‘The country that bombed you is your friend…

The one that built your new railway is your enemy’

This is the Western media’s bizarre messaging to the people of Laos. The nation that was carpet-bombed by America, and which is now being vilified for accepting a new $9 billion railway line paid for by China.

Tom Fowdy

is a British writer and analyst of politics and international relations with a primary focus on East Asia.

Thursday was National Day in Laos. A celebration marking 46 years since the landlocked Southeast Asian nation deposed its monarchy and became a revolutionary communist state. An effort which was supported by Vietnam.

This year, the anniversary had added significance, as it saw the opening of a major new project. It is an electrified high-speed and freight railway system connecting the capital city, Vientiane with its northern neighbour, China. 

The $9 billion project is part of the Belt and Road Initiative, and has been hailed as one of its flagship achievements. It is the first commercial and industrial railway in Laos, which, given its geography and the fact it is surrounded by mountainous terrain, has not previously had many options to expand its exports and generate economic growth.

Now, though, it has a direct rapid link into the world’s second largest economy and the world’s largest consumer market by population, and a connection to the booming ports of Guangdong. In terms of what it will bring to Laos, it is a game changer. So, what’s not to like about it?

To nobody’s surprise, the mainstream media have responded to the railway with the usual anti-China negativity. A plethora of articles sought to paint the project as a ‘debt trap’. Promoting the accusation that Beijing loans countries money for projects they cannot afford and then exerts political leverage over it. 

”China, but at what cost?”

The Financial Times, for one, ran with a cynical article headlined ‘Laos to open Chinese-built railway amid fears of Beijing’s influence’. It implied that somehow Laos feels threatened or fears the construction of this very pioneering railway project. This suggestion of ‘fears of Chinese influence’ has become a common feature on such stories. It seek to cast doubt over anything positive China may be achieving or doing. 

A common Twitter meme among pro-China users which has followed from stories like this asks: “but at what cost?” highlighting the frequency of such negative coverage.

And if you Google “China, but at what cost?” you can find a great many examples of articles published in major outlets. In producing such pieces, the broader intention is to depict Beijing’s actions as unwanted, threatening and constantly facing opposition. In the case of the Laos railway project, the ‘problem’ is it was financed by debt, and therefore it is not a positive step.

Yet this argument is as insulting as it is outright insensitive to Laos’ contemporary history. Anyone who knows anything about Laos’ relatively recent past will be well aware that China is not the country to fear, but the United States – the nation that dropped over 260 million cluster bombs on Laos and completely devastated the country as an extension of the Vietnam War, making it the most single bombed nation in history and claiming over 50,000 lives. 

What is the cost of unexploded bombs clearing?

Many of these bombs remain unexploded and litter the countryside of Laos, continuing to kill civilians. In constructing the new railway, workers first had to clear the unexploded ordnance. How is it that the world and the mainstream media remain indifferent to this atrocity? And how, by any stretch of the imagination, can they claim that China is the true threat to Laos, and that the US and its allies act in the true interests of the country?

Herein lies the problem. Such a mindset symbolizes the elitism, chauvinism and self-righteousness of the countries of the West. Countries which are ideologically inclined to believe that they stand for the ‘true interests’ of the ordinary people in the countries they profess to liberate. 

Western politics peddles the assumption that through countries’ adherence to liberal democracy, they exclusively hold a single, universal, impartial, and moralistic truth, derived from the ontological legacy of Christianity, and they must introduce it to others. The West always acts truthfully and in good faith, while its enemies do not. And therefore, so the logic goes, any policy the US or its allies direct towards Laos is motivated by sincere intent and goodwill for its interests. In turn, anything that China does is bad-faith, expansionist and power-hungry behaviour motivated by a desire to influence or control the country. 

This creates the bizarre scenario whereby Beijing is depicted as evil and sinister for building a railway to connect to its neighbour. However, we should forget America dropping millions of bombs on the country because it was done in the name of ‘freedom’. I’m sure you can imagine how the media would react if China did the latter.

Pro US media distorting reality

The Laos-China railway has provided a textbook example of how the media can distort a story in order to fortify an incriminating narrative, while brushing aside brutal realities. We are shown a lopsided world, where the travesty of a country being bombed into oblivion with consequences lasting decades is ignored, and the preference is to try to convince us how that same country’s first commercial railway line is, in fact, what it should really be scared of. 

It is a demonstration of how the power of the English-language, pro-US media distorts reality itself and how they can blow up an issue, yet hide the truth, by professing to care dearly about the wellbeing and interests of a country which the West poured death, destruction, and carnage upon in the name of freedom.

The concept of “green” hydrogen energy is increasingly being shattered by reality …

Today, the transition to carbon-free energy is considered to be a resolved issue. The general trend to improve the environmental friendliness of the economic activity of entire countries of the world has become the subject of numerous disputes, discussions and development of strategies for the transition to a new energy structure.

Europe (and the whole world as a whole) has chosen the transition to hydrogen energy as the most economically and energetically effective means of achieving climate neutrality in its countries by 2050.

