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Spectre of ‘Indo-Pacific Nato’ accelerates China’s decoupling from the west

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For weeks Chinese officials and analysts have endorsed Russia’s claims that Nato’s expansion in Europe triggered its invasion of Ukraine. Now they are pointing to a new spectre to justify their support of Russia’s war: an “Indo-Pacific Nato” that could ultimately force China to decouple from the west and achieve self-sufficiency in everything from food to semiconductors.

Ever since Xi Jinping and Joe Biden refused to budge from their opposing assessments of the conflict during a two-hour phone call on March 18, Chinese diplomats have gone on a rhetorical offensive, arguing that US-led alliances are as much a threat to Beijing as they are to Moscow.

Most of their ire is directed at the “free and open Indo-Pacific” strategy Biden inherited from Donald Trump, which seeks to bind the US, Japan, Australia and India in a united front against China.

“Nato has kept strengthening and expanding, and intervened militarily in countries like Yugoslavia, Iraq, Syria and Afghanistan,” Le Yucheng, vice-foreign minister, said a day after the presidents’ call.

“The Indo-Pacific strategy is as dangerous as the Nato strategy of eastward expansion in Europe,” he added. “If allowed to go unchecked, it would bring unimaginable consequences and ultimately push the Asia-Pacific [region] over the edge of an abyss.”

Indian foreign minister S. Jaishankar’s and his Chinese counterpart Wang Yi greet media before their meeting in New Delhi on March 25
Indian foreign minister S. Jaishankar’s and his Chinese counterpart Wang Yi greet media before their meeting in New Delhi on March 25 © Indian Foreign Minister S. Jaishankar/Twitter/AP

In an attempt to counter Biden’s “real goal” of establishing “an Indo-Pacific version of Nato”, Le’s boss, foreign minister Wang Yi, met his Indian counterpart in New Delhi on Friday.

On Tuesday Wang addressed the Organisation of Islamic Cooperation in Islamabad, where he touted $400bn in Chinese-led projects across 54 Islamic countries. China, India and Pakistan, which have a combined population of 3bn, all abstained on the UN resolution condemning Russia’s invasion of Ukraine.

Alicia García Herrero, Asia-Pacific chief economist at French investment bank Natixis, said that as the Ukraine crisis drove the US and EU closer together, China was seeking to complement its Russian partnership with stronger economic and diplomatic ties to large countries across the developing world and resource-rich nations in the Middle East.

While the US and EU are trying to push China into a corner, she said “China has taken and enlarged that corner . . . China is building this sphere of influence which makes its self-reliance [strategy] much more credible”.

Ni Lexiong, an independent military analyst in Shanghai, said China needed to adopt a long-term perspective when making assessments about the situation in Ukraine and its relationship with Russia. “If we don’t [handle the Ukraine crisis] right, 30 years from now the west will treat China the same way it is treating Russia,” Ni said.

Chinese officials increasingly worry that such treatment could include wide-ranging sanctions similar to those imposed by the US and EU on Russia. In that event, they argued, China would need Russia’s support as much as Russia now needed China’s support.

Hu Xijin, former editor of the Chinese nationalist Global Times newspaper, said that Xi’s “no-limits” partnership with Putin would serve China well in any “strategic showdown” with the US over Taiwan or a similar flashpoint.

“With Russia as a partner, if the US carries out maximum strategic coercion against China, China won’t be afraid of [a] US energy blockade, and our food supply will be secure,” he wrote in a recent column. “So will [our supply of] other raw materials

“We must constantly boost our own strength to make the US feel that having a conflict with China is more and more unbearable. Russia is China’s most crucial partner to achieve this goal.”

Russia, however, will be of little help to China in securing supplies of high-tech components vital to its vast manufacturing base, such as semiconductors as well as the largely western machinery and software needed to make them.

Dan Wang at Gavekal Dragonomics, a Beijing-based consultancy, noted that if China ever faced sanctions similar to those imposed on Russia, “they would be devastating for China’s ability to remain a manufacturing superpower”.

As result, argues Andrew Gilholm at Control Risks, a consultancy, Xi must pursue “decoupling on China’s terms”. That will entail securing, with Russia’s help, food and energy supplies while avoiding US sanctions on technology, finance and other areas where it is still dependent on the west.

“The idea was always to build up China’s diversification and self-reliance as fast as possible,” Gilholm said. But after Russia’s invasion of Ukraine “the motivation has gone to another level: this now must be seen almost as a national security issue, and an existential one at that”.

China rescinded phytosanitary restrictions on Russian wheat exports on February 24, the same day that Putin’s troops invaded Ukraine, and can now congratulate itself for having resisted US demands for reforms of its state-led agriculture sector during the two countries’ trade war in 2018 — 19.

“Beijing probably feels very validated in their approach,” said Darin Friedrichs at Sitonia Consulting, an agriculture consultancy in Shanghai. “They have kept a high level of state control and stockpiles.

“And now, while a lot of other countries are scrambling for supplies, they are relatively insulated,” he added. “Those policies were pretty successful and meant for a time like this.”

