

China claims most of the energy-rich sea where neighbors Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have claims.

“We hope to send a warship to region next year. We have not finalised exactly where that deployment will take place but we won’t be constrained by China from sailing through the South China Sea,” Fallon told Reuters.

“We have the right of freedom of navigation and we will exercise it.”

The presence of a British vessel threatens to stoke tensions, escalated by China’s naval build-up and its increasingly assertive stance.

China’s construction of islands and military facilities in the South China Sea has stoked international condemnation, amid concern Beijing is seeking to restrict free movement and extend its strategic reach.

Britain’s Secretary of State for Defence, Michael Fallon, arrives in Downing Street for a cabinet meeting, in central London, Britain July 18, 2017

Toby Melville

Britain’s move could also upset ties between London and Beijing, undermining efforts to shore up what the two governments have called a “golden era” in their relationship as Britain heads towards a divorce with the European Union.

“We flew RAF Typhoons through the South China Sea last October and we will exercise that right whenever we next have the opportunity to do so, whenever we have ships or planes in the region,” Fallon said.

The United States estimates Beijing has added more than 3,200 acres (1,300 hectares) on seven features in the South China Sea over the past three years, building runways, ports, aircraft hangars and communications equipment.

To counter the perceived Chinese aggression, the United States has conducted regular freedom of navigation exercises that have angered Beijing.

Earlier this month, the United States sent two bombers over the region, coming just a few months after it sent a warship to carry out a maneuvering drill within 12 nautical miles of one of China’s artificial islands.

China has repeatedly denounced efforts by countries from outside the region to get involved in the South China Sea dispute.

The South China Sea is expected to dominate a regional security meeting in Manila next week, where Chinese Foreign Minister Wang Yi will meet counterparts from the Association of Southeast Asian Nations (ASEAN) countries.

Meeting ASEAN diplomats in Beijing on Wednesday, Wang told them both sides must “exclude disturbances on the South China Sea issue, and maintain positive momentum”, China’s Foreign Ministry said.

Source: http://www.reuters.com/article/us-southchinasea-britain-idUSKBN1AC1CB

24/07/2017

China warns India not to harbor illusions in border stand-off

China’s defense ministry on Monday warned India not to harbor any illusions about the Chinese military’s ability to defend its territory, amid a festering border dispute.

The stand-off on a plateau next to the mountainous Indian state of Sikkim, which borders China, has ratcheted up tension between the neighbors, who share a 3,500-km (2,175-mile) frontier, large parts of which are disputed.

“Shaking a mountain is easy but shaking the People’s Liberation Army is hard,” ministry spokesman Wu Qian told a briefing, adding that its ability to defend China’s territory and sovereignty had “constantly strengthened”.

Early in June, according to the Chinese interpretation of events, Indian guards crossed into China’s Donglang region and obstructed work on a road on the plateau.

The two sides’ troops then confronted each other close to a valley controlled by China that separates India from its close ally, Bhutan, and gives China access to the so-called Chicken’s Neck, a thin strip of land connecting India and its remote northeastern regions.India has said it warned China that construction of the road near their common border would have serious security implications.

The withdrawal of Indian border guards was a precondition for resolving the situation, Wu reiterated.

“India should not leave things to luck and not harbor any unrealistic illusions,” Wu said, adding that the military had taken emergency measures in the region and would continue to increase focused deployments and drills.

“We strongly urge India to take practical steps to correct its mistake, cease provocations, and meet China halfway in jointly safeguarding the border region’s peace and tranquillity,” he said.

Speaking later, Chinese Foreign Ministry spokesman Lu Kang said Ajit Doval, India’s national security adviser, would attend a meeting in Beijing this week of security officials from the BRICS grouping that includes Brazil, Russia, India, China and South Africa.

Lu would not be drawn on whether the border issue would be discussed at the meeting, hosted by China’s top diplomat, State Councillor Yang Jiechi, meant to discuss multilateral issues.

“China hopes to maintain the peace and stability of the China-India border area, but certainly will not make any compromise on issues of territorial sovereignty,” Lu said.

Indian Prime Minister Narendra Modi is to visit China early in September for a summit of BRICS leaders.Indian officials say about 300 soldiers from either side are facing each other about 150 meters (yards) apart on the plateau.

They have told Reuters that both sides’ diplomats have quietly engaged to try to keep the stand-off from escalating, and that India’s ambassador to Beijing is leading the effort to find a way for both sides to back down without loss of face.

Chinese state media have warned India of a fate worse than its defeat suffered in a brief border war in 1962. China’s military has held live fire drills close to the disputed area, they said this month.

Source: China warns India not to harbor illusions in border stand-off

21/07/2017

Why India and Pakistan hate each other

EVERY AFTERNOON AT sunset, at a point midway along the arrow-straight road between Amritsar and Lahore, rival squads of splendidly uniformed soldiers strut and stomp a 17th-century British military drill known as Beating Retreat (pictured).

