Escobar Exposes Real BRICS Bombshell: Putin's "Fair Multipolar World" Where Oil Trade Bypasses The Dollar

Authored by Pepe Escobar via The Asia Times,

Putin reveals "fair multipolar world" concept in which oil contracts could bypass the US dollar and be traded with oil, yuan and gold...

The annual BRICS summit in Xiamen – where President Xi Jinping was once mayor – could not intervene in a more incandescent geopolitical context.

Once again, it’s essential to keep in mind that the current core of BRICS is “RC”; the Russia-China strategic partnership. So in the Korean peninsula chessboard, RC context – with both nations sharing borders with the DPRK – is primordial.

Beijing has imposed a definitive veto on war – of which the Pentagon is very much aware.

Pyongyang’s sixth nuclear test, although planned way in advance, happened only three days after two nuclear-capable US B-1B strategic bombers conducted their own “test” alongside four F-35Bs and a few Japanese F-15s.

Everyone familiar with the Korean peninsula chessboard knew there would be a DPRK response to these barely disguised “decapitation” tests.

So it’s back to the only sound proposition on the table: the RC “double freeze”. Freeze on US/Japan/South Korea military drills; freeze on North Korea’s nuclear program; diplomacy takes over.

The White House, instead, has evoked ominous “nuclear capabilities” as a conflict resolution mechanism.

Gold mining in the Amazon, anyone?

On the Doklam plateau front, at least New Delhi and Beijing decided, after two tense months, on “expeditious disengagement” of their border troops. This decision was directly linked to the approaching BRICS summit – where both India and China were set to lose face big time.

Indian Prime Minister Narendra Modi had already tried a similar disruption gambit prior to the BRICS Goa summit last year. Then, he was adamant that Pakistan should be declared a “terrorist state”. The RC duly vetoed it.

Modi also ostensively boycotted the Belt and Road Initiative (BRI) summit in Hangzhou last May, essentially because of the China-Pakistan Economic Corridor (CPEC).

India and Japan are dreaming of countering BRI with a semblance of connectivity project; the Asia-Africa Growth Corridor (AAGC). To believe that the AAGC – with a fraction of the reach, breath, scope and funds available to BRI – may steal its thunder, is to enter prime wishful-thinking territory.

Still, Modi emitted some positive signs in Xiamen; “We are in mission-mode to eradicate poverty; to ensure health, sanitation, skills, food security, gender equality, energy, education.” Without this mammoth effort, India’s lofty geopolitical dreams are D.O.A.

Brazil, for its part, is immersed in a larger-than-life socio-political tragedy, “led” by a Dracula-esque, corrupt non-entity; Temer The Usurper. Brazil’s President, Michel Temer, hit Xiamen eager to peddle “his” 57 major, ongoing privatizations to Chinese investors – complete with corporate gold mining in an Amazon nature reserve the size of Denmark. Add to it massive social spending austerity and hardcore anti-labor legislation, and one’s got the picture of Brazil currently being run by Wall Street. The name of the game is to profit from the loot, fast.

The BRICS’ New Development Bank (NDB) – a counterpart to the World Bank – is predictably derided all across the Beltway. Xiamen showed how the NDB is only starting to finance BRICS projects. It’s misguided to compare it with the Asian Infrastructure Investment Bank (AIIB). They will be investing in different types of projects – with the AIIB more focused on BRI. Their aim is complementary.

‘BRICS Plus’ or bust

On the global stage, the BRICS are already a major nuisance to the unipolar order. Xi politely put it in Xiamen as “we five countries [should] play a more active part in global governance”.

And right on cue Xiamen introduced “dialogues” with Mexico, Egypt, Thailand, Guinea and Tajikistan; that’s part of the road map for  “BRICS Plus” – Beijing’s conceptualization, proposed last March by Foreign Minister Wang Yi, for expanding partnership/cooperation.

A further instance of “BRICS Plus” can be detected in the possible launch, before the end of 2017, of the Regional Comprehensive Economic Partnership (RCEP) – in the wake of the death of TPP.

Contrary to a torrent of Western spin, RCEP is not “led” by China.

Japan is part of it – and so is India and Australia alongside the 10 ASEAN members. The burning question is what kind of games New Delhi may be playing to stall RCEP in parallel to boycotting BRI.

Patrick Bond in Johannesburg has developed an important critique, arguing that “centrifugal economic forces” are breaking up the BRICS, thanks to over-production, excessive debt and de-globalization. He interprets the process as “the failure of Xi’s desired centripetal capitalism.”

It doesn’t have to be this way. Never underestimate the power of Chinese centripetal capitalism – especially when BRI hits a higher gear.

Meet the oil/yuan/gold triad

It’s when President Putin starts talking that the BRICS reveal their true bombshell. Geopolitically and geo-economically, Putin’s emphasis is on a “fair multipolar world”, and “against protectionism and new barriers in global trade.” The message is straight to the point.

