Posts Tagged ‘China’

August 23rd is the birthday anniversary of the prominent Russian politician Nikolai Muravyov-Amursky. This man, whose image is displayed on the five thousand rouble note, is known for his substantial contribution to the development of East Siberia and the Russian Far East. Today, some 150 years since, we have little idea how to properly dispose of his heritage. In the meantime, our Chinese neighbors are more than happy to take advantage of the region’s enormous resources for the benefit of their growing economy. Will we be able to use Siberia in a way that, 150 years from now, will make our descendants proud and grateful?

Dubious benefit

Some of the corporate media portray worst case scenarios of the Far East being inevitably run over by hordes of hungry Chinese, who lack the space to sustain continued population growth. Frankly, with equal probability we can expect a hungry alien invasion. And yet, it is foolish to deny the danger of Chinese expansion into Russian soil – it’s just that it will happen according to a completely different scenario.

This scenario is laid out in great detail in the co-operation program between the regions of the Far East and Eastern Siberia, Russia and Northeast China over the period 2009-2018, approved in 2009 by the leaders of Russia and China. After its publication the document caused quite a stir. The fact that it secured the position of Russia’s eastern regions as China’s raw materials appendage caused considerable outrage. Under the program, the Chinese are going to build numerous production facilities in their north-eastern provinces, which will use Russian raw materials. This means that the Russian territory will contain only mining and transportation resources, while the Chinese side will be home to processing and manufacturing of finished products. And even then, the Russian companies will be created using Chinese capital. It’s a great win for China, which will allow it to solve the problem of large-scale revival of its north-western provinces with the help of Russian natural resources. But what’s in it for us?

It was planned that Russia will develop a program that will help maximize profits from such cooperation with China. Not only from the sale of resources, but also from the powerful impulse that was bound to arise as a result of massive growth in cross-border trade. However, as time passed, the media’s hue and cry over the content of the program subsided, yet no coherent strategy for the Far East and Eastern Siberia is in sight.

New resource pipeline

In 2012 the problem resurfaced at the highest level. Sergei Shoigu (Moscow region Governor) proposed to create a state corporation for the development of Eastern Siberia and the Russian Far East. The structure was to have unprecedented powers of distribution of rights for exploitation of natural resources. The government supported this idea, but it was never implemented. Instead, it created the Ministry of Development of the Far East. But once again, without any single view as to the region’s strategy of development.

Obviously China plays a huge role in this process, which means that development of such a strategy should focus on the basis of building a relationship with her. According to some experts, China’s interest in gaining access to Russian resources far exceeds Russia’s willingness to sell them. Siberia’s vast timber, metals, energy and hydrocarbon resources are essential for the maintenance of China’s economic growth. Hence, it would seem that Russia as a competent seller should take advantage of this huge demand and bargain for the best of terms. Alas, this isn’t happening. Instead of adapting a prudent approach to the wealth of her East, Russia is planning to build another resource pipeline.

Key problems: transport and manpower

Among the major challenges facing the region are its lack of a developed transport infrastructure and outflow of workforce. In addition to its resources the Far East has strong potential to become a major transport corridor. Development of railways and roads in conjunction with the Vanino and Nakhodka ports, amongst others, can help create a powerful regional logistics hub, a kind of land-based Panama Canal.

No less acute is the problem of attracting workers. The situation is such that able young people continue to leave the region in an effort to move closer to the country’s center, or to China. This applies to professionals in all areas – from construction workers to scientists.

By the way, the conventional wisdom that the Far East is flooded with cheap Chinese labor, is not true.

Sergei Mazunin, chairman of the Khabarovsk regional branch of Opora Russia party as quoted by the Kommersant daily as saying that “Chinese citizens today often ask for salaries higher than their Russian counterparts. But the productivity of our workers is much lower. For example, logging companies confirm that a single brigade of Chinese workers outperforms three brigades of locals.”

In sum, development of the Far East requires extensive construction, but where will the manpower come from? There is no answer to this question still.

Summit as a chance to break the deadlock

Nevertheless, we would prefer to abstain from hopeless criticism of Far Eastern policy. Much attention is paid to the upcoming APEC summit in September 2012. For the first time it will be held in Russia on Russky island (yes, that’s the actual name), which was used as as a pretense for some large scale construction in the region, such as a bridge across the Golden Horn Bay, a bridge to Russky island and the Far Eastern Federal University.