In the energy strategies presented by Japan, South Korea, Russia and European countries, hydrogen is a universal energy carrier. It is intended to replace hydrocarbon fuels (oil, gas, coal) with an environmentally friendly and neutral gas with a high calorific value.

However, hydrogen energy has a significant problem (in addition to storage and transportation). The lack of free hydrogen deposits. Therefore, hydrogen is required to be produced. That is, to convert primary energy and primary resources into the production of hydrogen.

In other words, we must artificially create this energy carrier, moreover spending more energy on its production than we will receive from its use. And this, in turn, imposes a lot of restrictions on the use of primary energy. Firstly, it must be carbon-neutral, and secondly, powerful enough to provide not only the energy needs of mankind in primary energy, but also have a large reserve for the production of hydrogen and the transition to a hydrogen economy (as seen in Germany). Or to the hydrogen society (according to the Japanese version).

The basic concept for the use of hydrogen in Europe. 
Hydrogen is produced in electrolytic cells using renewable energy sources, as well as coal and gas stations. 
In addition, hydrogen and raw materials for its production (ammonia) are imported. 
The feedstock is processed into an additional volume of hydrogen, which is supplied to consumers through the existing gas pipelines (including together with natural gas).

Primary energy can be obtained in several ways:

  • burning traditional hydrocarbon raw materials (oil, gas, coal);
  • by using the physical processes of fission of an atomic nucleus (atomic energy);
  • using the potential of water masses in places of elevation differences (hydropower);
  • or using wind and solar energy (wind and solar energy);
  • using the thermal energy of the bowels of our planet (geothermal energy);
  • in the future, it is possible to use physical processes of fusion of nuclei of light elements (thermonuclear energy).

Since the hydrogen concept provides for the abandonment of hydrocarbon resources, it is impossible to use gas or coal to produce hydrogen – this will break the entire hydrogen concept.

However, new gas-fired power plants under construction in Germany have practically zero CO2 emissions into the atmosphere due to the technology of capturing associated greenhouse gases with their subsequent utilization. For example, the energy company “Uniper” in Germany has already built the world’s first coal-fired power plant that meets all European environmental standards.

Moreover, in spite of Germany’s policy of not using coal, a brand new 1100 MW Datteln 4 coal-fired power plant was launched in 2020, whose emissions are at the level of the most modern gas-fired power plants operating in Germany. The cost of this project amounted to almost 1.5 billion euros.

Kraftwerk Datteln 4 is the world’s first environmentally friendly coal-fired power plant. 
Germans do things ..

Yes, as amazing as it is, Germany has donated € 1.5 billion to a coal plant! Coal! But an environmentally friendly coal-fired power plant. And this is different – you need to understand.

Obviously, in the next 10 years, gas and even coal-fired power plants will become climate neutral, without harmful emissions into the atmosphere. And this is a fact.

The production of hydrogen as an energy carrier implies the use of renewable environmentally friendly raw materials – water, as well as renewable environmentally friendly sources of energy in the form of the sun, wind and the same hydropower.

The production of hydrogen by this method will be as natural for the Earth’s ecosystem as the water cycle in nature. This type of hydrogen has received the designation – “green”.

Today it is too expensive to mass-produce “green” hydrogen using solar and wind power plants. This trend will only get worse in the future. The thing is that the cost of raw materials in the form of rare earth metals, and just all other non-ferrous metals (for example, copper) is already breaking records due to high demand. Without them it is impossible to build a modern SPP and wind turbine.

Thus, spot prices for polycrystalline silicon increased by more than 20%. And the cost of producing polysilicon panels has grown exponentially since the beginning of 2021!

Therefore, conversations about the mass production of “green” hydrogen, faced with the harsh reality, began to subside on the sly. Simply because producing electricity at the same solar power plants is 3 times more profitable than producing the same amount of “green” hydrogen in energy equivalent.

Today, the production of “blue” hydrogen is 3-4 times more profitable than the production of “green”, even taking into account the carbon tax 

Realizing this, many would-be hydrogen producers have simply abandoned the mass production of green hydrogen. For example, Australia in its hydrogen strategy focuses on the production of “gray” hydrogen from coal with associated storage of CO2. Japan is already interested in the project.

The United Arab Emirates and Qatar will invest in the production of blue hydrogen.

And in the hydrogen strategies of Japan, South Korea and European countries, the point of self-sufficiency of their economies with the necessary amount of hydrogen is generally omitted.

In Germany, it is generally stated that Russia should supply them with hydrogen, so there should be no problems with the transition to a hydrogen economy by 2050 (see paragraph 38 of Germany’s hydrogen strategy).

In Russia, according to the hydrogen strategy, by 2024 the economic model of the hydrogen economy itself, with all its derivatives (production of methane-hydrogen mixtures; production of turbine units capable of operating on hydrogen; production of hydrogen transport) should be developed and substantiated. Gazprom is developing a technology for producing “blue” hydrogen. Rosatom is developing a technology for producing “yellow” hydrogen (electrolysis of water at nuclear power plants and the construction of a nuclear power plant for the direct production of hydrogen by high-temperature electrolysis).

