Under The Radar 07.30.12

Posted on Monday, July 30, 2012 by Michael Chen

A weekly compilation of under-reported events in Asia.

  • The U.S. ambassador to South Korea urged North Korea to learn from the recent political and economic reforms in Burma (Myanmar), saying that U.S. would respond constructively to positive changes. North Korea has yet to lay out specific plans to reform its economy, but rice hoarders eager to turn a profit from potential reforms have already raised prices, driving rice produce even further out of reach of North Korea’s starving population.
  • South Korean intelligence revealed that North Korea's former army chief Ri Yong-ho was ousted because he unilaterally repositioned troops near Pyongyang during a military exercise. Mr. Ri reportedly also expressed dissatisfaction over Kim Jong-un’s decision to transfer control of lucrative businesses from the military to the Workers Party.
  • Japan’s Prime Minister Yoshihiko Noda took steps to extend the life of what pundits say may be another short-lived government. Facing growing concern over the deployment of Ospreys, Noda conceded that Japan was in no position to block the deployment, but ordered that no Ospreys be allowed to fly until investigations of prior accidents were concluded. To prevent more party members from defecting, Noda may also postpone Japan’s entry into Trans-Pacific Partnership (TPP) negotiations.
  • Australia’s gas producers expect to benefit from Japan’s new energy policy while Australia’s uranium industry sees a decline in its exports. Japanese Prime Minister Yoshihiko Noda will unveil a medium-term national energy plan in August, but already natural gas is the favored option for Japan’s national energy mix.
  • Taiwanese regulators cleared the way for a pro-China media tycoon to take over one of the nation’s largest cable TV systems, drawing sharp criticism from opposition lawmakers, who said the deal would create a “media monster” and called for an immediate reversal.
  • Amidst severe flooding in Beijing, the public has exposed the government’s inability to respond to the severe conditions and criticized the government’s lack of transparency, forcing city officials to update the death toll from 37 to 77. The mayor of Beijing and his deputy resigned, but pundits say the resignations were most likely a routine reshuffling, and that the mayor is still poised to be promoted later this year.
  • Leaders of Burma and Thailand met to sign three Memoranda of Understanding, focusing on development cooperation, joint energy projects, and a commitment to invest in Dawei, a multi-billion-dollar port and special economic zone located in Southwest Burma.
  • Tens of thousands marched on the streets of Hong Kong in protest of the local government’s plan to implement a new curriculum praising the Chinese Communist Party. The Hong Kong government, undeterred by protests, continued to defend the curriculum, but promised to form a committee to monitor “moral and national” education.
  • The Philippine Senate ratified the Philippines-Australia Status of Visiting Forces Agreement (SOVFA), which is expected to further expand bilateral cooperation in maritime security, humanitarian assistance, and counter-terrorism. In addition to the agreement with Australia, the Philippine Coast Guard also received assistance from Japan, which announced plans to provide 12 new patrol boats by 2014.
  • The Vietnamese and Philippine Foreign Ministries jointly protested China’s plans to establish a military garrison on the disputed Paracel Islands in the South China Sea. The two ASEAN members also voiced their opposition to the creation of Sansha City, a Chinese prefecture created to administer the Paracel and Spratly Islands.

Under The Radar 07.23.12

Posted on Monday, July 23, 2012 by Rosalind Reischer

A weekly compilation of under reported events in Asia.

