The Canary in the Coal Mine

 Last December, Germany finalised a Comprehensive  Agreement on investment  with China on behalf of the EU, angering many EU members in the process. While somewhat understandable from a German point of view, the speed with which the agreement was concluded and the opportunity to do so in the current context leave much to be desired.

Before signing it, officials should have taken clues from last year's attack by the Chinese government on Australian exports. As dependent as Germany is on the Chinese market for a significant share of its exports, Australia has seen its barley, beef, wine, lobster, timber and even coal exports brutally affected by an official ban. China has revived its old imperial kow-tow policy, according to which countries around it could see their access to its market denied if the political leadership in Beijing feels slighted by them in any way.

Australia has displeased Beijing last year when it called for an international inquiry on the origins of the Covid-19 pandemic. The call was seconded at the time by the EU and is fully justified in scientific terms, even if the Chinese leadership preferred to give it a political spin. Soon thereafter the Chinese government started targeting Australian exports one after another on an almost monthly basis, trying to make an example of Australia should any other country try to follow in its footsteps. Problem is, Australia had signed a bilateral free trade agreement with China back in 2015, which should theoretically have protected the two countries' companies from such unwarranted political disputes. It follows that concluding treaties with China is not worth the paper treaties are written on and will clearly not protect anyone .

The EU-China investment protection treaty ( CAI) should not be ratified until the Chinese government abandons such harmful commercial tactics with Western countries like Australia, with which they have a free trade agreement in force. In this case, Australia is no more and no less than the canary in the coalmine for the EU, blinded - as it were -  by the false hope of enjoying normal economic relations with China.

Once it concludes major trade agreements, China succeeds in modernising and in boosting its own economy's growth. However, it does so at the expense of its trading partners, as its record attests when examining its economic relations with first the USSR and then the US.

This is why Australia's recent commercial predicament should be taken seriously in Brussels and should act as a powerful brake against the type of wishful thinking that disregards Chinese polity's true nature and its hidden geopolitical agenda.

Investing Our Way out of the Crisis: the Ben Rosen Model

 September 25, 2011

Resolving the EU’s debt crisis might be affected by political indecision. America’s economic recovery, however, is affected by political infighting and proposals of Keynesian-style stimulus packages that have no chance of being adopted by Congress and are inappropriate at this junction in time. The lessons of the 1980’s recovery could help end the current policy paralysis in Washington

The news that Steve Jobs has left Apple due to illness has brought to mind another outstanding American entrepreneur I have actually met in Sydney in 1985, the one and only Ben Rosen. At the time, I was a very young marketing and sales consultant at ComputerLand, promoting the products of a PC industry still in its infancy.At the beginning of the 1980’s when the microcomputer revolution started, the Anglo-Saxon world was going through a severe recession. To reduce unemployment, the Australian Labour government invested heavily in retraining the unemployed, enabling many, including myself, to get jobs in high tech industries – an area of the economy hitherto closed to them due to lack of adequate skills. Ben Rosen came down to Sydney to talk to us about the virtues of a new relational dbase product – Paradox – he happened to be involved in at the time. He was jovial, friendly and unassuming. His venture capital company had made Compaq Computers the most successful company in capitalist history and he was also behind the huge success of the Lotus 1-2-3 spreadsheet package. In fact, many of today’s hardware and software companies that are the pride and glory of Silicon Valley could not have seen the light of day without his stewardship and money. To be sure, the US federal government did its bit and helped the microcomputer industry take off, as it became its most important buyer, seconded by universities all over the country. As a graduate of the prestigious Caltech Institute and the holder of a Master’s in Engineering science, Ben Rosen decided to work on Wall Street as a technology consultant. He was known to carry around to his clients an Apple IIe computer and was eager to invest in the first-ever portable microcomputer, Compaq. Unlike today’s Wall Street advisers who prefer to recommend various speculative investments to their clients, he made his reputation and money the old-fashioned American way, that is by investing in start-ups and asking his friends and clients to do the same. Together with his brother, he also invested 24 million dollars of his own money in the production of a clean car engine, a venture that did not find favour with US car manufacturers at the time. Today, when neoliberal economics have been thoroughly discredited, the work of Ben Rosen the entrepreneur and investor should become a model to be emulated. The presence of too many MBA graduates specialising in financial transactions and the relative scarcity of technology consultants, such as Ben Rosen, underpins America’s current predicament. As matters now stand, the US economy has all but hollowed out, deriving more than 35 percent of GDP from financial transactions, including speculations. Naturally, there is a way back from the brink, if only the US’ two major parties could put ideology aside and work together with the private sector in addressing the ills of the American economy and the plight of the unemployed.

China's Investment Strategy in Central Asia

 

October 5, 2010

Over the past few years, China has become a major player in Central Asia’s oil & gas and in Afghanistan’s mining sector. Its investments in the region are an important part of its worldwide FDI strategy.

To date, China’s biggest purchases of gas come from Turkmenistan. In 2009 the Chinese president inaugurated a gas pipeline that stretches for 4,000 miles from Turkmenistan via Kazakhstan and Uzbekistan to China. 30 billion cubic metres per year will be supplied by Turkmenistan, while 10 billion cubic metres will come from Kazakhstan’s gas fields. The vast amount of gas will supply some 50 percent of China’s gas needs, estimated at over 80 billion cubic metres per annum. The Chinese will pay USD 195/1,000 cubic metres over 30 years, thus bringing their country into competition with Russia, as well as the EU with its Nabucco pipeline project. To get to the Turkmen gas the Chinese paid around 3 billion USD necessary for the construction of the pipeline and the development of the fields.

In Kazakhstan, China National Petrol Corporation together with Kazmunay Gas inaugurated in 2006 a 2,200 km oil pipeline between Atyrau (Kazakhstan) and Xinjiang in China – the first such pipeline to connect China to the Central Asian oil & gas fields. In 2009 CNPC took a 50 percent stake in Kazakhstan’s largest oil & gas company, in exchange for a USD 5 billion loan to Kazakhstan.

This year Uzbekistan’s state company UzbekNeftegaz officially announced that it entered discussions with CNPC to supply China with 10 billion cubic metres of gas per annum, on top of the 40 billion cubic metres supplied jointly by Kazakhstan and Turkmenistan.

In Afghanistan, MCC of CHina has signed a 3,5 billion USD deal with the Afghan government to exploit Aynak’s estimated 240 million-ton copper deposits. To seal the deal, China has offered to build a railroad and provide the infrastructure needed, the project being the biggest FDI to date in Afghanistan. Chinese negotiators outfoxed their American and Indian competitors and worked – as they did elsewhere in Central Asia – closely with their Russian counterparts in order to finalise the deal. The Afghan government will also receive hundreds of millions of dollars every year in royalty fees after the mine becomes operational.

According to American, Australian and Canadian geologists, Afghanistan is the “Saudi Arabia of lithium” and also has significant deposits of gold, copper, cobalt and iron, which could not be exploited until now because of 50 years of continuous warfare that had ripped through the country. In the quest for Afghanistan’s mineral deposits, China is favoured to develop most of them, as it did not intervene militarily there and has Pakistan on its side. The latter in turn could help the Chinese to be shielded from attacks by the Taliban and even, if the political environment changes, to win their favour.

By contrast, the US – which spent a reported 940 billion USD over the past 8 years in Afghanistan – and their Indian ally are not likely to capitalise on the development of Afghanistan’s mining sector. (sources: Asian Times, Reuters, Xinhua, The Guardian, Far Eastern Economic Review, WSJ, Daily Finance, NYT)