Barked commands, fierce glares and preposterously high kicks all signal violent intent. But then, lovingly and in unison, the enemies lower their national flags. Opposing guardsmen curtly shake hands, and the border gates roll shut for the night.

As India and Pakistan celebrate their twin 70th birthday this August, the frontier post of Wagah reflects the profound dysfunction in their relations. On its side Pakistan has built a multi-tiered amphitheatre for the boisterous crowds that come to watch the show. The Indians, no less rowdy, have gone one better with a half-stadium for 15,000. But the number of travellers who actually cross the border here rarely exceeds a few hundred a week.

Wagah’s silly hats and walks serve a serious function. The cuckoo-clock regularity of the show; the choreographed complicity between the two sides; and the fact that the soldiers and crowds look, act and talk very much the same—all this has the reassuring feel of a sporting rivalry between teams. No matter how bad things get between us, the ritual seems to say, we know it is just a game. Alas, the game between India and Pakistan has often turned serious.

After the exhaustion of the second world war Britain was faced with two claimants to its restless Indian empire, a huge masala of ethnic, linguistic and religious groups (half of which was administered directly and half as “princely states” under 565 hereditary rulers subject to the British crown). Just about everyone wanted independence. But whereas the Congress Party of Mahatma Gandhi envisioned a unified federal state, the Muslim League of Muhammad Ali Jinnah argued that the subcontinent’s 30% Muslim minority constituted a separate nation that risked oppression under a Hindu majority. Communal riots prompted Britain’s last viceroy, Lord Mountbatten, to make a hasty decision. He split the country in two—or rather three, since the new state of Pakistan came in two parts, divided by the 2,000km (1,240-mile) expanse of the new state of India.

When the two new states were proclaimed in mid-August 1947, it was hoped the partition would be orderly. Lines had been drawn on maps, and detailed lists of personnel and assets, down to the instruments in army bands, had been assigned to each side. But the plans immediately went awry in a vast, messy and violent exchange of populations that left at least 1m dead and 15m uprooted from their homes.

Within months a more formal war had erupted. It ended by tearing the former princely state of Kashmir in two, making its 750km-long portion of the border a perpetual subject of dispute. Twice more, in 1965 and 1971, India and Pakistan fought full-blown if mercifully brief wars. The second of those, with India supporting a guerrilla insurgency in the Bengali-speaking extremity of East Pakistan, gave rise to yet another proud new country, Bangladesh; but not before at least half a million civilians had died as West Pakistan brutally tried to put down the revolt.

Even periods of relative peace have not been especially peaceful. In the 1990s Pakistan backed a guerrilla insurgency in Indian Kashmir in which at least 40,000 people lost their lives. In 1999 Pakistani troops captured some mountain peaks in the Kargil region, which India clawed back in high-altitude battles. A ceasefire in Kashmir that has held since 2003 has not stopped Pakistan-sponsored groups from striking repeatedly inside India. Pakistan claims that India, too, has covertly sponsored subversive groups.

Analysts discern a pattern in this mutual harassment: whenever politicians on both sides inch towards peace, something nasty seems to happen. Typically, these cycles start with an attack on Indian soldiers in Kashmir by infiltrators from Pakistan, triggering Indian artillery strikes, which prod the Pakistanis to respond in kind. After a few weeks things will calm down.

Just such a cycle started in late 2015, prompted, perhaps, by a surprise visit to the home of the Pakistani prime minister, Nawaz Sharif, by his Indian counterpart, Narendra Modi. Hopes raised by this overture dimmed within days when jihadist infiltrators attacked an Indian airbase. Another suicide squad struck an Indian army camp near the border, killing 19 soldiers. Faced with public outrage, Mr Modi ordered a far harder response than usual, sending commando teams into Pakistan. In the past, India had kept quiet even when it hit back, leaving room for Pakistan to climb down. This time Mr Modi’s government moved to isolate Pakistan diplomatically, rebuffed behind-the-scenes efforts to calm tensions and sent unprovoked blasts of fire across the Kashmir border.

 India’s loss of patience is understandable. It has a population six times Pakistan’s and an economy eight times as big, yet it finds itself being provoked far more often than it does the provoking. When Mr Modi’s Hindu-nationalist Bharatiya Janata Party (BJP) came to power in 2014, it promised to put muscle into India’s traditionally limp foreign policy. “India for the first time is being proactive, not just responding,” says Sushant Singh, a military historian and journalist. “This is a huge shift.”

Yet Mr Modi’s pugnacity raises the risk of a dangerous escalation. “After a routine operation, the adversary may or may not escalate; after a publicised operation he will have only one option: to escalate,” writes Pratap Bhanu Mehta, one of India’s more thoughtful intellectuals.

Whether India and Pakistan are reckless enough to come to serious blows would not matter so much if they simply fielded conventional armies. But they are equipped with more than 100 nuclear warheads apiece, along with the missiles to deliver them. Since both countries revealed their nuclear hands in the 1990s, optimists who thought that a “balance of terror” would encourage them to be more moderate have been proved only partially right. Indians complain of being blackmailed: Pakistan knows that the risk of nuclear escalation stops its neighbours from responding more robustly to its provocations. Worryingly, Pakistan also rejects the nuclear doctrine of no first use. Instead, it has moved to deploy less powerful nuclear warheads as battlefield weapons, despite the risk that fallout from their use might harm its own civilians.

