Another War of Jenkins' Ear

Resist The Pointless

Posts Tagged ‘China

You most likely know it as Myanmar, but it will always be Burma to me

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“You most likely know it as Myanmar, but it will always be Burma to me.”

This is to raise a serious question: what is the policy of the United States towards Burma?

A special envoy to Burma is about to be nominated by the Obama administration, and is widely praised across the political spectrum, from Bush’s nominee for the position to a director from Human Rights Watch. That just leaves the policy:

But Malinowski also said that the substance of the administration’s Burma policy is more important than the identity of the person implementing it. He feels Burma has fallen through the cracks in terms of the administration’s focus and attention.

[. . .]

The administration’s idea was to feel out Burmese leaders in order to make incremental progress leading up to the November 2010 elections. But those elections were marred by the sort of vote rigging, intimidation, and outright violence that the Burmese junta is known for. The elections were condemned by the international community, including the United States.

The failure of the junta to make any real effort to answer the United States’ call for cooperation and dialogue poses a problem for the Obama administration’s policy of engagement. “I would say the administration has been realistic about the nature of the so-called ‘election,'” said Green. “They recognize that the junta is actually consolidating power in many areas, privatizing state assets to fill their own pockets, and marginalizing the handful of ‘Third Wave’ candidates that were supposed to be independent voices in the parliament.”

An administration official told The Cable that the U.S. government is clear eyed on the junta’s behavior but will continue to try to find ways to move forward the policy.

“The U.S. government acknowledged that this was a fundamentally flawed election based on a corrupt constitution, but that doesn’t mean that we aren’t ready to reengage in dialogue,” the official said. “But we will be very clear what our expectations are and we will be extremely tough on both non-proliferation and human rights.”

Are there any further levers for the US to pull? Obviously, military action is out of the question. The Security Council hasn’t done much on Myanmar/Burma, but I can’t imagine China is eager to let any such discussion go too far. Indeed, in 2007 Russia and China both vetoed a resolution, and China is seen as being generous in even allowing Security Council meetings on the matter they consider an internal issue only.

Events in 2010 posed major challenges regarding Burma and the region:

The election has been criticised by the Secretary-General as “insufficiently inclusive, participatory, and transparent”. The UN Special Rapporteur on  the situation of human rights in Myanmar,  Tomás Ojea Quintana, has dubbed the election as “deeply flawed”, as certain opposition parties were excluded from the process.

Council members have expressed differing views on the validity of the election. US President Barack Obama criticised the election in Myanmar, saying it had been neither free nor fair, and the UK’s Foreign Secretary, William Hague, deemed the election as “the return to power of a brutal regime”. China’s ministry of foreign affairs characterised the election as “peaceful and successful” and a positive step in the transition to an elected government. The Association of Southeast Asian Nations welcomed the election “as a significant step forward “in the implementation of the seven-point Roadmap for Democracy”.

Following the election, on 8 November, violent clashes broke out between ethnic Karen rebels and Myanmar troops, reportedly causing some 15,000 people to flee into northern Thailand. On 12 November the UN High Commissioner for Refugees reported that most had returned to Myanmar.

On 13 November, pro-democracy leader Aung San Suu Kyi was released, after spending most of the last two decades under house arrest. The Secretary-General urged Myanmar to release the remaining 2,200 or so political prisoners.

On 22 October, cyclone Giri struck Myanmar, claiming the lives of at least 45 people and causing the destruction of at least 20,380 homes and thousands of acres of crops and fish breeding ponds. Currently, 100,000 people remain homeless as relief efforts by government authorities, UN agencies and NGOs are under way.

I cite all this because it’s unclear that there is even a potential solution. There’s no leverage to pull left (sanctions are due to be renewed by the US and EU and most feel that will be done, from what I can gather), unless there are some unilateral sanctions possible I am not aware of (this indicates that is possible, but it does not seem like much). Beyond that, I don’t see what can possibly be done: the hope seems to be that a special envoy can simply talk the Burmese into reforms. As unlikely as that is, I don’t see any other way forward that wouldn’t make things immediately worse.

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Blood for Corporate Russian Oil in Cote D’Ivoire? UPDATE: GOP Ties

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As the crisis escalates seemingly daily in Cote D’Ivoire, I’ve been wondering why Russia and China abstained on a Security Council measure regarding Libya but have been slow to allow anything in Cote D’Ivoire. The answer, upon doing some research, appears to be oil. Conventionally, one thinks that Libya has oil and countries like Cote D’Ivoire do not. See, for instance, the comments here.