Additional reporting by Emma Zhou in Beijing



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Virgin Atlantic ceases Hong Kong operations, cites Russian airspace closure

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Virgin Atlantic has not operated any passenger flights to Hong Kong since December 2021, after the city-state suspended all flights from the U.K. due to a resurgence in Covid-19 cases.

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British airline Virgin Atlantic announced Wednesday it was permanently ceasing operations in Hong Kong due to issues related to the closure of Russian airspace.

The decision marks the end of the carrier’s London Heathrow to Hong Kong flight route and the closure of its Hong Kong office. It also ends the airline’s 30-year presence in the Asian financial hub.

Virgin Atlantic said in a statement that the closure of Russian airspace following Moscow’s invasion of Ukraine in late February was one of several “complexities” contributing to the decision.

It said that on the basis of the airspace remaining closed, Heathrow to London flight times would be around one hour longer than in 2019, while Hong Kong to Heathrow flights would be 1 hour 50 minutes longer.

It added that the 2019 termination of Virgin Australia’s Hong Kong to Melbourne and Hong Kong to Sydney services had already reduced the airline’s presence in the city-state.

“After careful consideration we’ve taken the difficult decision to suspend our London Heathrow – Hong Kong services and close our Hong Kong office, after almost 30 years of proudly serving this Asian hub city,” a spokesperson for the airline said.

“Significant operational complexities due to the ongoing Russian airspace closure have contributed to the commercial decision not to resume flights in March 2023 as planned, which have already been paused since December 2021,” it added.

Virgin Atlantic has not operated any passenger flights to Hong Kong since December 2021, after the city-state suspended all flights from the U.K. due to a resurgence of Covid-19 cases.

The airline was previously due to resume Hong Kong services from March 2023. However, with Wednesday’s announcement, it said it would be able to increase services in other key markets from next summer.

Around 46 Virgin Atlantic jobs, including those of office staff and cabin crew, are set to be impacted by the decision, according to Bloomberg.

The airline said it would offer refunds or vouchers for alternate Virgin Atlantic services to the “limited number” of customers due to travel from March next year.

Virgin’s exit from Hong Kong is the first by a major airline since American Airlines left the city in late 2021.



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German minister criticizes U.S. over ‘astronomical’ natural gas prices

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A photo of a natural gas flare burning near an oil pump jack at the New Harmony Oil Field in the U.S. on June 19, 2022.

Luke Sharrett | Bloomberg | Getty Images

Germany’s economy minister accused the U.S. and other “friendly” gas supplier states of astronomical prices for their supplies, suggesting they were profiting from the fallout of the war in Ukraine.

“Some countries, including friendly ones, sometimes achieve astronomical prices [for their gas]. Of course, that brings with it problems that we have to talk about,” Economy Minister Robert Habeck told regional German paper NOZ in an interview published Wednesday which was translated by NBC News. He called for more solidarity from the U.S. when it comes to assisting its energy-pressed allies in Europe.

“The United States contacted us when oil prices shot up, and the national oil reserves in Europe were tapped as a result. I think such solidarity would also be good for curbing gas prices,” he said.

CNBC contacted the White House for a response to the comments and is awaiting a reply.

Habeck, the co-leader of Germany’s Green Party, which is a part of Berlin’s coalition government led by center-left Chancellor Olaf Scholz, said the EU should also do more to address the region’s gas crisis, with countries scrambling for alternative supplies which has pressured prices even more, that was brought about by the war in Ukraine and deteriorating relations with Russia.

The U.S. energy economy is benefiting while Europe suffers, says Citi's Morse

Moscow’s state-owned gas giant Gazprom has cut supplies to the bloc drastically over the last few months, largely due to international sanctions and a desire to punish Europe — the EU used to import around 45% of its gas supplies from Russia but is seeking to halt all imports — for supporting Kyiv.

Habeck said the EU “should pool its market power and orchestrate smart and synchronized purchasing behavior by the EU states so that individual EU countries do not outbid each other and drive up world market prices.” 

European market power is “enormous,” it just has to be used, he noted, according to the German news outlet.

Europe is facing a hard winter with gas shortages predicted across the region. Countries like Germany have been largely dependent on Russian gas supplies for decades with massive energy infrastructure, such as the Nord Stream 1 and 2 gas pipelines, designed to bring gas from Russia to Germany via the Baltic Sea.

While the $11 billion Nord Stream 2 pipeline was never even launched, with Germany refusing to certify the pipeline following Russia’s invasion of Ukraine in February, Nord Stream 1 has become a pawn in souring relations between Moscow and Brussels.

Over the summer, gas supplies via the pipeline stopped and started seemingly at Moscow’s whim, although it invariably cited the need for maintenance and sanctions as a reason for halting supplies. But then supplies came to a halt in September.

More recently, Russia and Europe’s energy ties have literally been damaged with the Nord Stream pipelines suffering leaks last month in suspicious circumstances.

Russia denied it had sabotaged the pipelines, with reported underwater explosions damaging the pipes in several places, sending natural gas spewing from the Baltic Sea. The damage prompted an international outcry with the EU vowing a “robust” response to attacks on its energy infrastructure.



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