India does espouse a no-first-use nuclear doctrine, but its military planning is said to include a scenario of a massive conventional blitzkrieg aimed at seizing chunks of enemy territory and crushing Pakistan’s offensive capacity before it can respond. India’s arsenal includes the hypersonic Brahmos III, the world’s fastest cruise missile, which can precisely deliver a 300kg payload to any target in Pakistan. An air-launched version could reach Islamabad in two minutes, and Lahore in less than one. And in a grim calculation, India, with four times Pakistan’s territory, sees itself as better able to absorb a nuclear strike.

Alarmists will probably be proved wrong. Both countries are prone to sabre-rattling theatrics, but they are well aware that the price of full-blown war would be appalling. And despite the uncertainties generated by the rise of China, the continuing troubles in Afghanistan and the incalculability of Donald Trump’s America, the international community still seems likely to be able to pull Pakistan and India apart if need be.

As this special report will argue, though, both Pakistan and India should more openly acknowledge the costs, to themselves and to the wider region, of their seven decades of bitter separation. These include not only what they have had to spend, in lives and treasure, on waging war and maintaining military readiness over generations, but the immense opportunity cost of forgoing fruitful exchanges between parts of the same subcontinental space that in the past have always been open to each other. Trade between the two rivals adds up to barely $2.5bn a year.

Perpetual enmity has also distorted internal politics, especially in Pakistan, where overweening generals have repeatedly sabotaged democracy in the name of national security. Pakistan has suffered culturally, too; barred from its natural subcontinental hinterland, it has opened instead to the Arab world, and to the influence of less syncretic and tolerant forms of Islam. For India, enmity with Pakistan has fostered a tilt away from secular values towards a more strident identity politics.

Reflexive fear of India prompts Pakistan’s generals to meddle in Afghanistan, which they see as a strategic backyard where no foreign power can be allowed to linger. In turn, India, because of the constant aggravation from Pakistan, has become bad-tempered with its smaller neighbours. Small wonder that intra-regional trade makes up barely 5% of the subcontinent’s overall trade, compared with more than a quarter in South-East Asia. And it is no surprise that Pakistan has opened its arms to China, which is offering finance, trade and superpower patronage.

This special report will seek to unravel the causes of this irrational enmity, and to explore the contrasting internal dynamics in both countries that sustain it. It will examine new factors in this complex geopolitical board game, such as the rise of China. And it will consider what might be done to nudge the two rivals away from the vicious circle that binds them.

Source: Why India and Pakistan hate each other

21/07/2017

India says in quiet diplomacy with China to tackle border stand-off

When Chinese President Xi Jinping and Indian Prime Minister Narendra Modi met on the sidelines of a regional conference last month, officials said they reached an understanding not to let the two countries’ long-standing “differences become disputes”.

Yet within days, Chinese and Indian soldiers were jostling in a desolate but disputed border region in the Himalayas that has since grown into an eyeball-to-eyeball confrontation from which neither army is ready to back off.

The flare-up is the latest incident in a steadily deteriorating relationship between the Asian giants who are unable to agree on their 3,500 km (2,175 miles) border, over which they went to war in 1962.

Indian officials said diplomats from the two sides were now quietly trying to ensure the stand-off near the three-way border between India, its ally Bhutan, and China does not escalate into a conflict, invoking the agreement reached by their leaders at the Shanghai Cooperation Organisation summit in Astana.

Behind the scenes, India’s ambassador to Beijing is leading the effort to find a way for both sides to back down from confrontation on the Doklam plateau – which China calls Donglang – without losing face, an Indian government source aware of the sensitive negotiations told Reuters.

In public, the two sides are saying little about the delicate diplomatic engagement.

“We want both sides to call back troops and work things out with talks,” Indian Foreign Minister Sushma Swaraj told parliament on Thursday.

China says India must first pull back its troops from the area before meaningful discussions can take place.

“Of course, we have said before, China-India bilateral diplomatic channels are always open,” said Foreign Ministry spokesman Lu Kang, when asked whether talks with India were being held to defuse the situation.

“But with regard to this incident, we have emphasised many times that the Indian border defence personnel who illegally crossed the boundary withdrawing to the Indian side of the line is the basis and precondition for China and India conducting any kind of meaningful dialogue.

“Chinese state media have warned India of a fate worse than then the defeat it suffered in their border war in 1962.

Strategic Rivals

In recent years, the two have clashed over China’s strategic ties with India’s arch rival Pakistan, including a massive trade corridor that China is building through the disputed territory of Kashmir.

