US Sanctions Facilitate China’s Economic Expansion into Iran


Reuters says in its report “China’s CNPC ready to take over Iran project if Total leaves: sources” on May 11 that due to US sanctions to be imposed after Trump’s withdrawal from the Iran nuclear deal, Frances’ Total may be forced to let Chinese oil giant CNPC take over its 51% share in Iran’s South Pas gas project with world largest natural gas reserve.

CNPC has 30% share now, it it gets Total’s share, it will have an overwhelming majority share of 81% in the lucrative natural gas project.

Trump wants to make Iran suffer, but with Chinese investment, Iran will not suffer. His sanctions may not hurt Iran like his sanctions on Russia. The US has only been benefiting China with its sanctions. However, what the US has got and will get by its enmity with Russia and Iran? A Russia, Iran and China iron triangle?

Comment by Chan Kai Yee on Reuters’ report, full text of which is reblogged below:

China‘s CNPC ready to take over Iran project if Total leaves: sources

Chen Aizhu May 11, 2018

BEIJING (Reuters) – China’s state-owned energy major CNPC is ready to take over Total’s stake in the giant Iranian South Pars gas project if the French company leaves amid newly announced U.S. sanctions, industry sources said.

The United States this week said it would impose new sanctions against major oil and gas producer Iran after abandoning an agreement reached in late 2015 that limited Tehran’s nuclear ambitions in exchange for sanctions relief.

While the new sanctions are unilateral, many companies, including Japan’s Inpex, already appear to be bowing to Washington’s pressure and abandoning projects in Iran.

If Total walks away from the South Pars field, which has the world’s biggest natural gas reserves ever found in one place, CNPC is prepared to step in, the sources said.

It was not clear whether CNPC had received top government approval to do so. But such a move could further strain the tense trade relationship between Beijing and Washington.

Reuters reported in December that a $1 billion deal signed last July gave the Chinese firm the option to take over Total’s stake if it left Iran.

Since then, the Beijing-backed giant has conducted significant due diligence and planning, several high-level industry sources told Reuters.

“The possibility of Total’s pullout is quite high now, and in that scenario CNPC will be ready to take it over fully,” said a senior state oil official with knowledge of the contract.

An executive with direct knowledge of the project added that planning began “the day the investment was approved.”

“CNPC foresaw a high probability of a reimposition of (U.S.) sanctions,” the executive said.

All the sources spoke on condition of anonymity because they were not authorized to speak to media.

Under the terms of the agreement to develop phase 11 of South Pars, CNPC could take over Total’s 50.1 percent stake and become operator of the project.

CNPC already holds a 30 percent stake in the field, while Iranian national oil company subsidiary PetroPars holds the remaining 19.9 percent.

So far, the Chinese oil giant, which already operates two oil fields in Iran, has spent about $20 million on planning to develop the field, the sources said.

EARLY STAGE

Despite CNPC’s preparations, the two sources said they were not aware of any meetings between Total and CNPC after Trump’s move.

CNPC and Total declined to comment.

A source close to Total said the French company was analyzing the impact of new sanctions and whether it could get a waiver that would allow it to keep its stake.

An experienced onshore oil and gas producer, CNPC is relatively green in offshore drilling. Most of its experience lies in its subsidiary China Petroleum Offshore Engineering Company (CPOE), which has worked in shallow waters off north China.

The South Pars gas reservoirs are buried beneath the seafloor, 70 meters underwater.

The project will have a production capacity of 2 billion cubic feet per day, or 400,000 barrels of oil equivalent per day, including condensate, Total has said.

At current market prices, the whole reserves of the field, which Iran shares with Qatar, would be worth around $2.9 trillion.

The field is set to start supplying the Iranian domestic market in 2021.

CNPC is prepared to use its banking unit Bank of Kunlun Ltd as a funding and clearing vehicle if it takes over operation of South Pars, the second senior state oil official said.

The bank was used to settle tens of billions of dollars worth of oil imports during the UN sanctions against Tehran between 2012 and 2015, the official added.

Most of the bank’s settlements during that time were in euros and Chinese renminbi. The U.S. Treasury sanctioned Kunlun in 2012 for conducting business with Iran.

If CNPC goes ahead, it would also likely have to develop crucial equipment, such as large-powered compressors needed for developing gas deposits on this scale, on its own.

