JAPAN’S JITTERS OVER CHINESE NAVAL INCURSIONS; BEIJING, OTTAWA INK NEW ENERGY, RESOURCE DEALS

China Reform Monitor No. 574, January 21, 2005
American Foreign Policy Council, Washington, DC
http://www.afpc.org

Editor: Ilan Berman
Associate Editor: Lisa-Marie Shanks

JAPAN’S JITTERS OVER CHINESE NAVAL INCURSIONS;
BEIJING, OTTAWA INK NEW ENERGY, RESOURCE DEALS

[Dear Readers: The American Foreign Policy Council thanks Al Santoli for editing the first 573 issues of the China Reform Monitor, and welcomes AFPC Vice President for Policy Ilan Berman as interim editor]

January 16:

Amid growing concern for China’s expanding military capabilities, Japan has mapped out a strategic plan to defend a chain of its southern islands in the East China Sea, Agence France Presse reports. “China has been expanding its scope of activities, as seen in the case of an invasion of Japanese territorial waters (by a Chinese nuclear submarine) last November,” an official from the Japanese Defense Agency official has stated. “We need to monitor [China’s] moves.”

Japan currently does not have troops stationed on most of the remote islands. The new plan, however, calls for the positioning of some 55,000 troops – as well as warplanes, destroyers and submarines – in the region to guard against an attack on Okinawa or other remote areas. Under the new guidelines, Japan intends to defend (or recapture, in the event of Chinese occupation) the islands situated in a 1,000 kilometer zone between the southern tip of Kyushu Island and Taiwan.

January 18:

In a bid to protect its oil supplies and growing international clout, China is building up its military forces and establishing military bases along sea-lanes from the Middle East to the South China Sea, the Washington Times reports. According to “Energy Futures in Asia,” a new report by defense contractor Booz Allen Hamilton, the new deployments are intended not only “protect China’s energy interests, but also to serve broad security objectives.” The study attributed the massive oil shipments passing through the sea-lanes, coupled with growing piracy and maritime terrorism, as China’s motivations for the increase in naval power. Another reason is also in play; China believes that the U.S. military will disrupt its energy imports in the event of a conflict over Taiwan, and is therefore seeking to “encircle” China by expanding control over key energy canals, particularly the Strait of Malacca, through which 80 percent of Chinese oil imports transit.

The weapons being acquired by China for sea-lane control include new warships equipped with long-range cruise missiles, as well as submarines and undersea mines. The country also plans to purchase aircraft with long-range target acquisition systems, including optical satellites and maritime unmanned aerial vehicles. These activities are designed to enable the PRC to effectively control tanker transit through key areas, according to the report.

China, the study says, has also developed electronic eavesdropping posts from the Pakistani port of Gwadar to Burma, to monitor ship traffic through the Strait of Hormuz and the Arabian Sea, and has provided Burma – the closest point to the Strait of Malacca – with “billions of dollars in military assistance to support a de facto military alliance.”

January 20:

Chinese and Canadian officials have concluded a series of new energy and resource agreements in Beijing, Bloomberg reports. The deals – which follow meetings between Chinese Premier Wen Jiabao and Canadian Prime Minister Paul Martin – involve greater Chinese involvement in the development of Canada's natural gas sector and its vast oil sands deposits. In addition, according to the financial news service, the two countries have also pledged greater cooperation in “uranium resources.”

China's Choice WSJ Asian Edition

January 21, 2005

China has a simple choice to make. It can continue to trade with the United States, a relationship upon which its prosperity is predicated, or it can undermine vital U.S. interests by helping Iran's nuclear proliferation efforts. It is a binary decision, and both President George W. Bush and his new secretary of state have made this clear as a new term starts today.

Flouting U.S. warnings, China appears to have continued to export to Iran technology that would let the mullahs extend the reach of their missiles. But the Bush administration seems finally to be getting Beijing's attention on this matter.

This month the U.S. renewed sanctions on eight Chinese companies caught selling strategic materials to Iran. According to reports, the eight are among China's top firms, including China Great Wall Industry and China North Industry. Exports included high performance metals and missile components, sales of which violate U.S. law, specifically the Iran Nonproliferation Act of 2000. As a result, these companies won't be able to do business with the U.S. or obtain licenses to export U.S. technology.

A Chinese spokesman predictably complained on Tuesday that Beijing was "adamantly opposed" to the fact that Washington had "wantonly launched sanctions against Chinese companies."

But Chinese spokesmen are often "adamant" or "indignant" about something. The fury usually means that Beijing is finally paying attention, in this case to real a rage building up in the U.S. over Chinese help for Iran's uranium-enrichment and missile-enhancement programs.

"They've heard us loud and clear," President Bush told Fox News Channel after the spokesman's outburst. "To the extent that other nations are proliferating into this closed country, that represents a significant problem as well. That's why we're dealing with the Chinese firms and that's why we're mindful of making sure the proliferation efforts are stopped at their source."

Mr. Bush clearly wanted China to realize that it wasn't being singled out. He added in the interview, "we'll make it clear not only to China but elsewhere that we'll hold you to account ... we want to have friendly relations but do not proliferate." Indeed, the White House had tried to keep news of the sanctions as quiet as possible to save China's face. It buried the penalties on page 133 of the Federal Register, and withheld the identity of the companies and the nature of the exports.

But if China thinks it has a problem with the administration, it should really be concerned about the impact all this could have at the other end of Pennsylvania Ave. -- over at the U.S. Congress. Plenty of lawmakers there, both Democrats and members of Mr. Bush's own Republican Party, look askance at China's bulging trade surplus with the U.S. ($26.63 billion in November alone), and the concurrent accumulation of U.S. government securities. News that Beijing is arming an enemy of the U.S. at a time of war can only awaken the protectionist impulses that are always lurking below the surface in Congress.

If China's leaders have any doubts about how serious Mr. Bush will take the challenge of disarming Iran in his second term, they should read Condoleezza Rice's statements during this week's Senate Foreign Committee's hearings on her confirmation as the new U.S. secretary of state. "The goal of the administration is to have a regime in Iran that is responsive to concerns that we have about Iran's policies, which are about 180 degrees antithetical to our interests," Ms. Rice told Senators. After listing Iranian support for al-Qaeda and Hezbollah terrorists, Ms. Rice added "It is really hard to find common ground with a government that thinks Israel should be extinguished."

China has until now given short shrift to Washington's concerns. Its hunger for energy has led it to deal with some of the globe's most troublesome regimes, including also Sudan -- as Human Rights Watch executive director Kenneth Roth points out nearby.

Two months ago Beijing signed Iran's largest energy deal ever, a contract to buy 250 million tons of natural gas in 30 years and, in time, 150,000 barrels of crude oil per day. It already imports 13.6% of its oil from Iran. It was around that time that China let it be known that it would use its status as a permanent member of the U.N. Security Council to block any resolution calling for Iran to be hauled before that body on charges of violating the nuclear Non-Proliferation Treaty, which could earn it economic sanctions.

It would be a bad thing for the world if this dispute between China and the U.S. escalates. But it would be particularly bad for China itself, which depends heavily on rapid economic growth to stave off social and political unrest in its provinces.

Chinese sales to U.S. retailer Wal-Mart alone amount to $15 billion a year, or more than seven times China's $2 billion worth of exports to Iran. China's trade with the U.S. reached a staggering $153 billion in the first 11 months last year. Beijing can continue to ignore U.S. concerns if it wants to, but that doesn't look like a very wise choice.

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