The Syria game-changer – where Beijing silently but firmly supported Moscow – had to be evoked; “It was largely thanks to the efforts of Russia and other concerned countries that conditions have been created to improve the situation in Syria.”

On the Korean peninsula, it’s clear how RC think in unison; “The situation is balancing on the brink of a large-scale conflict.”

Putin’s judgment is as scathing as the – RC-proposed – possible solution is sound; “Putting pressure on Pyongyang to stop its nuclear missile program is misguided and futile. The region’s problems should only be settled through a direct dialogue of all the parties concerned without any preconditions.”

Putin’s – and Xi’s – concept of multilateral order is clearly visible in the wide-ranging Xiamen Declaration, which proposes an “Afghan-led and Afghan-owned” peace and national reconciliation process, “including the Moscow Format of consultations” and the “Heart of Asia-Istanbul process”.

That’s code for an all-Asian (and not Western) Afghan solution brokered by the Shanghai Cooperation Organization (SCO), led by RC, and of which Afghanistan is an observer and future full member.

And then, Putin delivers the clincher;

“Russia shares the BRICS countries’ concerns over the unfairness of the global financial and economic architecture, which does not give due regard to the growing weight of the emerging economies. We are ready to work together with our partners to promote international financial regulation reforms and to overcome the excessive domination of the limited number of reserve currencies.”

“To overcome the excessive domination of the limited number of reserve currencies” is the politest way of stating what the BRICS have been discussing for years now; how to bypass the US dollar, as well as the petrodollar.

Beijing is ready to step up the game. Soon China will launch a crude oil futures contract priced in yuan and convertible into gold.

This means that Russia – as well as Iran, the other key node of Eurasia integration – may bypass US sanctions by trading energy in their own currencies, or in yuan.

Inbuilt in the move is a true Chinese win-win; the yuan will be fully convertible into gold on both the Shanghai and Hong Kong exchanges.

The new triad of oil, yuan and gold is actually a win-win-win. No problem at all if energy providers prefer to be paid in physical gold instead of yuan. The key message is the US dollar being bypassed.

RC – via the Russian Central Bank and the People’s Bank of China – have been developing ruble-yuan swaps for quite a while now.

Once that moves beyond the BRICS to aspiring “BRICS Plus” members and then all across the Global South, Washington’s reaction is bound to be nuclear (hopefully, not literally).

Washington’s strategic doctrine rules RC should not be allowed by any means to be preponderant along the Eurasian landmass. Yet what the BRICS have in store geo-economically does not concern only Eurasia – but the whole Global South.

Sections of the War Party in Washington bent on instrumentalizing  India against China – or against RC – may be in for a rude awakening. As much as the BRICS may be currently facing varied waves of economic turmoil, the daring long-term road map, way beyond the Xiamen Declaration, is very much in place.

The Hidden Motives Of The Chinese Silk Road

Authored by YaleGlobal Online via OilPrice.com,

China’s Belt and Road Forum, hosted with great fanfare, signals the priority of this flagship connectivity initiative while also underlining its credentials as the new “shaper” of global trends and norms. Exhorting all countries to participate, Chinese President Xi Jinping suggested that “what we hope to create is a big family of harmonious co-existence.”

But India, an emerging economy that shares a contested border with China, worries about containment and new pathways for aggression from Pakistan. Other nations wonder if hegemonistic designs are hidden behind the rationality of connectivity and trade. The policy initiative aims to enhance China’s centrality in the global economic unilateral approach in how the project is conceived and implemented so far belies the rhetoric of multilateralism emanating from Beijing.

Taking inspiration from the ancient Silk Road trading route, China’s One Belt One Road initiative, or OBOR, hopes to link more than 65 countries, encompassing up to 40 percent of global GDP. Xi’s signature foreign paradigm – linking China to Asia, Europe and Africa via an ambitious network of ports, roads, rail and other infrastructure projects. Beginning in China"s Fujian province, the projected Maritime Silk Route passes through the Malacca Strait to the Indian Ocean, moving along the Red Sea and the Mediterranean, ending in Venice.

The scale and scope of OBOR is huge, with at least $1 trillion in investments. At the Shanghai summit, Xi announced an additional $124 billion in funding for OBOR, including $8.7 billion in assistance to developing countries. China, desperate to deflect criticism that OBOR is primarily an instrument for Chinese expansionism, managed to convince heads of 29 states and governments to participate in the summit, including Turkish President Recep Tayyip Erdo?an, Italian Prime Minister Paolo Gentiloni, Russian President Vladimir Putin and United Nations chief Antonio Guterres. Most western leaders sent representatives.

