What Really Happened in Beijing: Putin,
Obama, Xi And The Back Story The Media Won’t
Tell You
Ukraine, Iran's nukes, the price of oil:
There are ties worthy of a Bourne film, if
the media connected the dots
By Patrick L. Smith
November 16, 2014 "ICH"
- "Salon"-
By way of events on the foreign side, the
past few weeks start to resemble some
once-in-a-while event in the heavens when
everyone is supposed to go out and watch as
the sun, moon and stars align. There are
lots of things happening, and if we put them
all together, the way Greek shepherds
imagined constellations, a picture emerges.
Time to draw the picture.
The situation on the ground in Ukraine is
getting messy again. Equally, events of the
past year now leave Ukraine’s economy not
far from sheer extinction. You have not read
of this because it does not fit the approved
story, but Ukraine’s heart barely beats.
Further east, we hear in the financial
markets that the ruble’s decline brings
Russia to the brink of another financial
collapse.
Let’s see. Oil prices are now below $80 a
barrel. It costs me nearly $20 less to put
gasoline in my car than it did a year ago,
and good enough. But why has the price of
crude tumbled in so short an interval? It
makes little sense when you gather the
facts, and — goes without saying — you get
no help with that from our media.
Let’s keep on trucking. Secretary of State
Kerry went to Oman for another round of
talks on the Iranian nuclear question last
weekend. Russia recently emerged as a
potentially key part of a deal, which will
be the make-or-break of Kerry’s record. In
effect, he now greets Russian Foreign
Minister Sergei Lavrov with one hand and
punches him well below the belt with the
other. Somewhere beyond our view this must
make sense.
En avant! Obama went to Beijing last week
for a sit-down with Xi Jinping, who makes
Vladimir Putin look like George McGovern
when he wants to, which is not infrequently.
Still in the Chinese capital, our president
then attended a meeting with other Asian
leaders to push a trade agreement, one
primary purpose of which is to isolate China
by bringing the rest of the region into the
neoliberal fold. (Or trying to. Washington
will never get the overladen, overimposing
Trans-Pacific Partnership off the ground, in
my view.)
A big item on Xi’s agenda — he was in on the
Pacific economic forum, too — was the recent
launch of an Asians-only lending institution
intended to rival the Asian Development
Bank, the World Bank affiliate doing the
West’s work in the East. Being entirely
opposed to people helping themselves advance
without American assistance and all that
goes with it, Washington used all means
possible to sink this ship. When Obama got
off the plane in Beijing, the Asian
Infrastructure Investment Bank had $50
billion in capital and 20 members, more to
come in both categories.
Xi,
meantime, had a productive encounter —
another — with the formidable Vlad. My
sources in attendance tell me both put in
strong performances. In short order, Russia
will send enough natural gas eastward to
meet much of China’s demand and — miss this
not — in the long run could price out
American supplies in other Pacific markets,
which are key to the success of the current
production boom out West.
This is a lot of dots to connect. As I see
it, the running themes in all this are two:
There is constructive activity and there is
the destructive. Readers may think this
oversimplifies, but for this there is the
ever-lively comment box below. I am willing
to listen.
Let’s go back to early September. On the
5th, Germany brokered a cease-fire between
the Ukraine government in Kiev and the
rebels in the eastern Donbass region.
Washington made it plain it wanted no part
of this, preferring to continue open
hostilities. And then strange things
happened.
Less than a week after the Minsk Protocol
was signed, Kerry made a little-noted trip
to Jeddah to see King Abdullah at his summer
residence. When it was reported at all, this
was put across as part of Kerry’s campaign
to secure Arab support in the fight against
the Islamic State.
Stop right there. That is not all there was
to the visit, my trustworthy sources tell
me. The other half of the visit had to do
with Washington’s unabated desire to ruin
the Russian economy. To do this, Kerry told
the Saudis 1) to raise production and 2) to
cut its crude price. Keep in mind these
pertinent numbers: The Saudis produce a
barrel of oil for less than $30 as
break-even in the national budget; the
Russians need $105.
Shortly after Kerry’s visit, the Saudis
began increasing production, sure enough —
by more than 100,000 barrels daily during
the rest of September, more apparently to
come. Last week they dropped the price of
Arab Light by 45 cents a barrel, Bloomberg
News just reported. This has proven a market
mover, sending prices to $78 a barrel at
writing.