New Delhi has also been stung by China’s veto of United Nations sanctions against the leader of a Pakistan-based militant group and Beijing’s refusal to let it become a member of the Nuclear Suppliers Group, a global cartel.Beijing has bristled at the Modi government’s public embrace of the Dalai Lama, the Tibetan spiritual leader whom it regards as a dangerous splittist. It has also grown concerned at India’s military ties with both the United States and Japan.Indian Foreign Ministry spokesman Gopal Baglay said diplomatic channels between Delhi and Beijing were open and being used to tackle the border crisis.

“Diplomatic communications to the best of my understanding have never stopped,” he said. “There are diplomatic communications taking place.”

He would not go into further details.

Flashpoint

The latest trouble began when Chinese forces were spotted constructing a road with bulldozers and other heavy equipment in an area claimed by the tiny kingdom of Bhutan, prompting an intervention by Indian troops stationed nearby.

Groups of soldiers pushed and shoved each other, military officials said, but no weapons were used.

India said its action was guided by its special relationship with Bhutan as part of a 2007 treaty to cooperate on security issues, but also by the threat posed by the alleged Chinese incursion in Doklam to its own security.

The plateau lies close to the “Chicken’s Neck”, a 20-km wide corridor that links India to its northeastern states. The biggest fear among India’s military planners is that a Chinese offensive there could cut off the link.

China, which is engaged in a massive regional infrastructure drive to boost trade, says the area where the road was being constructed is part of its territory, and that in any case India does not have a role in what it sees as a bilateral matter with Bhutan.

About 300 soldiers from either side are facing each other about 150 metres (yards) apart on the Doklam/Donglang plateau, 10,000 feet (3,050 metres) above sea level, Indian officials say.

Behind them in the barracks below are thousands of troops ready to be deployed on either side. So far there has been no sign of either side trying to mobilise more troops, military officials in New Delhi said.

One possibility is that the weather may force the two sides to quietly disengage, the Indian government source said. Construction activity in the area can only take place between June and September before it becomes snowbound.

Source: http://uk.reuters.com/article/uk-india-china-idUKKBN1A51S9

05/07/2017

What Rosneft’s purchase of Essar’s oil refinery means

CONGLOMERATES sometimes sell their least promising units, thereby ginning up returns for the remaining empire. But groups saddled with huge debts do not have that luxury; only by disposing of the most profitable parts can they raise enough funds to satisfy creditors. Such is the story of the Essar Group, which is in the final stages of selling its crown jewel, India’s second-biggest private oil refinery, to a consortium led by Rosneft, a Russian oil titan. The slimming of what was once the country’s third-largest diversified corporate group is a welcome signal that an era of powerful industrialists running rings round their creditors is ending.

The purchase by Rosneft (along with a Russian investment fund and Trafigura, a trading firm) of the giant Vadinar refinery in the state of Gujarat for $12.9bn will be the largest-ever foreign investment in India. It has been a long time coming. It was first mooted over two years ago and jointly announced with fanfare in October by India’s Narendra Modi and Russia’s Vladimir Putin. The deal includes an Indian port and a network of coveted petrol stations.

Most analysts approve of Rosneft’s intiative as a way of diversifying away from upstream activities in Russia. But what is most telling is why the assets came up for sale in the first place. Essar, whose interests span power plants, steel, infrastructure and shipping, says that it saw a good opportunity to monetise an asset it has nurtured for years. It may have had little choice. An investment splurge starting in 2011 has left various Essar operating entities, along with a holding company based in the Cayman Islands, with a combined debt of around $20bn. Although the company does not disclose updated financials (it is privately held by the Mumbai-based Ruia family) few firms in its various industries make the sort of money it would need to pay down such a debt.

In the past, bosses at Indian state-run banks (which conduct over two-thirds of all lending) could easily be convinced to overlook trifles such as a debtor’s inability to repay loans. It takes over four years for an insolvency process to return a meagre 26 cents on the dollar to creditors, so bankers often preferred to behave as if even the most distressed company might somehow find a way of repaying a loan.

A bad-loan crisis followed. Around one in five loans made by state-owned banks are either set to default or have already done so. The central bank is pushing bankers to get tough on errant borrowers. In recent weeks it has threatened to push a dozen firms with huge debts into insolvency unless deals to refinance their debts could be reached quickly. One was Essar Steel.

Banks are still allowed to forgive a part of a company’s debt. But there is now pressure to show that shareholders pay a price, by having to forfeit large chunks of their equity to the banks. Advisers involved in the talks over Essar Steel say the group will have to give up over half its equity in the steel business to convince lenders to refinance loans. That is new: in past cases, parts of Essar have moved in and out of debt restructurings without the central group having to give up any stakes.

Part of the reason the Rosneft deal was held up for so long, insiders say, is that state-owned banks insisted that the Ruia family clear debts from other bits of the Essar empire first, including from the central holding company. They refused to agree to a sale until that was done (Essar repaid in part by taking out a bridge loan from Vneshtorgbank, a big Russian lender). That shows a savvy few thought state-owned bank executives possessed.