But there are many oil wells off the coast of west Africa, much like the Gulf of Mexico. The oil production in the country has dramatically risen (PDF link) the past decade by a factor of three and more wells are scheduled to be drilled. And even though MMS regulations in the Gulf of Mexico have been notoriously lax, regulations in west Africa are even weaker, if not nonexistent:

LUKoil produces almost 2 million barrels of oil per day, but faces a declining level of output from its Russian oilfields. For this reason it has been more active than other Russian oil producers in pursuing oil prospects outside Russia — in Iraq, Saudi Arabia, Egypt, and west Africa. The Gulf of Guinea. In the mid-Atlantic, is as rich in potential oil reserves as the Gulf of Mexico, the Russian oil company says — but with a significantly looser regulatory supervision and lower drilling and environmental safety costs.

Russia and China both have oil interest in the country, and the Russian firm (see directly above) LUKoil has an especially close relationship with the illegitimate President Laurent Gbagbo, which has made Russia unwilling to endorse any real action in the country. LUKoil has made big investments in the country and is scheduled to drill wells in Cote D’Ivoire waters with the state oil company Petroci in 2012, as part of a comprehensive LUKoil expansion. LUKoil highlights the Cote D’Ivoire projects on its website. Gbagbo still controls oil interests in the country through Petroci.

Petroci is one of the main assets Gbagbo has. EU sanctions have targeted the company:

The Gbagbo administration is being increasingly isolated. One after the other all its ambassadors in the EU and in the US were declared personae non gratae and replaced by pro-Ouattara diplomats. Since January 14, the EU sanctions apply to [. . .] the directors of the National Petroleum Operations Company of Cote d’Ivoire Petroci, Kassoum Fadika and Laurent Ottro Zirignon, [. . .] who are accused to have contributed to the “funding of Mr Gbagbo’s illegitimate administration”.

Last December, Fadika provided a significant help to Gbagbo by transferring CFA francs 20 billion (some € 30m) from Petroci’s accounts to Cote d’Ivoire’s National Treasury, which helped Gbagbo to pay the salaries of civil servants. EU sanctions also target 11 parastatals including the oil company Petroci. . . .

In other words, all transactions by European companies are banned, including loans or the payment of services either directly or through proxies. It means for instance that shipowners who come and load cocoa or other commodities in the Ivorian harbours are no longer allowed to pay the port authorities for these services. As far as Petroci is concerned, one of the immediate consequences may be the postponement of a project to build a 60,000 tons refinery with an American partner.

The Gbagbo administration is being increasingly isolated. One after the other all its ambassadors in the EU and in the US were declared personae non gratae and replaced by pro-Ouattara diplomats. Since January 14, the EU sanctions apply to high-ranking figures of the financial sector including Marcel Gossio, the director general of the Port Autonome d’Abidjan, the directors of the National Petroleum Operations Company of Cote d’Ivoire Petroci, Kassoum Fadika and Laurent Ottro Zirignon, the chairman of the Société ivoirienne de raffinage (SIR) who are accused to have contributed to the “funding of Mr Gbagbo’s illegitimate administration”.

There are American companies doing business in Cote D’Ivoire (Yam’s Petroleum is based in Wyoming and Total E&P appears to be based in France and the U.S., Vanco is out of Texas, and there are likely more.) But both France and the United States are willing to take action in the country. though that could be a result of that the legitimate President Ouattara is closer to France, as some have accused. Some say the French want control of the country to protect Total:

One of the most significant events in West Africa last year was the purchase of the Swiss oil trading company Addax by the Chinese firm Sinopec. Addax was a frequent deliverer of oil to the Ivory Coast and was a major player in the West African oil mafia. The loss of a key player to the Chinese was seen as a real threat. Since then the French oil companies have been buying up oil assets in the region using obscure shell companies. The Western oil companies seem to be using the Ivory Coast as the first battle against the Chinese moving into the oil and gas business in the region.

The Gulf of Guinea is rapidly becoming a major international oil play. Abidjan has a good refinery and will soon have another. Looking through the list of vessels delivering crude to the SIR refinery in Abidjan more than half were Addax vessels. Now they are Addax/Sinopec vessels. This has frightened the oil companies, especially Total. They do not have the money to compete with the Chinese and now Russian companies like Lukoil are entering the Gulf of Guinea market in a big way as well. The only way the French can compete is to try and maintain control of the strings of power in the Ivory Coast to find ways to delay or deter the Chinese and Russian invasion in what they thought of a their patch. The US and European countries share this ambition. Perhaps that is their reason for their blind and self-destructive policy in the country.

But on the other hand LUKoil is a key part of Gbagbo’s agenda. The relationship is such that Gbagbo scrubbed his website of evidence of meetings with the firm, but the evidence is still there on Google’s cache. Indeed, one of the main differences between Ouattara and Gbagbo is that Gbagbo rejected French (Cote D’Ivoire was a French colony) investment for nationalism and Russian investment:

Although Gbagbo’s supporters make much of his nationalist and anti-French stance, the regime signed a multimillion-dollar deepwater oil contract with Total two months before the elections. France still contributes 60% of foreign investment – including contracts for ports, oil production and telecommunications. Gbagbo’s failure to bring in alternative investors from the Middle East and Asia has weakened his negotiating position. However Russia’s Lukoil has been a lifeline to Camp Gbagbo. Along with Angola and Israel, the country has been its bedrock in terms of financial support.