Leading manufacturers like U.S. firm GE and Germany’s Siemens could be barred from supplying to Iran under U.S. sanctions.

Additional reporting by Bate Felix in Paris and Ron Bousso in London; Editing by Henning Gloystein and Gerry Doyle

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In concession, Trump will help China’s ZTE ‘get back into business’


Valerie Volcovici, Karen Freifeld May 13, 2018

WASHINGTON (Reuters) – U.S. President Donald Trump pledged on Sunday to help ZTE Corp “get back into business, fast” after a U.S. ban crippled the Chinese technology company, offering a job-saving concession to Beijing ahead of high-stakes trade talks this week.

“Too many jobs in China lost. Commerce Department has been instructed to get it done!” Trump wrote on Twitter in the first of two tweets about U.S. trade relations with China. It said he and Chinese President Xi Jinping were working together on a solution for ZTE.

Shortly after Trump’s tweet, a Democratic lawmaker questioned the move to help the Chinese company, given numerous warnings about ZTE’s alleged threat to U.S. national security.

ZTE suspended its main operations after the U.S. Commerce Department banned American companies from selling to the firm for seven years as punishment for ZTE breaking an agreement reached after it was caught illegally shipping U.S. goods to Iran.

The Commerce Department, ZTE and the Chinese embassy in Washington could not immediately be reached for comment.

White House spokeswoman Lindsay Walters confirmed that U.S. officials were in contact with Beijing about ZTE. She said Trump’s tweet underscored the importance of “free, fair, balanced and mutually beneficial” relations between the United States and China on issues involving the economy, trade and investment.

Trump expects Commerce Secretary Wilbur Ross “to exercise his independent judgment, consistent with applicable laws and regulations, to resolve the regulatory action involving ZTE based on its facts,” Walters said.

U.S. officials are preparing for talks in Washington with China’s top trade official Liu He to resolve an escalating trade dispute.

Trump’s proposed reversal will likely ease relations between the world’s two biggest economies. Washington and Beijing have proposed tens of billions of dollars in tariffs in recent weeks, fanning worries of a full-blown trade war that could hurt global supply chains and dent business investment plans.

In trade talks in Beijing this month, China asked the United States to ease crushing sanctions on ZTE, one of the world’s largest telecommunications equipment makers, according to people with knowledge of the matter.

In a second tweet on Sunday, Trump said past U.S. trade talks with China posed a hurdle that he predicted the two countries would overcome.

“China and the United States are working well together on trade, but past negotiations have been so one sided in favor of China, for so many years, that it is hard for them to make a deal that benefits both countries,” Trump wrote on Twitter.

“But be cool, it will all work out!” he added.

 

SHOCKING BLOW

It was not clear China would accept Trump’s assertion that Beijing needs to work toward a mutually beneficial outcome.

“The U.S. should be aware that it must become more cooperative and constructive in the trade talks with China,” the China Daily, China’s official English-language newspaper, said in a Monday editorial.

“It should bear in mind that the outcomes of dialogue should be mutually beneficial and China will not accept its interests being damaged,” the newspaper said, adding that Washington must “cast away its unilateral mentality”.

The editorial did not mention ZTE.

Trump’s comments on ZTE could have a significant impact on shares of American optical components makers such as Acacia Communications Inc and Oclaro Inc, which fell when U.S. companies were banned from exporting goods to ZTE.

ZTE paid over $2.3 billion to 211 U.S. exporters in 2017, a senior ZTE official said on Friday.

The U.S. government launched an investigation into ZTE after Reuters reported in 2012 the company had signed contracts to ship hardware and software worth millions of dollars to Iran from some of the best-known U.S. technology companies. (Reuters report that exposed the practice: reut.rs/2GbpCmO)

ZTE pleaded guilty last year to conspiring to violate U.S. sanctions by illegally shipping U.S. goods and technology to Iran and entered into an agreement with the U.S. government. The ban is the result of ZTE’s failure to comply with that agreement, the Commerce Department said.

It came two months after two Republican senators introduced legislation to block the U.S. government from buying or leasing telecommunications equipment from ZTE or Huawei [HWT.UL], citing concern the companies would use their access to spy on U.S. officials.