The cash from the sale to Rosneft will take away about half of Essar’s $20bn of debt but will also deprive it of its main source of profits. Essar’s pain in having to sell the oil refinery is the corporate system’s gain. Resolving festering bad loans, either by forcing asset sales or seizing ownership, is an essential part of restoring the health of Indian banking. Credit to Indian industry is currently shrinking for the first time in two decades. Resolving this mess can only help companies—including what will remain of Essar.

Source: What Rosneft’s purchase of Essar’s oil refinery means

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02/06/2017

Is Trump abandoning US global leadership? – BBC News

What is Donald Trump’s vision of American leadership? His inaugural speech gave us a headline – “from this day forward, it’s going to be only America first” – but four months on, how much more do we know?

Amid a flood of stories about the president’s lack of commitment to cherished post-war alliances, his attitude to trade and his unwillingness to collaborate on issues like climate change, Mr Trump’s critics draw pessimistic conclusions.

“The cumulative effect of Trump policies, capped by his foolish, tragic Paris decision = abdication of America’s global leadership. Shame!” tweeted Susan Rice, Barack Obama’s former national security adviser.”Donald Trump’s every instinct runs counter to the ideas that have underpinned the post-war international system,” writes G John Ikenberry, Professor of Politics and International Affairs at Princeton.

“Across ancient and modern eras, orders built by great powers have come and gone,” he writes in Foreign Affairs. “But they have usually ended in murder not suicide.”

However, in the wake of President Trump’s first, much scrutinised foreign trip, two of his closest aides argued that America’s allies have nothing to fear.”America First does not mean America alone,” wrote White House National Security Adviser HR McMaster and National Economic Council Director Gary Cohn in the Wall Street Journal.

The president, they insisted, had reconfirmed America’s commitment to the Nato principle of collective defence (there is a debate about this: his endorsement was less than explicit). Using a pejorative phrase often thrown at Barack Obama, the authors said America would not “lead from behind”. They also made it clear that the president’s approach is fundamentally transactional and highly competitive.

Donald Trump found himself out of step with other leaders at the G7 summit in Italy

They hailed Donald Trump’s “clear-eyed outlook that the world is not a ‘global community’ but an arena where nations, non-governmental actors and businesses engage and compete for advantage”.

Where America’s interests align with those of its friends and partners, they wrote, the administration was open to working together to solve problems.

But the two officials signed off with an unambiguous reminder of their master’s core purpose.

“America First signals the restoration of American leadership and our government’s traditional role overseas – to use the diplomatic, economic and military resources of the US to enhance American security, promote American prosperity, and extend American influence around the world.

“No place here, it seems, for Harry Truman’s 1945 declaration that “no matter how great our strength… we must deny ourselves the license to do always as we please”.

For Donald Trump, the exercise of American influence revolves around imposing Washington’s will.

Muscular approach

“We must make America respected again and we must make America great again,” he declared in April 2016.

“If we can do that, perhaps this century can be the most peaceful and prosperous the world has ever known.”

Some of the president’s fiercest critics reacted with horror to the McMaster/Cohn article.The conservative commentator David Frum said the two officials “have re-imagined the United States in the image of their own chief – selfish, isolated, brutish, domineering, and driven by immediate appetites rather than ideals or even longer-term interests.”

There were times, during the European leg of his tour, when the president’s body language and demeanour seemed calculated to confirm his opponents’ worst fears.

Trump pushes past Montenegro’s PM

When he shoved aside the prime minister of Montenegro, Donald Trump seemed to act out an ugly version of America First.

A billionaire who is used to bending friend and foe alike to his will appears to struggle with anything more collaborative.

But there are signs that his muscular approach, while popular among supporters at home, has already caused a shift in the tectonic plates of the global world order.

Germany’s Angela Merkel says the days of depending on others are “to a certain extent” over.”

We Europeans truly have to take our fate into our own hands,” she told supporters last Sunday.

She struck a similar note when welcoming the Chinese Premier Li Keqiang to Berlin.

“We are living in times of global uncertainty,” she said, “and see our responsibility to expand our partnership… and push for a world order based on law.”

For his part, Mr Li seemed only too happy to reciprocate.

“We are both ready to contribute to stability in the world,” he said.It’s been clear since Donald Trump’s election that China sees this as a moment of opportunity.

China is not being pushy, foreign ministry official Zhang Jun told reporters in January.

Chinese President Xi Jinping has committed his country to renewable energy

“It’s because the original front-runners suddenly fell back and pushed China to the front,” he said.

At the World Economic Forum in Davos it was left to China’s President Xi Jinping to defend globalisation and free trade, both frequently and colourfully attacked during Donald Trump’s election campaign.

The EU and Nato also came in for scorn, and even though President Trump has subsequently moderated his tone, damage has undoubtedly been done.

David Frum reaches a bleak conclusion. America is no longer the leader its partners once respected “but an unpredictable and dangerous force in world affairs, itself to be contained and deterred by new coalitions of ex-friends”.

