One Belt, One Road (FB Ali)

The Chinese project of "One Belt, One Road" (OBOR) has drawn remarkably little attention and comment in the West, especially in the USA. This is surprising, considering its tremendous scope, its implications for a large part of the world (with its potential to transform the lives of a sizable part of humanity), and its geostrategic significance.

Typically, the only voice talking about this (and other developments in China) in a sane and prescient manner is that of Amb Chas Freeman. (The neocons were right ‒ from their perspective ‒ in ensuring in 2009 that he would not be able to officially influence US policy; the loss, a grave one, was their country's). He first talked at some length about OBOR in July 2015, and then again in June of this year. This post should be considered an updated summary; for a more detailed view I would recommend Mr Freeman's 2015 talk.

OBOR seeks to convert the Eurasian land mass into a single economy by interconnecting it with a network of roads, railroads, pipelines, ports, airports, and telecommunications links, and, based on these, to create a series of development corridors containing large zones of productive economic activity (and, ultimately, prosperity).

Supplementing this essentially continental development will be a maritime component (the "Road"), aimed at investing and fostering collaboration in Southeast Asia, Oceania, and North Africa, through several contiguous bodies of water – the South China Sea, the South Pacific Ocean, and the Indian Ocean. This will be achieved by developing suitable (deep water) ports and then building the infrastructure to link them to interior industrial zones and markets, e.g, Piraeus (in Greece), Zarubino (in Russia), Djibouti and Mombasa (in Africa), Kyaukpyu (in Myanmar) and Gwadar (in Pakistan).

Amb Freeman rightly called One belt, One Road "the largest and potentially the most transformative engineering effort in human history".

The scope of OBOR can be judged from China's plan to ultimately commit to it some 4 trillion dollars. Currently, the Chinese say, 900 deals in 60 countries are in place or are being negotiated or planned, with a proposed investment of $890 billion. Three "policy banks" have been set up by the Chinese government for OBOR projects with an initial capital of $82 billion. A Silk Road Fund has been established with a capital of $40 billion. China has sponsored the Asian Infrastructure Investment Bank with a capital of $100 billion (it is likely to invest mainly in OBOR projects).

The vast majority of these OBOR projects will be planned, designed and managed by Chinese enterprises, with local partners. Where resources (such as energy, cement, etc) are unavailable, the Chinese will set up local plants to produce them. The Chinese companies will be given low-interest loans for their projects, while the local partners (either state or private enterprises) will be financed from cheap loans and grants provided by the Chinese government to the country. 

Naturally, OBOR is not a purely altruistic project; China will derive major short-term and long-term benefits from it (but it will also greatly benefit the lands and peoples covered by it). It will enable China to invest its huge foreign reserve holdings (some $3.5 trillion at the end of 2015, mostly in US assets) mainly in Chinese enterprises, without the negative effects that such an investment within China would produce (over-capacity, rising costs, environmental effects, etc). It enables the utilisation of the large developmental capacity currently existing in China that was built up in its industrialisation and infrastructure development drive, and which is now surplus to its needs. The investments in OBOR, and its successful development, will make it much easier for China to break out of the present international financial system ruled by the US dollar.      

One of the OBOR projects likely to be completed early is the China Pakistan Economic Corridor (CPEC). Since many of its features are fairly typical of these projects, it is worth considering in a little more detail. Basically, the project is to link the Indian Ocean port of Gwadar in Pakistan to the Chinese rail hub of Kashgar, a distance of some 2000 miles through some of the highest passes in the Himalayas (involving some 125 miles of mountain tunnels). This corridor will consist of road, rail, oil and liquefied gas pipelines, and fibre optic cable links. Industrial plants, most of them related to energy, will be set up in the corridor. Some $46 billion is earmarked for the whole project: $34 billion for energy projects and $12 billion for infrastructure. An "Early Harvest" section of the plan will see some $26 billion invested in projects slated for completion by 2018.

Though China is pushing OBOR as a (collaborative) economic project, it obviously has significant geostrategic implications. In seeking to create a Eurasian bloc, China is resurrecting the concepts of the Heartland and the World Island that Halford Mackinder first wrote about, a century ago, as the repository of Land Power that will unavoidably compete with Sea Power. Today, the latter is personified by the United States, and it will inevitably see such a development as a challenge to its current dominating position in the world. Conflict is inevitable; what shape it takes may well determine the fate of humanity.

