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China may finance Russia’s natural gas pipeline to Europe

NOVANEWS
Image result for Russia’s natural gas CARTOON

Gazprom’s Nord Stream 2 pipeline may get Chinese financing if European companies are forced out of the project by the latest round of US sanctions, business daily Vedomosti reports.

Russian officials have already contacted Chinese banks, sources have told the media.

“Nord Stream 2 has a good rate of return and low risks for creditors. Chinese banks may be interested,” explains Aleksey Grivach, deputy CEO at Russia’s National Energy Security Fund.

The extension will double the existing pipeline which delivers natural gas to Germany under the Baltic Sea and is estimated to cost €9.5 billion.

Initially, Engie, OMV, Royal Dutch Shell, Uniper, and Wintershall were to get a 50 percent stake minus one share in Nord Stream 2. However, red tape at the European Commission made Gazprom and its partners come up with another financing option. Under this plan, European companies will each provide an equal long-term loan to Gazprom, which will fully own the pipeline.

Financing of Nord Stream 2 may be affected by new US sanctions which target firms investing in Russian gas and oil projects. According to the new bill passed by the US Senate, and currently, before the House of Representatives, companies will be forbidden from making investments of over $1 million in the Russian energy sector.

On Wednesday, Russian President Vladimir Putin met the CEO of Royal Dutch Shell, Ben van Beurden. Among other things, they discussed Nord Stream 2. Van Beurden told Interfax the new project “will be realized for the benefit of all parties – both Europeans and the Russian Federation.”

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As Tensions with US Mount, Germany Reaffirms “Strategic Partnership” with China

Under conditions of mounting tensions with the United States, Germany is expanding its already close political and economic ties with China.

At a joint press conference in Berlin with Chinese Prime Minister Li Keqiang, German Chancellor Angela Merkel said on Thursday that in the period since China initiated diplomatic relations with Germany 45 years ago, the country has “become an increasingly important and now strategic partner.” This applies to “the entire spectrum” of relations, “of a political as well as economic nature … but also with regard to the cooperation on cultural and social issues.”

“At times of global instability,” Merkel said, both countries feel they “have a responsibility to expand our partnership in these diverse areas and intervene in favour of a rules-based global order.”

She was “happy” that there was “during this year a very intensive exchange.” Another visit is planned by Chinese President Xi Jinping ahead of the G20 summit in early July in Hamburg.

Trading relations had been “an important subject” in the talks, Merkel continued. It had been

“agreed that trading nations like Germany and China should cooperate and issue a clear recognition of free trade,” declared Merkel, in what was a barely concealed swipe at US President Donald Trump.

At the G7 summit last week, Trump repeated his criticism of Germany’s trade surplus and threatened to adopt counter-measures.

Germany’s political and economic relations with China are already more developed than with any other country outside of the European Union (EU). Regular government consultations have been taking place between the two countries since 2011.

“China was our most important trading partner in 2016, with a bilateral trade volume of €170 billion. These are already very impressive figures,” Merkel said.

Merkel and Li had “discussed that we want to expand these developments, which have been positive for both sides.”

The two countries signed 11 agreements and declarations of intent, according to the German government’s web site, including on cooperation in air travel technology, electronic mobility and recycling technology, and in the area of artificial intelligence. Partners on the German side included industrial giants like Airbus, Daimler, VW and Bosch, as well as mid-sized businesses and research institutes.

Chancellor Angela Merkel and China's Prime Minister Li Keqiang shake hands - behind them a bank of photographers with cameras.

Prime Minister Li Keqiang was in Berlin for talks with the Chancellor (Source: Bundesregierung/Denzel)

Deutsche Bank signed a five-year cooperation agreement with the China Development Bank (CDB) on Tuesday. Both banks committed in the agreement to finance projects on the “New Silk Road,” up to a cost of $3 billion. With its “One Belt, One Road” initiative, the Chinese government hopes to revive the trade route of the Middle Ages with massive investments in infrastructure in order to connect China’s major economic centres with Europe and Africa.

Germany and China also intend to cooperate more closely in the future on climate protection measures.

China will “continue to adhere to its promises within the framework of the Paris Agreement on climate change,” Li announced in Berlin, only a few hours before Donald Trump declared the US was exiting the deal in Washington.

The picture of Merkel and Li jointly reaffirming their commitment to the Paris Agreement took on a symbolic character under such conditions and was circulated widely around the world.

It is expected that during his visit to Brussels today, Li will sign a joint agreement with EU Commission President Jean-Claude Juncker and Council President Donald Tusk on wide-ranging cooperation to combat climate change.

Cooperation between Germany and China on security policy matters is relatively new. With regard to North Korea,

they “shared the conviction that North Korea could pose a danger to world peace,” Merkel said.

At the same time, they were “committed to a negotiated solution that is very, very urgent.” Germany declared its readiness “to be able to contribute to such a solution.”

Li also noted that they “want to cooperate more closely on other security policy matters.” Among other things, Germany and China want to “provide assistance to Afghanistan to rebuild its society and economy, and help them to increase their security capabilities so that the population can live there in peace.” The two countries would consult closely on “other international issues,” including “the Iranian nuclear dossier and the Istanbul process.”

Cooperation is also developing in the military sphere. German soldiers took part in joint exercises with troops from the Chinese People’s Liberation Army for the first time on Chinese territory during the 2016 “Combined Aid 2016” aid exercise. It was the first joint exercise between the PLA and any European army. Armed forces from both countries are already working side by side in Africa in UN missions, such as Minusma in Mali.

The deepening cooperation between Berlin and Beijing in a number of important policy areas is directly bound up with fraying Transatlantic relations, which have been a cornerstone of German foreign policy since the founding of the Federal Republic 70 years ago. Following last week’s NATO and G7 summits, Merkel called the alliance with the US into question during a speech in a Munich beer tent on Sunday, and declared that Germany would now take its “fate” into its own hands.

Although neither Merkel nor Li referred to the US or Trump by name during the press conference, German-Chinese cooperation is increasingly directed against the policies of the US, which is turning to economic protectionism and preparing for a military confrontation with Iran and North Korea. Such conflicts would not only be targeted at China, but also the geopolitical and economic interests being pursued by German imperialism in Asia.

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China’s “One Belt, One Road” Initiative: “A New Silk Road linking Asia, Africa and Europe”

NOVANEWS
 

On Sunday May 14, China’s President Xi Jinping will inaugurate the One Belt One Road summit, the object of which is to to build a “new Silk Road linking Asia, Africa and Europe”, largely focussing on infrastructure investment. Global Research brings to the attention of its readers this carefully researched review by political scientist Zhao Bingxing

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The debate on China’s ambitious “One Belt, One Road” (OBOR, also referred to as “Belt and Road”) initiative seems gradually cooled down in the last year and one plausible reason was the relatively slow and limited progress it made. But recent news released by Chinese government reheated it: The Belt and Road Forum for International Cooperation will be held in Beijing in the middle of this May and 28 heads of state and government leaders [including North Korea] have confirmed their attendance.

For international observers, at least two factors make this forthcoming meeting eye-catching. On the one hand, it may tell whether China can convince other countries it is capable of playing a leading role in promoting global free trade by implementing OBOR when the U.S. turns to isolationism and protectionism.

On the other hand, three and a half years have passed since this initiative was announced and a mid-term review is required, which should preferably in a summit or high-level forum, rather than by a one-sided progress report, and the conclusion of this review will be a focus. To make judgment on either of the issues, the analysis of the motive, rationale of OBOR are necessary but still not enough. We need to examine how successful this initiative was implemented in those relevant countries so far and what impact OBOR will bring to them. Considering the different national power, developing level, economic institution of these countries, and even their complicated relations with China, an unified or too generalized view without studying of each country should be avoided.

In this article, four countries in the OBOR scope, i.e. Russia, Uzbekistan, Malaysia and Germany are selected to do case studies and it shows that OBOR, though based on  positive principles, which focus on enhancing connectivity, facilitating trade and improving infrastructure, may not bring equal benefit to the relevant countries along this route and its impact on these countries differs significantly from one to another. In the meantime, the response of these countries also differs, which is closely relates to their economic, geopolitical and ideological consideration.