The West views this as a Chinese bilateral project being touted a multilateral venture. The outgoing president of the EU Chamber of Commerce in China complains that the OBOR has “been hijacked by Chinese companies, which have used it as an excuse to evade capital controls, smuggling money out of the country by disguising it as international investments and partnerships.”

The rest of the world is more receptive. Lavishing praise on China for the OBOR initiative while targeting the U.S., Putin warned at the summit that “protectionism is becoming the new normal,” adding that the “ideas of openness and free trade are increasingly often being rejected (even) by those who until very recently expounded them.”

South Asia also welcomes OBOR, and most of India’s neighbors attended.

India refused to participate, maintaining opposition to China"s investment in the China-Pakistan Economic Corridor, or CPEC, which passes through Pakistan-occupied Kashmir. India, boycotting the event, announced in an official statement: “No country can accept a project that ignores its core concerns on sovereignty and territorial integrity.” Indian Foreign Secretary S Jaishankar articulated this position at the 2017 Raisina Dialogue: “China is very sensitive about its sovereignty. The economic corridor passes through an illegal territory, an area that we call Pak-occupied Kashmir. You can imagine India’s reaction at the fact that such a project has been initiated without consulting us.” Prime Minister Narendra Modi reinforced this point, asserting that “connectivity in itself cannot override or undermine the sovereignty of other nations.”

New Silk Roads: China, with about 60 other nations, pursue ambitious plans to connect three continents with infrastructure investments (Source: The Economist)

The advantages for India of joining China’s multibillion dollar OBOR initiative are apparent, and the economic logic is compelling. With bilateral trade of $70.08 billion in 2016, China remains India’s largest trading partner. Last year also saw record Chinese investments into India reaching close to $1 billion. Compared to this, China’s economic ties with Pakistan remain underwhelming with bilateral trade volume reaching $13.77 last year.

Yet against the backdrop of deteriorating Sino-Indian ties, India cannot feasibly join the OBOR project without challenging the very foundations of its foreign policy. The $55 billion CPEC would link China’s Muslim-dominated Xinjiang Province to the Gwadar deep-sea port in Pakistan. Despite the rhetoric, Beijing’s priority in pumping huge sums into a highly volatile Pakistani territory is not to provide economic relief for Pakistan’s struggling economy or to promote regional economic cooperation.

The development may not subdue restive Muslims in either country. The challenges are huge as underscored by the related militarization. Pakistan has deployed more than 15,000 troops to protect the CPEC, and is raising a naval contingent for protection of Gwadar; China will also station part of its growing naval forces at Gwadar. Concerns are already being expressed that Pakistan could become a Chinese colony once the corridor is operationalized. For the Chinese, security in the province of Balochistan is the biggest concern. Economic conditions in Balochistan remain dire with over two-thirds of its inhabitants living in poverty, and local opposition to the project is mounting by the day. Baloch separatists, especially those from the Baloch Liberation Army, are reported to have abducted and killed foreigners, particularly the Chinese. Such turmoil could have regional consequences.

The long-term strategic consequences of OBOR for India could also allow China to consolidate its presence in the Indian Ocean at India’s expense. Indian critics contend that China may use its economic power to increase its geopolitical leverage and, in doing so, intensify security concerns for India. CPEC gives China a foothold in the western Indian Ocean with the Gwadar port, located near the strategic Strait of Hormuz, where Chinese warships and a submarine have surfaced. Access here allows China greater potential to control maritime trade in that part of the world – a vulnerable point for India, which sources more than 60 percent of its oil supplies from the Middle East. What’s more, if CPEC does resolve China’s “Malacca dilemma” – its over-reliance on the Malacca Straits for the transport of its energy resources – this gives Asia’s largest economy greater operational space to pursue unilateral interests in maritime matters to the detriment of freedom of navigation and trade-energy security of several states in the Indian Ocean region, including India.

More generally, the Maritime Silk Road reinforces New Delhi’s concerns about encirclement. Beijing’s port development projects in the Indian Ocean open the possibility of dual-use facilities, complicating India’s security calculus.

India has its own set of connectivity initiatives such as Myanmar’s Kaladan project, the Chabahar port project with Iran, as well as the north-south corridor with Russia which could be potentially leveraged. The proposed 7200-kilometer International North South Transportation Corridor is a ship, rail and road transportation system connecting the Indian Ocean and Persian Gulf to the Caspian Sea via Iran to Russia and North Europe. The Indian and Japanese governments are working on a “vision document” for developing an Asia-Africa Growth Corridor largely meant to propel growth and investment in Africa, in part a response to China’s ever-growing presence on the continent.

The Belt and Road Initiative is a highly ambitious undertaking in line with China’s aspirations to emerge as the central economic power at a time when the United States makes plans to step back from global affairs. Its success depends on China’s ability to move beyond the bilateral framework and allowing a truly multilateral vision for the project to evolve. Otherwise, China can expect to contend with opposition from more countries than India.