Since 2010, Rosatom has been developing a technology for producing hydrogen using high-temperature gel nuclear reactors. 
The first such station should appear in 2030

Even old Europe is not so optimistic about green hydrogen anymore. Europe suddenly equated the ecological footprint of nuclear power plants in her 387-page study posted on the European Commission’s JRC SCIENCE FOR POLICY REPORT to the ecological footprint of wind and solar power plants.

This is because there is no other way to realize the mass and, most importantly, cheap production of “green” hydrogen, on which Europe relies heavily. Well, this somehow saves the very concept of environmentally friendly hydrogen.

However, in Russia, quite recently, the development of a project began, which is still able to revive the original concept of precisely “green” hydrogen. As the use of water and a renewable environmentally friendly source of energy. This project, worth more than $ 300 billion, will pay off in just 5 years. It will fully provide Europe with the necessary amount of “green” hydrogen. At the same time, Russia itself by 2050 will become the world’s largest producer of hydrogen of all “colors”. And 85% of the total world production of “green” hydrogen will be generated by Russian power plants.

One of the projects for the production of mass and cheap “green” hydrogen is the construction of a tidal power plant in the water area of ​​the Penzhinskaya Bay.

By
Alexey Kochetov

India has key first-mover edge on China in Iran

India doubling down on Iran’s Chabahar port project as strategic counter to China’s Belt and Road gains trade traction

By FM SHAKIL

When China clinched a massive $400 billion bilateral investment pact with Iran, few noted that India was already well-engaged.

By the end of May, India will begin full-scale operations in its first foreign port venture at Iran’s Chabahar. That is facility that opens on the Gulf of Oman that will aim to facilitate more South Asia, Central Asia and Middle East trade while bypassing Pakistan.

India’s US$500 million investment represents a clear and potent commercial challenge to China’s massive port investment in neighboring Pakistan’s Gwadar. Gwadar is a key component of Beijing’s Belt and Road Initiative (BRI).

The 10-year lease agreement, a deal first clinched by Prime Minister Narendra Modi in Tehran in 2016, has until now been hobbled by US sanctions imposed under the Donald Trump administration.  

Indian suppliers and engineers, some with interests in the US, were reluctant to deliver essential machinery and services to Iran on fears they could somehow be sanctioned, despite clear exemptions on Chabahar in Trump’s sanction order. That led to certain speculation that China may take over the project from India.

New Delhi has doubled down and accelerated the project with the shift from Trump to Biden. It is banking like others on a new breakthrough on the Joint Comprehensive Plan of Action (JCPOA) nuclear agreement and a broader US-Iran warming trend.

Aerial view of Iran’s Chabahar port. Image: Twitter

India has supplied two large cargo-moving cranes. It will deliver two more in the coming weeks before the facility’s expected ceremonial opening.

New Delhi is already promoting the port’s potential humanitarian role, noting it was used to send emergency shipments of wheat to Afghanistan during the Covid-19 crisis and pesticide to Iran to deal with a recent locust infestation.

Pakistan is getting worried about losing regional trade

India’s renewed commitment to Iran via Chabahar is already setting alarm bells ringing in neighboring Pakistan, which is already losing regional trade mainly from Afghanistan to Iran despite US sanctions.

India and Pakistan recently announced a renewed commitment to an existing 2003 ceasefire over contested Kashmir. That move that should allow both to focus more on economic linkages than strategic rivalry.

Chabahar has seen limited operations since 2019, a result of US restrictions imposed on Iran’s energy exports. The port handled a mere 123 vessels with 1.8 million tons of bulk and general cargo from February 2019 to January 2021. It is well below its operating capacity, according to reports.

That’s set to change. New Delhi ultimately aims to link Chabahar to its International North-South Transport Corridor (INSTC). It is a project initially proposed by India, Russia and Iran in 2000 and later joined by 10 other Central Asian nations.

Some see the INSTC as a less-monied rival to China’s BRI. Belt-Road-Initiative has invested heavily in Pakistan’s road, power and trade infrastructure. And including huge multi-billion dollar investments at Gwadar port some critics have likened to a debt trap.

Security concerns sparked by armed groups in Pakistan’s Balochistan province, where Gwadar is situated, have hindered progress on various BRI projects and pushed Pakistan to recently ramp up security at the Beijing-invested port.

From India to Europe – cheaper and faster

INSTC envisions a 7,200 kilometer-long, multimode network comprised of shipping, rail and road links. It is connecting India’s Mumbai with Europe via Moscow and Central Asia. Initial estimates suggest INSTC could cut current carriage costs by about 30% and travel times by half.

That means more trade and port activity for Iran and less for Pakistan. Last year Iran has already usurped 70% of Pakistan’s recent transport business at Karachi port.

Landlocked Afghanistan has traditionally relied on Pakistan as its gateway to international shipping routes. However, recent trends indicate that as much as 70% of Afghan transit trade is now handled by Iran.

If India presses ahead as planned with INSTC, Pakistan would be the ultimate loser as Afghan and Central Asian transport business diverts increasingly to Chabahar and away from Karachi and Gwadar.

“Iran had already started working on a 600-kilometer-long railway line connecting Chabahar port to Zahedan, the provincial capital of Sistan-Baluchestan province close to the Afghan border,” he said.