Russia

According to Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road (hereafter referred to as Vision and Actions), the official guiding document of OBOR, one of the three routes of the “Belt” passes Russia and two passes Central Asia, whereby Russia considers it to be a part of its historical economic and regional interests.[1][2] Hence, Russia can be viewed as a key to the success of OBOR. In a sense, the construction of the “Belt” will face more challenges if it lacks Russia’s cooperation, or at least consent.

A recent official remark in respect to bilateral relations between Russia and China seems quite optimistic. On Jan 17 and 18, 2017, Russian Foreign Minister Sergey Lavrov and a Chinese spokesperson for the Ministry of Foreign Affairs respectively stated that Sino-Russian relations were “at their best level ever in the two countries’ history”.[3] Both of them also mentioned OBOR as a part of Sino-Russian cooperation.[4] Though China has consistently been seeking support and cooperation with Russia (and all the other countries along OBOR as well), it is important to note, however, that Russia’s position was not consistent and underwent an obvious shift.

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Chinese President Xi Jinping and Russian President Vladimir Putin

Initially the Kremlin didn’t give the OBOR initiative positive feedback and it didn’t show enthusiasm for Asian Infrastructure Investment Bank (AIIB) in the first place, either, which reflected a dominant view of Russian elites that these would lead to a mutual distrust between the two countries.[5]

Russia’s concern about losing freight traffic was one reason for its unwillingness because the original route based on Chinese planning was to bypass Russia.[6] More importantly, it worried that the closer economic ties between China and the Central Asian countries would compete with Russia’s own integration plans for this region, which may further make the Central Asian countries drift away from Russia and embrace China.[7] But President Putin soon changed his position when China acknowledged Russia’s concerns and agreed to make some concessions to accommodate Russia’s needs, followed by the Russia’s endorsement of OBOR and its joint declaration with China on coordinating and linking OBOR to Eurasian Economic Union (EEU) in the middle of 2015.[8]

In fact, China did show considerable willingness and flexibility to cooperating and this was exemplified by China’s “creation” of an economic corridor with Russia and Mongolia, which would connect the “Belt” to Russia’s transcontinental railroad plan which was not in the initial plan of the OBOR.[9] Besides, China’s “Three Nos” principle in Central Asia, i.e. no interference with Central Asian countries’ internal affairs; no attempt to seek a dominant role in regional affairs; and no desire to create a sphere of influence, being a policy for dealing with its relations with Central Asian countries, to some extent eased Russia’s concern about China’s involvement in this region, because such showed that China had no intention of changing the status quo (Russia’s dominant influence) even though China didn’t formally acknowledge Central Asia as Russia’s backyard.[10] So far the concessions China made with regards to Russia are probably the most significant ones made during the promotion of OBOR because no other country alone constituted a reason for China to change the route.

Russia’s consideration is also based on the fact that some benefits, including infrastructure construction and cooperation on industrial capacity with China are not a priority and the only significant and substantial benefit to be incurred may be the receipt of funding from China. Rather, apart from the competing interest in Central Asia, some cooperation models as used in other countries such as contracting a construction project and dispatching thousands of Chinese workers there would hardly be acceptable for Russia due to its vigilance on the issue of Chinese migrants, especially in Far East region.

However, there are some reasons that Russia eventually decided to support this initiative. First, there is some tangible benefit that Russia can expect, though it doesn’t seem so imperative for Russia to seek out for the time being. In addition to being another channel for funding of infrastructure, OBOR, after an adjustment to its route as per Russia’s requirements, both in the plan and in practice, has brought some benefits to Russia.

Since Russia’s transcontinental rail was connected to OBOR and China-Mongolia-Russia economic corridor started to build, freight volume rocketed up in the railway routes from China to Russia, and to Europe via Russia, both of which used Russia’s transcontinental railroad, such as Chongqing-Inner Mongolia-Russia (Yu-Meng-E) and Hunan-Inner Mongolia-Europe (Xiang-Meng-Ou), which had positive effects for both China and Russia.[11]

Second, EEU is currently Russia’s priority. Though initially OBOR was viewed more as a rival, China’s clarification and commitment on connecting the two projects eased Russia’s concerns to a large extent. As a concrete step, a document was signed in the middle of 2016 in which the two governments decided to formally start negotiations on an economic partnership, mainly focusing on trade facilitation, merging different standards on intellectual property, customs, and other areas.[12] Third, it might not be wise nor feasible for Russia to contain China’s influence in Central Asia, or larger scope by boycotting this initiative.

For one thing, though the influence of Russia, the “elder brother” in Eurasia is still dominant, which is determined by its close political, economic, cultural, language and even people-to-people ties with the five republics in this region, the latter have long been seeking reducing their overdependence on Russia and striking a balance among big powers. Of course, Russia and China are the most important two in the region. In the past decade, China’s influence in the field of economics in this region grew very quickly and as such China has been able to compete with Russia, if not surpass it.

In 2015, all Central Asian countries have a larger share of their two-way trade with China than with Russia except for China’s exports to Kazakhstan and Turkmenistan and imports from Kyrgyzstan and Tajikistan.[13] Besides, the build-up of mutual trust and cooperation in other areas such as that of anti-terrorism also increased China’s influence and say in this region. These facts make it very difficult for Russia to sway these countries by one-sided action. It is even interesting that Kazakhstan, where Xi Jinping first announced the “One Belt” initiative, is exactly the country which has the closest relations with Russia in Central Asia. For the other, OBOR is basically based on the actual needs of both China and many other countries. Also, China has enough political will and financial resources to push forward with. These factors mean that it can still proceed even if the support from some of the local big powers is absent.

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In addition, it is necessary to examine Russia’s position beyond the calculation of the benefit or loss of OBOR per se and put it in a broader context. After the annexation of Crimea, the Ukrainian territory in March, 2014, the West imposed the harshest sanctions since the Cold War was over against Russia and this was a heavy, though not devastating blow to Russia, both in politics and in economy.

Data showed that Russia entered into a recession, with GDP growth of -2.2% for the first quarter of 2015, as compared to the first quarter of 2014, which was regarded as a success of Western sanctions in terms of the proximate goal of inflicting damage on the Russian economy.[14] Under this great pressure, it is no surprise that the Kremlin turned to the East and sought cooperation opportunities from China. Though China didn’t support Russia’s annexation of the Crimea and basically held a neutral position, it did have a great deal of interest in strengthening bilateral cooperation with Russia in economic, military and other areas because China also faced pressure from the West and needed political support from Russia. Admittedly, joining OBOR cannot bring enough benefits to Russia to offset its losses from the sanctions, nor can the closer relations with China.

However, a positive attitude to OBOR is vital for Russia if it hopes to get more financial support from China, whether under the OBOR initiative or other bilateral projects. It is hard to image that the $400 billion USD gas deal between the two countries, which was signed shortly after Russia annexed the Crimea and other cooperation projects can be implemented smoothly if Russia eventually declines this initiative that China attaches the most importance to.

On the whole, the benefit of OBOR seems more symbolic than substantial for Russia and thus Russia still sticks to the EEU project, which can help to bolster its economic and political dominance in Eurasia. This has been evidenced by the wording used when Lavrov mentioned that the Russia-China relations were at the best of all time this January. He emphasized “aligning” the two projects, instead of “joining” OBOR. Nevertheless, Russia still cannot neglect OBOR because the latter is closely related to China, who is able to provide key support to Russia. This support was vital to Russia when it suffered from the sanctions from the West and is expected to continue to play an important role in the near future because the relations between Russia and the West have been in a stalemate and chances of lifting the sanctions look very slim in the near future.

Uzbekistan

It is not a coincidence that Xi chose Central Asia to announced the “One Belt” initiative first. One plausible explanation for such is that this is the region where the ancient Silk Road first passed by when it left West China, but the underlying reason may be that the five republics of Central Asia are the countries who best match the ideas of OBOR and support it most as well. Since they gained independence twenty-five years ago, these landlocked countries had to face a common challenge, i.e. how to develop their economies in the Post-Soviet time?