Russia is also in an interesting position with respect to OBOR. On the one hand, China is its ally against the pressures being applied to it by the US and Europe; on the other, it has hitherto been the primary player in this duo (as Russia has been historically in Eurasia). It will not be easy for Putin to cede that role to Xi. However, he does not have much choice. His trump card is Russia's military strength, especially in nuclear weapons; China needs these to offset the danger of the use of such weapons by the US against it. Thus, one can expect that it will offer Russia a special place in OBOR; this will make it easier for Russia to participate in it. Also, Russia cannot ignore the wider (and, for it, positive) strategic significance of these developments vis-a-vis its relations with the US and the West.

These future developments highlight the unfortunate nature of the policies being currently followed by the US. Its worldwide expression of military power, steered by the neocon foreign policy establishment (the Borg, as Col Lang calls it), and its equally aggressive economic and financial policies (pursued by the plutocrats who control them), have created a backlash, not only in other lands but also within the country. Nevertheless, there appears to be this underlying assumption that matters can continue indefinitely as they are now (and, if they tend to veer off course, brute power can be used to bring them back on track).

Even as the US rides forth as did the Four Horsemen of the Apocalypse, a new world is being born on the Eurasian continent, a world that, if allowed to survive, may hold the promise of a prosperous new age for billions of deprived human beings. 

Comments

[Lemur (prev EA)]

i'd like to make the following observations:

1. The SCO and EEU demonstrate effective international cooperation can be achieved without unbearable impositions upon national sovereignty, contra the EU.
2. There's a flood of articles coming out of Russian think tanks like Katehon of late cogitating on the idea of the land vs sea powers.
3. Although it's unlikely Russia will rival China's economic strength anytime soon, improving social metrics (including a rising Total Fertility Rate), economic diversification and revitalization, strict fiscal discipline, and pivotal location on the world island will see Russia gradually replicate German economic strength in Eurasia. Thus, Russia will be the sub-dominant power on the world island, as opposed to the master-vassal relationship between the US and Canada. (We should also take into account China faces internal challenges like contracting population in a way that the old world hegemon, the US, did not during its expansive post war phase).
4. If Germany can be pulled into Russia's orbit, a Russian-German axis could balance against both China (favourably) and the US (competitively). I've come to the conclusion Russia's entire long term European strategy is an alliance with Germany.

[axel]

You nailed this one! And also, good that you credited Freeman. It is a sad state of business when one of our nation's finest diplomats in the last 70 years should be so marginalized by the power of a lobby, even as he is still providing such important advice.

[JMGavin]

I was riding in a Panamanian taxi not long ago, in the area which used to be the Canal Zone. The cab driver and I were discussing the changes to Panama after the US essentially left, and the Chinese filled the void. The cabbie made the comment "The Americans took the best drumstick for themselves, but the Chinese eat the entire chicken."

We'll see what benefit the Chinese bring to the rest of the world. My experience with Chinese influence in Africa and Central Asia does not bode well.

[Jack]

Brig. Ali

Thanks for bringing this to the attention of the SST correspondents. This has long been a topic of discussion among financial investment circles. There's a minority viewpoint there that China will not have sufficient capital to finance this large project to completion as they will sooner or later require trillions of dollars to recap their banks and shadow banks.

Kyle Bass is one of those. Excerpts from a recent interview of his.

http://www.zerohedge.com/news/2016-07-01/kyle-bass-shares-stunning-thing-central-banker-once-told-him

[LG]

I disagree. From what I've seen in various nations in Africa, the Chinese principle is "you get what you pay for"- no more, no less. Contracts on road building, pipelines, industries are established with national elites, and if they don't play ball, the Chinese move elsewhere.

With the West, if national elites don't fall in with their plans, the latter are replaced.

Contrast the strategies, one based on negotiation and peace, the other oppressive and violent.

I also used to hear a lot of complaints from Africans about how hard their Chinese employers made them work- in slave like conditions. But they were no different in their treatment of Chinese labourers, usually prisoners, who also worked in large numbers in these coubntries.

I remember the construction of a building by the Chinese from across my place in Khartoum, Sudan. I was working from home and observed the goings on for an entire day. A single Chinese operator of some cement mixing machine outlasted three consecutive batches of African laborers working on that site. He was cheerful throughout. I saw the same extreme industriousness by Chinese workers roadbuilding in Nigeria and Liberia.

I know this is anecdotal, but sometimes firsthand observations are useful.

By the way, some of local perceptions of the Chinese are shaped by the negative light they are shown in by local churches. I attended a service in Nigeria in an upscale church of prosperity. Apart from the shocking extravagance of the church, a large part of the sermon was a rant against China's designs on Africa, which was in contrast to the benign actions of the west.