That still leaves one question: Why is Russia catering to LUKoil so much? Aside from being the biggest Russian non-state oil and gas producer, LUKoil threatened to leave Russia and drill more overseas, particularly in west Africa over a dispute related to Russian tax rates:

An announcement last week by LUKoil’s number-2 executive and shareholder, Leonid Fedun . . . that the Russian oil producer expects to find more crude oil in Africa than in Russia was intended to set off alarms bells at the Ministry of Finance in Moscow. That is where Fedun is negotiating for tax concessions for his company’s newly developed oilfields in the Russian sector of the Caspian Sea and in western Siberia. Company sources admit there was nothing new about the African projects in what Fedun had to say. Whether the Finance Ministry intends to offer tax benefits to temper LUKoil’s African enthusiasm remains to be seen. And for the time being, West African spending represents a small fraction – maybe less than a tenth – of LUKoil’s global exploration budget.

. . .

LUKoil spokesman did not respond to a request for a breakdown of LUKoil’s recent and planned expenditures at prospects off the coasts of Ghana and Cote d’Ivoire.  . . .

In the Cote d’Ivoire project three “promising geological targets” have been mapped, according to the annual report, and prepared for drilling.

. . .

So what was Fedun’s reason for the promoting the notion that LUKoil has found more oil in Ghana and Cote d’Ivoire than in western Siberia? In mid-July, the Moscow industry press reported that LUKoil had applied to the Finance Ministry for a tax holiday to cover its brand-new Korchagin oilfield in the Caspian, and for other fields being developed to production nearby. The company application was for zero export duty on the oil it plans to lift and ship from Korchagin. This would be worth at least $400 million, if granted.

And that’s the rub. LUKoil is competing against Rosneft and other Russian crude oil exporters for relief of the export duty on new fields. The others who have already benefited from zero export duty since January are producing at new fields in eastern Siberia; they are shipping eastwards to the Asian market, through a pipe and rail link to China; and through the new Pacific Ocean tanker terminal at Kozmino Bay.

LUKoil wants the benefit to apply with equality over the entire oil geography of Russia. The Finance Ministry wants to eliminate or reduce the tax benefit to the oil companies so as to cover rising budget outlays demanded by the approaching national election campaigns. LUKoil’s response is Fedun’s – make our new Russian wells more profitable, or else we’ll drill elsewhere.

This was serious enough that Putin himself was involved in the negotiations, promising partial relief. It dragged on into this year as Russia needed some of the revenue to close a budget gap. And it still has not been resolved, with the founder of LUKoil himself now talking up African locations instead of Russia.

So essentially, Russia probably wants to protect the company it gets tax revenue from (imagine that, tax revenue from an oil company), in order to prevent it from leaving altogether – very much a quid pro quo: You stay here with slightly lower profits, and we’ll protect you overseas.

Western diplomats have also connected numerous times LUKoil to Russia’s objections and also stated that Russian objections to previous resolutions were not substantive objections. One diplomat even said Russian’s objections were “90 percent about oil, ten percent about sovereignty.” When Ban Ki Moon raised concerns that Belarus may have delivered attack helicopters, Russia lept to its defense, calling it an errant report; a Brazilian diplomat in charge of the matter said later there was likely no such delivery.

For it’s part, China has previously stated that it will allow the African Union to lead:

China has said that it will respect the sovereignty of the Ivoirian government but will back efforts of the African Union to mediate. The African Union, for its part, quickly dispatched former South African president Thabo Mbeki to Abidjan to try to break the standoff. Mbeki left two days later, unsuccessful, urging that “every effort should be made to ensure that the transition to democracy succeeds.” Subsequently, the African Union went further, issuing a statement that calls for “respect for the outcome of the presidential election as proclaimed by the Independent Electoral Commission.” West African leaders, joined by Mbeki, have convened an emergency meeting of the regional grouping ECOWAS to determine a way forward. ECOWAS too has endorsed the findings of the electoral commission and called for Gbagbo to resign.

Chinese oil interests in the country seem to be more dependent on stability (PDF link) rather than a connection with Gbagbo; they are partnered with an American company (Vanco, which also partners with LUKoil) and an Indian company).

Just yesterday, France introduced a new draft resolution to the Security Council that the United States has announced its support for (State Department briefing yesterday). But it’s hard to see Russia agreeing to a resolution that allows for “all necessary means” to disarm Gbagbo’s forces, even if they are protecting civilians.