Leading The Multipolar Revolution: How Russia And China Are Creating A New World Order

Authored by Federico Pieraccini via The Stratgeic Culture Foundation,

The last thirty days have shown another kind of world that is engaging in cooperation, dialogue and diplomatic efforts to resolve important issues. The meeting of the members of the Belt and Road Initiative laid the foundations for a physical and electronic connectivity among Eurasian countries, making it the backbone of sustainable and renewable trade development based on mutual cooperation. A few weeks later, the Shanghai Cooperation Organization meeting in Astana outlined the necessary conditions for the success of the Chinese project, such as securing large areas of the Eurasian block and improving dialogue and trust among member states. The following AIIB (Asian Infrastructure Investment Bank) meeting in ROK will layout the economical necessities to finance and sustain the BRI projects.

The Shanghai Cooperation Organization (SCO) and the Chinese Belt and Road Initiative (BRI) have many common features, and in many ways seem complementary. The SCO is an organization that focuses heavily on economic, political and security issues in the region, while the BRI is a collection of infrastructure projects that incorporates three-fifths of the globe and is driven by Beijing"s economic might. In this context, the Eurasian block continues to develop the following initiatives to support both the BRI and SCO mega-projects. The Collective Security Treaty Organization (CTSO) is a Moscow-based organization focusing mainly on the fight against terrorism, while the Asian Infrastructure Investment Bank (AIIB) is a Beijing-based investment bank that is responsible for generating important funding for Beijing’s long-term initiatives along its maritime routes (ports and canals) and overland routes (road, bridges, railways, pipelines, industries, airports). The synergies between these initiatives find yet another point of convergence in the Eurasian Economic Union (EEU). Together, the SCO, BRI, CTSO, AIIB, and EEU provide a compelling indication of the direction in which humanity is headed, which is to say towards integration, cooperation and peaceful development through diplomacy.

On the other side we have the «old world order» made up of the IMF, the World Bank, the European Union, the UN, NATO, the WTO, with Washington being the ringmaster at the center of this vision of a world order. It is therefore not surprising that Washington should look askance at these Eurasian initiatives that threaten to deny its central and commanding role in the global order in favor of a greater say by Moscow, Beijing, New Delhi and even Tehran.

One of the most significant and noteworthy events in the last month, or even in recent years, has been the admission into the SCO of India and Pakistan, two nuclear powers with a history of tension and conflict between them. These two countries are critical to the peaceful and fruitful integration of Eurasia. The slow, two-year process of India and Pakistan’s admission into the SCO benefited greatly from China and Russia’s mediation, culminating in the historical agreement signed by Modi, Sharif, Putin and Xi. This is not to mention Afghanistan’s Ghani being at the same table with Modi and Sharif, representing one of the most infamous locations where Eurasian powers have clashed with each other, acting as an obstacle to the integration and development of the region. The main goal of the new SCO organization is a peaceful mediation between New Delhi and Islamabad, and certainly to reach a wider agreement that can include Afghanistan. Kabul is a good example of how the SCO can offer the ideal framework for achieving a definitive peace settlement. This reflects the sentiment that was expressed during the meeting that took place a few weeks ago in Moscow between Pakistan, India, China, Russia and Afghanistan over the complicated situation in the country. Clearly there are conflicting interests, and it is only through the mediation of Beijing and Moscow that it will be possible to reach a wider agreement and end the 16-year-old conflict.

Afghanistan is a good example of how the SCO intends to support the BRI. In this sense, it is important to note that Moscow and Beijing have decided to engage in a partnership that looks more like an alliance with long-term projects planned deep into 2030. The extent to which Russia and China are committed to common initiatives and projects can be seen in the BRI, SCO, AIIB and CTSO.

Security and Development

Beijing is fully aware that it is impossible to defeat terrorism without laying the foundation for economic growth in underdeveloped countries in Africa, Middle East, Central Asia and South Asia. Terrorist organizations are generally better able to recruit from populations suffering from low income and poor schooling. The SCO is required to manage and control its members’ most unstable areas (Central Asian republics, Afghanistan, India-Pakistan border, Beijing-New Delhi relations) and mediate between parties. The BRI and SCO go hand in hand, one being unable to operate without the other, as Xi and Putin have reiterated.

The SCO and BRI are both capable of meeting the challenges of economic growth through development and progress. Just looking at the BRI"s major projects helps one understand the level and extent of integration that has been agreed. The Eurasian Land Bridge begins in Western China and ends in Western Russia. The China-Mongolia-Russia economic corridor begins in Northern China and arrives in Eastern Russia. Central Asia will be connected to Western Asia, which practically means China linking with Turkey. The China-Indochina corridor runs from Southern China to Singapore; and the Bangladesh-China-India-Myanmar corridor starts in Southern China and arrives in India. The nearly completed China-Pakistan corridor starts in south-western China and reaches Pakistan. Finally, the maritime route running from the Chinese coast through to Singapore will reach the Mediterranean in Greece or, in the future, Venice.