India has already lined up $1.6 billion for the project to facilitate the movement of goods to and from Afghanistan via Iran. India also plans to invest $2 billion to develop supporting infrastructure including the Chabahar-Hajigak railway line in Afghanistan.

Many Afghan traders are plugging into Chabahar

Many Afghan traders still rely on traditional transit routes through Pakistan. However, many are plugging into Chabahar’s comparative cost-effectiveness and speed in handling transit cargo, analysts say. The same is true for Uzbekistan, Tajikistan and other landlocked Central Asian countries looking for alternatives to Pakistani ports.      

Pakistan-Afghanistan trade has recently fallen from around $2.5 billion to $1 billion annually due to wide-ranging differences over the now expired transit agreement.

“Afghans want Pakistan to allow Afghan wheelers to enter into Indian border areas through Wagah for transportation of Afghan export goods and on return upload import consignments from India,”

“Pakistan on the other hand argues that the APTTA is a bilateral arrangement between Pakistan and Afghanistan and not a trilateral agreement to facilitate mutual trade between India and Afghanistan,”.

Chabahar is Iran’s only oceanic port and so far consists of Shahid Kalantari and Shahid Beheshti terminals. Each of which has five berth facilities. The port is located in Iran’s Sistan and Baluchestan Province. It is about 120 kilometers southwest of Pakistan’s Balochistan province, where the China-funded Gwadar port is situated.

In May 2016, India, Iran and Afghanistan signed a trilateral agreement for the strategically-located Chabahar to give New Delhi access to Kabul and Central Asia without having to travel through Pakistan.

Chabahar is regional project unlike Gwadar which is China oriented

The original plan committed at least $21 billion to the so-called Chabahar–Hajigak corridor, which then included $85 million for Chabahar port development, a $150 million credit line to Iran, an $8 billion India-Iran MoU for Indian industrial investment in a Chabahar special economic zone, and $11 billion for the Hajigak iron and steel mining project awarded to seven Indian companies in central Afghanistan.

Unlike Chabahar, which is designed more to serve the economic and trade interests of the wider region, Gwadar is more tilted toward Beijing’s ambitions, analysts and traders say.

Gwadar port’s planned capacity will accommodate a massive 300 to 400 million tons of cargo annually, comparable to the combined annual capacity of all Indian ports. It also dwarfs the 10-12 million tons of cargo handling capacity now planned for Chabahar.

In another comparison, the largest US port at Long Beach, California, handles 80 million tons of cargo, about a quarter of what Gwadar could handle upon completion of a project that is designed largely to receive and move China’s, not the region’s, trade.

The North-South corridor and the Eurasia canal

From Russian point of view

The accident of the container ship Ever Given in the Suez Canal, which blocked this important transport artery for almost a week, sparked discussions on alternative routes for the delivery of goods from Asia to Europe. One such alternative is the so-called North-South corridor and the associated Eurasia Canal project. They are able to connect the center of the continent and the Gulf region with the markets of Europe.

At the same time, the implementation of these logistics projects is impossible without Russia. Why are both routes interesting for world trade?

Nursultan, move the sea!

The agreements on the implementation of the North-South International Transport Corridor (ITC) project – from the Indian port of Mumbai (Bombay) through the Persian Gulf, Iran, the Caspian Sea and further through our country up to the ports of the Baltic Sea and western borders – were signed by Russia. India and Iran in St. Petersburg back in 2000. The 7200 km route avoids the passage of the Suez Canal and the roundabout route around all of Europe, transporting goods from India and the Persian Gulf countries through Russian territory directly to the markets of Northern and Western Europe.

In turn, the Eurasia canal adjoins the North-South corridor and brings it to the countries of Eastern and Southern Europe. This navigable canal should connect the Caspian and Azov Seas and pass through the bitter-salt lake Manych-Gudilo and the Manych depression. The maximum height of depression is only 20 meters above sea level.

The idea of ​​”Eurasia” arose much earlier, in the 1930s, even before the construction of the Volga-Don Canal. Such a deep-water channel would allow not only river-sea vessels to enter the Caspian, but also large sea-going ships. For the first time in modern times, the idea of ​​building a canal was returned at the interstate level in 2007. It was during a meeting between Russian President Vladimir Putin and the head of Kazakhstan Nursultan Nazarbayev.

Both projects are not purely maritime transport routes. Rather, they are similar to China’s Belt and Road Initiative, which uses Eurasian connectivity across inland seas, roads, and railways. So-called “combined” transport corridors. Such corridors include not only port-to-port maritime transport. They also include significant land sections that complement maritime transport.

Benefits for Kazakhstan

In the usual comparison, of course, road and rail transport lose out to sea transport. In case of combined transport, direct comparison often does not work. Take Kazakhstan: this country is located in the very center of Eurasia – and in one way or another it is forced to rely on roads and railways to trade with the world. And the closer the conditional sea comes to the borders of Kazakhstan, the easier and cheaper it will be for Astana to send its goods for export and receive imported goods from abroad.