Without specifying companies or countries, Federal Communications Commission Chairman Ajit Pai recently said “hidden ‘backdoors’ to our networks in routers, switches, and other network equipment can allow hostile foreign powers to inject viruses and other malware, steal Americans’ private data, spy on U.S. businesses, and more.”

ZTE relies on U.S. companies such as Qualcomm Inc, Intel Corp and Alphabet Inc’s Google. American companies are estimated to provide 25 percent to 30 percent of components in ZTE’s equipment, which includes smartphones and gear to build telecommunications networks.

Claire Reade, a Washington-based trade lawyer and former assistant U.S. Trade Representative for China affairs, said the ZTE ban was a shocking blow to China’s leadership and may have caused more alarm in Beijing than Trump’s threats to impose tariffs on $50 billion in Chinese goods.

“Imagine how the United States would feel if China had the power to crush one of our major corporations and make it go out of business,” Reade said. “China may now have strengthened its desire to get out from a under a scenario where the United States can do that again.”

Even though ZTE was probably “foolish” in not understanding the consequences of violating a Commerce Department monitoring agreement, she said the episode made it less likely that China would make concessions on U.S. demands that it stop subsidizing efforts to develop its own advanced technology, she said.

Other experts said Trump’s policy reversal was unprecedented.

“This is a fascinating development in a highly unusual case that has gone from a sanctions and export control case to a geopolitical one,” said Washington lawyer Douglas Jacobson, who represents some of ZTE’s suppliers.

Trump’s announcement drew sharp criticism from a Democratic lawmaker, who said the move was jeopardizing U.S. national security.

“Our intelligence agencies have warned that ZTE technology and phones pose a major cyber security threat,” Representative Adam Schiff said on Twitter. “You should care more about our national security than Chinese jobs.”

Reporting by Valerie Volcovici and Karen Freifield; Additional reporting by Steve Holland, David Lawder, Chris Sanders and David Morgan in Washngton and John Ruwitch in Shanghai; Editing by Paul Simao and Peter Cooney

Source: Reuters “In concession, Trump will help China’s ZTE ‘get back into business’”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


China’s first home-built carrier sets out for sea trials


China’s first domestically developed aircraft carrier departs Dalian, Liaoning province, China May 13, 2018. REUTERS/Stringer

Reuters Staff May 13, 2018

BEIJING (Reuters) – China’s first domestically developed aircraft carrier left its northeastern port to begin sea trials on Sunday, state media said, the latest milestone in the country’s efforts to modernize its military.

The still-unnamed carrier was launched this time last year but since then has been undergoing fitting of weapons and other systems and has not yet entered service.

The official Xinhua news agency confirmed the ship had left for trials with a short announcement. Other state news outlets showed undated photos of a fog-shrouded carrier just off of its dock.

“Our country’s second aircraft carrier set sail from its dock in the Dalian shipyard for relevant waters to conduct a sea trial mission, mainly to inspect and verify the reliability and stability of mechanical systems and other equipment,” Xinhua said.

Little is known about China’s aircraft carrier program, which is a state secret, though official media in recent weeks had widely speculated that sea trials were set to start.

Chinese President Xi Jinping is overseeing an ambitious plan to update the armed forces, including the development of stealth jets and anti-satellite missiles, as China ramps up its presence in the disputed South China Sea and around self-ruled Taiwan, an island it considers its own.

Chinese military experts have told state media that the carrier, China’s second and built in the northeastern port of Dalian, is not expected to enter service until 2020, once it has been fully kitted out and armed.

But the government has said the new carrier’s design draws on experiences from the country’s first carrier, the Liaoning, bought second-hand from Ukraine in 1998 and refitted in China.

The new conventionally powered carrier will be able to operate China’s Shenyang J-15 fighter jets.

Unlike the U.S. Navy’s longer-range nuclear carriers, both of China’s feature Soviet-design ski-jump bows, intended to give fighter jets enough lift to take off. They lack the powerful catapult technology for launching aircraft that U.S. carriers have.

China’s navy has been taking an increasingly prominent role in recent months, with its first aircraft carrier, expected to serve more as a training vessel, sailing around self-ruled Taiwan and new Chinese warships popping up in far-flung places.

State media has quoted experts as saying that the country needs at least six carriers. The United States operates 10 and plans to build two more.

