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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?


To: Taikun who wrote (67627)8/16/2005 11:20:59 AM
From: shades  Read Replies (1) | Respond to of 74559
 
So what does all this info make you think about investing in INDIA?



To: Taikun who wrote (67627)8/16/2005 11:58:19 AM
From: Slagle  Read Replies (1) | Respond to of 74559
 
Taikun Re: "slowdown" There appears to be already to be a recent falling off in some of the smaller Asia markets, Indonesia, Malaysia, Thailand, ect. and in the country funds like IF, TTF, EWM ect. It may be spreading to India as IFN and IIF have been weak for a few days. Do you think that a China slowdown may be the reason?
Slagle



To: Taikun who wrote (67627)8/16/2005 8:48:51 PM
From: TobagoJack  Read Replies (2) | Respond to of 74559
 
Three comments,

(a) Given that much is founded on Stratfor's supposed contrarian take on issues and events, and given that Stratfor has been consistently mainstream and wrong, there take on matters is just and only that, their take.

(b) If Stratfor's take on oil price decreasing depends on China importing less, I have news for them, China is already importing less, and waiting for market to settle, and so I haven't a clue who is buying oil at the spot. However, given that oil was at 15 only so long ago, and is at 65 now, what does it matter if spot goes to 55 or 45, it is a tax on global economy, and one that is living off of J6P housing 'wealth' extraction.

(c) As far as Stratfor's take on the Chinese economy, they have been wrong forever plus a day, and the points they make on source of foreign investment are irrelevant, because the fact of the matter is, regardless of origins, investments are made, structures built, income rising, and trade increasing.

Yes, China's economy is already taking a rest, and, as in but, only resting, so as to do the next leg up. The reform is in fact gathering pace, privatization happening at full throtle, and the next phase, after any possible deluge, will be even stronger, not weaker, because that is the TREND, one that Stratfor has failed and failed again to recognize.

Focusing on 1929 in USA would have been an error, and Stratfor is making that error, today, regarding China.

Stratfor could easily have noted back in 1991 (they probably did, had their foolishness extended that far back) that 90% of FDI in China is from Hong Kong, Taiwan, and Macao, and my comment would have been, yeah, and so what? Do they mean that the investments are not real, or they suppose that the investment will be pulled back out of the cement and machinery stock?

I read Stratfor for amusement and triangulation, I definitely fade much of what they have to say.

I got asked about the source of China's inward FDI recently, and I e-mailed response as below, QUOTE

Hi guys, I think Stratfor is blinded by its politics,
and is in fact not commercial savvy. Their geopolitical analyses is interesting as a view, to be considered, but not altogether correct as far as economics is concerned.

I think ...

The source of China FDI can all be traced to Maestro Greensputin's money printing, and Professor BurnAndKaput's Secret Weapon printing press. Whether the money goes to China via GoodYear or GM, or via Silverstone (Malaysian overseas Chinese outfit) or Mr. Wang from Vancouver is not entirely important, because the invested assets resulting in production capacity all serve customers all over.

The overseas Chinese money really only started entering China in large dollops and huge tranches after June 4 1989, as it is the first time in a longtime that overseas Chinese money can hope to make a dollar or yen or won in China, or on the stock exchanges in New York or London or Hong Kong or Singapore. The money all comes from one source, the US Fed Reserve, vi Fannie Mae and Freddie Mac, enabled by Joe6Pack refinancing his house for three times.

As the dollars built up, of course the domestic Chinese started getting some, and learning from their naughty cousins, started establishing offshore companies, bank accounts, trading companies, etc. And yet, still, the money can all be traced to the same gushing source, the US Fed.

The companies that invested in production in China, including some early-adopter US companies, all play the offshore company re-invoicing game (using controlled offshore companies to buy from their China invested and subcontracting companies at low ex-factory prices, and selling the same at marked up importing cost to controlled US companies). Whether
the operation in China is making large or small profit is not relevant. The profit is made somewhere along the chain, and it mostly is also not on-shore US. This fact can be easily discerned by checking general ex-factory price in China vs import. wholesale, and retail prices in USA.

So, bottom line, profit is made, not so much for the GMs and GEs, but for 90% of everybody else.

... and ...