[Brunswick]

Pepe Escobar has long talked about the"New Silk Road",

He's also long talked about the "Empire of Chaos".

The funny thing about the "New Silk Road", is it bypasses the US.

[Bill Herschel]

This exceptional post is thrown into sharp relief by a consideration of the United States' actions in Ukraine. Victoria Nuland, certainly not representing the wishes of the American people and explicitly contemptuous of the people of Europe (f**k the EU) engineered an ultra-right wing coup. Russia, confronted with the certainty of a "NATO" naval base in Crimea acted.

Vladimir Putin, whose popularity in Russia was not overwhelming, became overnight the Hero of Russia (and probably the European people) by annexing Crimea. His intervention in Syria has only increased that popularity.

How much longer can the U.S. puppet Merkel prevent an alliance between Russia and Germany, the true European union? I daresay that the entire purpose of the "European Union" was to prevent that alliance... at all costs.

At all costs. The "neocons" have thrown everything they have into this final battle: Saudia Arabia has been given free rein to spread terror throughout the world, all in the hope that this diversion will prop up the likes of Cameron, Hollande, and Merkel a little longer. Brexit and next Marine Le Pen show how well that is working.

War on Terror? Try Saudi Arabian War on Civilization, backed by a minority of "leaders" the United States whose last remaining champion is "private server" Clinton. Just about the only good thing you can say about Donald Trump, and it is a very good thing, is that he annihilated the Saudi Arabian puppets on the Right.

The Emir had no allies in Europe. Charles Martel represented the French people. Would that the modern Emir was not supported and encouraged by the United States. How many more Americans, soldiers and civilians alike, must die before this Satanic alliance is broken?

[Bill Herschel]

And if you want to read an almost surreal example of Bernaysian double-speak and Satanic inversion of the truth, read this by Nicholas Kristof, the NY Times go-to specialist in neocon propaganda. Nominally, it is an article about the malignant influence of Saudi Arabia throughout the world, but it is not. Rather, it is a defense of Kosovo, a narcotics kingpin, created by NATO, that has probably spread more devastation and misery through the world via the narcotics trade than Saudi terrorists could manage in an eternity of armed attacks on civilians. Please note the explicit support of Clinton.

http://www.nytimes.com/2016/07/03/opinion/sunday/the-terrorists-the-saudis-cultivate-in-peaceful-countries.html

[JJackson]

F B Ali
Thank you for the excellent resume. How do you think the various South China Sea disputes fit in to all this? The gain, in terms of territorial waters, seem small when compared to political difficulties caused with neighbours who are important to this geostrategic plan. The US – with the various trade zones it is trying to set up - and this project seem busy in creating a bi-polar world – again.

[rjj]

idling around a day or so ago looked up US high level Go and chess players - who are they? how many are there?

next question was "what are the Chinese words/expressions = chutzpah?"

[Peter Reichard]

Fueled by foreign reserves and without a scintilla of altruism behind it China has crafted a cogent plan for global economic and political primacy in the 21st century. The US response has been to play the great game of geopolitics with breathtaking ineptitude. When you are number one obviously you ally with number three, Russia against number two, China or better yet get them to fight each other. By trying to contain both simultaneously America has driven them together. Rather than offer a better alternative to the New Silk Road we have tried to stop it with chaos, color revolutions, military interventions and Islamic terrorism, an effort doomed to failure while alienating the entire world. Meanwhile the US has committed national suicide by running huge trade deficits that indebted us while enriching the Chinese, by allowing the infrastructure to crumble, dumbing down the educational system and adopting trade policies that benefit transnational corporations at the expense of the national interest.

[Yellow Dog]

Interesting to contrast this long term infrastructure vision with the short term money-grubbing practiced by American corporations and their wholly-owned representatives in the US government. Maybe we should pull our heads out of our asses, and recognize that not all public spending is always wasted.

[LeaNder]

Off topic, me following you:

Relapse as far as I am concerned. Strictly you may want to look into the larger context. Albania? Economical problems? Historically established routes in the trade?

But yes, Barney surely may be helpful for everybody in search for a clear definition of a easily definable evil out there.