Source: Is Trump abandoning US global leadership? – BBC News

24/03/2017

The subtleties of soft power: China is spending billions to make the world love it | The Economist

The subtleties of soft powerChina is spending billions to make the world love itCan money buy that sort of thing? From the print edition IMAGES of China beam out from a giant electronic billboard on Times Square in the heart of New York city: ancient temples, neon-lit skyscrapers and sun-drenched paddy fields. Xinhua, a news service run by the Chinese government, is proclaiming the “new perspective” offered by its English-language television channel. In Cambodia’s capital, Phnom Penh, children play beneath hoardings advertising swanky, Chinese-built apartment complexes in the city.

Buyers are promised “a new lifestyle”. Across the world, children study Mandarin in programmes funded by the Chinese state. Some of them in Delaware don traditional Chinese robes and bow to their teachers on Confucius Day.

For many years, shoppers around the world have been used to China’s omnipresence: “Made in China” has long been the commonest label on the goods they buy. More recently, however, the Chinese government has been trying to sell the country itself as a brand—one that has the ability to attract people from other countries in the way that America does with its culture, products and values. A decade ago the Communist Party declared a new goal: to build “soft power”, as a complement to its rapidly growing economic and military strength. It spends some $10bn a year on the project, according to David Shambaugh of George Washington University—one of the most extravagant programmes of state-sponsored image-building the world has ever seen. Mr Shambaugh reckons that America spent less than $670m on its “public diplomacy” in 2014.

The party borrowed the idea of soft power from an American academic, Joseph Nye, who coined the term in 1990. Mr Nye argued that hard power alone was not enough to wield influence in the world. It had to come from “the soft power of attraction”, too. China was acutely conscious that it lacked it. Many in the West were deeply suspicious of its authoritarian politics. In Asia people feared China’s emergence as a regional hegemon. China knew it could use its economic might to win over governments, such as by building roads, railways and stadiums for them. But Mr Nye saw those kind of investments as expressions of hard power. China decided it needed more of the soft kind as well, so that foreigners would feel naturally inclined to do its bidding.After several years of debate about soft power, or ruan shili, among Chinese academics, China’s then president, Hu Jintao, spoke up on the topic in 2007, telling a party congress that China needed to build it. Mr Hu’s successor, Xi Jinping, has stepped up the effort. In 2013, about a year after he took over as China’s leader, Mr Xi convened a meeting of the ruling Politburo to discuss soft power. Its members agreed that it was a vital ingredient of Mr Xi’s “Chinese dream of the great revival of the Chinese nation”—the term “Chinese dream” being one of Mr Xi’s favourites.

Mr Xi has made himself promoter-in-chief of this new form of power (helped when he travels abroad by the highly visible presence of his elegant, smiling wife). His efforts to boost it were on display at the World Economic Forum in Davos in January, where he won plaudits for extolling globalisation and calling for unity in the fight against climate change. Even Mao Zedong, who enjoyed a cult status abroad among some left-wing academics, put far less work into winning over foreigners.

Raise the red lanterns

According to Mr Nye, whom Chinese officials acknowledge as a guru on the topic, there are three main ways that a country can gain soft power: through its political values, its culture and its foreign policies. But winning on all fronts is not easy. The party knows that its ideology has little chance these days of attracting others. Arguably China’s soft power was stronger in the 1950s and 1960s when Mao, a brutal but charismatic dictator, espoused a socialist Utopia that inspired many people around the world. Nowadays some Chinese academics speak of a “China model”—the winning combination, in their view, of authoritarian politics and somewhat liberal economics (with a big role for the state). But Chinese leaders prefer to gloss over the politics when describing their country to foreigners. In 2008 the opening ceremony of the Olympics Games in Beijing barely hinted at the party or its principles.

Instead, China’s soft-power strategy focuses mainly on promoting its culture and trying to give the impression that its foreign policy is, for such a big country, unusually benign. The culture that the party has chosen for foreign consumption is mainly one that was formed long before communism. Confucius, condemned by Mao as a peddler of feudal thought, is now being proffered as a sage with a message of harmony. Since 2004 China has established some 500 government-funded “Confucius Institutes” in 140 countries. These offer language classes, host dance troupes and teach Chinese cooking. Many of them are on campuses (an activity involving one, at the University of Delaware, is pictured). China has also set up more than 1,000 “Confucius Classroom” arrangements with foreign schools, providing them with teachers, materials and funding to help children learn Mandarin.

Let there be no confusion about Confucius

China hopes foreigners will take up some of its traditional customs. For example, it has set out to make Chinese new year as popular as Christmas. In 2010 the government put on fewer than 100 new-year events in foreign countries. This year it sponsored some 2,000 of them in 140 countries to mark the year of the chicken. Red-coloured Chinese lanterns swayed in city streets thousands of miles from the home of the lunar festival. The Communist Party wants China’s cultural presence to reach everywhere: it recently staged a fashion show in Ethiopia’s capital, Addis Ababa, featuring the qipao, a sleeveless dress that gained popularity among fashionable Chinese women in the 1920s.