(a) It is all about Humvees
worldmarket.blogspot.com

(b) Sin
worldmarket.blogspot.com

(c) In changing times
worldmarket.blogspot.com

(d) Where things can go
worldmarket.blogspot.com

(e) When we must dial 1.800.save.my.azz
worldmarket.blogspot.com

(f) Get money for coffee
worldmarket.blogspot.com

(g) Then select to go through Door #3
worldmarket.blogspot.com



To: Taikun who wrote (67627)8/16/2005 8:52:53 PM
From: TobagoJack  Read Replies (2) | Respond to of 74559
 
Stratfor does not realize, foolish that they are, that their brand of policy proscription is in fact, once more, pushing China toward Russia, as had happened in the 1920s, except this time, the push may matter:

Russia, China: Training to Fight Together Against Potential Enemies
Aug 16, 2005

Summary

With their upcoming joint military exercises, Beijing and Moscow will send signals to the United States that Washington will not want to see -- the potential of close Sino-Russian military and political cooperation and the possibility of China's increased ability to complicate U.S. naval operations in its waters. Though the exercises do not indicate an upcoming Chinese invasion of Taiwan, they are a major step in training China's forces to achieve such a goal -- a fact that will not be lost on Taipei. The exercises will not only lead Russia and China's allies to feel they have solid protection, they also will result in China's acquiring more advanced Russian military hardware, and Russian and Chinese officers and troops will gain experience by working together. Though the upcoming exercises are very different from the original plan, they signal a burgeoning military interoperability that could be needed elsewhere -- perhaps in Central Asia -- to prevent another pro-Western "revolution."

Analysis

Russia and China will conduct military exercises, called Peace Mission 2005, from Aug. 18 to 26 under the auspices of the Shanghai Cooperation Organization (SCO). The maneuvers represent a qualitative leap in the countries' military ties and overall strategic partnership, advancing them toward a strategic alliance and signaling that they could conduct joint military operations in the future. The exercises will be the largest in the history of Sino-Russian training and will involve "the most modern Russian weapon systems and a large number of troop units and weapons of our Chinese partners," Russian President Vladimir Putin told Xinhua.

The multi-purpose exercises' goals are ambitious indeed. The key military goals include learning how both nations' troops and staffs can coordinate on the battlefield in any conflict they jointly fight -- which entails learning about the interoperability of their respective weapons and tactics. Other goals are to advance capabilities on both sides -- especially China -- for contingency planning, such as preparing their forces to fight in conflicts that are off the table now but for which general staffs are always planning -- such as a Chinese invasion of Taiwan -- in case geopolitical circumstances change.

The exercises' key political goals are to warn Washington to stop pushing both Russia and China, or face the possibility of an eventual joint military response. This not only forces pro-U.S. governments -- from Tokyo to Taipei and some former Soviet Union (FSU) regimes -- to consider whether being solidly pro-U.S. and playing against the two Asian Giants is in their best interest, it also assures China and Russia's allies that the two countries' military umbrella is strong enough to ward off a U.S. geopolitical offensive.

To reinforce the seriousness of the two countries' shared intentions to counter the U.S. geopolitical offensive in their region, Russian and Chinese defense ministers will observe the live-fire part of the exercises -- and, as he has done before, Putin could make a surprise appearance and join Chinese President Hu Jintao to observe the exercises. Other SCO members' defense ministers are also invited observers. The United States, for obvious reasons, will send observers to the exercises. China and Russia's extension of an invitation to Washington was meant as a friendly move, but Washington will watch nervously and try to determine how strong the Russian forces still are and how strong the Chinese will become, along with how serious both countries are about military cooperation.

Eighteen hundred Russian troops and staff members will participate in Peace Mission 2005, as will two Tu-95MS strategic missile carriers, four long-range Tu-22M3 bombers, two Tu-22MR reconnaissance aircraft and up to six of Russia's newest Su-27SM multi-purpose jets. About 10 other aircraft -- including long-range Il-76 transportation, air-refueling and early-warning aircraft -- also will be involved. The Russian Navy will be represented in the exercise by the Udaloy class destroyer Marshal Shaposhnikov, which specializes in anti-submarine warfare; the Sovremenny class destroyer Burny; the BDK-11, a large amphibious landing ship capable of deploying 25 armored vehicles and up to 225 troops; the tanker Pechenga; the rescue tug SB-522; and a Kilo class diesel-electric submarine.