What is evident is that countries like India, Singapore, Turkey and Myanmar, just to name a few, do not wish to miss the opportunity to join this initiative that promises to revolutionize trade and globalization as we know it. Today’s main economic problems, as well as the problem posed by terrorism, stems from the lack of economic growth brought on by a globalization that enriches the elites at the expense of ordinary people. The BRI aims to reinvent globalization, avoiding the protectionist drift that many countries today adopt in response to an aggressive and failed approach to globalization. Beijing intends to bring about a radical change to its industries by restructuring its production and boosting its investment in technology, generating more internal consumption, and becoming a country that offers services and not only manufacturing. For this process to be successful, it will be fundamental to reorganize the regional supply chain by transferring production to more competitive countries that will play important roles in sectors such as agriculture, energy, logistics and industrial projects. Southeast Asia in particular seems to offer ideal destinations for transferring Chinese industries.

In this process of transforming a good part of the globe, some countries currently outside of the SCO organization are nevertheless fully part of the integration schemes and will play a decisive role in the future. In particular, Iran, Turkey and Egypt are the main focus when one looks at their geographical position. The importance of these three countries vis-a-vis the SCO arises mainly from the need of the organization to pursue its work of political expansion and, in the future, to counter militarily the problem of terrorism and its spread. Naturally, countries like Iran and Egypt already devote a large part of their resources towards counteracting the terrorist phenomenon in the Middle East and North Africa. Their entry into the SCO would be seen by many protagonists of the BRI, especially China, as providing the opportunity to expand their projects in areas in North Africa and the Middle East that are currently tumultuous.

This should not come as a surprise, since even countries like Jordan and Israel have been taken into account by Beijing for important infrastructure projects related to the transport of desalinated water to regions with a high rate of drought. With Israel, the Chinese partnership is stronger than ever, counting on various factors such as technological development and the expansion of several Israeli ports to connect more Chinese maritime routes with destinations in the Mediterranean like Piraeus in Greece and probably Venice in Italy. Turkey"s entry into the SCO is mainly aimed at gathering the region"s major oil and gas suppliers and consumers under a single umbrella guaranteed by the SCO. These operations take time and a degree of cooperation that is hard to maintain, although the resolution of the situation in Syria, in addition to the crisis in the Gulf between Qatar and Saudi Arabia, could accelerate synergies and easily facilitate them.

The entry of Iran, Egypt and Turkey into the SCO is inevitable, receiving the strong encouragement of China and Russia, especially as regards the future connection between BRI and other infrastructure projects that are part of the EEU. The advantages are quite obvious to everyone, bringing about greater integration and infrastructure links, the increase of trade between nations, and general cooperation in mutual development. Products can travel from one country to another based on conditions determined bilaterally, something that often favors bigger nations rather than smaller ones. The intention of ??China"s Globalization 2.0, coupled with a Eurasian revival of the EEU, is to change the future of humanity by shifting the global pole of globalization and development towards the east. The BRI is immense and mind boggling in its scope, given that it embraces realities ranging from Panama (focused on the extended channel and the Nicaragua project for a new channel) to Australia, passing through Europe, the Middle East, Asia and the Persian Gulf.

Naturally, in this delicate balance, Europe is called on to play a decisive role in the future. The United States, with its «America First» policy, has already burned bridges with the Chinese BRI revolution, and indeed hopes to throw a spanner in China’s works. European countries including England, France, Germany and Italy have already begun to sign onto various Chinese proposals. It looks as if America’s allies are no longer listening to their former boss. The European Central Bank has for the first time diversified $500m into Yuan currency, and London, together with Rome, Berlin and Paris, was present in Beijing for the launch of the BRI. France, Germany and England sent high-level representations and delegations, Italy directly the Prime Minister. For Europe, the largest exporter to China and the second-largest regional block importing from China, it is inevitable that it will be an integral part of the BRI, looking to reach Iran, Turkey and Egypt for energy supplies and diversifying sources, all within the framework of the BRI.

In this process of Eurasian integration, there are some key countries to keep in mind, but the first steps have already been made with almost indissoluble ties having been made between Moscow and Beijing, as well as the monumental inclusion of Pakistan and India at the same table. With an understanding between India, Russia and China, as well as a lack of hostility to the project in Iran, Israel, Germany, England, Turkey and Egypt, it will be possible to speed up this global change, bringing it to the African countries, Gulf monarchies, South Asian countries, and even South and Central America. Even Washington"s historic allies like Israel, Saudi Arabia and the EU vacillate in the face of such an opportunity to broaden their horizons with significant gains. As far as their alliance with the United States, in this world rapidly heading towards a multipolar world order, not even Riyadh, Tel Aviv or London can afford the luxury of ignoring the project that perhaps more than any other will revolutionize the future of humanity in the near future. Not being a part of it is simply not an option.