China’s diplomats have been busy trying to convince foreigners that China’s rise is nothing to fear. Mr Xi speaks of a “new type of great-power relations”, suggesting that China can co-exist with America without the kind of rivalry that caused the two world wars. His “One Belt, One Road” scheme—involving Chinese investment in infrastructure across Asia, the Middle East, Africa and Europe—aims to reinforce China’s image as a country eager to use its newfound wealth for the good of the world (see article).

To help craft such an image, China has been investing massively in its foreign-language media. Xinhua, the government’s main news agency, opened nearly 40 new foreign bureaus between 2009 and 2011, bringing its total to 162—at a time when cash-strapped media organisations elsewhere were shutting them down (it hopes to have 200 by 2020). The number of Xinhua correspondents based overseas doubled during that time. In December the state broadcaster rebranded its international media service, calling it China Global Television Network. Its six channels aim to compete with global services such as the BBC, CNN and Al Jazeera. (Mr Xi urged the network to “tell the China story well, spread China’s voice” and “showcase China’s role as a builder of world peace”.) China Daily, the government’s main English-language mouthpiece, pays for inserts in newspapers such as the Washington Post and the Wall Street Journal.

The government is trying to extend its reach online, too. Last year a government-affiliated media group spent 30m yuan ($4.35m) to launch a free, English-language website called Sixth Tone. It tries to sell China’s message by being more sassy, and sometimes more critical, than other state media. With the party’s blessing, private companies are getting involved, too. In 2015 Alibaba, China’s biggest e-commerce firm, paid $260m for the South China Morning Post, Hong Kong’s flagship English-language newspaper which has incisive—and often critical—reporting on Chinese politics. The deal has raised fears that Alibaba will try to turn the newspaper into a cheerleader for the party. China’s richest man, Wang Jianlin, is trying to buy film studios and production companies in Hollywood, the epicentre of American culture (China’s clampdown on capital outflows may have been frustrating his efforts recently—earlier this month he withdrew a $1bn bid for Dick Clark Productions, an iconic Hollywood firm).

China wants its message to be clearly visible in the heartland of America’s capitalist culture. It began advertising itself in Times Square in 2011 (see picture). Last year Xinhua used its billboard there to broadcast a video 120 times a day for two weeks defending China’s territorial ambitions over disputed rocks in the South China Sea. Sometimes the party uses covert means to sway foreign opinion. In 2015 an investigation by Reuters, a news agency, revealed that a Chinese state broadcaster, China Radio International, controlled at least 33 radio stations in 14 countries, including the United States, but was using front companies to mask its ties with them. Reuters said the stations avoided airing anything that might portray China in a negative light.

Sweet and sour

 But when Mr Nye wrote about soft power, he suggested that governments could not manufacture it. He argued that much of America’s had sprung from its civil society: “everything from universities and foundations to Hollywood and pop culture”. The party is distrustful of civil society; its soft-power building has been almost entirely state-led. China has tried to combine elements of soft power with the hard power of its illiberal politics. Far from enhancing China’s global image, this approach has often served to undermine it.

Take the Confucius Institutes and Classrooms. In 2007 a senior party leader described these as “an important part of China’s overseas propaganda set-up.” But many cash-strapped universities have gratefully supplanted their own language courses with ones led (even funded) by Confucius Institutes. In some places Confucius Institutes have replaced or started up entirely new China-studies programmes. Most of them do not actively push the party line, but Confucius Institutes usually skate over sensitive political topics such as the crushing of pro-democracy protests in 1989.

They often attract controversy. In 2013 McMaster University in Canada severed ties with its on-campus Confucius Institute after one of the institute’s employees was forbidden to follow Falun Gong, a spiritual sect that is banned in China (the institute subsequently closed down). At a European Chinese-studies conference in 2014, the Chinese head of Confucius Institutes worldwide ordered pages referring to a Taiwanese educational foundation to be ripped from each programme. Such attempts at censorship only help to reinforce Western misgivings about China’s politics and undermine its soft power.

China’s efforts to use its global media to paint a rosier picture of the country also face a tough challenge. Its television networks employ foreign anchors (and plenty of panda footage) to try to win audiences abroad. But foreigners can also see the Chinese state’s heavy hand, such as when it mobilises pro-China crowds to drown out protesters during visits by Chinese leaders, or when it arm-twists foreign politicians not to complain about China’s human-rights record (Liu Xiaobo, a Chinese human-rights activist who was awarded the Nobel Peace prize in 2010, languishes in a Chinese jail, rarely mentioned in public by Western leaders). In February an official at the Chinese embassy in London warned Durham University not to host a vocal critic of the party: a former Miss World contestant who was born in China and raised in Canada—the country she represented.

As for China’s message of peace to other countries, many in Asia are far from convinced. Its grabs for territory in the East and South China Seas have fuelled widespread resentment. The rapid expansion of its navy and air force, and its build-up of missiles, have sown anxiety in America, too.