Although Putin showed a strong desire to play an even bigger role in this region, Russia’s capabilities alone are not enough to ensure the prosperity of these counties. More importantly, such support is not without a price—overreliance on one big power will risk their independence. The rise of China provided an alternative to these countries which enabled them to choose partners from a wider range and benefit from both. OBOR is attractive to Central Asian countries because the focuses of this initiative, such as promoting connectivity, facilitating trade and investment, and improving infrastructure are all imperative to them. In this section, Uzbekistan is selected as an example, which can be a representative of the other four countries.
In May 2014, one year before the Vision and Actions was released, the then Uzbek President Karimov stated that Uzbekistan would actively participate in the building of the Silk Road economic belt when he met with Chinese President Xi.[15] In June 2015 China and Uzbekistan agreed to expand trade and economic cooperation under the framework of the “Belt initiatives”.[16] In June 2016, Karimov and Xi agreed to focus on jointly promoting this initiative.[17] All of which clearly shows Uzbekistan’s positive attitude to OBOR.

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Uzbek President Karimov and Chinese President Xi Jinping

The main areas of cooperation under the OBOR framework include economic and trade cooperation, gas pipeline, railway tunnel construction, people-to-people exchange, etc. and much progress has been witnessed since a series of pacts were signed.[18] For example, the Qamchiq Tunnel in Uzbekistan, which is a part of the Angren-Pap railway line that connects Tashkent and Namangan, was completed on June 22, 2016 as a major achievement of OBOR.[19]

There is also some uncertainty about the implementation of OBOR in this country, which not only comes from the death of Karimov in last September, but also comes from local Uzbekistanis’ insufficient knowledge and recognition of OBOR, and too even China’s overall model of economic development.[20] In spite of this, cooperation related to OBOR still seems to be on track and there is no sign that it has been set aside by Uzbekistan.

Admittedly, the five republics in Central Asia differ from each other in terms of levels of democracy, natural resources, economic development levels, even in terms of domestic tensions or conflicts. Nevertheless, their common feature in geographic location cannot be overlooked. Being landlocked states, their trade connectivity with the rest of the world is limited, but they are also the overland juncture between East Asia and Europe, which gives them the potential to become a transportation hub that can connect the East and the West.[21] OBOR looks like a perfect solution to this situation.

If properly managed, it can better the connectivity within their individual country and that with other countries, which will bring triple benefits to them. First benefit is in meeting their local needs. Second is in facilitating their own export and import, and the third is to make profit by providing transshipment services. Also, appealing to Central Asian countries is China’s “no intervention in domestic politics”, “business-is-business” and economic oriented approach. When compared to Russia or other powers, China “is more inclined to perceive the local situation in terms of a sophisticated win-win scenario rather than in terms of aspirations of geopolitical dominance in the region” and such this policy has been approved to be successful.[22]

Overall, OBOR is beneficial to Uzbekistan and joining this initiative can be a reasonable choice. In fact, Uzbekistan can be a typical case with regards to OBOR from two different angles. One is that it represents the other four Central Asian countries which have similar geographic advantages as well as disadvantages and economic status quo. The other is that it can represent many medium or small developing states which have little direct conflicting interest with China in terms of geopolitics and thus can focus more on the economic cooperation they are mutually interested in. Basically, it is not difficult for them to find some areas in which they can cooperate with China on and benefit from them together.

Malaysia

Being an important part of 21st century Maritime Silk Road, or “One Road”, the other half of the OBOR, Malaysia, has its significance in two aspects. First, it is sitting on a strategic spot, in that Kuala Lumpur is quite close to the Malacca Strait, the second busiest waterway in the world. Trade statistics show that almost half of the world’s total annual seaborne cargo passed through this passage, which is jointly administered by Malaysia, Singapore and Indonesia.[23] Second, Malaysia is now China’s largest trading partner in ASEAN and the third largest in Asia and its policy option can be used as reference for some other countries.[24] In addition, Malaysia is able to help China expand markets in other ASEAN and neighboring countries.[25] All these factors together make Malaysia’s position key to the prospects of “One Road”.

In fact, Malaysia is perhaps the most active country regarding the OBOR in ASEAN, or Southeast Asia. In October 2014, Malaysian Prime Minister Najib Razak voiced his country’s readiness to support both OBOR and AIIB when meeting with Chinese State Councilor Yang Jiechi.[26] In addition, many other high-ranking governmental officials also echoed Najib’s position on OBOR. For example, Liow Tiong Lai, the Minister of Transport of Malaysia reiterated that the OBOR was a win-win project and indicated that Malaysia was ready for that in his speech at the Boao Forum for Asia in June 2015.[27]

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Malaysian PM Najib Razak and Chinese President Xi Jinping

Several key areas and projects have been highlighted by both Malaysia and China under the umbrella of OBOR, including infrastructure, transportation, energy, property and even education and some progress have been made on each to date. For example, 60% of the equity of the 1MDB-owned Bandar Malaysia project in Kuala Lumpur was sold to a consortium led by a Malaysian company and China Railway Engineering Corp (CREC, a stated owned Chinese company) at RM7.41 billion in early 2016.[28] In November of the year, following an official visit to China by Najib, Malaysian and Chinese companies saw the signing of fourteen agreements on several iconic and mega agreements worth RM144 billion.[29] Another eye-catching project which China hopes to incorporate into OBOR is the High Speed Rail (HSR) connecting Malaysia and Singapore. Though the final result of HSR bidding will not be available until 2018, it is a general consensus that a Chinese-led consortium is one of the two most promising competitors (the other is Japanese-led consortium) because of its successful precedent as set in Indonesia.

There are several reasons that can explain the positive attitude of both government and business sectors. First, Malaysia has basically maintained friendly relations with China over the past few decades. In fact, Malaysia was the first country in Southeast Asia to build formal ties with China in 1974.[30] Such good relations are also based on the fact that there was little strategic conflict between the two countries after 1980s whereas there was also a frequent people-to-people exchange that occurred because of the large Chinese ethnic population present in Malaysia. It should be noted that territory disputes between the two countries do exist, which is about the waterways in the South China Sea. However, both Malaysia and China seem to be restrained about such and downplay this dispute, which is unlike the situation between the Philippines and China in the last several years. As a result, this dispute didn’t impede the bilateral relations. Second, both Malaysia and China have benefited a lot from previous economic cooperation and thus there is a strong driving force for them to maintain such development. A closer look at the bilateral economic cooperation between the two countries shows that two-way investment and trade involves different sectors, from manufacturing to construction, and different regions in these two countries, which reflects the in-depth and successful cooperation of both. Third, Malaysia believes that much of its needs in infrastructure, transportation and investment can be met by joining OBOR. As Najib notes, for instance,

“[The double-track East Coast Rail Line] will spur socio-economic growth in specific areas and bring great benefit to the people in the East Coast [of Malaysia]”.

Image result for east coast rail line malaysia

Also, with the implementation of OBOR, Malaysia sees more opportunities to attract Chinese investment.[31]
OBOR can be a good opportunity for Malaysia too because it is more likely to succeed in this country than in some other developing countries along the OBOR. Aside from the strategic significance, Malaysia has a relatively stable political environment, well-established legal system and sound economic framework and good infrastructure. Its unique advantages include its large Muslim population as well as its Chinese ethnic population. The latter can help Chinese businesses easily enter into the local market and the former provide a possibility to connect the Chinese halal industry to the Muslim world.[32]

Though geopolitical consideration is not frequently and publicly emphasized when Malaysian high-ranking officials talk about OBOR, there is good reason to believe that Malaysia is trying to seek a balance between the two big powers of the United States and China. While actively getting involved in OBOR, Malaysia is also a member of TPP, a US-led trade agreement.[33] Since OBOR and TPP are widely considered to be part of a rivalry between China and the US, the involvement of both projects clearly shows that Malaysia hopes to benefit from both but not to overly rely on any. In a sense, the choice of “OBOR or TPP” reflects the choice of “US or China”, which is a common issue facing almost all the ASEAN countries, which is largely due to the geographic location of these countries. Although ASEAN countries try to speak with one voice, each of them have different responses to the “US or China” issue — some are more pro-American and others seem more pro-China. Of course, such is subject to change depending on their leadership and certain circumstances and the dispute over the South China Sea plays a key role in the policy option.

Last but not least, skepticism and concerns about OBOR can also be found in Malaysia. In addition to the dispute concerning the South China Sea, the “indifference” of Malay ethnic people as opposed to the “enthusiasm” of Chinese ethnic people and the exaggeration of the potential effect of OBOR are also challenges.[34] However, it seems that the Malay-Chinese cooperation on OBOR hasn’t been influenced much by such opinions.