It is assumed that during the summit Russia should be able to attract foreign investment in development projects in the region. Or at least the general idea:

According to President Putin, “The forthcoming summit is a significant political and economic event for the entire. Certainly, its success will allow Russia to strengthen its international position and help establish additional contacts with our partners in the region. But it is, above all, a good opportunity to focus resources on solutions to the many problems of our largest metropolis in the Far East, to make life more comfortable for its citizens, to position Vladivostok as the “Pacific Gate,” and Russia – as a promising center of international cooperation.”

But as usual, most skeptics do not expect any breakthroughs to write home about. Russia is a newcomer in the Asia-Pacific region, home to such economic sharks as China, the US, Japan and South Korea. So far, all of our attention was drawn to the West, but times change, and the East is increasingly attracting more and more attention. No doubt 150 years from now our descendants will glorify either our wisdom and prudence, or the Chinese.

Petro news - Afghanistan is Full of Oil

Petro news – Afghanistan is Full of Oil

One of our recent articles about the discovery of huge oil reserves in Tajikistan have led readers to the logical question – if there is oil in Tajikistan, shouldn’t’ there also be oil in Afghanistan? Indeed, Afghanistan has major hydrocarbon reserves and international oil giants are already scrambling for the right to develop Afghan deposits. However, mining operations in the troubled country carry specific risks, which we discuss below.

Got oil? We’re coming over.

According to recent reports by the U.S. Geological Survey, Afghanistan has a substantial mineral base, containing cobalt, iron, copper, gold and even lithium. But the oil fields of northern Afghanistan are its most attractive feature: the Afghan-Tajik Basin is reported to contain some 1.9 billion barrels of oil.

Of course, this black gold cannot remain without an owner for too long. Since the Afghans are unable to extract it on their own, foreign oil companies have to do the “dirty work”. A tender is currently under way to award oil exploration licenses, but with results due only in December participants keep their offers under wraps. However, we do know the tender list includes ExxonMobile (U.S.), Dragon Oil (Saudi Arabia), Kuwait Energy (Kuwait), ONGC Videsh (India), Petra Energia (Brazil), Pakistan Petroleum (Pakistan) PTT (Thailand), and TPAO (Turkey).

The list above includes only the lucky few who passed the initial tender commission, with over 20 other international oil companies having dropped out at the early stage. As you can see, interest in Afgan oil is, indeed, substantial.

But…. where is the ubiquitous China, you ask?

Haste makes waste

The China National Petroleum Corporation (CNPC) already won a tender to develop oil fields in the Amu Darya river basin last year. And it is presicely China’s interst that, according to some sources, forced the other players to pay more attention to Afghan oil. The market knows that profiting after the Chinese have taken root will not be easy, so the scramble to join the game is understandable. Even US Congressman Rohrabacher, known for his provocative statements, said on this subject: “The Chinese do everything for their gain only, using for their own benefit even the war waged by the United States” (source: InoSMI).

However, the Chinese haste to be first kid in the sandbox may have played a cruel joke on them. The problem is that the license acquired by the CNPC  in northern Afghanistan falls squarely onto the territory of the so-called Dostumistan, a region controlled by Abdul Rashid Dostum. Permit us a few words to paint a proper picture of this character.

Dostum is well known to Soviet Afgan veterans. Half-Uzbek and half Tajik by birth, after completing his education in the USSR Abdul-Rashid returned to Afghanistan to commence his military and political career. During the Afghan War in 1979-1989 he was the commander of the 53rd Division of the Afgan government troops, and he backed the Najibullah government until 1992. After its collapse Dostum was the de facto ruler of a vast northern region with its capital in Mazar-i-Sharif, which was named “Dostumistan.” Over the years he has repeatedly changed his political views, feeling the country for his life a number of times, but each time he returned and regained power. At the moment, Dostum is chief of General Staff of Afghanistan and the unofficial ruler of the same Dostumistan.

The problem with all of this is that the Chinese have made a rather grievous error in failing to take Dostum’s interests in the region into account when they took up mining his land. In order to win the tender the Chinese had for form a joint venture with one of Karzai’s company, who promised to solve any problems that may arise, and complete protection. But in Afghanistan, Karzai’s authority extends only to the territory controlled by Karzai. Therefore, upon seeing the first Chinese engineers on their territory, Dostum’s militia have demanded hefty baksheesh for the right to continue drilling operations. Given that even in the best of circumstances the Chinese will see first debit in only about five years, CNPC appears to have landed itself in a bit of hot water.

However, for major international oil corporations such problems are nothing new. A similar situation prevails in the African continent, and certainly the oil production in Afghanistan is no more difficult than, say, on the Arctic shelf. This largely explains the high interest in profiting from exploration of Afghan mineral resources. In light of the foregoing, the news of the oil fields in Tajikistan is not so fantastic.

Eugene Super