It’s Eurasia integration vs. Empire of Chaos

Talk about a day that will live forever in history: Tuesday, November 18, 2014 in Yiwu, Zhejiang province, China. The first China-Europe Block Train, carrying 82 containers of exported goods, leaves the massive industrial warehouse of Yiwu to Madrid, with arrival December 9, 2014.   

Welcome to the China-Europe choo choo train, the longest freight train route in the world, way longer than the legendary Trans-Siberian Railway – crossing China from East to West and then Kazakhstan, Russia, Belarus, Poland, Germany, France, and finally Spain.[1]

You may not have the faintest idea where Yiwu is, but every businessman plying his trade across Eurasia, especially Arabs, is absolutely hooked on

Yiwu (“Where amazing happens!”).[2] We're talking about the largest wholesale center for small consumer goods not only in China but arguably on the whole planet.

Yiwu-Madrid is a spectacular game-changer in more ways than one. It’s an efficient logistics channel. It’s geopolitics with a human touch – knitting together traders and markets. It’s a graphic example of Eurasia integration on the go. And most of all it’s the first building block of China’s New Silk Roads – the greatest trade story in the world for the next 10 years. 

Go West, Young Han. And one day, all this will be yours on high-speed rail; China-Europe in two days instead of 21. As the Block Train left Yiwu, the D8602 bullet train was leaving Urumqi to Hami, in Xinjiang, China’s far west. That’s the first high-speed railway built in Xinjiang, and more is yet to come in, what else, dizzying speed.[3]

As global container trade (90% of the total volume) still ply the oceans, Beijing has counterpunched overland, boosting Eurasian railway freight and, just as an aside, starting to provide stiff competition to European companies which still rule the sector. This embryonic, still relatively slow New Silk Road is the first step towards an overland, trans-continental container trade revolution. 

And then there’s the proverbial voluminous basket of “win-win” deals; lower transportation costs; Chinese construction companies expanding their already booming trade with the Central Asian “stans” and Europe; an easier and faster way to have uranium and rare metals transported from Central Asia; and all those myriad new markets harboring hundreds of millions of people to be opened along the way. 

So Washington is “pivoting to Asia”? China is pivoting to Europe - across Eurasia.

Defect to the East, everybody 

The speed this is all happening is absolutely staggering. Chinese President Xi Jinping launched the New Silk Road Economic Belt in Astana, Kazakhstan, in September 2013. One month later, he launched the 21st Century Maritime Silk Road in Jakarta. Beijing defines the overall concept as “One Road and One Belt” – when it’s actually a myriad of parallel roads.

We’re talking about national strategy – milking the pull of the legendary, historical Silk Road, where trade was the prime bridge of civilizations – as the base for a post-modern, pan-Eurasian economic cooperation chessboard. 

Already a $40 billion infrastructure fund – overseen by China Development Bank - got the go-ahead to build and expand roads, high-speed rail and pipelines in assorted Chinese provinces.[4] The fund will expand to cover projects in South Asia, Southeast Asia, the Middle East and parts of Europe. But Central Asia is the key immediate target.

Chinese companies will be investing and bidding for contracts in dozens of countries along the New Silk Roads(s). After three decades developing at breakneck speed and sucking up foreign investment, China’s strategy is now to spread capital flows along its neighbors.

China has already clinched $30 billion in contracts with Kazakhstan; $15 billion with Uzbekistan; has given $8 billion in loans to Turkmenistan and $1 billion more to Tajikistan. Relations with Kyrgyzstan have been upgraded to strategic level in 2013. China is already the largest trading partner of them all, except Uzbekistan. And as much as the old Soviet pipeline network still reign supreme, new instances of Chinese-driven Pipelineistan – such as the gas pipeline from

Turkmenistan – will keep developing.[5]

Competition between Chinese provinces will be fierce. Xinjiang is being configured by Beijing to become a key hub. Guangdong – the “factory of the world” – hosted in early November 2014 the first international expo for the Maritime Silk Road. No less than 42 countries joined the party.

Shaanxi, Xi’s home province – which harbored the start of the historic Silk Road, in Xian - is now being enthusiastically sold by no less than the President, in person. He already made his pitch to Tajikistan, the Maldives, Sri Lanka, India and Afghanistan – all salivating with the economic prospects. 

Just like the historic Silk Road, the New Silk Road(s) are a maze of branching out. A key stretch runs through Central Asia, Iran and Turkey, with Istanbul as a key crossroads. Another follows the Trans-Siberian, with Moscow as a key crossroads. In the Trans-Siberian high-speed rail remix, travel time between Beijing and Moscow will plunge from the current 6 days and a half to only 33 hours.[6]

The Maritime Silk Road will start in Guangdong province, en route to the Malacca Strait, the Indian Ocean, the Horn of Africa, the Red Sea and the Mediterranean. The meeting of the roads is in Venice – Marco Polo in reverse; but then there is branching out to Rotterdam, Duisburg, Berlin.[7] German business just can’t get enough of it.