Germany

China became the biggest trading partner of Germany in 2016 for the first time, overtaking France and the US, and Germany has long been China’s biggest trading partner in Europe.[35] This clearly shows the even closer economic relations between the two countries. From China’s perspective, Germany’s significance for OBOR primarily lies in its geographic location as one of the destinations of OBOR as well as its identity as an important actor among Western countries, which means that cooperation on OBOR, if successfully implemented, may set an example for other Western countries in Europe and attract more Western partners. Overall, the German government holds a relatively positive position towards OBOR and its focus is mainly on the areas of improving connectivity and trade and investment facilitation. Germany’s Chancellor Angela Merkel has welcomed the initiative to secure more Chinese investment in Europe.[36] At the same time, reservations and ambiguity can also be read from German government positions. German Consul General in Hong Kong when asked about the position of Germany on OBOR, said that Germany welcomed China’s openness to the rest of the world but he also highlighted that “any roads and any belts should be and will be in both directions”.[37]

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German Chancellor Angela Merkel and Chinese President Xi Jinping

Although German government is not very willing to provide clear and strong support to OBOR, it didn’t refuse the relevant business opportunities that came with such. However, when compared to the Central Asian countries or some Southeast Asian countries, the result yielded in Germany under OBOR seems rather limited. The most prominent progress related to OBOR made in Germany is the Sino-European freight trains. In fact, the only five big projects to be undertaken by the end of 2016 were those linking the existing railroads. But it should be noted that several of them had been planned long before the announcement of OBOR and were just included in this initiative later.[38]

Unlike some countries which are China’s immediate rivals or have territory disputes with China, Germany can stay away from such tricky problems. As a result, the responses of Germany regarding OBOR, especially those positive ones, including the statements of the government or business sectors and projects discussed or agreed to are almost all based on economic calculations. In fact, the realistic or foreseeable benefits for Germany may also lie in this area. For one thing, the operation of Sino-German freight train provided a new option for the transportation of goods between China and Germany, and other European countries with a shorter timeline and more affordable cost. According to the China Railway, the total freight volume of the Sino-European railway reached 42 million tons in 2016, an increase of 12% and Germany was the main destination.[39] It should be noted that there are other destination countries of eastbound freight trains aside from China, such as Kazakhstan.[40] This demonstrates that the connectivity achieved can be beneficial to all the countries along OBOR. For the other, it did attract more Chinese investors to Germany. So far around seventy enterprises have settled in Duisburg, one of the destinations of Sino-German freight train, and most of them entered the European market within the last two years.[41] Overall trade and investment statistics show a very positive trend for the past three years and OBOR did play “some” positive role in such, though it may not be easy to measure precisely to what extent OBOR contributed to this trend.

Admittedly, the challenge facing OBOR in Germany is huge, and such a challenge is quite different from that in the developing countries or in China’s neighboring rivals. For a Westernized developed economy like Germany’s, infrastructure, one of the key pillars of OBOR, which is also a focus for many of the countries in Central Asia and Southeast Asia, is not a priority, nor even a concern of Germany’s because infrastructure is well-established throughout the country. Foreign investment is generally welcomed but not a pressing need. The cooperation on manufacturing capacity which has been in operation by China and some developing countries along OBOR is not applicable to Germany at all. This explains why the major benefit, if not the only benefit, that is attractive to Germany may be the connectivity created by OBOR and the resultant trade and investment opportunities.

In addition to the mismatch as mentioned, the obvious divergence between Germany and China regarding China’s markets, transfer of cutting-edge technology to Chinese companies, Chinese state-owned enterprises, or ultimately, China’s model of economic development is also a big obstacle for OBOR. For example, Berlin became seriously concerned that Chinese acquisition of hi-tech German companies would make China an even more aggressive competitor while Chinese officials criticized this new protectionist tendencies in Germany in response.[42] Needless to say, this is a common issue between almost all the EU countries and China. Furthermore, the EU’s approach has, to a large extent been based on a democratization and human right paradigm, which can be viewed as one of the root causes of their indifference and skepticism of OBOR.[43]  As a result, Germany’s involvement with OBOR is limited and the influence of OBOR to this country is drastically weakened.

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Siemens is a German conglomerate company with headquarter in Beijing, China.

For years Germany’s policy on China has been split between the economic interests and ideological considerations. On the one hand, it cannot ignore the Chinese markets and cooperation with China, which has brought huge benefit to its economy. On the other hand, Germany’s free market capitalism and values can hardly accommodate China’s development and expansion based on the Chinese model and thus deterrence is required. This dilemma has inevitably influenced how Germany looks at OBOR and what impact OBOR will bring to Germany. The result is, not surprisingly, a temporary balance between the two objectives. Of course, such a balance is not unchangeable and the struggle over economic interests and ideological principles will continue. A recent and noticeable event that occurred which may sway Germany’s position might be US president Trump and his isolationism. Before Merkel’s meeting with Trump, Merkel and Xi stressed a commitment to free trade during a telephone call.[44] This move signals that Germany may have to attach more importance to achieving economic cooperation with China, which means OBOR will probably have a more favorable environment in Germany in the future.

The case of Germany can reflect the general European situation to some degree and it basically coincides with European Commission President Jean-Claude Juncker’s statement, who also emphasizes the importance of investment and links and holds that this initiative can bring huge benefit to both China and the EU, if it works well.[45] However, the representation of Germany shouldn’t be overestimated. On the one hand, there is no official EU position on OBOR as of yet and EU countries also lack a collective voice.[46] On the other hand, the Germany case is more applicable to Western Europe than Eastern, Central and Southeastern Europe. Unlike Germany, most countries in the Central, Eastern and Southeastern parts of Europe are less developed and thus need more infrastructure building assistance and foreign investments, which brings them more opportunities to cooperate with China under OBOR. And this has been evidenced by a series of cooperation between two parties, such as the China Ocean Shipping Company (COSCO)’s purchase of the Greek port of Piraeus and China’s building of a high-speed railway from Hungary to Serbia.

Conclusion

The analysis of the four countries, though fragmented and not adequate to provide a whole picture of the impact of OBOR for those countries within the scope as well as their response, to some extent reveals the trend of the relations between OBOR and the relevant countries, because each of the four countries can represent a group of countries, or at least reflects some key consideration of the countries with the same features.

First, big powers are more inclined to put OBOR in the context of power rivalry and this inevitably reinforces OBOR as a challenge and usually leads to distrust of this initiative. Russia’s response initially reflected

this relationship but China’s immense move towards making concessions and Russia’s plight in the Ukraine eventually changed Russia’s position. By comparison, India is a case in point to show how another power is wary of China’s OBOR initiative. Since India positions China more as a rival than a partner, and there are no key drivers that emerged like those which occurred in Russia’s case that could reverse the trend, to date India hasn’t endorsed this initiative and there is little hope it will in the future. To some degree, the benefits or losses that OBOR can yield have become secondary to geopolitical considerations. Small or medium states, such as the Uzbekistan and Malaysia cases suggest, however, don’t want to get involved in the great power games and tend to focus on the tangible and immediate gains that can be derived from OBOR. They don’t seem to care whether or not China can get more from the bilateral cooperation than they do. In reality, many of them tend to seize the opportunity as it presents itself and transform it to improve their own country’s economy.

Second, developing countries are meant to benefit more from OBOR. Overall, the trade and investment facilitation, one of main goals of OBOR is universally welcomed by both developed countries and developing countries alike. But only the developing countries have huge demands for infrastructure building and requirements for relevant funding to be invested, which can probably be met by the implementation of OBOR. Then it should come as no surprise that developing countries along OBOR show relatively more positive attitudes towards it.

Third, political and economic institutions and too even ideology can play a important role in the assessment of OBOR as well as the position a country takes on it. Western counties are more concerned about the role of the Chinese government and state-owned enterprises in OBOR and are prone to link the implementation of this initiative outside China to the market environment within China. By contrast, non-Western countries have less concern in this regard partly because some of them are also practicing state capitalism, rather than free market capitalism. Therefore, their judgment is basically centered on what result OBOR can yield and to what degree such is beneficial to them.

In general, the idea of enhancing connectivity and promoting trade, which constitutes the main rationale of OBOR, is positive and this explains why OBOR won quite a bit of recognition after three years of intensive promotion, though it has always been accompanied by skepticism and challenges outside China. However, this initiative is still not a one-size-fits-all solution because its real effect relies heavily on the different situation of each country. Then it is no surprise that each country has different positions, all depending on the consideration of various factors, including economic, geopolitical, ideology, etc. Roughly speaking, OBOR is more of an opportunity for small and medium developing states than big powers or Western countries.