By itself, the Caspian Sea is unsuitable for this: it is an isolated seawater that does not communicate with the World Ocean by deep-water transport. But if you connect the Caspian with the Black Sea, which already has access to the ocean routes through the Bosphorus, and provide rail transportation to the Persian Gulf region, then Kazakhstan’s entry into the world market will be much easier.

Ukrainian rake

At first glance, Russia’s interest in the North-South corridor and the Eurasia channel is not so obvious. After all, let’s say, cargo from Central Asia, which today goes to Europe on our railways, will then be sent directly by sea vessels from the Caspian ports belonging to Kazakhstan or Turkmenistan. After that, the sea vessel will transport them either to the ports of Iran, or straight to Europe through “Eurasia”.

However, there is a certain flaw in this logic. The geographical advantage should not be abused. This is clearly shown by the example of Ukraine. Ukraine, being a practical monopoly on the transit of Russian gas to Europe in the mid-1990s, completely squandered this unique potential in less than 30 years. Russia simply built bypass routes around Ukraine.

The development of the future logistics of the Caspian region can follow the same logic. There is an alternative version of the shipping channel between the Caspian and the Black Sea. That should pass through Azerbaijan and Georgia, along the valleys of the Kura and Rioni rivers. The British even tried to dig such a canal in the early 1920s. However, the annexation of Menshevik Georgia to Russia closed the possibility for its construction. Today such plans are cherished by Turkey. Turkey wants to link Central Asia with its territory through Azerbaijan and Georgia, and in the future through Armenia.

Iran as counterweight to Turkey

If Russia retains control over important sections of the North-South corridor in cooperation with Iran and provides a deep-water sea route to the Caspian through its territory, this will not only reduce the cost of logistics for a number of Asian countries, but also reliably “tie” them to Russia. In addition, Iran is a natural counterweight to Turkey in the region, which was clearly demonstrated during the recent aggravation of the Karabakh conflict.

As for our railways, you don’t have to worry about them. There is quite enough work for Russian Railways within the framework of the increased trade turnover along the North-South corridor. The decrease in trade turnover due to sea vessels passing through Eurasia will be offset by canal fees collected from them.

The main effect of the implementation of both projects may be the creation of two Russian transport corridors at once. They will compete with all the “southern” routes from Asia to Europe. Including the route through the Suez Canal and around the Cape of Good Hope. Russia becomes not only a transport hub, but also a guarantor of stability for many countries of Eurasia. Such an intracontinental transport corridor is much less dependent on unexpected changes in the geopolitical situation. Or the West’s desire to grossly interfere in world trade through sanctions, embargoes and other restrictions.

Author: Alexey Anpilogov


On June 15, 2007, at the 17th Foreign Investors’ Council Meeting in Ust-Kamenogorsk, President Nursultan Nazarbayev of Kazakhstan proposed the Eurasia Canal project to build a canal connecting the Caspian and Black Seas. The project was estimated to cost US$6 billion and take 10 years to complete.[7][8]

Wikipedia

If built, the nearly 700 km (430 mi) Eurasia Canal would be four times longer than the Suez Canal and eight times longer than the Panama Canal. President Nazarbayev stated that the canal would make Kazakhstan a maritime power and benefit many other Central Asian nations as well.[7] Russia has proposed an alternative plan to upgrade the existing Volga-Don Canal.

Wikipedia

China determined to build iron ore hub in Africa

World’s largest untapped iron ore reserve could be online by 2025, expert says

KEN MORIYASU, Nikkei Asia chief desk editor

There was a time when Japan, like China today, was the rising power in the East. That kept military planners in the West awake at night.

“It is very certain that no other nation at the present time is spending so large a part of its revenue on naval preparations,” military author Hector Bywater wrote in the 1921 book “Sea-Power in the Pacific — A Study of the American-Japanese Naval Problem.”

But Japan had a critical weakness: a lack of steel.

“Since the close of the Great War, shipbuilding in Japan has been seriously hampered by the difficulty of obtaining steel,” Bywater observed in his book. He accurately predicted a naval conflict between Imperial Japan and the U.S. two decades later.

Japan had imported large quantities of American steel under a special agreement between the two governments prior to 1917. Then the U.S. imposed a steel embargo that stemmed the flow to the Asian country.

“So serious has the shortage become of late that the output of tonnage in Japan during 1920 was 25% short of the forecast of 800,000 tons which had been made in January of that year,” Bywater wrote. “This scarcity of steel reacted on the naval program, delaying the launch and completion of ships.”

The armored cruiser Izumo, flagship of the Third Fleet of the Imperial Japanese Navy, is seen in Shanghai in 1937. Japan struggled to procure steel after the U.S. enacted an embargo in 1917.   © Getty Images

China learning from history

Chinese state planners looking to learn from history would quickly notice that the glaring vulnerability for Beijing today is its dependence on iron ore from Australia. While Beijing has tried to squeeze and punish Canberra for proposing an international investigation into the roots of COVID-19, it has been unable to wrestle itself away from Australian iron ore, which accounts for over 60% of China’s imports.

Australia deepens its connection to the Quad grouping with the U.S., Japan and India, forming a de facto anti-China tag team in the Indo-Pacific. Beijing has found it increasingly uncomfortable to depend so much on Canberra for iron ore. Also the basic material behind its own military buildup.