Most experts agree that developing such a force will be a decades-long endeavor for China, but progress on the home-built carrier holds a certain prestige value for Beijing, seen by many analysts as keen to eventually erode U.S. military prominence in the region.

Reporting by Michael Martina; Editing by Eric Meijer

Source: Reuters “China’s first home-built carrier sets out for sea trials”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


China’s Busy Diplomacy to Grab World Leadership from the US


The US has to pursue isolation as world leadership is too heavy a burden and it has to boost its economic growth to maintain its number one status in world economy. That is certainly a correct move, but it gives China opportunity to grab world leadership from the US.

I have repeatedly warned China not to try to replace the US as world leader as it has not been strong enough yet, but China’s Xi seems precisely doing the opposite – making great efforts to grab from the US world leadership at least in economy and diplomacy.

Is Xi stupid in doing so? China’s gifted strategist Sun Tzu teaches us to maintain invincible position while not miss the opportunity to win. One relies on oneself to be invincible but cannot make one’s enemy lose the war, if there are no factors for the enemy to lose the war. That is why Sun Tzu says that one can know victory but cannot make victory.

Indeed one can play tricks to make one’s enemy commit mistakes and lose the war like what China’s gifted strategist Sun Bin did in his famous Battle of Maling. But what if the enemy would not be duped?

At the beginning of the Korean War, China’ talented general Peng Dehuai copied Sun Bin’s trick. His troops encountered South Korean troops first but retreated instead of winning an easy first battle as he had to avoid giving his enemy the impression that his troops were capable to fight.

On the contrary, he told his troops to throw things away while retreating to give General McArthur the false impression that his troops were in panic as they were afraid of well-equipped US troops. As a result, McArthur advanced rashly and had his troops encircled by Chinese troops. Peng’s surprise offensive caused US troops to collapse and retreat as fast as they could to the south of Seoul. The victory was brilliant, but what if General McArthur had not been arrogant but had stopped his rash advance and, instead, built fortifications along the frontline to keep the large part of North Korea he had occupied. With poor weapons, General Peng simply could not break US troops’ defense.

McArthur gave Peng the opportunity to win and Peng did not miss the opportunity to win though his troops were much weaker.

Now, China is not strong enough to win, but the US is giving China the opportunity to win. Shall China miss the opportunity? I pointed out in my post earlier that Chinese President Xi Jinping is a man of quick decision and quick actions. I now realize that Xi is taking the opportunity to win. That is why China has suddenly taken the initiative to improve relations with Japan, India and Indonesia, the most important nation of ASEAN. (See Reuters’ reports “China’s Xi, India’s Modi seek new relationship after summit” on April 28 at https://www.reuters.com/article/us-china-india/chinas-xi-indias-modi-seek-new-relationship-after-summit-idUSKBN1HZ019, “China Premier Li says open to increasing Indonesia palm oil import quota” on May 7 at “https://www.reuters.com/article/us-indonesia-china/china-premier-li-says-open-to-increasing-indonesia-palm-oil-import-quota-idUSKBN1I80RH and
“Japan, China hail warming ties amid troubled history” on May 9 at https://www.reuters.com/article/us-japan-china/japan-china-hail-warming-ties-amid-troubled-history-idUSKBN1IA1GF.

The busy diplomacy shows Xi’s efforts to grab world leadership from the US as US retreat in the world is giving China the opportunity to win. Japanese PM Abe in particular has failed sadly to persuade Trump to return to the Trans-Pacific Partnership (TPP) and has now to focus on ASEAN + three (China, Japan and South Korea), where China will certainly be the leader.

Under such circumstances, China may not allow the US to defeat it in trade war or how can China make others believe that it is a real rival to the US?

Comment by Chan Kai Yee on Reuters’ reports


China steps up quarantine checks on U.S. apple, log imports


Reuters Staff  May 7, 2018

BEIJING (Reuters) – China’s main ports will step up quarantine checks on imports of apples and logs from the United States, and shipments found carrying disease or rot could be returned or destroyed, the Chinese customs agency said on Monday.

Reuters reported last week that the main Chinese ports of entry have ramped up checks on fresh fruit imports from the United States, which could delay shipments from U.S. growers already dealing with higher tariffs as China-U.S. trade ties sour.

