Is a Divide Opening Between Beijing’s Leaders?

The normally private internal conflicts of the Chinese Communist Party spilled into the public sphere with the dramatic sacking of Chongqing party chief Bo Xilai on March 15. Subsequently, on the evening of March 19, rumors of a coup surfaced. Gunshots were reportedly heard on the edge of Zhongnanhai in central Beijing and military vehicles seen on Chang’an Avenue.

In addition to Bo’s ouster, exile websites report that Zhou Yongkang, a leading Politburo official and ally of his, had been neutralized by his rival, President Hu Jintao, who enjoys the support of the military.

Bo’s and possibly Zhou’s ouster expose a fierce struggle within the Communist Party over the 2012 succession of power in Beijing.

The dramatic sacking of Bo and neutralization of his allies marks a victory for the party’s liberal reformers and an official rebuke of Bo’s neo-Maoist “Chongqing Model.”

Premier Wen Jiabao and his allies saw Bo as a new Mao, a dictator who could threaten them and their families’ business interests.

Hu, Wen and their supporters employed a tried and true method for eliminating the upstart from Chongqing — corruption charges. Charges against Bo stem from the attempted defection of Wang Lijun, Bo’s recently demoted vice mayor and police chief, who fled to the American consulate in Chengdu, allegedly to seek asylum.

Later, while being questioned in Beijing, Wang reportedly provided authorities with incriminating material about Bo and his family. Read more “Is a Divide Opening Between Beijing’s Leaders?”

Medvedev Predicts Eurasian Union by 2015

Outgoing Russian president Dmitri Medvedev has given impetus to the Eurasian Union by declaring that it will be up and running in three years.

An idea that has been around the block several times, the union would encompass Belarus, Kazakhstan, Kyrgyzstan and Tajikistan and have as observer countries Armenia, Moldova and Ukraine. The union would be one of a myriad of regional initiatives set up in the post-Soviet space. Whether there will be meaningful integration remains doubtful. Read more “Medvedev Predicts Eurasian Union by 2015”

Beneath the Radar, Russia-Pakistan Entente Takes Shape

Pakistan and Russia have begun cooperating on energy and military matters.

Pakistani prime minister Yousuf Raza Gilani called Vladimir Putin to congratulate him after his electoral victory and invited him to visit Islamabad later this year, which Putin agreed to. It would be the first visit to Pakistan, a Cold War rival, by a Russian leader.

This comes on the heel of a growing rift between Pakistan and its longtime patron, the United States, which has seen it diversify its allies in the region, most notably China as of late. In the last year, there have been growing contacts (high level visits) between the two nuclear powers, concentrating on regional security and economic investment.

Most notably is Pakistan’s purchase of fifty JF-17 Thunder fighter planes from China, which use a Russian engine (thus requiring Russia’s approval), the proposed construction of the Trans-Afghanistan Pipeline that will bring natural gas from Turkmenistan through Afghanistan to the subcontinent and a state of the art coal and natural gas complex in the Sindh.

In response to growing American ties with India (Russia has maintained its close ties with India as well), including joint military exercises in the Rajasthan desert, there is a ongoing discussion between the military brass of both powers to begin greater military cooperation. Pakistan, desperate for energy, has also begun negotiations with Iran over a proposed natural gas pipeline, which would bring sanctions against it from the United States. Read more “Beneath the Radar, Russia-Pakistan Entente Takes Shape”

The Long Shadow of German Ordoliberalism

Berlin Germany
A bird sits on top of one of the spires of the German Reichstag building in Berlin, December 31, 2005 (Max Braun)

Germany’s approach to the euro crisis stems from deeply entrenched neoclassical economic views. The fundamentals of these views will not change and must be taken into consideration when negotiating with Germany, for example by making the case for pan-European investment programs instead of outright atttacking austerity as a concept.

Contrary to popular belief, Germany’s reaction to the euro crisis — its strict focus on price stability and austerity — is not a result of historical experiences with hyperinflation, a selfish intent to maintain a surplus at the expense of others, or an intent to punish Southern European deadbeats.

Rather, the German approach stems from an entrenched belief in price stability coupled with budgetary discipline as the only road to prosperity. German economic orthodoxy holds that a European coordination of taxes, labor laws, retirement age, etc. is unnecessary. If everyone “does their homework” prosperity will naturally result. Hence the emphasis on fiscal discipline.

The European Council on Foreign Relations in a policy brief (PDF) recommends that member states accept these concepts when dealing with Germany. Instead of attacking austerity as such, they should demand pan-European investments, Europe level taxation and more time to implement austerity measures. The basic German position will remain the same regardless of government, even if a center-left coalition may be more open to eurobonds. Read more “The Long Shadow of German Ordoliberalism”

Belarus, Europe Preparing Diplomatic Countermeasures

Diplomatic relations between Belarus and the European Union have been deteriorating with the latest news of European ambassadors leaving Minsk for home. EU states have recalled their top diplomats in solidarity with Brussels and Warsaw whose envoys were kicked out by Belarus. For the EU ambassadors to return to work, condition is that Belarus will have to release and rehabilitate its political prisoners. The news has been that Belarusian regime is now preparing to ban one hundred or so leading opposition figures.