Chinese forces participating in the maneuvers include about 10,000 troops and staffs, various ground forces' weapons systems, dozens of Russian-made Su-27 "Flanker" air superiority fighters and Su-30MKK "Flanker-C" multi-role fighters, coastal artillery and missile batteries, two Russian-made Sovremenny class destroyers, several surface warships -- some of which will carry amphibious means -- and two Russian-built Romeo and Kilo class diesel submarines. Two Chinese-built Luhai class destroyers comparable to the U.S. Aegis destroyers also could participate.

Peace Mission 2005's many purposes become apparent in an analysis of the maneuvers' theater and scenario. Choosing a sea and coastal theater shows that Moscow and Beijing are concerned with the well being of not only their landlocked Central Asian allies but also of other friendly states in coastal areas.

The scenario of Russo-Chinese military operations always has been a nightmare for Washington. The Sino-Soviet split in the 1960s was crucial to the United States' success in the Cold War. An overall strategic and military alliance between Russia and China would pose a very serious threat to U.S. dominance. The joint exercises are intended to send a very loud message to Washington meant to deter further geopolitical encroachment on Moscow and Beijing's spheres of influence.

The exercises betray Beijing and Moscow's strategic concerns that if the U.S. geopolitical offensive is not checked, eventually all of Russia and China's allies in the region will turn pro-U.S., as Russia has seen happen in the FSU with a series of pro-Western "revolutions." Apparently at their early July summit in Moscow, Putin and Hu decided that the time had come to stop retreating and take a stand against further U.S. moves by resisting new "revolutions" -- a decision that translates into armed confrontations. To overthrow current FSU governments, opposition movements will have to use force, such as Kyrgyzstan and Uzbekistan recently saw. Though Moscow and Beijing's allies feel they can quell armed uprisings on their own, China and Russia fear the United States will offer opposition movements military support. Thus, the exercises include a scenario in which a hypothetical ally asks Beijing and Moscow for help to defeat an internal uprising and fend off U.S. intervention into the conflict on behalf of the armed opposition. According to Russian military sources, in the first two days of the exercises, high-level staff officers will not only participate in war games on the sea but also will participate in scenarios using Central Asian maps -- a reflection of the fact that China and Russia feel the most geopolitical pressure from the United States there.

Though joint military training and coordination are certainly required if China and Russia are to jointly fight armed separatists in a weaker third country, it is even more important if they are to ever jointly fight the world's most high-tech force: the United States. Geopolitics dictates that no matter what a country's relations with other major players are, that country should prepare to confront those other players in case of a threat to national interests. Thus, no matter when or whether it will happen, all major powers train their armed forces to fight major potential enemies. Even U.S. forces, with their involvement in Iraq and Afghanistan, still find time to conduct exercises with missile test launches and develop new conventional and nonconventional strategic weapons systems that have little use in counterinsurgency operations, but would be needed in a confrontation with China and Russia.

Beijing and Moscow are no different. Chinese and Russian troops will use high-tech weapons in the air and naval portions of the exercises as part of their training for a hypothetical battle against a highly sophisticated enemy such as the United States. The contingency part of Peace Mission 2005 is not limited to training Russian and Chinese armed forces to fight together against the United States. The sophisticated amphibious and airborne operations and anti-ship maneuvers could serve as training for either joint or unilateral operations in other scenarios -- conflicts against Taiwan, Japan, further clashes over the disputed Spratly Islands in the South China Sea or over the energy riches of the Caspian Sea or other areas. These conflicts are unlikely in the near future but are not inconceivable further down the road.

Building a Sino-Russian military alliance implies not only joint training on fighting together but also arming China with modern Russian weapons that would increase Beijing's chances to fare well in a possible confrontation with U.S. forces -- over Taiwan or in another scenario. Russia must send Beijing more modern arms with greater firepower than Beijing has received so far. All indications are that Peace Mission 2005 will serve to showcase Russian weaponry to the Chinese military, which already is Russia's largest client for weapons sales. In 2004, Russia transferred more than $1.4 billion of hardware to China, including more Su-30MKK fighters and a Kilo class diesel-electric submarine. China and Russia already have contracted for more weapons -- and it seems more powerful weapons have been added to the plate.

Tasks, Weapons and Major Focus

The exercises' goals, including showcasing specific modern weapons, are reflected in specific tasks the Chinese and Russian forces will perform.