[Jov]

Nice article.
In my opinion, the Silk road will be built and function partly depending on the fact how the US administration and elites perceive it.
If they analyze it through the eyes of the borg, neocons, or some other emotional way unfounded in real life, probably they will do what they can to stop it from occurring as planned.
If there is rational analysis (taking into account that the Chinese need new jobs for their construction industry, that the world has changed a lot in the last 20 years, and although the US is without doubt the leading nation in most economic, military and similar categories, the differences are not so big as in the 90's, and etc.) perhaps the conclusion might be that the silk road is not necessarily opposed to US interests, and that these US interests can be taken account of by the Chinese.

[rjj]

in addition to "dumbing down the educational system" there is the other Weapon of Mass dysfunctionalization -- the US Cultural Commissariat's entertainment product.

for comparison (one of my favorites: riveting, instructive,** great meta-viewing) see

https://www.youtube.com/watch?v=0mdKEGPdfDs&list=PLLac-P2kBBgRuug2bgj3XD7dCHeD_XH5c

https://en.wikipedia.org/wiki/Yongzheng_Dynasty

The series, spanning 44 episodes, occupied the CCTV-1 prime time slot; after its premiere, there have been many re-runs of the show on television networks in Taiwan, Hong Kong, as well as mainland China.

Yongzheng Dynasty was one of the most watched television series in mainland China in the 1990s and remains one of the "classics" among Chinese historical television dramas. It is among the highest rated CCTV-1 prime time historical dramas in history.

....[It] received critical acclaim.

The major themes covered in the series include loyalty and betrayal, fratricide, political corruption, and the centralisation of power.

As it relates to the groundwork for the geopolitics, hope downscale does not = off-topic.

** like A Little Golden Book of statecraft and its challenges.

[ISL]

Dear SST,

For anyone not familiar with the Chinese Treasure fleet and its approach to imperialism (versus the wests), I recommend doing some research (wikipedia, etc), it is well worth a read. The comparison in technology with the Spanish at the time is very illuminating. If China had not turned inwards, an alternate history would clearly have us writing and speaking in Chinese, and not had the european's ethically challenged approach to imperialism applied for the last half millennia.

I see many echoes in the old approach today.

Thanks FB Ali for bringing this to the discussion.

[robt willmann]

China's approach to "foreign policy" is much smarter than the unfortunate gangster foreign policy of the U.S., which also has as its goal to control and dominate other countries through their political structures, rather than to make agreements for commercial ventures.

Instead of exporting weapons of mass destruction and initiating unnecessary wars, the U.S. could export something at which it excels: medical technology and the extensive understanding of human biology, medicine, and surgery. Just think of the number of hospitals and clinics that could be built and staffed for less than the total trillions of dollars in cost spent in Afghanistan, Iraq, and the MENA area since 2001. (We also need to clean up our own medical house, with its cartel structure, price fixing, etc.).

Mostly off topic -- although a Chinese businessman is involved -- is a curious incident in which the president of the United Nations General Assembly from 2013 to 2014, John Ashe, was found dead in his home on 22 June 2016, the week before he was to appear in court along with Ng Lap Seng. Mr. Ashe is said to have died of "traumatic asphyxia with laryngeal cartilage fractures while lifting barbell on bench, the county’s Medical Examiner’s Office said in a statement." In other words, he "accidentally" dropped a barbell on his throat.

"Ashe was due in court Monday [June 27] with his Chinese businessman co-defendant Ng Lap Seng, who is charged with smuggling $4.5 million into the US since 2013 and lying that it was to buy art and casino chips."

"Ng was identified in a 1998 Senate report as the source of hundreds of thousands of dollars illegally funneled through an Arkansas restaurant owner, Charlie Trie, to the Democratic National Committee during the Clinton administration. (Ng was not charged with any crime [in that particular episode].)"

"Ng and Trie had visited the White House several times for Democratic fundraising events and were photographed with then-President Bill Clinton and first lady Hillary Clinton."

http://nypost.com/2016/06/23/ex-un-general-assembly-chief-dies-amid-bribery-scandal/?_ga=1.135162801
.1464433910.1467554310

http://pagesix.com/2016/06/26/disgraced-ex-un-officials-death-conveniently-timed/?_ga=1.26569789.146
4433910.1467554310

http://www.targetliberty.com/2016/07/un-official-accidentally-crushes-throat.html

[Babak Makkinejad]

I think that the significance of this initiative is in its existence, in the first place. That is, a non-European state with strategic autonomy is promulgating a global economic and political expansion through bilateral deals.

Like everything else in life, Chinese program probably will not reach all the goals of its planners but will also not fail as its detractors wish; it will fall somewhere in between.