In a sense, Trump’s new policy, Brexit and even the rise of right-wing political force in West Europe provided an unexpected opportunity for China’s OBOR initiative because most countries in the world are still in favor of open and free trade. In the meantime, they also need some kind of mechanism and project to materialize this conception. Intentionally or unintentionally, OBOR may probably play a positive role in this regard, but we also need to realize its limit and avoid too optimistic or unrealistic expectation.

NOTES

[1]National Development and Reform Commission, Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road.
[2]Linn, J. F., Central Asian Regional Integration and Cooperation: Reality or Mirage?, 96.
[3]See Russian Foreign Minister Sergey Lavrov’s remarks and answers to media questions at a news conference on the results of Russian diplomacy in 2016, Moscow, and
Chinese Foreign Ministry spokesperson Hua Chunying’s regular press conference on January 18, 2017.
[4]Ibid.
[5]Li, X., Silk Road Can Find Common Ground with Eurasian Economic Union.
[6]Wilson, The Eurasian Economic Union and China’s Silk Road: Implications for the Russian–Chinese Relationship, 119.
[7]Yu, China-Russia Relations: Putin’s Glory and Xi’s Dream.
[8]Wilson, The Eurasian Economic Union and China’s Silk Road: Implications for the Russian–Chinese Relationship, 119.
[9]Li, X., Silk Road Can Find Common Ground with Eurasian Economic Union.
[10]Yu, China-Russia Relations: Putin’s Glory and Xi’s Dream.
[11]Xinhua, China Uses Cooperation on Regional Ports to Boost China-Mongolia-Russia Economic Corridor.
[12]Shtraks, China’s One Belt, One Road Initiative and the Sino-Russian Entente: An Interview with Alexander Gabuev.
[13]Central Intelligence Agency. World Factbook,
[14]Christie, Sanctions after Crimea: Have They Worked?
[15]Ministry of Foreign Affairs of PRC, Xi Jinping Meets with President Islam Karimov of Uzbekistan.
[16]Xinhua, China, Uzbekistan to Strengthen Cooperation Under the Silk Road Initiative.
[17]Xinhua, China, Uzbekistan Agree to Focus on Belt and Road Development.
[18]Xing, Guangcheng, and Weiwei Zhang, Promote the Building of Sino-Uzbeki “One Belt, One Road”.
[19]Xinhua, Chinese, Uzbek Leaders Hail Inauguration of Central Asia’s Longest Railway Tunnel.
[20]Chen, Julie Yu-Wen, and Olaf Günther, China’s Influence in Uzbekistan: Model Neighbor or Indifferent Partner?
[21]Li, Z. G., Central Asia Embraces “One Belt, One Road” Because of the Matched Interest.
[22]Kozłowski, The New Great Game Revised: Regional Security in Post-Soviet Central Asia.
[23]InvestKL, One Belt One Road: Kuala Lumpur is Sitting on a Strategic Spot.
[24]Foon, “Belt-road” to Benefit Businesses.
[25]Ibid.
[26]Xinhua, China, Malaysia Wow to Promote Bilateral Relationship.
[27]Liow, Speech By YB Dato’ Sri Liow Tiong Lai, Minister Of Transport, Malaysia, Boao Forum For Asia – Luncheon Speech One Belt One Road Strategy, Vision, Action Plan.
[28]Khoo, China’s ‘One Belt, One Road’ Initiatives in Malaysia.
[29]Bizhive, Riding the dragon: Harnessing Malaysia-China’s Trade Partnership.
[30]Foon, “Belt-road” to Benefit Businesses.
[31]Bizhive, Riding the Dragon: Harnessing Malaysia-China’s Trade Partnership.
[32]Liow, Speech By YB Dato’ Sri Liow Tiong Lai, Minister Of Transport, Malaysia, Boao Forum For Asia – Luncheon Speech One Belt One Road Strategy, Vision, Action Plan.
[33]With the inauguration of President Trump, the US quitted TPP on Jan 23, 2017. See http://www.bbc.com/news/world-us-canada-38721056
[34]Chen, J.S., Where is “One Belt, One Road” Heading for?
[35]Xinhua, Sino-German Trade Reaches a New Level Based on Mutual Benefit.
[36]Gaspers, Germany Wants Europe to Help Shape China’s Belt and Road Initiative.
[37]Lau, Make China’s Belt and Road Initiative a Two-way Street, Says German Consul General in Hong Kong.
[38]Ibid.
[39]Guan, “One Belt, One Road” Is a Lucky Key for Us.
[40]Ibid.
[41]Ibid.
[42]Larres, China and Germany: The Honeymoon Is Over.
[43]Arduino, China’s One Belt One Road: Has the European Union Missed The Train? 14.
[44]DW, Germany, China Stress Commitment to Free Trade Ahead of Merkel’s Meeting with Trump.
[45]Xinhua, Interview: Europe to Benefit from China’s One Belt, One Road Initiative: EC chief.
[46]European Parliament, One Belt, One Road (OBOR): China’s Regional Integration Initiative.

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Kozłowski, Krzysztof. “The New Great Game Revised: Regional Security in Post-Soviet Central Asia.” Warsaw School of Economics, (2014): 190-203

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Posted in ChinaComments Off on China’s “One Belt, One Road” Initiative: “A New Silk Road linking Asia, Africa and Europe”

This is What Can Prompt China Not to Defend N Korea in the Event of War

NOVANEWS
Image result for China N Korea CARTOON
Sputnik 

Recently, there have been a growing number of suggestions by Chinese diplomatic and military commentators that Beijing is not obliged to defend Pyongyang in the event of a military attack, an article in the South China Morning Post read.

The assumption comes as senior officials in the United States have warned of a strike against North Korea.

In particular, Washington has positioned two destroyers in the region that can deploy Tomahawk missiles, according to what intelligence officials told NBC News, along with heavy bombers stationed in Guam that could provide support should such a strike take place.

“North Korea is a problem, the problem will be taken care of,” US President Donald Trump told reporters Thursday.

Chinese media outlets and even some official websites have recently published articles saying that in the current situation there are fewer options to find the peaceful solution to the North Korean nuclear issue.

For example, on March 22, website China Military, sponsored by China’s People’s Liberation Army (PLA), published an article commenting on a ground test by Pyongyang of a new type of high-thrust rocket engine.

“We believe that warfare is just a matter of time if DPRK continues its nuclear and missile program. […] Under no condition will the international community accept DPRK’s legal possession of nuclear weapons and intercontinental ballistic missiles. As Pyongyang continues with its nuclear programs, international sanctions will get tighter, and it will eventually be isolated from the rest of the world for a long time,” the article read.

It is not in Pyongyang’s interests to go against international community’s stance on nuclear weapons. In a situation when the US, Russia and China share views of North Korea’s nuclear ambitions Pyongyang has almost no room for maneuvering. On the other hand, Pyongyang’s decision to give up its nuclear ambitions would satisfy the interests of the North Korean political elite, without posing a threat to the country’s existence.

This assumption was made before President Trump and Chinese leader Xi Jinping met in Florida, which proves that Beijing toughened rhetoric towards Pyongyang not under the influence by Washington.

In formal terms, China is North Korea’s only military ally, according to the 1961 Mutual Aid and Cooperation Friendship Treaty. At the same time, many Chinese experts say that de-facto those obligations do not exist anymore. The reason is that Pyongyang’s nuclear ambitions have formed an epicenter of tensions near China’s border.

“Despite China’s support for North Korea during the 1950-1953 Korean War, in the current environment, Beijing will prioritize national security over ideology,” Andrei Karneyev, deputy director of the Institute of Asian and African Countries at Moscow State University, told Sputnik China.

According to the expert, this change of heart is not related to any pressure from Washington, but is dictated by security needs. However, the question remains: what would China do in the event of a military confrontation against North Korea?

Shanghai-based military analyst Ni Lexiong told the South China Morning Post that Beijing would need to provide military assistance to its neighbor if US troops invaded, but Pyongyang’s violation of the UN non-proliferation treaty was a “strong reason” for China not to help.