Though the maneuvers do not officially start until Aug. 18, they unofficially began Aug. 13. The unofficial stage, which will end Aug. 16, is in the Yellow Sea off Qingdao, a major Chinese naval base located in Shandong province. Six Russian warships and a large number of Chinese warships, including diesel submarines (nuclear subs are unlikely to participate because of the area's shallow water), are training on executing a joint cruising and combat order while going to high seas, and on blockading a coast occupied by hostile forces. At this stage, the main focus is for the Chinese People's Liberation Army's Navy (PLAN) to learn from its Russian counterpart how to better operate and maneuver modern naval ships in order to maximize the use of the high-tech Russian ships PLAN currently has, including submarines and missile destroyers. Meanwhile, the Russians are gaining experience in cooperating with China's navy and getting an idea of what PLAN -- which is striving to develop blue-water capabilities -- can do at sea.

The second stage will take place on Russian territory, in the Far Eastern Military District. Both countries' chiefs of general staff -- Russia's General of the Army Yuri Baluyevsky and Chinese People's Liberation Army (PLA) Col. Gen. Liang Guanglie -- will officially open the exercises. Then map and computer-simulated staff exercises down to the regimental level will be conducted Aug. 18-19. Though less spectacular than other stages, this is a crucial part of the maneuvers; Russia and China's strategic planners and commanders from operational to tactical levels will gain experience in jointly planning and executing wargames against what effectively could be U.S. and pro-U.S. forces. In modern warfare, it is strategically important to have coordination and understanding among commanders and staffs from different countries.

During the third stage, Aug. 20-22, at China's request the Russians will demonstrate a beyond-horizon landing operation, with the enemy played by several Chinese and Russian submarines, aircraft and surface ships. Russian striking forces headed by the Marshal Shaposhnikov will engage the "enemy" by imitating naval strikes and executing electronic warfare and maneuvering, thereby clearing the way for the BDK-11 landing ship to deliver ashore a reinforced Russian marine company with amphibious armored vehicles and artillery to take a beachhead. Simultaneously, a reinforced paratrooper company with armor and artillery from the Russian 76th Airborne Division will airdrop behind "enemy" front lines. PLAN marines and PLA paratroopers might join Russian colleagues in this training coastal assault, while Chinese-built SH-5 could imitate dropping depth charges and torpedoes to help the attack. Chinese armor, infantry and coast artillery units will play the defenders. This stage's special significance is that the Russians' complex beyond-horizon landing operation -- effectively a combined arms operation with participation of forces from all armed services -- will be a complete revelation for the Chinese, giving them a first virtual modern experience of how to invade Taiwan.

Stage four, slated for Aug. 23-26, will consist of anti-shipping operations. Strategically, this is perhaps the most important stage. Here, the Chinese will observe some of Russia's most powerful airborne weapons in action during live-fire exercises. These exercises are designed to demonstrate the denial of territorial waters to an enemy navy -- another signal that Washington will hear loud and clear. Two Tu-95MS "Bear" bombers will launch long-range standoff missiles, probably the Kh-55 and 3M80 "Sunburn" anti-ship missiles. Originally designed as a strategic bomber in the 1950s, the Tu-95 has long since been adapted to perform long-range anti-shipping missions, specifically against aircraft carrier groups. It has been constantly upgraded and modified to carry various anti-ship missiles and guided munitions. It is possible that the "Bears" will deploy their guided munitions in this exercise. The four Tu-22M3 "Backfire" bombers most likely will deploy the same weapons, while the Su-27SM "Flanker" multi-purpose jets will demonstrate how they destroy the "enemy" planes that have taken off from aircraft carriers.

Stratfor has obtained satellite imagery showing that the incomplete Soviet-era aircraft carrier Varyag has been moved from its dry-dock at China's Dalian naval base. The carrier had spent two years moored to a dock but was moved to a dry-dock in April 2005, where major repair and refurbishment operations have been undertaken. As of Aug. 13, the Varyag had been relocated to a dock. That the carrier has been moved twice in the last four months after spending two years idle could indicate that the Chinese are preparing to use it as a target, perhaps posing as a U.S. aircraft carrier heading a group of warships, during the live-fire portion of the exercise. There are two likely scenarios if this happens. The first -- and more spectacular -- is that the ship will be destroyed in the exercise by Russian air- or sea-launched anti-ship missiles. The second scenario is that the Varyag will not be destroyed but simply aimed at by the Chinese and Russian aircraft and missile destroyers. This would preserve the Varyag for future exercises.