  • In response to renewed friction between Japan and China over Tokyo’s plan to nationalize the Senkaku (Daioyutai) Islands, Japan recalled its ambassador to China, Uichiro Niwa, ostensibly to brief him on how best to inform China of the country’s island purchase plan. In a survey conducted by the Yomiuri Shimbun, a Japanese newspaper, 65% of respondents were in favor of the plan to purchase the islands.
  • Taiwan conducted a military exercise with aircraft and helicopters to prepare for the event of a Chinese attack. Taiwan is also scheduled to acquire several more aircraft from the United States next year. Taipei signed an agreement with the United States to upgrade their existing 146 F-16A/B Block 20 fighter aircraft.
  • In what appears to be a military purge to further consolidate the power of Kim Jong-un, the leader of North Korea received the highest military rank of marshal, while the chief of army’s general staff, Ri Yong-ho, was relieved of all posts.
  • China announced that Jiaolong, its record-setting deep-sea submersible, will dive into the South China Sea by next year. The purpose is reportedly to prepare for commercial mining of the sea bed. Chinese researchers believe that the hydrocarbon reserves in the sea might be the equivalent of 80 percent of the reserves held by Saudi Arabia.
  • After disagreement over the South China Sea issue led to the failure to form a joint communiqué at the conclusion of the ASEAN meeting last week, the foreign minister of Indonesia went on a tour of Southeast Asia in an effort to form a consensus. Indonesia has no claim on the South China Sea and is seen as a neutral country in the area. In a meeting with his counterpart in Vietnam, both ministers agreed that ASEAN should play a central role in the region and the South China Sea issue should be resolved with respect to the UN Convention on the Law of the Sea (UNCLOS).
  • At the fifth ministerial meeting of the Forum on China-Africa cooperation in Beijing, Chinese President Hu Jintao announced US$20 billion in new loans to Africa. South African president, Jacob Zuma, welcomed the investment, saying it would be spent on support for infrastructure and education, but also cautioned against the continuation of the current unequal trade relationship between Africa and China, a trade pattern he called “unsustainable in the long term.”
  • Russia seized two Chinese fishing vessels and detained 36 fishermen for “poaching” in Russia’s EEZ. According to one Russian media source, the Russian ship chased one Chinese boat for three hours before opening fire, ramming, and finally boarding their boat. There were no casualties but one man was reported to have fallen overboard in the chaos.
  • After a diplomatic push from Seoul, China released four South Korean human rights activists they had detained in March. The activists had been criticizing China’s repatriation policy for North Korean defectors when they were arrested. Details on the arrests have not been released, but many human rights activists are known to help Korean defectors escape to the South at the North Korean border with China.

Under The Radar 07.16.12

Posted on Monday, July 16, 2012 by Michael Chen

A weekly compilation of under reported events in Asia.

  • Efforts to solve the South China Sea dispute suffered a setback as ASEAN nations failed to issue a joint statement, an unprecedented outcome in the organization’s 45-year history. The Philippines wanted the joint communiqué to include mention of the Scarborough Shoal, claimed by both the Philippines and China, but Cambodia, a Beijing ally and ASEAN chair, resisted the call.
  • Japan is considering a plan to buy the Senkaku islands from private landowners, drawing sharp criticism from Beijing. The disputed islands fall within the scope of the U.S.-Japan Treaty of Mutual Co-operation and Security and in the event of armed conflict, the Treaty would oblige the U.S. to defend Japan's sovereignty. In the midst of disputes, foreign minister Koichiro Gemba temporarily recalled Uichiro Niwa, the ambassador to China for discussions on how to prevent further damaging hard-earned China-Japan ties. However, critics believe that Niwa, with his dovish views and approach to China, has fallen out of line with the increasingly conservative Noda government.
  • While public backlash blocked the Korean government’s attempt to sign a military pact with Japan, foreign ministers of the two countries and Secretary of State Hillary Clinton gathered to announce the establishment of the Steering Group, a DC-based "consultative body" to reinforce trilateral security coordination. The first trilateral consultative body will tackle North Korea’s growing threats and China’s rising influence in the Asia Pacific.
  • The U.S. formally lifted sanctions on Burma, on the same day Derek Mitchell, the first U.S. ambassador to Burma since 1990, arrived at his post. The decision to allow U.S. firms to partner with state-owned Myanmar Oil and Gas Enterprise (MOGE) marks a rare divergence from Aung San Suu Kyi, who has warned that MOGE’s lack of transparency could set back Burma’s democratic reforms.
  • Burma’s Ministry of the Interior presented a new right-to-protest framework according civilians the right to gather and protest peacefully. Most civil rights activists welcomed the announcement, but some argued that the framework outlined several restrictions that can be easily abused. Earlier this week the military nominated a hard-line ex-general for the next vice president, disappointing activists who had hoped for a reformist.
  • Due to increased domestic consumption, China may become a rare earth element importer as early as 2014. China controls 95 percent of the world's rare-earth production and about half of global reserves, but Beijing has had a policy of encouraging internal domestic demand while imposing export quotas. To further control prices, China’s leading REE producer announced a plan to launch a rare-earth trading platform in August.
  • Park Geun-hye of the ruling Saenuri Party (New Frontier Party) formally announced her candidacy for president, campaigning on a moderate platform that includes welfare policies and engagement with North Korea. Park has been distancing herself from the Lee Myung-bak government, which suffers from low approval ratings domestically, and polls show her in the lead against other potential candidates.
  • After nearly two years of little progress, peace talks between the Philippine government and the Moro Islamic Liberation Front have finally resumed. Both sides hope to resolve the conflict that has led to more than 120,000 deaths in the last four decades and stalled development in the resource-rich Southern Philippines. Government officials, optimistic about the talks, say that a peace agreement could be reached as early as this year.