According to Zhan Debin, an expert from the Shanghai University of Foreign Trade, there is little chance of a military conflict on the Korean Peninsula.

“The US is unlikely to attack North Korea on its own initiative. It would be possible if Pyongyang endangered the key security interests of Washington and Seoul. This would be an adequate reason for the US,” he told Sputnik China.

The expert pointed out that the US military force redeployed to the Korean Peninsula is rather a warning for Pyongyang.

He added that the probability of minor conflicts between the US and North Korea is very low because any minor conflict will turn into a large-scale confrontation.

“We can’t say that the US recklessly wants to start a war. Of course, South Korea doesn’t want war. If a conflict broke out South Korea would be hit the most,” Zhan Debin said. Commenting on China’s actions during the hypothetical confrontation, the expert noted that Beijing may not get involved if Pyongyang provoked a conflict, but at the same time China cannot turn a blind eye to instability in the region.

“Of course, Beijing will try to prevent a conflict from turning into war. China will not supply weapons and provide military and combat assistance,” he said.

The expert continued: “It is not correct to speculate on the matter. This makes no sense. What we should do is to have a backup plan of actions. Of course, China would act [in the event of a confrontation], but there should be a reason for actions. On the whole, China’s goal is to maintain peace and stability in the region.”

Posted in USA, China, North KoreaComments Off on This is What Can Prompt China Not to Defend N Korea in the Event of War

China rejects coal shipments from North Korea

NOVANEWS
Image result for north korean photos
RT 

A fleet of North Korean cargo ships laden with coal is returning to their home port of Nampo after China ordered its trading companies to refuse the shipments, Reuters reports quoting shipping data.

This appears to show China is committed to the ban on imports of North Korean coal after Pyongyang carried out globally criticized missile tests. Coal is the crucial export product of the isolated state, especially the deliveries of the type used for steel making – coking coal.

To curb coal traffic between the two countries, Chinese customs ordered companies to return their North Korean coal cargoes starting from April 7, according to Reuters sources.

Two million tons are stranded at Chinese ports; the agency reported quoting a source at Dandong Chengtai, one of China’s biggest buyers of North Korean coal.

To reduce the shortfall in coal imports, China resumed buying American coal this year. According to trade data, China bought over 400,000 tons by late February. The US did not export coking coal to China between late 2014 and 2016. However, President Donald Trump pledged to revive the country’s coal sector.

US Secretary of State Rex Tillerson warned that following the missile strike again Syria, North Korea could be the next. Beijing and Washington have reportedly agreed to impose tougher sanctions against Pyongyang if it carries out nuclear or long-range missile tests.

President Trump tweeted on Tuesday that a trade deal between China and the US depends on how Beijing tackles North Korea.

“I explained to the President of China that a trade deal with the US will be far better for them if they solve the North Korean problem! North Korea is looking for trouble. If China decides to help, that would be great. If not, we will solve the problem without them!”  he posted.

Posted in China, North KoreaComments Off on China rejects coal shipments from North Korea

China and Russia Veto UN Security Council Resolution on Syria – No Carte Blanche for Chapter VII

Permanent UN Security Council member Russia, on Wednesday, used its veto right to block the adoption of a resolution on Syria that would have condemned the alleged use of chemical weapons in Syria and called on the Syrian government to cooperate with an investigation into the incident.

Ten of the fifteen members of the Council voted in favor of the draft resolution. However, permanent Security Council members China and Russia as well as Ethiopia and Kazakhstan voted against. The “no” of the two permanent Council members China and Russia, who have veto right, prevented the adoption of the document.

The proposed resolution had been drafted by permanent Council members France, the United Kingdom and the United States. The document would have strongly condemned “the reported use of chemical weapons in the Syrian Arab Republic, in particular the attack on Khan Shaykhun,” the site of last week’s incident that has drawn increasing global attention.

Some passages of the document implied that the government of the Syrian Arab Republic was responsible for the attack while others implied that the government of the Syrian Arab Republic refused to fully cooperate with relevant previous resolutions and the Organization for the prohibition of Chemical Weapons.

The text would, in other words, have implied an authorization of the use of Chapter 7 and military force against the government and military of the Syrian Arab Republic due to its “alleged” non-compliance with regard to chemical weapons, in an “alleged” chemical weapons attack, “allegedly” carried out by Syrian Arab Air Forces.

2013 - The Syrian Arab Army seized 281 barrels with chemicals from insurgents at a farm in Banias, Tartus.

2013 – The Syrian Arab Army seized 281 barrels with chemicals from insurgents at a farm in Banias, Tartus.

The adoption of the proposed draft resolution would have delivered a carte blanche for a military intervention against Syria. Despite much propaganda to the contrary, a reading of UNSC Resolution 2118 (2013) clearly shows that the resolution from 2013 stipulates that the Security Council:

Decides, in the event of non-compliance with this resolution, including unauthorized transfer of chemical weapons, or any use of chemical weapons by anyone in the Syrian Arab Republic, to impose measures under Chapter VII of the United Nations Charter.

Taking all of the above mentioned problems with UNSC Resolution 2118 (2013) into account, this paragraph can only be compared to a hair-trigger. There is dangerously much room for interpretation in this sentence. Two, equally correct interpretations are possible.

  1. By adopting UNSC Resolution 2118 (2013), the Security Council has made the unanimous decision, that measures under the UN Charter´s Chapter VII will be imposed against Syria. In other words, failure to comply will trigger the use of military force.
  2. By adopting UNSC Resolution 2118 (2013), the Security Council has made the unanimous decision, that the Security Council shall discuss the matter and decide whether the alleged non-compliance should trigger the use of military force against Syria under the UN Charter´s Chapter VII.

UN experts investigate, "protected" by the perpetrators. STR/EPA

More relevant details and problems with Resolution 2018 (2013) have been described in this author’s article entitled “A Critical Review of Security Council Resolution 2118 (2013) on Syria” from September 2013. A reading of this article will explain why UNSC Resolution 2118 (2013) is relevant for the French, British and U.S. American draft resolution and why China and Russia, on April 12, 2017, used their veto right.

Implying that the Syrian government was in non-compliance, the draft resolution would have called on the Syrian Government to comply with relevant recommendations of the Organisation for the Prohibition of Chemical Weapon’s (OPCW) Fact Finding Mission (FFM) and the OPCW-UN Joint Investigative Mechanism (JIM).

In February, Russia and China vetoed a measure that would have imposed sanctions on a number of individuals and entities linked to the “alleged” use of chemical weapons in cases where responsibility “allegedly” was established by the OPCW-UN Joint Investigative Mechanism (JIM).

ObamaDempseyBandar

It is noteworthy that UN investigators who investigated the chemical weapons use in East Ghouta in August 2013 worked under the “protection” of exactly those who according to an in-depth investigation by this author were directly responsible for the use of the chemical weapons.

This author has  in his article entitled “Top US and Saudi Officials responsible for Chemical Weapons in Syria” from October 2013 published the results of this in-depth investigation and proven that this author, two months prior to the attack warned that the attack was being planned on highest levels, with Liwa-al-Islam and Saudi intelligence asset Zahran Alloush acting as field commander.

Posted in USA, China, Russia, SyriaComments Off on China and Russia Veto UN Security Council Resolution on Syria – No Carte Blanche for Chapter VII

China proposes steps to help prevent ‘head-on collision’ between US, North Korea

NOVANEWS

Image result for North Korea LEADER AND TRUMP CARTOON

China has called on the United States and South Korea to stop joint war games in the Korean Peninsula in exchange for a halt to North Korea’s nuclear and missile tests as a step to defuse a looming crisis in the region.

Chinese Foreign Minister Wang Yi warned at a press conference on Wednesday that the US and South Korea on the one side and the North on the other “are like two accelerating trains coming toward each other with neither side willing to give way.”

“The question is: are the two sides really ready for a head-on collision? Our priority now is to flash the red light and apply the brakes on both trains,” Wang said.

He expressed hope that “suspension-for-suspension can help us break out of the security dilemma and bring the parties back to the negotiating table.”

Washington and Seoul launched large-scale annual drills on the peninsula at the beginning of this month amid already high tensions in the area.

Pyongyang condemned the military exercises as dangerous nuclear war drills at its doorstep. On Monday, the North also fired four ballistic missiles, three of which went down in waters claimed by Japan as its sovereign territory, according to South Korean and Japanese officials.