The powerful image of a large aircraft carrier under "attack" from Russian and Chinese forces would not be lost on Washington. Even if the Varyag is not used to represent a U.S. aircraft carrier, a major demonstration of air and naval firepower capable of destroying U.S. aircraft carrier groups will send an impressive message -- which could be made even more unnerving if, after the exercises, speculation resumes about Russia providing China with more advanced weapons, such as "Backfire" bombers, "Sunburn" missiles and perhaps new Russian submarines and destroyers later down the road.

Training for a Possible Taiwan Operation?

Aside from Washington, Tokyo -- which also sees Moscow and especially Beijing as current and potential rivals -- and pro-U.S. opposition forces in Central Asia are watching the exercises nervously. Of all countries, Taiwan perhaps is worrying the most. Although both Russia and China say the maximum number of troops involved in Peace Mission 2005 is approximately 10,000, Taiwanese officials have said they believe the number to be 20,000. It is possible the Taiwanese are exaggerating out of their traditional fear and bias toward the Chinese.

Taipei knows Beijing disagreed with Russia's initial suggestion to hold Peace Mission 2005 in Western China's Xinjiang Uighur Autonomous Region and kept insisting until the last moment that the exercises should be in Zhejiang province directly across the strait from Taiwan. Not willing to push Taiwan -- and thus Washington -- too far, Moscow agreed to Shandong province as a compromise. Though the province is far from Taiwan, it is a coastal area, and a landing operation and live-fire exercises at sea will take place during the maneuvers. This leads Taiwan to believe that China is gearing up for an invasion sometime soon, with the landing and sea exercises meant as practice for taking the island and inflicting heavy losses on the U.S. Navy.

Though China doubtlessly has Taiwan-directed training as one of its most important goals for this exercise -- after all, though Beijing's current strategy is to have Taiwan gradually rejoin China through merging market economies, it has not excluded a military option as a backup solution -- we would not call this a dry run for Taiwan's invasion. The north side of the Shandong Peninsula, particularly the area around Laizhou Wan Bay, has topographic features similar to Taiwan's west coast -- coastal lowlands gradually rising to mountains, ideal terrain for amphibious assault operations -- but the landing in this exercise will take place in the peninsula's south, which has terrain significantly different from Taiwan's.

Also, the Russians will probably execute the amphibious landing and airdrop exclusively, with the Chinese learning from the Russians and by observing and participating in the complex operation on a limited scale. Although China does not currently have nearly enough weapons systems and firepower for a successful invasion -- and acquiring them will take time -- Taiwanese military planners will interpret this exercise as a major step forward in developing the PLA's contingency plans and relevant capabilities for a possible Taiwan operation.

Russian and Chinese general officers, soldiers, sailors and airmen will gain experience by working with each other. Though Peace Mission 2005 differs from the original plan, it will be the beginning of an interoperability that could be needed elsewhere, such as Central Asia. Either way, the exercises will send many signals on many levels to Washington and other governments.



Copyright 2005 Strategic Forecasting Inc. All rights reserved.




To: Taikun who wrote (67627)8/16/2005 8:54:58 PM
From: TobagoJack  Read Replies (1) | Respond to of 74559
 
I made my points about Russia to CB repeatedly, that (a) it is not down, not by a long shot, and (b) there is no such thing as friends in the geopolitical arena. Oh well, she didn't believe. Too bad.

Russia: Military Exercises Send a Message To Washington
Aug 16, 2005

Summary

Russian President Vladimir Putin attended the opening of the MAKS 2005 international air show at Moscow -- which showcases Russia's most advanced aerospace systems -- before traveling to observe Russian strategic forces exercises in the Arctic Ocean region. Both of these events were timed to begin along with the Russian-Chinese military exercises in China. Together, they demonstrate that Russia can conduct major military operations in at least two theaters thousands miles apart, and serve to reinforce Moscow's message to the United States that Russia remains a formidable military power able to check the U.S. geopolitical offensive in the former Soviet Union.

Analysis

Russian President Vladimir Putin attended the opening day of the MAKS 2005 air show at Zhukovsky Field near Moscow on Aug. 16. Putin then boarded a Russian strategic bomber and observed a combined air and naval exercise in the Arctic Ocean.

Putin's participation in the exercise immediately after visiting a display of Russia's most advanced aerospace technology represents part of Moscow's response to the West's geopolitical offensive in Russia's periphery.