Under The Radar 07.09.12

Posted on Monday, July 9, 2012 by Rosalind Reischer

A weekly compilation of under reported news in Asia.

  • Pakistani Foreign Minister Jalil Abbas Jilani travelled to India to meet with his counterpart Ranjan Mathai for discussions on normalization of India-Pakistan relations. One conclusion that emerged was that finding justice for the 2008 Mumbai terrorist attacks is the most important confidence building measure for India and Pakistan.
  • Indonesian President Susilo Bambang Yudhoyono proposed a plan for joint military exercises focused on disaster relief with the U.S., Australia, and other militaries in the region, including, China. The plan marks an easing of Jakarta’s distrust in U.S. plans to rotate 2,500 Marines through Darwin, Australia.
  • U.S. Secretary of State Hillary Clinton issued an apology to Pakistan for a NATO airstrike that killed 24 Pakistani troops in November 2011. As a result, Pakistan reopened vital supply routes to Afghanistan. Sherry Raman, Pakistan’s ambassador to the U.S., called it a “historic turn” for relations between the U.S. and Pakistan.
  • On July 4, China added the last of 32 hydropower generators to the Three Gorges Dam, which is now operating at full capacity. The addition of the final turbine will enable the dam to generate 11 percent of China’s total hydropower potential.
  • Beijing initiated the strategic purchase of Rare Earth Elements (REE), taking advantage of current low prices and stockpiling against future shortages. Officials hope that the recent purchases will stabilize REE prices which plummeted earlier this year, and that the investment will grant China more control over rare earth prices.
  • South Korean left wing reunification activist Ro Su-Hui was arrested after returning from an unauthorized visit to North Korea. Ro had gone to North Korea in March to attend an event commemorating the death of Kim Jong-Il, and reportedly met with Kim Jong-Un during his time there. Due to a South Korean security law that punishes Koreans who visit North Korea without permission, Ro could face up to ten years in jail for his actions.
  • A Taiwanese fishing boat accompanied by four Taiwan Coast Guard patrol boats entered contiguous waters surrounding the disputed Senkaku (Diaoyutai) Island chain. Taiwanese officials claimed the patrol boats were sent to protect the fishing vessel, which carried nine activists advocating for ROC sovereignty over the island.
  • The People’s Liberation Army Navy (PLAN) will start their annual live ammunition exercises in the East China Sea on July 10. The exercises are designed to test new strategies as well as practice coordination between warships and fighter jets. The upcoming five-day military exercises are intended to assert sovereignty over the region, especially the Diaoyutai (Senkaku) Islands. This announcement is in the wake of similar exercises the PLAN carried out last week in the same area.
  • Japanese Prime Minister Yoshihiko Noda announced plans to purchase one out of the five major Senkaku Islands. Uosturi, one of the larger islands, had been the focal point in a simmering dispute involving a Taiwanese fishing boat and four patrol vessels. China and Taiwan responded to the proposition with separate statements expressing indignation over perceived infringement of their respective claims over the islands.

Sino-Indian Energy Cooperation in Burma: Toward an Integrated Asian Energy Market?