Japanese Prime Minister Shinzo Abe immediately reacted to the launches by saying, “This clearly shows North Korea has entered a new stage of threat.”

The North Korean ambassador to the United Nations, Ja Song-nam, has also warned that the US-South Korean military exercises are driving the Korean Peninsula and Northeast Asia toward “nuclear disaster.”

In a letter to the United Nations Security Council, he warned that the war games “may go over to an actual war and, consequently, the situation on the Korean Peninsula is again inching to the brink of a nuclear war.”

On Tuesday, the first pieces of a US-made missile system arrived at the Osan Air Base in South Korea.

North Korea has long opposed the controversial deployment of the US system in South Korea. It has been using the threat of American aggression as a reason to develop its own missile and nuclear programs.

In the drills with South Korea, the US is using nuclear-propelled aircraft carriers, nuclear submarines, nuclear strategic bombers, and stealth fighters. The US has military forces in South Korea on a permanent basis.

China is also opposed to the installment of the US missile system in South Korea for its own security reasons.

Posted in USA, China, North KoreaComments Off on China proposes steps to help prevent ‘head-on collision’ between US, North Korea

Yuan Clearing Bank Opens in Moscow as Russia, China Dump Dollar in Bilateral Trade

NOVANEWS

Russia and China accelerate local currency cooperation

 
Vladimir Putin, Xi Jinping

Moscow and Beijing took another step towards de-dollarization with the announcement of the opening of a renminbi clearing bank in Russia on Wednesday. 

Local currency transactions were first used in both countries’ border regions. Today, more and more Chinese and Russian financial institutes and enterprises are using local currencies to invest and settle accounts, as the yuan-ruble trade platform is becoming more established and the transaction network is expanding amid deepening China-Russia economic and financial cooperation.

goodbye dollar, hello renminbi

The yuan clearing bank in Moscow will greatly accelerate trade in local currencies:

Industrial and Commercial Bank of China (ICBC) officially started operating as a Chinese renminbi (CNY) clearing bank in Russia Wednesday, a move set to facilitate the use of the currency and cooperation in various fields between the two countries.

“Under the guidance of the governments and central banks of both countries, ICBC’s Moscow branch will effectively fulfill its responsibility and obligation as a renminbi clearing bank by taking further advantage of its leading edge in renminbi businesses, providing customers with safe, high quality and convenient clearing services,” said Hu Hao, ICBC’s deputy governor, at the opening ceremony.

“Financial regulatory authorities of China and Russia have signed a series of major agreements, which marks a new level of financial cooperation,” said Dmitry Skobelkin, deputy governor of the Central Bank of the Russian Federation.

“The launching of renminbi clearing services in Russia will further expand local settlement business and promote financial cooperation between the two countries,” the official added.

With the continuous deepening of the Russia-China comprehensive strategic partnership of coordination in recent years, the two countries are now starting to enhance local currency cooperation.

At the end of 2015, the Russian central bank announced the inclusion of the renminbi in its national foreign exchange reserves, making it Russia’s officially recognized reserve currency.

During Russian President Vladimir Putin‘s visit to China in June last year, the central banks of the two countries signed a memorandum of cooperation in starting renminbi clearing services in Russia, just three months before ICBC’s Moscow branch was appointed by China’s central bank as the clearing house for settling renminbi transactions there.

It’s no secret that Russia and China have employed a number of methods to slowly wean themselves off dollar dependency.

Russia became China’s largest energy exporter in February of last year after it agreed to accept payment in yuan.

The dollar is slowly losing its privileged place in international transactions.

We’re sure Washington is less than thrilled.

Posted in China, RussiaComments Off on Yuan Clearing Bank Opens in Moscow as Russia, China Dump Dollar in Bilateral Trade

Walking a tightrope: China manoeuvres between Saudi Arabia and Iran

NOVANEWS

President Xi Jinping and King Salman

By James M. Dorsey

This week’s imposition of sanctions on one of China’s largest telecom equipment manufacturers, ZTE, by the US Commerce Department, and an investigation of Huawei, ZTE’s foremost Chinese competitor, could not have come at a more auspicious moment for Saudi King Salman as he visits China on the third leg of his month-long Asian tour.

Fishing in murky waters

King Salman’s visit aims to strengthen economic and military ties and persuade China that Saudi Arabia rather than Iran is its most useful regional ally. The penalties and investigation of the two Chinese companies related to violations of US sanctions on Iran and North Korea signal the Trump administration’s intent to adopt a tough stance toward the Islamic republic. ZTE pleaded guilty to the US accusation that it sold US-made electronics to Iran and agreed to pay a $1.19 billion fine.

“We are putting the world on notice: The games are over. Those who flout our economic sanctions and export control laws will not go unpunished – they will suffer the harshest of consequences,” said US Commerce Secretary Wilbur L. Ross.

Speaking days before King Salman’s arrival in Beijing and immediately after the imposition of sanctions on ZTE, Chinese Foreign Minister Wang Yi positioned his country as a friend of both Saudi Arabia and Iran. Mr Wang urged the countries to “resolve the problems that exist between them through friendly consultations” between equals and offered to play a mediating role.

There is little prospect for successful mediation with Saudi Arabia and Iran, given the zero-sum nature of their global rivalry and the kingdom’s hope that a tougher US policy towards Iran will extend its window of opportunity in what is fundamentally an uphill battle against the Islamic republic. The imposition of sanctions on ZTE sends China a message that the US does not endorse business as usual with Iran and that this could have consequences for future US-China trade negotiations.

King Salman’s quest is further enhanced by the fact that China, which has close, long-standing military ties to Iran, last year agreed to upgrade cooperation with the kingdom. “China is willing to push military relations with Saudi Arabia to a new level,” Chinese Defence Minister Chang Wanquan told his visiting Saudi counterpart, Deputy Crown Prince Muhammad bin Salman last August. Special counter-terrorism forces from the two countries held the first ever joint exercise between the Chinese military and an Arab armed force two months later.

Closer military relations and Saudi hopes that US sanctions will complicate Chinese engagement with Iran counter perceptions that Chinese President Xi Jinping was tilting towards the Islamic republic when he visited the Middle East in early 2016.

Iran’s strategic advantage

King Salman hopes to exploit this window of opportunity while in Beijing in what is fundamentally an unequal battle with Iran that brings assets to the table that Saudi Arabia lacks. Those assets, no matter how degraded, include a large population, an industrial base, resources, a battle-hardened military, a deep-rooted culture, a history of empire and a geography that makes it a crossroads. Saudi custodianship of the Muslim holy cities, Mecca and Medina, and money will in the medium and long term not be able to compete.

Iran’s strategic advantage is nowhere more evident than in global competition to shape the future architecture of Eurasia’s energy landscape. Energy scholar Micha’el Tanchum argues that Iran is pivotal to the success of China’s trans-continental, infrastructure-focused One Belt, One Road initiative in ways that Saudi Arabia is not.

In a study published in 2015, Mr Tanchum suggested that it would be gas supplies from Iran and Turkmenistan, two Caspian Sea states, rather than Saudi oil that would determine which way the future Eurasian energy architecture tilts: China, the world’s third largest liquid natural gas (LNG) importer, or Europe. The ability of Iran to capitalise on the fact that it boasts the world’s second largest natural gas reserves and its fourth largest oil reserves was significantly enhanced with the lifting in 2015 of international sanctions.

Liquid Natural Gas importers

Liquid Natural Gas importers

According to Mr Tanchum:

Iran, within five years, will likely have 24.6 billion cubic metres of natural gas available for annual piped gas exports beyond its current supply commitments. Not enough to supply all major markets, Tehran will face a crucial geopolitical choice for the destination of its piped exports. Iran will be able to export piped gas to two of the following three markets: European Union (EU)/Turkey via the Southern Gas Corridor centring on the Trans-Anatolian Natural Gas Pipeline (TANAP), India via an Iran-Oman-India pipeline, or China via either Turkmenistan or Pakistan. The degree to which the system of energy relationships in Eurasia will be more oriented toward the European Union or China will depend on the extent to which each secures Caspian piped gas exports through pipeline infrastructure directed to its respective markets.

