| OIL-AHOLIC AGGRESSION
by Marc Faber
In the late 1980s, shortly before the first Iraq War, a client of
mine, General Ho (he had been general under Chiang Kai-shek),
complained that we 'Wall Street' people didn't take political and
military trends sufficiently into account when analyzing economic
and financial trends.
Personally, I follow geopolitical trends quite closely, but I am
aware that the short-term momentum players, who dominate the
financial markets, pay little attention to these trends, since it
is their belief that any economic, political, or social factors
will be reflected in the market action of the various asset
classes.
A hawkish leadership in the US, the war in Iraq, terrorism,
soaring commodity prices, the economic rise of China and its
thirst for resources (oil in particular), several recent articles
concerning the growing tensions between Japan and China, and
instability in Saudi Arabia all suggest to me that global
geopolitical tensions are on the rise and could, at some point in
the future, have a very negative impact on the global economy and
financial markets. Today we focus on China.
Last year, China replaced Japan as the world's second largest
importer of crude oil. Soon after taking over power, a year ago,
President Hu Jiantao and Premier Wen Jiabao decided that,
"securing reliable supplies of petroleum and other scarce
resources was not only crucial to sustained economic development,
but integral to China's national security."
According to Willy Lam, a Hong Kong-based specialist in Chinese
politics and foreign policy, China's thirst for oil "is the real
story behind Beijing's worsening territorial dispute with Japan
over the group of supposedly oil-rich islands claimed by China as
the Diaoyus, and by Japan as the Senkakus. That same concern also
explains the recent flare up in China's dispute with some South
East Asian nations over their claims to the resource-rich Spratly
Islands in the South China Sea. It's a thirst that threatens to
pit China against its neighbors, despite Beijing's avowed policy
of 'peaceful emergence' in the global community"
In addition, reliable, firsthand sources in the oil industry have
told me that, on numerous occasions, when Chinese oil companies
have wanted to acquire oil concessions around the world, the
American State Department has interfered and tried to prevent
such acquisitions.
It may initially seem far-fetched, but with all these threats,
it's not hard to see why China might want to invade Taiwan.
To anyone who looks at a map of the region, the reasons are
obvious. Taiwan's strategic location makes it extremely valuable.
The Taiwan Strait is a critical sea lane, and taking Taiwan would
allow China to choke off international commercial shipping,
especially oil, to Japan and South Korea, should it ever decide
to do so."
Wendell Minnick, Jane's Taiwan correspondent, published a
disturbing article recently. Under the title "The year to fear
for Taiwan: 2006." (Most analysts believe that China's military
strength will exceed Taiwan's defense capabilities by 2005, hence
2006 is the year to fear.)
Minnick postulates that should China decide to take this route,
it would be unlikely to be a large-scale, Normandy-type of
amphibious assault, but involve something more akin to a
"decapitation strategy".
Minnick explains that "decapitation strategies short circuit
command and control systems, wipe out nationwide nerve centers,
and leave the opponent hopelessly lost. As the old saying goes,
'Kill the head and the body dies.' All China needs to do is seize
the center of power, the capital and its leaders."
According to Minnick, US Defense Department officials are now
reexamining China's military threat to Taiwan, and with a
potential decapitation strategy now believed to be in the works,
"US defense officials are beginning to think what had once been
unthinkable: losing Taiwan in only seven days."
The Taiwan takeover scenario would involve the initial deployment
of China's Special Forces and rapid deployment forces, combined
with air power and missile strikes.
The second phase of the decapitation operation would begin after
airborne forces had captured Sungshan Airport. With a secure
landing strip, China could fly in elements of its troops with the
air support of its 1,000 bombers and fighters.
Minnick says: "If the Chinese assaulted the capital, Regular
Taiwanese army units, all based outside of Taipei, would take
hours, perhaps days, to respond. It would be up to the MPC to
hold the Chinese back until reinforcements arrived - which might
be never... "
Pre-positioned Special Forces, smuggled into Taiwan months
before, would assassinate key leaders, and attack radar and
communication facilities around Taiwan, a few hours before the
main attack.
Taiwan's navy would have little to do in this war scenario,
except sink like rocks.
Taiwan's air force would be kept busy trying to repair runway
damage caused by the estimated 500 short-range ballistic missiles
deployed along China's coast and targeting Taiwan.
Once Taipei was captured, a new government chosen by Beijing
would be sworn into office. There would be plenty of Taiwanese
politicians to choose from. It is well known there are many
pro-China legislators who have investments in China and more than
a few who have had private meetings with Beijing officials. There
would be too many pro-China people in the US State Department —
privately relieved the Taiwan issue was finally settled — to say
anything in Taiwan's defense.
With the new government inaugurated, the new president would
declare an end to all hostilities with China. During a nationwide
televised speech, the new president would order all military
forces to stand down. With the pro-China sentiments running high
in the Taiwan military, it is likely that most would grudgingly
accept the new president.
Normally, I don't take futuristic war scenarios too seriously,
but very well informed sources with close connections to China's
military leadership have heard first-hand that, if Taiwan were to
push for independence, China would have no alternative but to
invade the "renegade province".
Taiwan is strategically important for the US and Japan, as
Minnick pointed out above, but from the Chinese perspective it is
vital. After all, whoever controls the Island of Taiwan also
controls the shipping lines in the Strait of Taiwan. Thus, an
independent Taiwan, with a hostile government, could block the
supply of oil to China, which would cripple the mainland, both
militarily and economically.
This vulnerability is China's Achilles heel. Rest assured that
the administration will consider every option to ensure China's
continued growth, including military operations.
Regards,
Marc Faber
for The Daily Reckoning
Editor's note: Dr. Marc Faber, editor of The Gloom, Boom
and Doom Report, has been headquartered in Hong Kong for
nearly 20 years, during which time he has specialized in
Asian markets. |
