Shadow Government

The Russia-China oil puzzle

By Philip Zelikow

As announced by Igor Sechin on leaving Beijing, it appears that the Chinese government will loan $25 billion to two giant energy companies controlled by the Russian government. In exchange, the Russian government has pledged to supply 15 million tons of oil to China per year for the next 20 years.

This appears, roughly, to be a pledge of about 2.2 billion barrels of oil, over the next 20 years, in exchange for $25 billion now. Depending on how one calculates the cumulative value of present money, this sounds like a deal worth something in the neighborhood of $20 a barrel. And this would lock in at least about 5 percent of all Russian oil exports just for the Chinese market, at such an effective price. I invite others to share information that contradict or elaborate on these apparent estimates. 

If the United States had used credit to obtain such a long-term commitment of oil on concessionary terms from a debtor (say, one in the Arab world), some of my academic colleagues would be calling this an illustration of informal empire. For anyone with memories of Chinese history of, say, the 1890s (specifically the history of Russian finance in Manchuria, and the Chinese Eastern Railway), this announcement has to bring a smile -- at least a smile to some folks in China, who know this history very well indeed.

If these numbers are close to being accurate, this deal is a revealing glimpse into the current state of Russia's political economy. Again, though, I invite others to refine these crude, initial guesstimates.

Shadow Government

Is China gaining on the U.S. militarily?

By Aaron Friedberg

Dan Twining's excellent post lays out the key elements of a U.S. diplomatic strategy for Asia. As he and Chris note, many of these policies were being actively pursued by the previous administration and there is reason to hope that the new one will follow suit.

I am less optimistic about the military aspect of our overall approach to the region, particularly as concerns that last stop on Clinton's trip: China. After nearly two decades of double digit increases in defense spending, China is beginning to acquire capabilities that could pose a serious challenge to our long-standing position as Asia's preponderant military power. Unless we respond in a prudent and timely fashion, we could find that our commitments to defend our friends and interests in the region are no long regarded as credible. Over time this could eat away at the foundations of our alliances and diminish our ability to deter conflict. A couple of examples can help to illustrate the problem:

Because it is thousands of miles away from most of the places that it might have to fight, the U.S. military relies very heavily on satellites and sophisticated computer networks to handle the vast quantities of information that it needs to coordinate its far-flung forces.  These systems give the United States tremendous advantages, especially against less sophisticated enemies. But against an adversary that has figured out a way to attack them, they could prove a significant vulnerability. 

Since the 1990s Chinese strategists have speculated that an opponent capable of disabling a handful of satellites, and disrupting supposedly secure military computer networks, could render U.S. expeditionary forces blind, deaf, and dumb -- at least for a time. In the last few years, the Chinese government has tested its first anti-satellite weapon and hackers apparently based in China have repeatedly penetrated government and business computer networks in the United States and Europe. It would be extremely unwise to allow any adversary to believe that it could gain a decisive advantage by striking first at our command, control, and communications systems.

Especially in the event of a crisis unfolding in the Western Pacific, the United States would rely heavily on aircraft carriers to signal its resolve and, if necessary, to project power. For example, in 1996, when China tried to influence the outcome of Taiwan's elections by test-firing missiles into the waters off its coasts, the Clinton administration dispatched two carrier battle groups to the region. Over the last 15 years, China has focused a great deal of energy on developing the ability to locate, track and sink U.S. aircraft carriers operating hundreds of miles off its coasts. Toward this end it has acquired ocean-scanning satellites, over-the-horizon radars, super high-speed anti-ship cruise missiles and torpedoes (both from Russia, still the world's leading authority on how to sink American naval vessels), and a new generation of medium range anti-ship ballistic missiles. These are intended to be fired from shore and to deliver their maneuverable, conventionally-armed warheads squarely onto the flight deck of a moving aircraft carrier. A few years from now, in some future crisis over Taiwan or in the South China, the U.S. Navy may have to think long and hard about sending its most precious and powerful assets in harm's way.  

None of this means that a Sino-American war is probable or even remotely likely. The balance of power in Asia has not tipped irrevocably in China's favor, but it is beginning to shift in ways that, under the wrong set of circumstances, could increase the risk of miscalculation and conflict.

There are steps we can take to counter these trends, including some that have already been initiated, but these will take time and money to implement fully. Given all of the other demands on the defense budget, the stringency imposed by the current financial crisis, the seemingly remote risk of conflict, and the desire to avoid antagonizing Beijing, temporizing half-measures seem more likely at this point than decisive action.

None of this will be on the agenda of Secretary Clinton's trip to Asia. But it should be very much on the minds of the Obama administration's defense team as they settle into their new offices.