In other words, Mr Tanchum argued that to determine the balance of power in Eurasian energy and establish One Belt, One Road as the key determinant of Eurasia’s energy architecture, China would need to position itself as the main recipient of Iranian and Turkmen gas. That, in turn, would enhance China’s growing economic influence in Central Asia, and further extend it to the Caucasus and the eastern Mediterranean.

China has already many of the building blocks needed to make that a reality: close and long-standing relations with Iran, significant investment in Turkmen gas production and pipeline infrastructure, and the construction of Pakistan’s section of the Iran-Pakistan pipeline. Hooking the pipeline to One Belt, One Road would allow China to receive Iranian gas not only by sea on its eastern seaboard but also in its land-locked, troubled north-western province of Xinjiang.

Pakistan’s top military commander, General Qamar Javed Bajwa, appeared to acknowledge Iran’s pivotal role by noting that “enhanced Pakistan-Iran military-to-military cooperation will have a positive impact on regional peace and stability”. Pakistan, which hosts One Belt, One Road’s flagship project, the $51 billion China Pakistan Economic Corridor (CPEC), has refrained from fully engaging with a 41-nation, Saudi-led military alliance perceived to be partly directed at Iran, while the Pakistani parliament rejected a Saudi request for military support in its war in Yemen.

Linking the Iran-Pakistan pipeline to CPEC would increase Iran’s importance for the success of China’s Eurasian infrastructure play. Iran’s geopolitical strengths are, however, not wholly dependent on aligning the Islamic republic with China. With the development of Iran’s Indian-built Chabahar port and the undersea Iran-Oman-India pipeline that would potentially create an alternative Asia-to-Europe energy corridor, Iran is, according to Mr Tanchum, well-positioned to play both ends against the middle as well as adopt a key role in the trans-Atlantic community’s effort to strengthen relations with India as an anti-dote to the rise of China.

Iranian bargaining power

Iran’s geopolitical significance is further enhanced by the fact that competition for Iranian gas favour occurs against the backdrop of expectations that Iranian cooperation with Russia in Syria and elsewhere is opportunistic and unlikely to prove sustainable. Iranian-Russian competition is already visible in the Caucasus and Central Asia that ironically mitigates in Europe’s rather than China’s favour. Iran is likely to deepen energy cooperation with Turkey in a bid to enhance its influence and curtail Russian inroads in the Islamic republic’s northern neighbours, Azerbaijan, Turkmenistan, China’s principle gas supplier, and Armenia where Russia’s state-owned Gazprom has invested in an Iran-Armenia gas pipeline.

For now, King Salman’s mission in Beijing is facilitated by the fact that Mr Trump is signalling that Iran’s return to the international fold based on the nuclear agreement is not a foregone conclusion. The Saudi king may also be banking on the fact that Iranian President Hassan Rouhani could be fighting an uphill battle in presidential elections in May because the lifting of international sanctions has been slow in benefiting Iran and Iranians economically. The king’s problem, however, is that Chinese strategists are likely to see obstacles to doing business with Iran as a short-term problem and that China recognizes that in the medium and long terms Iran has assets China cannot afford to ignore.

Posted in China, Iran, Saudi ArabiaComments Off on Walking a tightrope: China manoeuvres between Saudi Arabia and Iran

Dangerous Crossroads: America Threatens China

NOVANEWS

Dangerous Crossroads: America Threatens China, US Deploys THAAD Missile System in South Korea, Beijing Warns of Nuclear Arms Race

 
THAAD_1

The US has begun the installation of its Terminal High Altitude Area Defence (THAAD) anti-ballistic missile system in South Korea, provoking an angry reaction from China, which warned that it could trigger a nuclear arms race in the region. The provocative move will heighten the already tense situation on the Korean Peninsula as the US and South Korea engage in huge annual war games.

Two trucks, each mounted with a THAAD launch pad, were landed aboard a C-17 cargo plane at the US military’s Osan Air Base, south of Seoul, on Monday night. According to South Korean military officials, more equipment and personnel will arrive in the coming weeks. The THAAD battery installation is likely to be completed as early as May or June.

US officials exploited North Korea’s test launch of four ballistic missiles on Monday morning as the pretext for commencing the THAAD installation. However, the final go-ahead for the THAAD deployment, which was agreed by South Korea last July, occurred last week when the South Korean government acquired the planned site in a land swap deal with the conglomerate Lotte.

Washington also insists that the THAAD placement is purely defensive and needed to counter North Korea’s nuclear arsenal. In reality, the THAAD system is offensive in character. It is an important component of an expanding US anti-ballistic missile system in Asia that is primarily aimed at preparing for nuclear war against China, not North Korea.

US imperialism, which has an estimated 4,000 nuclear warheads, has never ruled out a first nuclear strike and is spending $1 trillion to upgrade its nuclear weapons and delivery systems. Its anti-ballistic missile systems are designed to neutralise the ability of any enemy to retaliate in the event of a US nuclear attack. The Federation of American Scientists estimated that China had about 260 nuclear warheads as of 2015.

The THAAD system is designed to intercept incoming ballistic missiles at high altitude. It consists of a powerful X-band radar system to track missiles at long range, linked to truck-mounted interceptors designed to destroy a hostile missile in flight. In the event of war with China, the THAAD system would not only protect key US military bases in South Korea and Japan. Its X-band radar could detect and track missile launches deep inside the Chinese mainland.

Chinese foreign ministry spokesman Geng Shuang yesterday reiterated Beijing’s opposition to the THAAD deployment. Geng warned that China would “take necessary measures to defend our security interests and the consequences will be shouldered by the United States and South Korea.”

Russia also condemned the THAAD installation. Victor Ozerov, who chairs Russia’s Federal Defense and Security Committee, branded the deployment as “another provocation against Russia” aimed, if not at encircling Russia, “then at least to besiege it from the west and the east.”

The Chinese government has already taken retaliatory moves against South Korea, closing more than 20 stores owned by Lotte in China on the pretext of safety violations, and has advised travel agents not to sell South Korean packages to Chinese tourists. The state-owned media has suggested a wider boycott of South Korean goods and even the severing of diplomatic relations with Seoul.

A commentary in the official Xinhua news agency warned that the THAAD deployment “will bring an arms race in the region.” Hinting that China would enlarge its nuclear arsenal to counter the US anti-ballistic missile systems, it declared: “More missile shields on one side inevitably bring more nuclear missiles of the opposing side that can break through the missile shield.”

The suggestion that China could expand its nuclear arsenal only underscores the reactionary character of the Chinese regime’s response to the escalating economic and military threats by the Trump administration. The Chinese Communist Party represents the interests of an ultra-rich oligarchy, not Chinese workers and the poor. Its military build-up and whipping up of Chinese nationalism heightens the danger of war and divides the working class.

A nuclear arms race between China and the United States would be profoundly destabilising in Asia and the world. An expansion of the Chinese nuclear arsenal could prompt South Korea and Japan to develop their own nuclear weapons, and encourage India to enlarge its nuclear arsenal, exacerbating tensions throughout South Asia, particularly with Pakistan.

The Trump administration has targeted China, warning of trade war measures, threatening military action against Chinese-controlled islets in the South China Sea and suggesting it could tear up the “One China” policy that forms the bedrock of US-China relations.

Trump has repeatedly accused China of not imposing crippling sanctions on its ally North Korea to force it to abandon its nuclear weapons and missiles. The White House is currently engaged in a review of US strategy toward North Korea, details of which have been leaked to the media, including proposals for pre-emptive military strikes on North Korea and regime-change operations.

North Korea provides a convenient pretext for the US military build-up in North East Asia against China. The New York Times reported that one option under consideration is the return of tactical nuclear weapons to South Korea—adjacent not only to North Korea, but also China.

Trump has already outlined a huge expansion of the US military and has tweeted that the US has “to greatly strengthen and expand its nuclear capacity.” Moreover, the US strategy is shifting from the use of nuclear weapons as a last resort to the active consideration of a limited nuclear war.

North Korea is rapidly emerging as a dangerous global flashpoint. A small incident, either accidental or calculated, has the potential to trigger a catastrophic conflict on the Korean Peninsula that would draw in nuclear-armed powers such as China and Russia.

The only social force capable of halting the drive to world war is the international working class, through building a unified anti-war movement based on socialist principles to put an end to capitalism and its outmoded nation-state system, which is the source of war.

Posted in USA, ChinaComments Off on Dangerous Crossroads: America Threatens China

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