But that dependence may very well change by 2025, says Peter O’Connor, senior analyst of metals and mining at Australian investment firm Shaw and Partners.

“They are very serious” about diversifying supply and flattening the cost curve of iron ore.

The top focus for China’s diversification push is Guinea. An impoverished but mineral rich country in West Africa. A 110 km range of hills called Simandou is said to hold the world’s largest reserve of untapped high-quality iron ore.

Commodity watchers have known of Guinea’s potential for many years. However, the lack of infrastructure has hamstrung such development efforts. A roughly 650 km railroad would need to be built from scratch. And also a modern port from which the iron ore would be shipped.

Cost calculations have always discouraged potential entrants, such as Rio Tinto. But Beijing has more incentive to carry out the project than mere return on investment calculations. Because China needs to avoid the fate of Japan in the early 20th century.

Infrastructure building – not a problem for China

“Infrastructure is a function of time, money, the willingness to invest and, more importantly, the capability.”

China is building railroads around the globe through its Belt and Road Initiative and has no shortage of experience.

But what about the funding?

China currently buys 1 billion to 1.1 billion tons of iron ore yearly from third parties, O’Connor said.

“For every $1 the Chinese can lower the long-term iron ore price … that’s $1 per ton times a billion. It is a billion dollars of saving per year. It’s not just about diversity, it’s about lowering the price. It is not about the return on equity or return on capital of the actual investment. It is more about the benefit of the longer-term structure of the price.”

The long-term trajectory envisions the price of iron ore dropping to around $60 per ton from around $160 currently.

The project to develop Simandou has been split into four blocks. China holds either a direct or indirect stake in every one of them. The area holds an estimated 2.4 billion tons of ore graded at over 65.5%.

“Extraction of Simandou’s iron ore reserves would transform the global market and catapult Guinea into an iron ore export powerhouse alongside Australia and Brazil,” Lauren Johnston, a research associate at the SOAS China Institute of the University of London, told Nikkei.

“Group of 77 plus China”

If China unlocks Simandou’s reserves and drives a drop in international iron ore prices, “it could see selective commodity markets increasingly driven by intra-developing country dynamics,” Johnston said.

China would find such waters easier to navigate than having to do business with Quad member Australia.

Guinea is this year’s chair of the “Group of 77 plus China” at the United Nations. It is a grouping of 134 developing countries that form a large voting bloc China can depend on. Guinea has actively made statements on behalf of the group since assuming the chairmanship in January.

Johnston predicted that China would be pleased if progress on Simandou were achieved ahead of the Forum on China-Africa Cooperation. It is to be held in neighboring Senegal this year. It is the first time the Beijing-led gathering — held every three years — will be hosted by a West African country.

China is “preparing the pathway” to develop Simandou, with an expeditious 2025 timetable. That would seem stretched if you’re talking about a Western producer in Australia or Brazil. However, it is entirely plausible that China could be producing in that time frame.”


This article was originally published by NIKKEI ASIA

A man, a plan, a canal…Thailand?

Ex-top brass appeal to new King Vajiralongkorn to bless building the long-envisioned Kra canal; China is keen to start digging

General Saiyud Kerdphol, the military engineer of Thailand’s winning Cold War-era anticommunism campaign, believes now is the time to build the Kra canal – a long-envisioned channel through the country’s southern isthmus that would connect the Indian and Pacific Oceans and dramatically shorten East-West shipping routes.

And for the massive infrastructure undertaking to finally break ground after centuries of pondering, the nonagenarian former supreme commander believes the monumental decision cannot be taken by any government and thus must be conceived and graced as “the king’s canal.”

“This cannot be done if it’s not the king’s project,” says Saiyud, who in an interview with Asia Times recalls meeting with the previous monarch in the 1980s when British motor company Rolls-Royce briefly had interest in the canal. “The government will never be firm enough to make a decision because they know they can’t control corruption.”

To be sure, Thailand is no closer to digging the Kra canal today than when it was first considered by King Narai in 1677. The scheme has been resurrected in various forms several times since, only to founder on political rocks and security concerns, including existential trepidation of physically dividing the nation in two.

The incumbent ruling junta, while grasping for new economic transformation strategies, has shown no interest in the canal. That’s due to perceived security risks in sight of a raging separatist Muslim insurgency in the kingdom’s southern reaches and the likely criticism that would arise from taking such a big decision as an unelected government.

But with the recent transition from deceased King Bhumibol Adulyadej to King Maha Vajiralongkorn, now known as Rama X, the canal’s ex-top brass backers hope the new monarch with a military background will give the scheme royal consideration, in the name of national peace and development.

Saiyud suggests the canal could herald “a new era of civilization” during Vajiralongkorn’s reign and bring peace through hearts-and-minds development to the conflict-ridden Deep South. The new king has taken special interest in the Muslim majority region, leading some to wonder if he may prioritize achieving peace in the region as part of his legacy.

It’s not altogether clear if the previous king shared concerns about physically dividing the kingdom, though staunch royalists note the canal would necessarily be wider than the Chao Phraya River, the nation’s main north-south waterway that travels through Bangkok and by the royal Grand Palace, viewed by many as the spiritual heart of the nation.