MAKS 2005 showcases the latest in Russian aerospace technology and is attended by 654 foreign companies representing 40 countries. The show is expected to generate millions of dollars of revenue for Russia's aerospace industry. Russian aerospace firms Sukhoi, Ilyushin, MiG, Kamov and Mil will be represented, among others. In addition to U.S. military aircraft, the French air force aerobatic team Patrouille de France and the Italian air force's Frecce Tricolori will also participate. Russia will also display the Kliper, its new three-person space shuttle set for a 2010 launch. Thus far, the international space research and business community has received the Kliper well, in contrast with the U.S. space shuttle program's continued problems.

Show-related sales included a deal by Russia's main arms exporter, Rosoboronexport, which just signed a multimillion dollar deal for 250 AL-55 engines for India's new jet trainers. The sale included an option for another 1,000 engines to be produced under license by Hindustan Aeronautics Ltd. Additionally, the Chinese signed a deal for at least 15 new Russian Tu-204 cargo aircraft. Finally, Jordan's King Abdullah II also attended the air show, meeting with Putin to discuss bilateral trade. King Abdullah might also have been shopping for military hardware: Russian military sources say Putin and King Abdullah discussed future purchase of Russian air and air-defense systems.

Putin then boarded a Tu-160 Blackjack supersonic bomber crewed by high-ranking officers from Russia's long-range strategic air force and flew to the Arctic Ocean. Putin's bomber was one of a flight of Tu-160s that are taking part in combined air and naval exercises. Putin observed as his bomber -- named Pavel Turan -- and another Tu-160 conducted a cruise missile attack exercise. The Russian bombers, flying only 600 feet high at 600 miles per hour, successfully launched two cruise missiles. All aircraft later landed at Olenegorsk air base, close to Norway on the Kola Peninsula.

The missile launch represented the rocket's first test, RIA Novosti news agency reported. In addition, the exercises drew in almost all Russian Northern Fleet combat warships, featuring operations by the Admiral Kuznetsov aircraft carrier and ballistic-missile launches from nuclear submarines.

Of greater significance than providing an opportunity to test new military hardware, however, the Arctic exercises demonstrate Russia's still-powerful military capability, and the increased attention devoted by Russia toward the further development of this capability. The exercises will strengthen Russian strategic forces in the nation's north, which face North Atlantic Treaty Organization forces just across the border and in the adjacent ocean. The goal of the exercises, then, is to test and "create a new strategic aviation formation in the strategic northwestern direction," as 37th Aviation Army Cmdr. Gen. Igor Khrapunov told RIA Novosti.

The Arctic exercises are taking place almost simultaneously with the Peace Mission 2005 joint exercises with China. After Putin's sortie on the Tu-160 with the Northern Fleet, he may choose to make a surprise visit to the Russian-Chinese exercises.

Both exercises serve to reinforce a powerful message to the United States that Russia is still strong and has modern, high-tech means to defend its national interests at the time of a U.S.-led geopolitical offensive against Russia. The exercises are thus intended to show that Russia could successfully resort to military means to stop Washington's encroachment into its adjacent areas, and that Russia has strong allies ready and able to cooperate militarily with Moscow.

Russia is also showing that its armed forces can conduct major military operations in at least two different theaters at the same time -- as in this case where the two exercises are taking place several thousand miles away from each other. In addition to the exercises in China and the Arctic, Moscow is also conducting exercises in the Baltic Sea featuring amphibious landing and simultaneous air drops as well as live-fire naval exercises.

Russian forces are also conducting joint Caspian task force exercises in Kazakhstan, and 2,000 Russian troops are participating in ground exercises in Tajikistan. Russian forces are also scheduled to conduct maneuvers with Russian allies in Uzbekistan in September. With Caspian and Central Asian exercises, then -- though these are much smaller -- Moscow will be active in every strategic theater along its borders where Washington is applying pressure in the span of several days. Increasing the number and scope of military exercises has indeed become a trend in Russia's current security policy under the second Putin administration.



To: Taikun who wrote (67627)8/16/2005 8:57:53 PM
From: TobagoJack  Read Replies (1) | Respond to of 74559
 
Let's watch this show, for it will give us a sense of the Energy and the alignment of the Force:

In the Battle for Kazakh Oil, India's Advantage
Aug 16, 2005

Summary

India and China are locking horns in a battle for oil assets in Kazakhstan. Both countries will offer enough money, meaning that ultimately Astana will determine the winner based on geopolitics. On the surface, China appears to be the front-runner, but India has one significant advantage in the eyes of the Kazakhs -- it is not China.