I will belabor a point that I have often made on this forum about a Positive & Credible vision of future being a sine quo none of political and commercial success (in sales activity, for example).

That is what NATO states are lacking, in my opinion, but Chinese are succeeding in painting.

[Harper]

The OBOR project as presented by F.B. Ali and Chas Freeman has both a land and maritime dimension. China has detailed a Maritime Silk Road aspect of the overall program, that runs through the South China Sea and the Indian Ocean to the east coast of Africa and up through the Suez Canal (recently greatly expanded to accomodate much larger volumes of traffic over time) into the Mediterranean and on from there. China has initiated the Asia Infrastructure Investment Bank with now nearly 70 member countries, operating at world-class standards. China and Russia, along with India, are part of the BRICS which formed a New Development Bank at their Fortaleza, Brazil annual meeting in 2014, which is now operational. Russia and China just signed $50 billion in bilateral economic deals when President Putin just visited with Xi Jinping in China, following the SCO meeting in Tashkent. This is moving fast and on a grand scale. Yes, there are geopolitical games that will be played to disrupt this (recent destabilizations of Brazil and South Africa, both BRICS member countries are exemplary), but the full realization of OBOR is a counter to geopolitics. Xi Jinping refers to this as "win, win" and he is not wrong. It represents a new paradigm of thinking, not just good business deals. China has already built up the Greek port of Piraeus and Xi was just in Serbia and Poland, making deals to develop the Danube River transport routes internally in Europe, with rail links to Pireaus.

The US has been invited, repeatedly, by China to participate in the AIIB and in the larger OBOR. In fact, there are proposals for building the tunnel links across the Bering Straits to directly bring the Western Hemisphere into this Eurasian development. Russia and China are discussing joint investment in this tunnel, rail, fiber optic and oil/gas link between the Russian Far Northeast and the Pacific coast of North America, running south. This is really worth following very closely.

Thanks to Col. Ali and Col. Lang for bringing this wonderful opportunity to the SST group.

[bth]

Kyle Bass interview definitely worth the read.

[elaine]

"Water consumption causing Beijing to sink at alarming rate, study says" Los Angeles
Times Water levels dropping in 45 Chinese cities & under high speed railways

[bth]

So why doesn't China get on with it already? If they've got the bucks and this is of such national significance to China, Russia and Pakistan then why isn't it done?

The implication is that the Americans are simultaneously (1) ignoring it and (2)should be trembling over its prospects and/or (3) somehow America has thwarted its development. Well Americans didn't mismatch the rail gauges for example; that was totally an affair between countries that have deep concerns about their neighbors. America isn't threatened by this one way or another.

By all rights it should have been done a decade or two ago. Instead China has benefited from decades of cheap and uninterrupted ocean access protected by the United States.

[ToivoS]

Lemus as to your #4. Stephan Cohen in one of Batchelor programs addressed the question as to why the US had such an aggressive policy towards Russia as was displayed during the Ukraine crisis. He actually had no opinion but said that some inside the beltway analysts said the top policy makers were motivated to prevent a Russian-German economic alliance. He provided no names nor references to this assertion.

In the short term this seems to have worked. Germany was thwarted from concluding a peaceful resolution of the crisis and furthermore was pulled into the US orbit even more tightly with the sanctions and movement of NATO troops into the Baltics.

[Amir]

The Saudi problem, is not a Saudi problem. It is a House of Al Saud problem. A tribe has been allowed to multiply in a viral fashion with the help of naturally occurring resource, oil. This tribe did not contribute to the creation, exploration, extraction or ways of utilization of this natural resource. Their only "help" was one of being one of the tribes sitting on the soil, on top of the resource and willing to collaborate. You want to combat terror, then combat the Al Saud tribe and all it's minions, spread out all over the world in the form of Ambassadors, investors, Cote d'Azur tourists.

[Jack]

bth

You may want to also listen to Mark Hart, another Texan. He too got our credit excess right and made a fortune. He did an in-depth interview on Bloomberg some months back and went through a detailed financial analysis of China's shadow banking system and how intertwined it was with state finance. Similar to our linkage between Wall St speculation and taxpayer backstops. He came to a similar conclusion as Kyle that the Chinese will have no choice but to devalue the yuan. And preceding that there would be capital flight as their elites get their money out.

He was derisive of the MMT crowd who pitch unlimited government spending as panacea with no costs. A perfect free lunch. He said the Chinese devaluation would point to the fallacy of all these theories including neo-keynesian and neo-monetarist. Between China and Japan we'll know soon enough if unicorns exist in finance.