The European Union finds Belarus once again on top of its political agenda with new tit for tat measures taken against each other.

Both sides are preparing fresh countermeasures against each other, with Belarus threatening to limit the presence of EU embassies and companies operating in Belarus while the EU is preparing to add one or more Belarus oligarchs to its blacklist in March. This week’s events have a precedent in the so-called Drazdy dispute of 1998 when President Alexander Lukashenko confiscated the homes of Western diplomats. Read more “Belarus, Europe Preparing Diplomatic Countermeasures”

China Takes New Step to Prime Its Slowing Economy

Seen from the beginning of 2012, the Chinese economy has showed signs of slowing down. Instead of keeping the overheated economy in reasonable pace in the past years, Chinese authorities are more afraid of an earlier economic slowdown than expected. A decision to reduce the amount of cash reserves that banks are required to hold has been adopted to encourage stronger growth and enable more money to circulate in the domestic market.

A similar cut came in December 2011 after the central bank had tightened bank lending for a period of time. Recent loose monetary policy is reflective not only of predicted slower economic growth but also of the European debt crises and the anemic American economy which might hurt China’s export revenue as these are its two biggest trading partners. Read more “China Takes New Step to Prime Its Slowing Economy”

Israel Has a New Friend, Cyprus

Israel has found a new regional ally in Cyprus. The basis for this relationship has been purely economic but could possibly grow deeper over time.

Israeli prime minister Benjamin Netanyahu visited Cyprus last week in order to discuss the furthering of relations between the two countries, which were mainly formed after the discovery of multibillion dollar gas finds in sea between Israel and Cyprus. The two countries focused primarily on exploiting hydrocarbon in today’s markets and other economic issues. However, the new contact between the two countries may raise concerns, particularly for Turkey, about their cooperation within the region. Read more “Israel Has a New Friend, Cyprus”

War Damage to Hit Return of Libyan Crude

Damage to Libyan production and port infrastructure means at least a fifteen month wait until crude output reaches preconflict levels.

Prior to the conflict, Libya was producing roughly 1.6 million barrels per day. Assessments of severe damage turned out to be less than initially expected but production levels are still being measured in the tens of thousands rather than the hundreds of thousands of barrels per day that was hoped for. Many of the oilfields and terminals were mined, workers’ camps looted and some of the wells have had trouble producing again but the main concern is the ports which were a major site of battles and suffered from NATO bombing.

The average fifteen month estimate of return to preconflict production levels falls between the most optimistic of oil executives, who are estimating a return in weeks and the most pessimistic of oil consultancies, which see a full return in about three years. Currently, none of the foreign oil producers have returned to Libya, but the provisional government has assured them they will honor the Gaddafi era contracts although no new exploration concessions will be granted until after the formation of a constitution and formal government. Read more “War Damage to Hit Return of Libyan Crude”

Montenegro to Join Russian South Stream Project

An agreement has been made between Russia and Montenegro that will initiate a study to deteremine the feasibility of the South Stream gas pipeline supplying the latter with Russian natural gas by a pipeline that will cross under the Black Sea. With Podgorica first expressing interest in joining the project toward the end of 2011, this deal means that Montenegro joins Austria, Bulgaria, Croatia, Greece, Hungary, Serbia and Slovenia in having signed agreements with Russia for the construction of South Stream. Read more “Montenegro to Join Russian South Stream Project”

Exxon Moves on Kurdistan Deal Despite Baghdad Threat

According to sources in the city, supermajor ExxonMobil is establishing a presence in Irbil, the capital of the Kurdistan Autonomous Region.

This is a major development because in November 2011, ExxonMobil signed an oil exploration deal with the Kurdistan Regional Government despite the fact that the different political factions in Iraq had not agreed on a law to distribute oil revenues between the provinces and the central government in Baghdad. The central government maintains that the KRG/ExxonMobil deal is illegal and threatened to nullify Exxon’s other contracts for oilfields in southern Iraq. Exxon announced that it would review the deal but appears to be going forward with implementing it.

ExxonMobil was the first supermajor to ink a contract with the KRG and rumors abound that other supermajors will finalize deals of their own soon. An industry source said that Total, ConocoPhillips, Chevron, Eni and Lukoil are all interested in working with the KRG. Kurdistan has an estimated 45 billion barrels of proven reserves, compared to at least one hundred billion barrels of oil in southern Iraq. However, Kurdistan has proven to be a more attractive target for investors because its security situation and economy are markedly better than the rest of Iraq. Read more “Exxon Moves on Kurdistan Deal Despite Baghdad Threat”