Analysis

A bidding war between India and China is brewing over PetroKazakhstan, a Canadian company that is Kazakhstan's second-largest foreign oil producer, with 549.8 million barrels of proven and probable oil reserves in the country. With money not an issue, the Kazakh government will use its geopolitical scale to weigh the offers. Should it find the China side a bit too heavy, India will walk away with the prize.

State-run China National Petroleum Corp. (CNPC), through its listed unit PetroChina, is preparing to submit a bid for PetroKazakhstan, the Financial Times reported Aug. 15. Meanwhile, India's state-run Oil and Natural Gas Corp. is teaming up with the country's Mittal Steel industrial group and is believed to have submitted a $3.585 billion offer for PetroKazakhstan, which is valued at $3.2 billion.

India and China have publicly spoken of the need for cooperation in the energy sphere -- as opposed to competition -- to avoid bidding wars that would be excessively costly to both. With the Indian and Chinese economies both expanding rapidly, however, energy security is taking on ever-growing importance for each, meaning that niceties are likely to go out the window when oil is at stake.

Given their motivation, both India and China will easily find the money necessary to offer the Kazakh government the right price. They also need not worry about other competitors entering the fray. Russian oil firms would seem a logical possibility, LUKoil in particular, given its increasing activity in Central Asia. LUKoil and PetroKazakhstan, however, are embroiled in a multi-million dollar lawsuit over a disputed joint venture.

Western firms are showing no interest either. Not only are they wary of buying reserves distant from the Caspian Sea in central Kazakhstan, where PetroKazakhstan's reserves are located, but they also want to avoid getting involved in the company's multiple high-profile problems.

In April, Kazakh authorities forced PetroKazakhstan to cut production from 150,000 barrels per day (bpd) to 85,000 bpd. In June, company founder Bernard Isautier announced that he would retire in September, after raising eyebrows in 2004 when he cashed out $92.6 million worth of stock options. In July, the Kazakh government slapped the firm with a $55 million anti-monopoly fine. State firms, such as those in India and China that do not have to answer to shareholders, can afford to brush off such concerns.

In the end, however, India and China likely will have little say in who gets the firm because the Kazakh government has the right to block any deal PetroKazakhstan makes, as all PetroKazakhstan operations are joint ventures with the state. In other words, Astana will be choosing who gets the company -- and it will not be making the decision based purely on economics.

Kazakhstan is pursuing a multi-pronged foreign policy that plays all the powers interested in Central Asia off of one another. The goal is to minimize the influence any one of them has in the region, thereby safeguarding Astana's independence as much as possible. China, along with the United States and Russia, is one of the major concerns.

Kazakhstan, which shares a border with China more than 1,000 miles long, looks warily upon its giant neighbor to the east. Beijing can offer Astana great economic opportunities, but with 1.3 billion people compared to Kazakhstan's 15 million, China could easily take over its neighbor. Astana is seeking closer economic and security ties with Beijing, both bilaterally and within the framework of the Shanghai Cooperation Organization -- but it is doing so carefully. China's rise was a primary motivation for the move of the Kazakh capital from Almaty, which is within easy reach of the Chinese border, to Astana, further to the north and west.

CNPC already has reserves in western Kazakhstan, and two pipelines of 1,250 miles and 1,865 miles each under construction that will connect them to China's Xinjiang province starting in 2008. PetroKazakhstan's assets also are located to the west of CNPC's operations, and the Canadian firm has a pipeline sending oil west to Kazakhstan's western oil infrastructure -- a flow that China would love to reverse. Astana's multi-vectored foreign policy, however, calls for it to limit China's influence in its oil sector.

Selling PetroKazakhstan to India, on the other hand, would not only limit Chinese influence in Kazakhstan, it also would introduce a new player to the Kazakh foreign policy equation -- and as far as Astana is concerned, the more foreign players there are fighting over it, the better off it will be. This is a compelling reason for the Kazakh government to favor an Indian bid.

Such a decision, however, would be met with dismay in Beijing, and the only thing worse than having King Kong as your next door neighbor is making him mad. Proximity means that Kazakhstan has to live with China whether it wants to or not, which means playing nice at times. The question now is whether Astana feels it already has made sufficient concessions to Beijing in eastern Kazakhstan that it can pacify an irritated China if it gives PetroKazakhstan to India.

The decision over PetroKazakhstan, then, will reveal how intent Astana is on maintaining its independence, and how close it is willing to get to Beijing.