The United States has two diametrically opposed options before it. It can operate alongside the BRI project, trying to fashion its own sphere of influence, albeit smaller than the countries residing within the Eurasian continent; but of course for Washington, simply being part of a grand project may not be enough, since it is used to getting its own way and subordinating the interests of other countries to its own. If the US decides to try and sabotage the BRI with their normal tools like terrorism, it is very likely that the countries historically aligned with Washington in these affairs (such as Pakistan and Saudi Arabia) will be subjected to Chinese economic pressure and encouraged to instead participate in a more positive manner.

Cooperation against Threats

The main question is the extent to which Chinese economic persuasion will succeed in overcoming US military threats. In this respect the SCO will be a decisive factor as it expands its influence beyond the Eurasian bloc into Africa and the Middle East. To date, the SCO cannot be considered a military bloc opposed to NATO. Everything will depend on the pressures that the United States will bring to bear on participating countries. Therefore, it is likely that the SCO will evolve to include a strong military aspect in order to counter American destabilization efforts.

It is difficult to predict whether the US will be neutral or belligerent. But considering recent history, American hostility is likely to force Moscow and Beijing into an asymmetric response that will hit Washington where it hurts most, namely its economic interests. Aiming at the dollar, and in particular the petrodollar, seems to be the best bet for advancing the BRI, threatening a massive de-dollarization that would end in disaster for Washington. This is the nuclear option that Beijing and Moscow are looking into, with more than a desire to accelerate this economic shift.

The future of humanity seems to be changing in exciting and unprecedented ways. The full integration of the Eurasian bloc will eventually end up changing the course of history, allowing nations that are currently weak and poor to withstand colonial pressures and broaden their cooperation and dialogue. Peace as a method for developing synergies and prosperity seems to be the new paradigm, contrasting with war and destruction as has been the case in the last decades.

One Belt, One Road, And One Debt Hangover

Autohred by Jim Rickards via The Daily Reckoning,

China is not only one of the world’s largest debtors, it is one of the world’s largest creditors.

China uses debt not in the customary financial manner, but as a political tool to generate employment and maintain social stability. Likewise China uses loans and investment as a tool to advance its strategic interests. This may be good geopolitics in the short run, but it will be a disaster economically in the long run.

Just as Chinese state owned enterprises (SOEs) can’t repay debts to Chinese banks, China’s foreign partners will not be able to repay debts to China itself. These twin disasters-in-the-making may converge in such a way that China’s assets disappear or become illiquid at exactly the time they are most needed to bail-out its own banking system.

China has launched four major overseas investment initiatives in the past ten years. The oldest is their sovereign wealth fund, China Investment Corporation, or CIC, established in 2007. Sovereign wealth funds are a way for countries to invest their reserves in securities other than safe instruments such as U.S. Treasury notes.

CIC today has assets of over $800 billion, spread among stocks, corporate bonds, hedge funds, private equity, commodities, and commercial real estate. Some of CIC’s investments are directly-owned enterprises, including gold mines in Zimbabwe.

While these assets may outperform Treasury notes over time, they are also illiquid, and would tend to decline in value during a financial panic. This means that about 20%, of China’s reserves are unavailable for critical tasks such as bailing out the banking system or defending the currency.

The second and third initiatives are the New Development Bank, NDB, created by the BRICS in 2014, and the Asia Infrastructure Investment Bank, AIIB, created by China in 2016. These have participation from 35 countries in the Asia/Australia region, and 18 other countries from outside that region, mostly in Europe. The United States refused to join.

Although NDB and AIIB are both multilateral institutions, China was the principal sponsor and a major source of funding. It provided about $10 billion to NDB and $30 billion to AIIB.

These banks will expand their lending capacity by issuing notes and will fund infrastructure projects in competition with the World Bank and its regional development banks — without interference from the U.S. on priorities.

China, One Belt, One Road

By far, the most ambitious outbound investment effort by China is the “One Belt, One Road” initiative. The “belt” refers to overland routes from central China to Europe. The “road” refers to maritime routes from eastern China to Southeast Asia, Africa, and Europe.

It is a recreation of the original Silk Road caravan route of the thirteenth century, and China’s glory days as a naval power led by Admiral Zheng He in the Ming Dynasty in the early fifteenth century.

The scope of the One Belt, One Road initiative is immense. It will include port facilities, railroads, highways, telecommunications channels, airports, transshipment facilities, renewable energy sources, and more strung out from Xian to Rotterdam, and from Guangzhou to Venice.