The Thai Canal Association (TCA), a group of influential former top brass soldiers advocating for the project, recently rechristened the canal from “Kra” to “Thai” to indicate it would be built for all Thais, in line with Bhumibol’s view that the decision should be made by the people.

TCA points to a recent local Songkhla University poll that apparently showed 74% of residents in 14 southern provinces agreed with building the canal.

The project’s skeptics, on the other hand, believe the latest drive-to-build aims ultimately to win rich feasibility study contracts “for the boys”, with scant prospects of actually implementing any proposed grand plan. The canal would cost anywhere between US$20-US$30 billion depending on the chosen route, and likely take a decade to dig.

While it’s unclear if any formal representations have been made to the monarch, the canal does have one rich and powerful new backer: China.

Beijing’s newly appointed ambassador to Bangkok, Lyu Jian, has said in recent high-level meetings that China envisions the Thai canal as part of its US$1 trillion ‘One Belt One Road’ (Obor) global infrastructure initiative, according to Thai government officials and advisors briefed on the discussions.

While China aims to link the initiative with the junta’s Eastern Economic Corridor industrial, logistical and real estate development plan, including via a long-stalled high-speed rail line connecting the two nations via Laos that broke symbolic ground in December, it is apparently the first-time Beijing has actively promoted the canal as part of the Obor program.

Until now, Beijing has publicly distanced itself from private Chinese companies which have engaged Thai trade groups to probe the project’s potential. That includes a memorandum of understanding entered by the China-Thailand Kra Infrastructure and Development Company and Asia Union Group to study the canal signed in Guangzhou in May 2015.

China’s Embassy in Bangkok did not respond to Asia Times’ written request for its current official position on the canal.

If China is involved, past financial and engineering obstacles – a previous consortium toyed with the notion of using nuclear explosions to excavate the channel – are likely no longer stumbling blocks, according to Pakdee Tanapura, a long-time advocate for building the canal and ranking TCA member.

Pakdee said Longhao Co Ltd, a Chinese construction company involved in recent land reclamation and island-building in the South China Sea, has expressed interest in the canal. Its plan would entail the construction of two man-made islands for facilities on either side of the canal’s entry points at the Gulf of Thailand and Andaman Sea, according to Pakdee.

Other Hong Kong and Macau-based construction firms have also expressed interest in meetings with known palace emissaries, according to a diplomat monitoring the security dimensions of the canal. Beijing has put Hong Kong and Macau companies forward due to their global experience and comparatively polished executives, the envoy says.

The canal would save approximately 1,200 kilometers from current East-West shipping routes that currently must travel through the congested Malacca Strait, the world’s busiest maritime area where an estimated 84,000 ships and around 30% of global trade currently passes each year.

The World Bank has projected that volume could increase to over 140,000 per year in the next decade, while the narrow strait currently has the capacity to handle 122,000 ships. Much of that transport passes by or stops over for supplies and fuel in Singapore, the wealthy city-state that would seemingly have the most to lose from an alternative East-West shipping route.

Jinsong Zhao, a maritime expert at state-led Shanghai Jiao Tong University, suggests the canal could put Thailand at the center of a “third revolution” of fast-transport global trade, where e-commerce driven sales require ever quicker door-to-door delivery of goods that is limited in the region due to the long shipping route through the Malacca Strait.

“To my Thai friends: Don’t waste your time, don’t delay this project,” Jinsong implored at a conference on the canal held last September in Bangkok. “We have technology, we have capacity, we have money, we are happy to help. It’s good for Thailand, Asia and the whole world.” He said if Thailand waited another 20 years, it would be “fatal” to winning China’s support.

That may or may not be true. As much as 80% of China’s fuel imports currently pass through the Malacca Strait, a maritime bottleneck running between Malaysia and Indonesia that strategic analysts say the US Navy could readily block in any conflict scenario by leveraging its strategic access to nearby Singapore.

Beijing’s interest in a Thai canal comes amid uncertainty at Obor-invested ports envisioned – at least in part – as strategic hedges to its Malacca vulnerability, including facilities in Sri Lanka, Pakistan and Myanmar’s now violence-wracked western Rakhine state, through which China has built oil and gas pipelines to fuel its landlocked southern hinterlands.

If built, the Thai canal would necessarily shift Asia’s maritime strategic dynamics by bypassing Malacca, one of the US’ chief strategic advantages vis-à-vis China at sea. One US official who communicated with Asia Times was skeptical the canal would be built any time soon, even with China’s apparent interest and potential financial support.

Another independent analyst with a US military background in the region and aware of the Pentagon’s recent strategic thinking said that even if the Thai canal was built, it would merely mean that the US Navy would have two strategic chokepoints, rather than just one, to block in a potential conflict with China.

Saiyud says he believes the US, which showed interest in the canal in an era when China was a minor maritime player, could ultimately support the canal for the logistical benefits to regional trade and as a long-time ally committed to Thailand’s economic development and prosperity. Thai-US bilateral relations have waned, however, under junta rule.