Copyright 2005 Strategic Forecasting Inc. All rights reserved.



To: Taikun who wrote (67627)8/22/2005 8:55:26 PM
From: TobagoJack  Read Replies (1) | Respond to of 74559
 
David, Following up to this earlier Watch & Brief Message 21611024 where Stratfor decided to hang its hat on its political hook.

Now, a come down, sort of, not really, actually just a grudging one at most, to, in effect, say "golly we were right, but just a bit off, even so, mostly right, just didn't work out as we wished, no biggie, onward to next item ... golly gee"

The fact of the matter simply is that Stratfor cannot see the changing political tides until and unless then they surge past its nose, and rushes down its windpipe, well after it watches Fox TV report.

I suppose I could alert Stratfor on more changes on the way, but why spoil the entertainment, and also mention that they got the relationship wrong re CNPC and PetroChina ... but why quibble :0)

As to Stratfor's take on the 21% premium, perhaps it has something to do with the pipeline routing, but maybe it also has also another thiung to do with differing perception on where energy price will go, as in 'option value'?

Recommendation, buy the dips on energy.

stratfor.com

Kazakhstan: China's Oil Bid and the Balance of Influence
Aug 22, 2005

Summary

A major Chinese state oil firm launched a takeover bid for PetroKazakhstan on Aug. 22. The offer is more than a simple Chinese resource acquisition and reflects the changing political tides in Central Asia.

Analysis

On Aug. 22, CNPC International -- a subsidiary of Chinese state firm PetroChina -- offered $4.18 billion to purchase PetroKazakhstan, one of the largest oil producers working in the Central Asian state. PetroKazakhstan's board immediately recommended that its shareholders approve the buyout offer. In the world of Central Asian politics, such a bold offer typically means that the Kazakh government has already signed on. Barring an unlikely decision by the Kazakh government to block the buyout, the Chinese are about to get their hands on a shiny new asset. Far from being a simple economic exchange, the deal symbolizes China's growing influence in its western neighbor -- and Astana's apparent willingness to hand geographically strategic assets over to the behemoth on its border.

PetroKazakhstan's primary assets are located in the Kumkol oil fields of central Kazakhstan. Compared to Kazakhstan's other massive fields, Kumkol is a small fry. Singular major projects in western Kazakhstan have six billion barrels or more in reserves, while all of PetroKazakhstan's Kumkol reserves -- comprising more than 20 small fields -- hold proven reserves of only 340 million barrels.

Thus, nearly all the heavy work has been done in Kazakhstan's northwest. That's where Chevron and Exxon are slaving away at the Tengiz superfield, and where a consortium of the world's largest oil firms are trying to figure out how to tap riches buried deep under the Caspian Sea.

For energy-starved China, however, those fields are on the wrong side of the country. After several years of attempting to square the circle by helping export Kazakh crude west to the Black Sea with the intent of shipping it around Africa and Asia to China's southern coast, China bit the bullet in early 2004 and began constructing a multi-billion-dollar, multi-thousand-kilometer pipeline to connect those western Kazakh fields with eastern China.

Enter PetroKazakhstan. The Chinese pipeline route runs smack through the middle of PetroKazakhstan's Kumkol project. No wonder CNPC's offer is at a 21 percent premium over the company's total stock value.

Considering Kazakhstan's extremely precarious geopolitical position -- sandwiched as it is between Russia and China, and with the West knocking down its door to get access to its Caspian resources -- such proximity would make Kazakhstan less likely to embrace Chinese involvement with PetroKazakhstan. Kazakh foreign policy is to seek balance among the various players, not to throw its lot in with one or another. In line with that policy, Astana seriously considered Indian suitors for PetroKazakhstan in initial discussions.

But the United States' recent efforts to roll back Russian influence have resonated in Central Asia as well, and the recent Kyrgyz "Tulip Revolution" which deposed an old and corrupt government in Bishkek startled an old and corrupt government in Astana.

Among the three "big" powers reaching into Kazakhstan -- the United States, Russia and China -- China is not only the weakest, but is both firmly aligned against U.S. interests in the region and cares not a whit about what sort of government rules Kazakhstan. Add in a generous buyout bid that could only be offered by a company with bottomless pockets, and it looks to become a deal that Astana cannot refuse. The cost will be stronger Chinese influence over Kazakh affairs, but for a government fearing a foreign-instigated overthrow, that is a small price to pay.



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