The graphic on the previous page shows the main corridors of the belt and road, but there are many ranches and capillaries not shown in detail. Of these offshoots, one of the most critical is a transportation link from Kashgar in western China to the port of Gwadar on the Arabian Sea in Pakistan. This route passes through disputed territory in Kashmir that could lead to a war with China and Pakistan on one side, and India on the other.

Another critical belt link runs from Kunming in southern China through Myanmar, Thailand, and Malaysia before terminating in Singapore.

Main routes in China’s “One Belt, One Road” Initiative are shown above. The overland belt is in green and the maritime road is in blue.

At a global leaders’ summit in Beijing on May 14–15, 2017, President Xi Jinping of China laid out his vision for the One Belt, One Road and committed $55 billion of lending capacity.

Vladimir Putin, president of Russia, was one of many foreign leaders present. The U.S. sent a low level delegation, probably including CIA assets, attempting to get a read on Putin, Xi and the North Korean delegation.

The problem with One Belt, One Road is that many of the potential recipients of development loans are not highly creditworthy or have a track record of defaulting on debts or requiring substantial debt restructuring in order to stay current.

As with Chinese bank loans to SOEs, the NDB, AIIB, and One Belt, One Road efforts are not primarily economic but political. China is seeking to use its economic clout to create jobs and control critical infrastructure.

In the end, China is attempting to create a geopolitical sphere of influence of even greater scope than the Japanese Empire prior to World War II, called by Japan “The Greater East Asian Co-Prosperity Sphere.”

As with its other policies, China will turn liquid assets into illiquid assets in order to pursue its ambitions. This could make sense if nothing goes wrong. But, things will go wrong.

China will face a monumental liquidity crisis sooner than later and find that its liquid assets have been turned into bridges to nowhere.

Shaping The Future: Moscow And Beijing's Multipolar World Order

Authored by Federico Pieraccini via The Stratgic Culture Foundation,

Once in a while, think tanks such as the Brookings Institute are able to deal with highly strategic and current issues. Often, the conferences held by such organizations are based on false pretences and copious banality, the sole intention being to undermine and downplay the efforts of strategic opponents of the US. Recently, the Brookings Institute"s International Strategy and Strategy Project held a lecture on May 9, 2017 where it invited Bobo Lo, an analyst at Lowy Institute for International Policy, to speak. The topic of the subject, extremely interesting to the author and mentioned in the past, is the strategic partnership between China and Russia.

The main assumption Bobo Lo starts with to define relations between Moscow and Beijing is that the two countries base their collaboration on convenience and a convergence of interests rather than on an alliance. He goes on to say that the major frictions in the relationship concern the fate that Putin and Xi hold for Europe, in particular for the European Union, in addition to differences of opinions surrounding the Chinese role in the Pacific. In the first case, Lo states that Russia wants to end the European project while China hopes for a strong and prosperous Europe. With regard to the situation in the Pacific, according to this report, Moscow wants a balance of power between powers without hegemonic domination being transferred from Washington to Beijing.

The only merit in Lo’s analysis is his identification of the United States as the major cause of the strategic proximity between Moscow and Beijing, certainly a hypothesis that is little questioned by US policy makers. Lo believes Washington"s obsession with China-Russia cooperation is counterproductive, though he also believes that the United States doesn’t actually possess capabilities to sabotage or delimit the many areas of cooperation between Beijing and Moscow.

What is missing in Lo’s analysis are two essential factors governing how Moscow and Beijing have structured their relationship. China and Russia have different tasks in ushering in their world order, namely, by preserving global stability through military and economic means. Their overall relationship of mutual cooperation goes beyond the region of Eurasia and focuses on the whole process of a sustainable globalization as well as on how to create an environment where everyone can prosper in a viable and sustainable way. Doing this entails a departure from the current belligerent and chaotic unipolar world order.

Moscow and Beijing: Security and Economy

Beijing has been the world"s economic engine for over two decades and shows no signs of slowing down, at least not too much. Moscow, contrary to western media propaganda, has returned to play a role not only on a regional scale but as a global power. Both of these paths of military and economic growth for China and Russia have set things on a collision course with the United States, the current global superpower that tends to dominate international relations with economic, political and military bullying thanks to a complicit media and corrupt politicians.

In the case of Beijing, the process of globalization has immensely enhanced the country, allowing the Asian giant to become the world"s factory, enabling Western countries to outsource to low-cost labor. In this process of economic growth, Beijing has over the years gone from being a simple paradise for low-cost outsourcing for private companies to being a global leader in investment and long-term projects. The dividends of years of wealth accumulation at the expense of Western nations has allowed Beijing to be more than just a strategic partner for other nations. China drives the process of globalization, as recently pointed out by Xi Jinping in Davos in a historic speech. China"s transition from a harmless partner of the West to regional power with enormous foreign economic investments place the country on a collision course with Washington. Inevitably, Beijing will become the Asian hegemon, something US policymakers have always guaranteed will not be tolerated.