Posted on Thursday, July 5, 2012 by Rosalind Reischer

Pipeline construction site in Arakan
On June 19, 2012 India’s Oil and Natural Gas Corp. (ONGC) and the China National Petroleum Corp. (CNPC) signed a Memorandum of Understanding. The MoU is intended to strengthen existing Exploration and Production (E&P) operations in Burma, Sudan, and Syria, and look ahead to making joint bids on foreign oil and gas fields for E&P in the future. This is the most recent development in a trend of cooperation between India and China that has slowly emerged over the past few years. In 2006, the two companies signed an initial pact for bilateral oil cooperation and possible joint crude purchases, which has enabled the ongoing joint E&P development in Burma, Syria, and Sudan. Yet, these agreements have not resulted in joint bidding or policy cooperation. The recent MoU will enable ONGC and CNCP to expand cooperation to jointly bidding on fields and jointly investing in infrastructure development. The pipeline across Burma from the Bay of Bengal to Southwest China is the first of such downstream projects and may demonstrate the maturation of Sino-Indian energy relations.

The reality of growing economic interdependence is contrary to the protectionist impulse that runs strong in both countries. Both countries strive to be energy independent, but in an increasingly interconnected and globalized world, neither India nor China has the financial or political capital to unilaterally and effectively develop energy resources across all energy markets. As one ONGC Videsh Ltd. (OVL) managing director D.K. Saraff said referring to the recent MoU, “we should collaborate and bid together; there is no point in raising prices.” Saraff was undoubtedly referencing the above market prices at which Chinese energy companies have secured rights to developing oil fields in the past. With the signing of the MoU, more safeguards will be adopted to ensure that bidding will not get out of hand, and prices will stay reasonable.

The proposed ONGC and CNPC partnership will ease exploration and development costs by enabling both countries to jointly participate in developing new energy resources. As two of the biggest economies in Asia and largest energy importers, energy access and development are primary and mutual concerns for India and China. Competition and high energy prices stem from the recognition on the part of both governments that energy availability will be a critical limiting factor for the growth of both economies, as energy access and availability is vital to economic growth.

Investments in energy development are not confined to E&P processes but also the ability to transport energy produced or purchased. According to the 2006 UN Economic and Social Commission for Asia (UNESCAP) study of energy infrastructure in Asia, most countries in the region were still in the process of developing their energy infrastructure, which in turn demands a higher percentage of GDP to be spent on production and transport. The survey proposed a “trans-Asian energy system” that would promote linkages towards greater system energy integration, which would bring about energy security and impose less risk on individual firms and countries. The pipeline through Burma could be the start to further productive energy integration in Asia. To be sure, limited energy resources in China and India have led to an intense regional competition for oil and gas fields, and the lack of government coordination has driven energy prices up and excluded countries with fewer financial resources from the market.

The pipeline through Burma, due to be completed in May 2013, is an integral part of China’s plan to diversify energy trade routes and will significantly shore up China’s energy security. As pipelines are built, developed, and used across borders, the risks and rewards are shared among all countries involved. Moreover, as more developed countries work with less developed ones, the private sector has had opportunities to partner with governments and local communities to develop alternative energy solutions.  Currently an overwhelming percent of China’s crude comes through the Strait of Malacca (one recent study put it at eighty-five percent) and the geopolitics of the area make it complicated and politically expensive for China to adequately secure imports. Energy corridors through Southeast Asia, such as the pipeline through Burma, are an important conduit for Chinese energy security and the diversification of China’s energy trade routes; the pipeline through Burma is the first of such investments.

Energy cooperation between India and China appears to be increasing; the signing of this MoU points to a maturing energy relationship between New Delhi and Beijing. This agreement may also set a precedent and provide a foundation for greater regional integration of the Asian energy market, which will be essential for stabilizing conflicts rooted in energy security concerns. However, the process of regional integration is far from complete and political tension is still present in the bilateral Sino-Indian relationship. While this agreement is an important step toward an alignment of energy policies, more political restraints and capital are needed so that the competition for energy, so crucial to economic growth, does not become a zero-sum game. The foundation for wider cooperation may have been laid and perhaps provides a model for further cooperation in other sectors of the economy, but the extent to which current state affairs will impede potential progress still remains to be seen. As both companies are state-owned, they have a closer relationship to their states than private companies would and coordination might be more feasible in that aspect. However in order for strategic cooperation to take place on a meaningful level, foreign policy in both countries needs to change and the differences in the economic and political interests of China and India need to be reconciled.

