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    Greater China
     Apr 30, '14

Ukraine crisis forces Eurasian evolution
By Francesco Sisci

BEIJING - It has not happened yet, but expectations are already enormous. A massive strategic and economic shift is expected to result from Russian President Vladimir Putin's to China in May.

After decades of fruitless talks, Moscow and Beijing are now likely ready to sign a sweeping deal which will see China invest billions of dollars in Russia, with vast resources being sold in the other direction. This correspondent first saw the agreement signed 20 years ago, when Boris Yeltsin and Jiang Zemin were the presidents, and not much occurred since. However, this time things seem to be real.

In the past, the two parties failed to finalize the fine print of the

deal. There were too many differences on the price of gas, the route of the pipeline, the ownership of resources in Russia and on the distribution network in China. Now all these problems are solved - or so it appears - because of a sudden change of heart in Russia linked to the ongoing Ukrainian crisis.

The threat for Russia resulting from the crisis is that Europe will not buy its gas and oil, or will decrease its purchases. Oil prices have remained pretty low, despite the fact that the supply from other oil-exporting countries has been low or dwindling.

Libyan oil production is at a fraction of its capabilities, Iranian trade remain subject to sanctions, the Iraqi supply has not recovered to pre-war levels, and Algeria is drying up. All of this, plus the Russian threat of not selling gas to Ukraine (which allegedly has been stealing gas and oil from Russia for decades), should have created a huge spike in oil prices.

That didn't happen because now the US shale oil and gas stocks are so big that has stalled previous American plans to increase its supply of energy from green sources by subsidizing new technologies. Now, and for the foreseeable future, problems with the oil supply hurt the producers far more than the Western consumers, who now have access to the American hoard. This makes it an issue of life and death for Russia to find an alternative consumer to Europe. Europe may suffer somewhat without Russian oil, but Russian economy could easily crack without its sales.

Now, apparently, China could realize up to 30% of its energy needs from Russia, which would equal over a third of the latter's production. This will partially unload the European gun of not buying Russian oil and create a new dimension to ties in the whole Eurasian continent. Russian can play Europe against China and vice versa. Beijing knows this, and it is interesting to think about why China is willing to be played and help Russia in this way.

China now is hooked on coal (which is extremely polluting and difficult to distribute) and energy imports from the Middle East. It would be good strategy to at least improve this situation. Besides, China may want Russian goodwill to move into Central Asia, as the eastern sea border and its sea-lanes may become difficult to manage because of the new animosity with many neighbors in that area. Thus, Central Asia or Russia could become an alternative route in order to avoid being constrained.

Without the Ukrainian crisis, Moscow might have taken more time to clinch a deal with Beijing, if it managed it at all, and even if a deal had happened, conditions could have been less advantageous for China. In fact, as former US president Richard Nixon observed in the 1970s, Eurasia has to be considered in its entirety to fully grasp its strategic possibilities. Then, by understanding the region's geopolitics, Nixon played China against Russia. Now, Russia, feeling pressed by Europe, and China, hemmed in by the "pivot" to Asia, are playing the Nixon doctrine against America, which has been considering Europe and Asia separately. In sum, Russian president Putin and his Chinese counterpart Xi Jinping may be better students of Nixon than the Americans.

Yet things perhaps are not quite that straightforward. In his recent visit to Japan and South Korea, President Barack Obama stressed the need to rethink the pivot to Asia. Moreover he signaled an important step in the heated controversy between China and Japan on the Senkaku/Diaoyu islands. He did not take a position on the ownership of the islands, and thus de facto supported the idea that there is a dispute there.

Japan has denied so far the islands are disputed. Moreover, in South Korea (a country that has consistently backed China on the Senkaku issue), Obama has encouraged Seoul to develop good ties with Beijing. In neither case did the US president hint that America is backing off from its history with either country, but definitely there was a finer political sensitivity at work here.

This plus the unexpected Russia-China energy agreement on the heels of the Ukrainian crisis prompts the idea that the US may want to begin considering its pivot to Asia not in regional terms but in global ones. China is a global player, and its influence is bound to only increase in the next few years. Therefore it may be naive to think that one can deal with China without taking into account also the balance of power in Europe or the Middle East or Russia.

In fact, the not yet proactive Chinese role in the Middle East has already spurred Israel to reach out to China, despite the long-established official Chinese support for Arab countries and Iran. In Europe, Germany has long stretched its economic and commercial muscles to reach out to China, but these muscles do not have political legs. China knows that the Israeli and German/European players have a role with the American game. It is not clear if America computes or will compute them in the recalculation of the pivot to Asia.

In any case, a new political phase is opening in Eurasia, once again under the star of Richard Nixon.

Francesco Sisci is a columnist. His e-mail is fsisci@gmail.com

(Copyright 2014 Francesco Sisci.)

The new Great (Threat) Game in Eurasia (Mar 12, '14)



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