The danger Washington sees is that of China emerging as a regional superpower that will call the shots in the Pacific, the most important region of the planet. The United States has many vested interests in the region and undeniably sees its future as the leader of the world order in jeopardy. Obama"s pivot to Asia was precisely for the purposes of containing China and limiting its economic power so as to attenuate Beijing’s ambitions.

Unsurprisingly, Washington"s concerns with Moscow relate to its resurgence in military capabilities. Russia is able to oppose certain objectives of the United States (see Ukraine or Syria) by military means. The possibility of the Kremlin limiting American influence in Eastern Europe, the Middle East and Eurasia in general is cause for concern for American policy makers, who continue to fail to contain Russia and limit Moscow’s spheres of influence.

In this context, the strategic division of labor between Russia and China comes into play to ensure the stability of the Eurasian region as a whole; in Asia, in the Middle East and in Europe. To succeed in this task, Moscow has mainly assumed the military burden, shared with other friendly nations belonging to the affected areas. In the Middle East, for example, Tehran"s partnership with Moscow is viewed positively by Beijing, given its intention to stabilize the region and to eradicate the problem of terrorism, something about which nations like China and Russia are particularly concerned.

The influence of Islamist extremists in the Caucasian regions in Russia or in the autonomous region of Xinjiang in China are something that both Putin and Xi are aware can be exploited by opposing Western countries. In North Africa, Egypt has signed several contracts for the purchase of military vehicles from Moscow, as well as having bought the two Mistral ships from France, thereby relying on military supplies from Moscow. It is therefore not surprising that Moscow and Egypt cooperated with the situation in Libya and in North Africa in general.

In Southeast Asia, Moscow seeks to coordinate efforts to reach an agreement between Afghanistan, Pakistan and India. The entry into the Shanghai Cooperation Organization (SCO) of New Delhi and Islamabad (Tehran will be next), with the blessing of Beijing as the protagonist of the 2017 SCO meeting, is a keystone achievement and the right prism through which to observe the evolution of the region. Moscow is essentially acting as a mediator between the parties and is also able to engage with India in spite of the dominating presence of China. The ultimate goal of Moscow and Beijing is to eradicate the terrorist phenomenon in the Asian region with a view to what is happening in North Africa and the Middle East with Iran and Egypt.

Heading to a Multipolar World Order

The turning point in relations between Moscow and Beijing concerns the ability to engage third countries in military or economic ways, depending on these countries’ needs and objectives. Clearly in the military field it is Moscow that is leading, with arms sold to current and future partners and security cooperation (such as with ex-Soviet Central-Asian republics or in the Donbass) and targeted interventions if needed, as in Syria. Beijing, on the other hand, acts in a different way, focusing on the economic arena, in particular with the Asian Infrastructure Investment Bank (AIIB) at its center.

Initiatives such as the One Belt One Road (OBOR) and the Maritime Silk Road have the same strategic aim of the Russian military initiative, namely, ensuring the independence of the region from a geo-economic perspective, reaching win-win arrangements for all partners involved. Naturally, the win-win agreement does not mean that China wins and then wins again; rather, a series of bilateral concessions can come to satisfy all actors involved. An important example in this regard that explains the Sino-Russian partnership concerns the integration of the Eurasian Union with the Chinese Silk Road. The Russian concerns over the predominant status of the Chinese colossus in Central Asia have been assuaged by a number of solutions, such as the support of the OBOR infrastructure program to that of the Eurasian Union. Beijing is not interested in replacing Moscow"s leading role the post-Soviet nations in Central Asia but rather with providing significant energy and economic development to particularly underdeveloped nations that are in need of important economic investment, something only Beijing is able to guarantee.

The linking of the Eurasian Economic Union (EEU) with the One Belt One Road initiative guarantees Moscow a primary role in the transit of goods from east to west, thereby becoming the connecting point between China and Europe while expanding the role and function of the EEU. All participants in these initiatives have a unique opportunity to expand their economic condition through this whole range of connections. Beijing guarantees the money for troubled countries, and Moscow the security. The SCO will play a major role in reducing and preventing terrorist influence in the region, a prerequisite for the success of any projects. Also, the AIIB, and to some extent the BRICS Development Bank, will also have to step in and offer alternative economic guarantees to countries potentially involved in these projects, in order to free them from the existing international financial institutions.

One Belt One Road, and all the related projects, represent a unique occasion whereby all relevant players share common goals and benefits from such transformative geo-economic relationships. This security-economy relationship between Moscow and Beijing is  the heart of the evolution of the current world order, from the unipolar to the multipolar world. The US cannot oppose China on the economic front and Russia on the military front. It all comes down to how much China and Russia can continue to provide and guarantee economic and security umbrellas for the rest of the world.