China’s soft-power push has made some gains. In global opinion polls respondents from Africa tend to be more positive about China than people from other regions. That is partly because of the money China has poured into the continent—in Angola every professional football match is staged in one of four, Chinese-built, stadiums. Younger people everywhere often view China more favourably than older people (see chart). This is a sign, perhaps, that the country is capable of being cool—who does not get a buzz out of Shanghai’s skyline? Portland Communications, a public-relations firm, has conducted surveys of public attitudes towards 30 countries—most of them, apart from China, rich ones. China ranked bottom in 2015. Last year it crept two places higher, above the Czech Republic and Argentina.

But money has not bought China anything like the love it would like. A year before Mr Xi took over, just over half of Americans had positive impressions of China, according to the Pew Research Centre. By the end of 2016 that share had fallen to 38% (see chart). Pew found a similar trend in other countries. In 14 out of 19 nations it polled between 2011 and 2013, views of China became less friendly.

No thanks to the party

China’s rapid economic development has won it many admirers. But the social and environmental costs of this have also produced many critics. A country can have soft power and smog as well (America has had plenty of both in much of its recent history). But China’s air pollution undermines its soft power: it is widely seen as evidence of a callous government that cares more about making the country richer than the health of its people or the planet. Many foreigners now associate the country with smog—an important reason why 37% fewer international tourists visited China in 2015 than in 2007. (Other reasons for the drop included the cost and increasing hassle involved in obtaining visas, and the yuan’s exchange rate.) Mr Xi’s eagerness to join the fight against global warming is partly driven by a desire to regain the soft power China has lost owing to its environmental horrors.

Some people in China privately grumble that the party itself, with its intolerance of dissent, is the biggest obstacle to the country’s soft-power development. Since taking office, Mr Xi’s relentless efforts to clamp down on civil society have hardly helped. He has also been trying to strengthen the party’s control over the arts: in 2014 he said they should promote socialism rather than be “slaves to the market”. That is unlikely to help China emulate the success of America’s television shows, which project an attractive vision of American culture into people’s living rooms the world over.

Few people outside China want to watch its programmes, which are often thinly disguised propaganda. The success of China’s most successful film globally, “Crouching Tiger, Hidden Dragon”, a co-production involving American companies, has not been repeated since its release in 2000. “Kung Fu Panda”, an American-made animated film series, has perhaps done more to boost China’s soft power than any movie made by the country itself. Small wonder that China was keen to enter into a co-production for the third in the series, which came out last year.

State-controlled media in China have reported with relish on commentary in America suggesting that Donald Trump’s presidency may deal a heavy blow to the United States’ soft power. If that arises from the appeal of a country’s culture, political ideals and foreign policies, as Mr Nye reckons, then America’s soft power is threatened in two of these domains. China’s political system may not exert much of a global pull, but it could begin to look a bit more attractive to some people when compared with America’s.

China has some attributes that it can play to its advantage. For example, it has no colonial history beyond its current borders and has started no wars in nearly 40 years. In a turbulent world, China’s leadership appears relatively stable and predictable (at least to the casual observer—Mr Xi’s determination to crush dissent suggests he sees serious threats to his power).

When Mr Xi became the first Chinese president to address the global elite at Davos, only days before Mr Trump was inaugurated, he appeared to sense an opportunity to bask in a rare glow. But the upswing in China’s soft power is likely to be limited. Chinese officials themselves quietly ask whether China’s strategy can ever succeed. In 2015 a senior official, Zhou Hong, wondered aloud what state-sponsored soft power could achieve. “Without the broad participation of the people,” he wrote in the party’s main mouthpiece, the People’s Daily, “the external propagation of culture not only loses its meaning, but also loses its intrinsic energy.” Mr Zhou was right about the Chinese people’s role. China will find it hard to win friends and influence nations so long as it muzzles its best advocates.

Source: The subtleties of soft power: China is spending billions to make the world love it | The Economist

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28/02/2017

US-China relations: Trump meets senior official Yang Jiechi – BBC News

State Councillor Yang Jiechi is the first senior Chinese official to meet Mr Trump since his inauguration.

Mr Yang also discussed security matters with the new US national security adviser, HR McMaster, and Jared Kushner, the president’s son-in-law.

It follows tensions over trade and security between the two countries.

On 9 February Mr Trump spoke to Chinese President Xi Jinping by telephone.

In that call he agreed to honour the “One China” policy, backing away from previous threats to recognise the government of Taiwan, which China regards as a breakaway province.In December Mr Trump, as president-elect, had spoken on the phone to the president of Taiwan – a break in protocol which angered Beijing.

In his visit on Monday, Mr Yang also met Vice-President Mike Pence and strategist Steve Bannon, Chinese state media reported.White House press secretary Sean Spicer told reporters that Mr Yang then “had an opportunity to say hi to the president”.

The talks with the Chinese delegation covered “shared interests of national security”, Mr Spicer said.

In January, China’s foreign ministry warned Washington against challenging Beijing’s sovereignty in parts of the South China Sea.

It came after Mr Spicer said the US would “make sure we protect our interests there”.

Barack Obama’s administration refused to take sides in the dispute.

Source: US-China relations: Trump meets senior official Yang Jiechi – BBC News

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