While fully engaged with Beijing, the canal’s Thai advocates are also keen to build a multinational coalition of backers and funders to prevent any one country, namely China, from having inordinate leverage over the channel and its related port facilities. “It must be a Thai company to lead and not look too Chinese,” says military statesman Saiyud.

Other advocates point to the recent multilateral funding for expansion of the Panama Canal, with support from Germany, Spain, South Korea, US, Argentina and Mexico, among others, as a financial model. They note the project would require new airports, communication networks and other modern infrastructure that would allow several nations to participate.

That’s sparked certain multinational interest. Last September’s TCA-organized conference held in Bangkok was supported by the European Association for Business and Commerce and sponsored by Hong Kong construction company Grand Dragon. A follow-up event on February 1 in Phuket will be staged in collaboration with the Thailand chambers of commerce of Australia, France, Germany, Netherlands and US.

Finance Minister Somkid Jatusripitak was scheduled to make opening remarks at last September’s canal event, but was held back at the last minute by the Prime Minister. As the junta’s political troubles mount and with an uncertain democratic transition on the horizon, such a monumental undertaking isn’t likely to win government support any time soon.

“We’re no closer today [to building the canal] than we were 340 years ago,” said General Pongthep Thesprateep, TCA’s chairman and secretary general of top royal advisor Prem Tinsulanonda’s Statesman Foundation, in an interview with Asia Times. “But for the people and the country, it’s a good time to start.”

Source: http://www.atimes.com/article/man-plan-canal-thailand/?utm_source=The+Daily+Report&utm_campaign=986de26588-EMAIL_CAMPAIGN_2018_01_25&utm_medium=email&utm_term=0_1f8bca137f-986de26588-21552319

Polar Silk Road: Why Russia’s Northern Sea Route is the Best Option for China

Russia’s Northern Sea Route emerges as the best option for Beijing’s “Polar Silk Road” project, RIA Novosti contributor Dmitry Lekukh underscores. Besides developing the secure transit routes along the Russian Arctic and Far East, Moscow and Beijing are likely to bolster the exploration of natural reserves in the region, he noted.

China’s newly announced “Polar Silk Road” evokes the memory of President Vladimir Putin’s remark about the possibility to link the Beijing-led One Belt One Road project with Russia’s Northern Sea Route, which is likely to become one of major trade routes connecting Asia and Europe, RIA Novosti contributor Dmitry Lekukh writes.

“The Chinese government hereby issues this white paper, to expound its basic positions on Arctic affairs, to elaborate on its policy goals, basic principles and major policies and positions regarding its engagement in Arctic affairs, to guide relevant Chinese government departments and institutions in Arctic-related activities and cooperation, to encourage relevant parties to get better involved in Arctic governance, and to work with the international community to safeguard and promote peace and stability in, and the sustainable development of, the Arctic,” China’s Arctic Policy white paper, which was released on January 26, reads.

The journalist argued that Russia’s northern route, which goes along Russia’s Arctic and Far East regions, corresponds best to Beijing’s geopolitical interests and security.

Lekukh drew attention to the fact that the trade route through the Suez Canal and the Mediterranean is overburdened. Moreover, the Middle East still remains a hotbed of instability. Another potential route running through Central America — either the existing Panama or the hypothetical Nicaraguan canal — doesn’t meet Beijing’s need to bolster ties between Europe and Asia, the journalist noted.

According to Lekukh, only two polar routes could be of a truly strategic, long-term interest for China: the Northwest Passage, which runs along the northern coast of North America; and Russia’s Northern Sea Route, which appears to be “far more attractive” for the Chinese, as the first lane goes through the territorial waters of Beijing’s geopolitical competitors, the US and its ally, Canada.

“For [Russia], China’s active participation in the development of the Northern Sea Route is attractive not only because of potential investments [into Russia’s economy on the part of Beijing],” the journalist explained, “For us, the Chinese could be of particular interest as constant ‘purchasers of services’… And it’s absolutely logical because the Japanese, Koreans, Vietnamese and the countries of the European Union will be also interested in [Russia’s] Northern Sea Route ‘services’.”

However, it’s beyond doubt that China will become the “transit wholesaler” on the NSR, Lekukh highlighted.

Meanwhile, China’s sphere of interest in the Arctic also includes the joint exploration of the region’s natural resources with the Russian Federation; while Moscow, for its part, is vitally interested in Beijing’s helping hand developing the Arctic infrastructure, the RIA Novosti contributor assumed.

Apparently, therefore, the two countries are boosting cooperation in the field of new Arctic technologies for ocean research, modeling of ice loads and ship structural analysis, Lekukh wrote, adding that in December 2017 the St. Petersburg State Maritime Technical University and the China Shipbuilding Research Center struck an agreement to jointly develop these technologies.

“It is a very good sign that the authorities of the Russian Federation and the People’s Republic of China have approximately the same vision for the need to cooperate on the development of this [Arctic] region. Neighborliness and common interests are the best way to establish cooperation, and not only in the ‘Arctic areas’,” the journalist underscored, admitting, however, that it will take time and effort to implement the mutually beneficial Sino-Russian project.

Source: https://sputniknews.com/analysis/201801301061169398-china-polar-silk-road/