Think about this. Winter is coming, there
are serious production outages now in Iraq,
Nigeria, Venezuela and Libya, other OPEC
members are screaming for relief, and the
Saudis make back-to-back moves certain to
push falling prices still lower? You do the
math, with Kerry’s unreported itinerary in
mind, and to help you along I offer this
from an extremely well-positioned source in
the commodities markets: “There are very big
hands pushing oil into global supply now,”
this source wrote in an e-mail note the
other day.
The
Russians, meantime, are reported to be
sending soldiers and artillery back across,
or maybe just across, the Ukrainian border.
This we read, but we read nothing as to why
this may be so, assuming for argument’s sake
it is. We are invited to accept that there
is no reason worth reporting.
I
decline the invitation. The
possibility-likelihood-probability — it is
impossible to say, we are so ill-informed —
is that these reported deployments are in
reaction to moves kept out of sight. Given
Washington’s disapproval of the Minsk accord
and its underhanded manipulations in the oil
markets since it was signed, I label this a
likelihood, at least, maybe more.
As
to the Ukrainian economy, this is getting
sordid even before the International
Monetary Fund gets its mitts on the place. A
Royal Bank of Scotland analyst in Hong Kong,
Roland Hinterkoerner, just published a tour
d’horizon, a few of the highlights
(or lowlights) being these:
-
With the Russian ruble cratering, Kiev
recently had to remove a currency peg of
13 hryvnia to the dollar. It dropped 15
percent in the next five trading
sessions. From a rate of 8 to 1 a year
ago, it now cost 16 hryvnia to buy a
dollar.
-
With the banking system in peril, a
third of deposits had been
withdrawn—before the currency collapsed,
this is. “There is no way to repair this
damage by doing some kind of
recapitalization exercise that may still
work in the eurozone,” the RBS man
writes.
-
Efforts to stem the hryvnia’s fall have
dangerously depleted foreign currency
reserves. As of October, the central
bank had $12.6 billion dollars in
assets—taxi fare in the context.
-
Ukraine owes Russia $1.6 billion in gas
bills by yearend—and then faces fees of
$700 million a month for new supplies.
-
The Ukrainian automobile association, to
burrow in slightly, just reported that
new car registrations fell by 65 percent
in October from the previous year, to
5,900 units—this in a nation of 46
million. The No. 1 producer, Saporisky
Awtomobilebudiwny Sawod, turned out
1,007 vehicles. It has 21,000 employees
on the payroll.
This kind of report leaves me nearly
speechless — and our correspondents silent,
of course. All that we have read of this
past year, events taking place in the name
of democracy and a better life for
Ukrainians, comes to this. “The economy?”
Hinterkoerner concludes. “What economy?”
Onward. “Going forward,” as the State
Department’s chirpy spokespeople like to put
it.
Kerry just finished up in Oman, where a
round of talks on the Iran question were
held just short of the Nov. 24 deadline for
a deal. Russia’s role in these talks has
suddenly grown potentially large. To break
the impasse over Iran’s centrifuge count,
Moscow offers to take most of Iran’s
stockpile of unprocessed uranium and send
back enriched fuel when Iran needs it to
power the nuclear energy program it wants.
This is a reprise of an idea first floated
five years ago, and this time Tehran finds
it acceptable, at least tentatively.
Put
this in the larger context: With the
prospect of ending three and a half decades
of pointless hostility within reach, this is
the moment to be battering Russia as near to
a pulp as possible with sanctions, market
interventions to its disadvantage, and who
can tell what on the military side in
Ukraine? You start to think Washington
simply cannot help itself, and more on this
in a minute.
And
so to Beijing. Nobody will put it this way,
but Obama arrived with one failure already
accomplished and others to come. It was a
mistake to oppose the Beijing-sponsored
Asian lending institution in the first
place, and already it begins to cost the
Americans. The TPP trade pact is no further
along, you may have noticed. The climate
pact Obama and Xi signed looks so far like
an agreement for the sake of an agreement —
something Obama could bring home in
triumph. The only “successes” American media
were able to report were a few
market-opening measures of benefit to
specific American corporations. Nothing
visionary, fair to say. A junior trade
negotiator could have got this done.
And
here is why, a point hardly lost on the
Chinese: There is no vision on the American
side, only resistance and objection. Xi has
consistently urged a “new great power
relationship,” and if someone can explain
why this is not a perfectly logical thought
in the face of 21st century realities,
again, to the comment box with it.