“Recently, pests were detected in apples and logs imported from the United States at the ports of Shanghai, Shenzhen, Qingdao, Xiamen and others,” the Chinese General Administration of Customs said in a statement posted on its website.

If apples or logs are suspected of carrying pests, samples will be sent to laboratories for inspections, and while the tests are under way goods will not be allowed to pass through customs.

Previously, customs officers in China had let shipments through while they conducted sample checks.

The measure was announced days after a U.S. delegation led by Treasury Secretary Steven Mnuchin visited Beijing for two days of talks aimed at easing trade tensions between the world’s two biggest economies.

U.S. President Donald Trump has threatened to impose tariffs on up to $150 billion in Chinese goods over allegations of intellectual property theft.

Fruits were among 128 U.S. goods that China slapped with more expensive import tariffs early last month in retaliation for U.S. levies on Chinese steel and aluminum.

Reporting by Chen Aizhu, editing by Louise Heavens

Source: Reuters “China steps up quarantine checks on U.S. apple, log imports”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


Bangladesh signs deal with China to set up coal-based power plant


Reuters Staff May 7, 2018

DHAKA (Reuters) – The state-run Bangladesh Power Development Board (BPDB) and China Huadian Hongkong Company Limited (CHDHK) have signed an agreement to form a joint venture company to set up a coal-based power plant with a capacity of 1,320 megawatts, a senior BPDB official said on Monday.

“These two firms signed the deal on Sunday to set up the plant at Moheshkhali island in Cox’s Bazar district, 415 kilometres (260 miles) south east from Dhaka,” said Mohammad Saiful Islam, a director of the BPDB.

The joint venture, equally owned by both the companies, will take four years to start production, the official said.

Another official, who is directly involved with the project, said that as per the initial plan it might cost about $2 billion to implement the project.

Bangladesh plans to provide electricity to all of its more than 160 million citizen by 2021, the year in which it aims to enter the league of middle-income countries.

At present, 20 percent of its people do not have electricity while the country is facing a shortage of between 1,000 and 1,500 megawatt electricity a day which goes up to 2,000 during peak season of summer.

Bangladesh at present produces up to 9,500 of electricity a day with a capacity of 12,000 megawatts, but owing to the shortage of primary fuel the country has not been able to utilize its full capacity.

Source: Reuters “Bangladesh signs deal with China to set up coal-based power plant”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


PLA airborne troops conduct first exercise with Y-20 transport aircraft


Gabriel Dominguez, London – IHS Jane’s Defence Weekly

10 May 2018

China’s PLAAF recently conducted its first airdrop and air delivery training exercise using the Y-20 strategic transport aircraft. Source: Via 81.cn

China’s People’s Liberation Army Air Force (PLAAF) has conducted its first airdrop and air delivery training exercise using the Xian Aircraft Corporation Y-20 Kunpeng strategic transport aircraft, the Ministry of National Defense (MND) in Beijing announced on 8 May.

The MND, which showed images of PLA airborne troops parachuting from the aircraft as well as of the air dropping of cargo, said in a statement that the PLAAF has begun “combat training” with the Y-20 that includes airdrops and long-range deliveries of military equipment.

At least five Y-20s are known to be operated by the PLAAF, with images recently published in Chinese online forums suggesting that two more platforms may have also entered service.

The 47 m-long Y-20, which entered service with the PLAAF in July 2016, has an estimated maximum take-off weight of 220 tonnes and a range of up to 2,000 n miles (maximum payload), according to Jane’s All the World’s Aircraft .

The indigenously designed and developed transport aircraft made its maiden flight in January 2013 and debuted at the 10th China International Aviation and Aerospace Exhibition (also known as Airshow China) in Zhuhai in November 2014.

The latest developments come as the MND announced on 9 May that the PLAAF’s Chengdu Aircraft Industry Group (CAIG) J-20 ‘fifth-generation’ multirole fighter aircraft recently took part in its first-ever combat training over the ocean.

The J-20 made its maiden flight in 2011 and was first publicly displayed at the Airshow China 2016 exhibition in Zhuhai. In March 2017 state broadcaster China Central Television (CCTV) stated the aircraft had entered military service, although it is thought that only small numbers of the platform have been produced.

Source: Jane’s 360 “PLA airborne troops conduct first exercise with Y-20 transport aircraft”

Note: This is Jane’s 360’s report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.