Posted on 10/12/2006 8:59:13 AM PDT by GodGunsGuts
Power Play
Frank J. Gaffney, Jr.
Last summer, the American people and their elected representatives suddenly awoke to a startling reality: Communist China is hungry for energy and working aggressively to secure assured access to it all over the world. And, for a brief moment, it looked as though the United States might become seized of the larger thrust of Chinese strategy, of which the PRC’s energy agenda is but one part. The precipitating cause was the proposed purchase of Unocal by one of the PRC’s state-owned energy giants, the China National Offshore Oil Corporation (CNOOC). In June 2005, the U.S. House of Representatives voted by a margin of 398 to 15 against the proposed deal, terming it a risk to national security. Two months later, CNOOC decided to drop its bid and Unocal was instead taken over by ChevronTexaco.
Unfortunately, the insights provided by this abortive transaction now seem as fleeting as the debate it inspired was super-charged. As a result, we are once again ignoring one of the most strategically ominous developments in the world today—and a possible source of conflict tomorrow.
There were three powerful reasons for objecting to China’s play for Unocal, and these should inform our thinking about PRC behavior more generally. First, the proposed purchase would have abetted Communist China’s effort to acquire more of the world’s relatively finite energy resources. Second, it also would have advanced the PRC’s efforts to dominate the vital supply of rare earth minerals. Finally, the deal was emblematic of China’s larger, and increasingly threatening, strategic plan—one with grave implications for U.S. economic and national security interests.
(Excerpt) Read more at securityaffairs.org ...
ping
Senate Floor Statement by U.S. Sen. James M. Inhofe(R-Okla) regarding rare earths:
"One example of CFIUS falling short is with Magnequench International Incorporated. In 1995, Chinese corporations bought GM's Magnequench, a supplier of rare earth metals used in the guidance systems of smart-bombs. For over twelve years, the company has been moved piecemeal to mainland China, leaving the U.S. with no domestic supplier of neodymium, a critical component of rare-earth magnets. CFIUS approved this transfer. The problem takes a unique twist, as Nathan Tabor of The Conservative Voice outlines, "China [has] become the dominant supplier of rare-earth elements, also called lanthanides (`lan-tha-nides). But in the U.S., owners of the Mountain Pass mine in California, one of the finest rare-earth deposits in the world, have been spending millions of dollars over many years to resolve an environmental complaint that processing the element threatens the habitat of the desert tortoise."
http://inhofe.senate.gov/pressreleases/chinaupdate.html
Do you know anything about the rare earths angle on this story???
Can somebody explain to me the beneficial economics and strategic value of "ownership" of off-shore oil supplies, when oils is a fungible world-wide commodity, and in a conflict we control the sea lanes?
I just don't see a problem. If China "owns" Sudanese (or other) oil fields, they are useless during a war in which we could sink every single tanker.
If China controlled the sea lanes, its a wholly different prospect. But that points out the real issue: Military Might is the strategic key, not ownership of assets.
Asset ownership is really just a financial play hedging against future price increases. If prices actually decrease (a real possibility) or substitutes become cheaper, China will merely have made a very bad investment.
Bump for tonight.
Sounds reasonable to me.
Just as a guess, to:
-guarantee supply for domestic needs
-fill up their strategic oil reserve
-influence world prices
-deny enemies access to certain oil fields
Magnequench's patents were expiring, plus there was so much patent infrigement going on world wide, they couldn't enforce it all. This was/is not cutting edge technology.
As for Molycorp's mine at Mountain Pass, there was a significant enviro problem there having to do with the evaporation ponds that were on BLM land.
Molycorp moved everything onto land that they own and re-entered the permitting process because they existing permits were set tp expire.
Since they moved back onto the private property, the County became the lead agency in the permitting process and they would much more co-operative than EPA or the State would be.
As it stands now, rare earth mineral prices are so depressed due to a world glut, Molycorp has not restarted the processing but are mining and shipping ore to cutomers with capability of processing and a very specialized needs for the mineral.
Molycorp has no intention of following thru on the permitting process because those permits have an effective life-span and they do not want to waste any of that lifespan on an idle plant.
There is nothing to indicate that China would remove any oil reserves or production from the world market.
Darn. Nothing like actual facts to screw up a good witchhunt.
We set out to modernize the world, and we have done so.
What we fertilized has grown by leaps and bounds.
Now that there are more of them than of us, we are alarmed because they want to be a major player on the world market.
It is a brave new world, and the world market has always been the big game.
No one wins in the market by cutting off sales to a major buyer.
It only seems ironic that we buy materials for our weapons from our enemies. The irony applies to both sides.
The most egegious mis-info spreaders on this subject is Sierra Times and they trot the story out about once a year. Then WND picks it up, and then others and others and others.
With what force projection capability that we can't annihilate in a strategically dire circumstance?
"fill up their strategic oil reserve"
"influence world prices"
Why is filling up a strategic oil supply more efficient from an owned asset than buying on the open market which is free?
How can minority ownership of oil supply influence world prices? By refusing to sell? That didn't work so hot for the Sheiks in the 1970s, after which they determined that maintaining consistent supply is revenue maximizing. The total world supply and demand determine prices, not an individual actor.
Mainly this revolves around battery powered power tools.
I hypothesize that the Chinese Communists are not savvy enough to understand free markets, and they believe that holding an asset is more important than the free trade of that commodity. They're wrong. The key is the free trade of oil, not its ownership by a consumer. Indeed, ask the Mexican consumer if state oil ownership has been a boon or a curse, and you'll have your answer.
China and Russia/Former USSR (and their allies) have cornered the Raw Materials market, as well as Oil and natural gas.
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