Washington’s claim to be an unrivaled
Pacific power by destiny goes back to Teddy
Roosevelt’s imperial cruise around the
region after the U.S. defeated the Spanish
and massacred the Jefferson-reading Filipino
democratic movement. We simply cannot
surrender the turf, realities be damned.
Xi,
on the other hand, is all about realities,
and not a few have to do with stronger ties
with Russia. Xi and Putin shook hands on a
historically huge, $400 billion gas deal
earlier this year. How did Obama feel when
the two announced during his visit that they
have just reached another one, this time for
$325 billion?
Details: The gas will arrive from Siberia by
way of a not-yet-constructed pipeline.
PetroChina will take a 10 percent share of a
subsidiary of Rosneft, the Russian gas
company. By 2020, China will source a
quarter of its demand from Russia; the
Russians, in turn, will by then sell more
gas to China than they now send to Europe.
Listen to the sound of the world turning.
Wonder why your media do not pass it on to
you.
Always more in this line, it seems. Russia
is also in numerous other energy deals with
China, including one that doubles petroleum
exports to the People’s Republic. Then there
is the Silk Road Investment Fund, a $40
billion vehicle to finance development
projects in the seven nations of Central
Asia. Relations with Vietnam and Japan,
horrible of late, now appear to be on the
mend. So much, maybe, for Washington’s role
as protector of the region from the
reawakening empire.
“Add this up,” writes Ken Courtis, a close
observer of the international scene for
decades, “and you have the outline of a
number of important initiatives which will
be key to China’s increased lead role in
development through investment in other
emerging market economies.”
Courtis had a curious exchange with Putin
during some of the economic forum sessions
in Beijing. He asked if Russia would provide
North Korea security guarantees if it agreed
to renounce nuclear weapons.
Putin replied in part: “Your question is too
clever. This is not the moment yet even to
raise that question, let alone answer it.
Often, the problem in the world is not that
small countries, who feel they are under
siege, are unwilling to change. Rather, it
is that the bigger countries are all piling
on like bullies in the school yard – and
they don’t know when to stop.”
I
hope Kerry and Obama were listening at that
moment. As Courtis heard it, “I think Putin
was signaling to the West that there will be
no more help from Russia with sanctions on
North Korea, or anywhere else. One could
also read Iran, Syria, Venezuela, etc., into
that line of reasoning.”
I
agree. We can start to connect the stars,
then, see our constellation, and identify
the costs of a consistent pattern of
destructive behavior on Washington’s part
here, there and everywhere. Specific to the
case, the Sino-Russian energy deals cannot
possibly be taken as other than long-term
responses to the West’s renewal of Cold War
hostilities toward Russia and its refusal to
countenance China’s emergence. More
narrowly, Putin wants an Iran deal to
demonstrate Russia’s importance as a global
player, yes, but he is not so far from fed
up even there.
The
obvious question is what we are watching as
all these events unfold and then coalesce
into a single reality. This peculiar moment
seems to make this reality clear. Nostalgic
for the period of primacy known as the
American Century, the U.S. cannot accept its
passing. Logically enough, the task becomes
essentially destructive of the world as it
is a-borning — an effort, in the end, to
destroy history itself.
The
planet’s other major powers, for all their
imperfections and, indeed, disgraces,
understand that their time has come, parity
between West and non-West is upon us. This
is the core reality, not to be lost sight
of. China’s and Russia’s domestic problems
are rather like America’s; they are to be
resolved by Chinese, Russians and Americans,
a point we understand easily when it comes
to the interference of others but not the
other way around, when the question is our
interference elsewhere.
All
too bad. But only for those who insist on
holding on to the wrong end of the stick.
This century’s winners and losers are not
yet clearly marked — I have to preserve my
optimism on this point — but with each
passing event, each mistake, who is fated
for which side becomes a little more
evident.
I
like the thought a Chinese
scholar-turned-diplomat-turned scholar again
made at a dinner in Beijing the other night,
as passed on by a friend. He spoke of
Ukraine, but the remark applies across the
board.
“From our perspective, we see all of this
agitation as noise at the surface,” he said.
Then he cited that scene from “Macbeth” at
Dunsinane Castle, “Life’s but a walking
shadow, a poor player that struts and frets
his hour upon the stage, and then is heard
no more. It is a tale told by an idiot, full
of sound and fury, signifying nothing.”
The
Chinese — always attuned to the long view.
Who are the idiots in this man’s rendering?
I
leave it there.