Under The Radar 07.02.12

Posted on Monday, July 2, 2012 by Michael Chen

A weekly compilation of under reported events in Asia.

  • China National Offshore Oil Corporation (CNOOC) announced it will open nine offshore blocks in the South China Sea to foreign bids for energy development. Vietnam protested the CNOOC decision, calling it a violation of its sovereignty. Territorial disputes in the South China Sea also came to a head last week when Vietnam passed its Maritime Law reaffirming national claims over the Paracel and Spratly islands. Meanwhile China released plans to establish Sansha City, a prefecture-level body that will administer islands in the South China Sea, including the Paracels and Spratlys.
  • After failed WTO negotiations, the U.S., EU, and Japan requested a dispute settlement panel against China’s restrictions on rare earths exports. The three powers accuse China, which produces 97 percent of the world’s total rare earth output, of artificially holding down prices for domestic manufacturers as a means to encourage international companies to move production to China. Later last week, however, Japan announced its own discovery of rare earths in its Pacific seabed, which scientists say could sustain the country’s industries for over 200 years.
  • India and South Korea have reacted differently to recent EU sanctions that will place a ban on insuring tankers carrying Iranian oil. Following Japan’s pledge last week to provide sovereign guarantees for Iranian shipments, India announced that it will use Iranian ships and insurers to continue crude imports from Iran. However, South Korea announced that it would halt Iranian imports starting July 1. The decision drew criticism from Iran, which threatened to reconsider ties between the two nations. Seoul may overturn its decision as the two countries are in talks to circumvent the sanctions by importing crude oil on Iranian-flagged tankers.
  • Seoul released a surprise announcement that it would sign the General Security of Military Information Agreement (GSOMIA) with Japan, but backtracked the next day, citing a need to discuss the issue with the National Assembly. The military pact would allow direct sharing of information on North Korean and Chinese military developments. Public backlash prompted ruling party officials to pressure the government to reverse the unpopular decision. As South Korea approaches election season the GSOMIA may constrain the current ruling party, whose candidate Park Geun-hye, already faces a serious challenge from independent businessman Ahn Cheol-soo.
  • South Korea may backtrack on plans to purchase 60 F-35s, a contender for Seoul’s fighter jet acquisition bid, if Lockheed Martin denies Korea the chance to monitor the stealth fighter’s performance. Meanwhile, Japan has agreed to purchase four F-35s as an initial purchase, an announcement experts say will boost Lockheed's prospects in Korea.
  • Japan’s lower house overwhelmingly passed a tax hike that would double the country’s sales tax by October 2015. 50 ruling party lawmakers who opposed the bill, led by faction leader Ichiro Ozawa, quit the party in protest to what they called a betrayal of the party’s campaign promise, leaving the ruling Democratic Party of Japan (DPJ) with a slim majority in the parliament’s lower house.
  • The newly confirmed ambassador to Burma (Myanmar), Derek Mitchell, said that lack of transparency in Burmese ties to North Korea remains a major obstacle to normalized U.S.-Burma relations. Apart from urging Burma to sever ties with Pyongyang, Mitchell also called for more transparency in its extractive industries, including oil and gas. Meanwhile, during Aung San Suu Kyi’s landmark visit to Europe, leaders including French president Francois Hollande vowed to support all actors in Burma’s democratic transition.
  • In legislative elections on June 28, Mongolia’s opposition Democratic Party narrowly defeated the ruling Mongolian People's Party. Both parties campaigned on platforms to reduce unemployment and narrow the income gap with revenues generated from mining. Mongolia’s mining boom has made the landlocked country the fastest growing economy last year, but a third of its population remains below the poverty line.

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