Additionally, the UN Human Rights Council announced yesterday that it is sending a commission to the country. This resolution was adopted without a vote and is essentially a fact-finding mission.

Is there a local solution? Probably not:

The Economic Community of West African States (ECOWAS), the African Union and the UN have taken a strong stand, unambiguously telling Gbagbo to go. Unheeded, ECOWAS and the AU then threatened using “legitimate force” – a revolutionary proposition for usually cautious organisations. So far, their actions have not matched their bold declarations.

Nigeria is not enthusiastic about intervention. It would have to pay for most of the operation and provide the logistics too. The country will hold its own elections in April. President Goodluck Jonathan is preoccupied at home with militias from the Niger Delta to the far north. Those realities might explain the mission of former president Olusegun Obasanjo to talk to Gbagbo in mid-January: few ex-leaders in the region are as blunt and forceful.

Côte d’Ivoire’s neighbours watch on closely. Ghana’s President John Atta Mills has ruled out sending troops, saying the matter should be settled through negotiations. Other states are wobbling. An intervention against an incumbent president would set an uncomfortable precedent in a year when some 18 African countries are holding elections.

Gbagbo’s camp says it is ready. One supporter showed Anansi a stash of arms in a darkened room, saying: “Eighty per cent of young Ivorians are unemployed. For us, a gun is a passport to making money.” Yet the truckloads of newly armed Gbagbo supporters patrolling Abidjan point to distrust: the cheerleaders cost money, and show a lack of confidence in the national army. “If you have to arm youths and recruit foreign mercenaries, you doubt either the capacity or loyalty of your own army of 18,000 men,” a general pointed out.

ECOWAS could still revise its position if sanctions against Gbagbo start to work. Civil servants and then, more dangerously, the army and assorted mercenaries could be left without salaries. Gbagbo’s grip on the army relies on the generals, not the ranks, many of whom voted for Ouattara. As the pressure mounts, junior officers could cut a deal with Ouattara and mount a putsch.

It’s hard to see how this doesn’t get worse before it gets better.

UPDATE: Upon recollection, I wondered if I pursued the Vanco story enough. Vanco is a partner with LUKoil and Petroci, in Cote D’Ivoirein Africa and, recently, in the Black Sea. And Vanco is based out of Texas.

Vanco, Petroci, and LUKoil have extensive plans in 2011 and 2012 to drill off the Ivory Coast – and there are indications as mentioned above that  the Russians feel this project may be at stake with the Gbagbo and Ouattara dispute.

Not surprisingly, leadership of Vanco energy have donated extensively to prominent Republicans. Founder Gene Van Dyke has donated to Republican Senators John Cornyn, Rand Paul, Roy Blunt, Kelly Ayotte, and James Inhofe. He’s donated to House members Ted Poe, Bill Flores, Michael McCaul, Pete Olson, and John Culberson. He also donated a substantial amount to the Republican National Committee.

Poe and McCaul are on the House Foreign Relations Committee. Neither are on the Subcommittee dealing with Africa and Human Rights.

James Inhofe is on the Senate Foreign Relations Committee, and is also on the Subcommittee on African Affairs.

I can find no evidence of any of these supporting Gbagbo over Ouattara in the current dispute. But the question should be posed to them.

FURTHER UPDATE: It took another week, but news broke that Inhofe, does, in fact, support Gbagbo, as predicted here. See Salon’s Justin Elliot here. This was tragically predicted.

One Two Three Four, I Declare a Trade War

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The EU and The US have declared a trade war against China:

The US trade representative issued a statement this afternoon criticising restrictions China has placed on exports of raw materials, to the disadvantage of American firms. Together with Europe, the US will start formal “dispute resolution consultations” at the WTO, claiming China has breached the rules of the international marketplace.

The trade representative said: “For American industrial manufacturers, this is a critical step toward market equality. China’s export restrictions on a broad range of raw materials have given unfair competitive advantages to their own manufacturers while raising the costs of doing business for US companies.”

The complaint concerns the minimum export prices and tariffs China imposes on several resources, including bauxite, magnesium and zinc. The EU claims the restrictions not only break general WTO rules, but specific promises China made when it joined the organisation in 2001, becoming a fully-fledged player in global markets.

A lot has been made comparing the current economic climate to that in the 1930s. A key difference is the existence of a forum like the WTO to negotiate these claims in. One can imagine an alternate reality where it did not exist causing increasing protectionist rhetoric.

I’m disappointed in the press corps, though. This broke relatively late in the day, but inovling so many big players – China, EU, and the US – it should have been the focus of a question at the press conference today. It went unmentioned.

Written by John Whitehouse

June 23, 2009 at 1:19 pm

Posted in Economics, News Media

Tagged with , , ,