DRIVING IN CHINA

When you hear the word "China," if you’re like most people the picture most likely to appear in your mind’s eye is vast uncountable hordes of people.  I’ve got a different picture, having bounced along so many thousands of kilometers of bad Chinese roads:  no people at all.

China is almost half a million square miles bigger than the continental US (the contiguous 48 states without Alaska/Hawaii) – and it is amazing how much of it is desert or high mountain plateaus where hardly anybody lives.  And I mean no one, as in empty.  I’d estimate that more than half, upwards of two-thirds of China is virtually uninhabited.

That means cramming 1.3 billion people into an area less than one-third of the continental US.  People who have made a deal with their Chicom leaders:  you get to keep political control and we get to prosper in a growing economy.  The deal breaks down if the economy falters – and it is faltering fast. 

The engine of China’s economy – her exports that we buy – is in steep decline, foreign direct investment is down 36% for 2008, scores of millions of peasants who had found work in cities are now unemployed and headed back to their bleak villages.

China is in trouble – and when dictatorships get in trouble, history shows the option they most often choose to try and save themselves is war.  Will China – or will it opt for the alternative that geopolitics is now providing, to take America’s place as protector and peacemaker?

A couple of weeks ago, some folks on the TTP Forum were skeptical of what they took as my prediction that China might attempt to seize eastern Siberia within 1-2 years rather than 10-20 (The Zero White House as A Target-Rich Environment).  I thought I was carefully not making a prediction by saying only that "the odds are growing" for this.

It’s quite possible for the Chicoms to figure a way out of their dire problems without war.  One thing they are not is stupid.  Just look at the banking deal they’ve brokered with Henry Paulson, as discussed this week in Breaking China’s Piggy Bank by Dagny D’Anconia.

And they’ve got something even more important than smarts:  civilizational confidence.  The confidence to act in their and their country’s interests and not give a damn about world envy or opinion.  It’s what they have that we lack.

The confidence of a Vladimir Putin, Dimitry Medvedev, and the KGB thugocracy running the Kremlin (collectively known as sivoliki) – exampled by sending a Russian warship through the Panama Canal this past weekend – by contrast is a façade, phony Russian bluster to coverup a massive inferiority complex and a dying society.

So maybe the Chinese will just end up cleverly using the threat of war, the threat of their seizure of Siberia, to prevent Russia from creating a war elsewhere, such as in Ukraine, or in collusion with Iran.

As things stand right now, Russia is absolutely screwed.  We’ve repeatedly documented in TTP how Russia is a dying society – the life expectancy of Russian men now is lower than that of men in Bangladesh.  That Siberia right next door to dried-up China is de-populated.  Now Barclays tells us that Russia will be in full recession next year.  One thing this means is no money to rebuild the Russian military, which is in tatters, no money for much of anything.

Russia’s economy is a one-trick pony in a one-ring circus, based entirely on oil and gas.  The peaceful option to raise oil/gas prices failed miserably this week.  OPEC announces it will cut production by 2.2 mbd (million barrels a day), and the benchmark prices tumble to $36.

All the traders know the cuts won’t materialize as free-rider members will cheat up the ying-yang, and Russia’s claim to "cut" production by .3 mbd is phony.  Russkie production is rapidly falling because no money is spent on refurbishing old fields and developing new ones. That 300,000 bd drop for 2009 was priced in long ago. 

So the peaceful option is gone.  The remaining option left to the Kremlin is to create a war that will skyrocket oil prices.  Where might that be?  They can’t quite do it in Ukraine, although they are causing trouble.  The best choice is obviously Iran.

Iran is in the same economic-political boat as Russia.  Tehran is spending billions of dollars it no longer has on subsidies to millions of Iranians for basic necessities (food, gas, medicine, etc.).  Sometime within the first few months of 2009, Tehran will be completely broke, and neither the IMF nor anyone else is going to bail it out.

Shortly after that, no later than mid-2009, Russia will have burned through its foreign reserves and will be broke as well.

So – how many New York seconds would it take you, if you were running Iran, to come up with a rationale to precipitate a war in the Persian Gulf that would shut down all oil shipments through the Straits of Hormuz – especially if you had Russia backing you up and egging you on?

A follow-up question:  would the Chinese view this as good or bad for them?

Real bad, right?  Skyrocketing oil prices that would further push them and everyone else (the US, Europe, et al) except Russia/Iran into deeper depression is not what the Chicoms want.

So – where’s the leverage that China has with Russia?  There’s normally only two kinds of leverage that work in Russia:  bribes and threats.  Probably it will be a combo, but more of the latter than the former, as China hasn’t got enough money to prop up the Kremlin.  The best place to threaten someone is where they are the weakest, the most vulnerable, the place where you can most effectively make a quid pro quo play.

That would be Siberia – starting specifically with that part of Siberia that Russia stole from China in the 1850s (see the maps and history in Chinese Siberia from November 2006).

One key lesson to draw from this is that Russia is going to become increasingly more desperate and dangerous – and that the one country with the most leverage against Russia and contain its danger is China… not America. 

What leverage do you suppose the Zero White House would have over the Kremlin?  More or less than China?  The answer is a lot less.

Which is why Russia’s neighbors, particularly the former Soviet republics, are going to be looking at China as a peacemaker, as their protector from the Soviet/Russian bear – not Zero’s America.

An example would be Azerbaijan.  That country’s most respected intellectual, Vafa Guluzade, has declared that Russia is now "pregnant with fascism."  The situation in Russia today, he says, "resembles the one in Germany in 1933 which brought Adolf Hitler and the Nazis to power."

Guluzade has publicly pleaded for all Azeris living in Russia to "leave before it is too late.  Bad days are ahead in Russia."  Privately he will tell you that only China can help stop a desperate Russia hungry for Azeri oil, and that you will hear the same talk in Kazakstan, Tajikistan, and Uzbekistan.

Meanwhile in Moscow, Putin is further solidifying fears of a return to Stalinism with his new law redefining "treason" to include doing anything the government doesn’t like.  "Anyone harming Russia should be exterminated," announced Putin’s sponsor of the law in the Duma (Russian parliament).

Then there are the nukes.  Russia still has thousands of fission or "atomic" bombs with uranium/plutonium cores that decay very slowly over centuries; we have only a few hundred left.  What Russia dismantled was most of their fusion or "H" bombs requiring tritium to ignite the fusion.  Tritium decays quickly over a few years so must be replenished – which we have not been doing for the H bombs we kept (and Zero is publicly opposed).

Thus we could be in for nuclear blackmail by Moscow – but such blackmail would be harder to pull off against China.  The Chicoms have a good nuclear deterrent and have no fear of Russia in this regard – which Russia knows.

The bottom line here is that if China succeeds in containing Russia from exploding outward, it will explode inward – implode.  Entire regions will secede from Moscow’s control, as we discussed last October in Will Russia Break Apart?

The irony for us is that America will be on the sidelines, while China will be looked to as the geopolitical leader and peacemaker, the world’s protector from warmongers like Russia and Iran.

It’s why I expect that someday not too far off I’ll be driving around in a newly-populated Chinese Siberia.

[Ps:  if you’re asking, what direct leverage does China have with Iran, not just indirect via Iran’s main ally, Russia, it’s a good question – which diplomats from all over the Gulf – Kuwait, UAE, Saudi, Oman – are now frequently meeting with their Chinese counterparts to answer.  It will be interesting to see what they come up with.]