China’s Silk Road fund will start turning China’s humongous reserves not only into real credit – but, crucially, into soft power, which China needs badly; China still lacks a clear identity to present to the world. When Xi hails the push to “break the connectivity bottleneck” across Asia, he’s implying Chinese credit is now available all across Asia. 

And all this is slated to finish by 2025.

Now mix the New Silk Road(s) strategy with accelerated cooperation within the BRICS; accelerated cooperation among the members of the Shanghai Cooperation Organization (SCO) in security, military, economic, and cultural terms; accelerated developing world cooperation inside the G-20 and the 120-member Non-Aligned Movement (NAM); and no wonder, across the Global South, there’s the perception the world is defecting to the East.[8]

Economic NATO? We’re out

There’s no question the recent APEC summit in Beijing was a major Chinese success story.[9]

Yet the big APEC development was virtually unreported in the U.S. 22 Asian countries approved the creation of the Asian Infrastructure Investment Bank (AIIB) - only one year after Xi himself proposed it.[10] So this is yet another bank – as the BRICS Development Bank – which will finance Asian projects in energy, telecom and transportation with an initial capital of $50 billion, and China and India as the main shareholders.

That’s the China/India counterpunch to the Asian Development Bank (ADB), which started in 1966 under the aegis of the World Bank. BRICS members China and India insist on “justice, equity and transparency” of the new bank, a stark contrast with the Washington consensus. Everyone in Asia knows how the US-supported international bank maze was used for decades to benefit the expansion of Western multinational corporations and keep away the former USSR sphere of influence in the former Third World.   

ADB remains a US-Japan affair (31% of capital, 25% of voting power) – and its decisions are far from representative. Not to mention ADB won’t finance the Asian infrastructure push. That’s where AIIB comes in. Once again, China is already the top trading partner of India, Pakistan and Bangladesh; in second place with Sri Lanka and Nepal; and the top with virtually all ASEAN members. ASEAN is where 600 million people in Southeast Asia meet the convergence of China’s 1.3 billion with the Indian subcontinent’s 1.5 billion. 

Guess who did not approve AIIB; Japan, South Korea, Indonesia and Australia, all under immense pressure by the Obama administration. Still, they ended up sidelined by yuan diplomacy.

What Washington has to offer in contrast is economic NATO – for both Asia and Europe. APEC signaled the virtual death of the Trans-Pacific Partnership (TPP) – the trade arm of  “pivoting to Asia”. For Europe, it’s more of the same, as then Dutch Foreign Minister Frans Timmermans made it quite clear last May in Washington;[11] “The Transatlantic Trade and Investment Partnership (TTIP) is not a free trade agreement. TTIP is a geostrategic agreement. When you have TTIP in place, it will change the nature of the game globally. Because then the United States and Europe will set the rules of the game, and the others will follow suit, including China, Japan and others.” No wonder the overwhelming majority of Asian nations want nothing to do with a NATO trade/commercial dictatorship. 

When Dragon meets Bear

Russian President Vladimir Putin had a fabulous APEC. After Russia and China clinched a $400 billion gas mega-deal in May – around the Power of Siberia pipeline – they clinched a second one worth $325 billion around the Altai pipeline in western Siberia.

These two mega-deals by no means signal that Beijing will become Moscow-dependent on energy. They will represent 17 per cent of China's gas needs by 2020; and natural gas is still only 10 per cent of China's energy mix.

But the extrapolations are quite something. As Russia and China signed mega-deals, Beijing offered Russian banks under stupid US/EU sanctions access to Chinese credit, and committed to accelerate a common push to replace SWIFT. On the military front, Russia and China will increase large scale joint military exercises.[12] And finally those S-400s missile systems will make their way to Beijing.[13]

No wonder the “evergreen tree of Chinese-Russian friendship”, in Xi’s words – or call it Putin’s strategic ‘pivoting’ to China – is driving Washington/Wall Street elites literally crazy.

Russia and China are not only protecting their core national interests but advancing their complementarity.  As noted here[14], Russian excellence in aerospace, defense technology and heavy equipment manufacturing matches Chinese excellence in agriculture, light industry and information technology.

Russia and China - backed by the institutional weight of BRICS, SCO, CSTO and the Eurasian Economic Union (EEU) - are more than a match to the Atlanticist block in political, economic and military terms.

In Pipelineistan, for years it’s been clear that Russian – and not Western – pipelines will prevail across Eurasia.

That’s crucial: for the first time in the post-Cold War environment, Moscow has discussed in Beijing, leadership to leadership, the Soviet-era doctrine of collective security in Asia as the key pillar of the new Sino-Russian strategic partnership. 

And last but not least, Putin has repeatedly emphasized, “we’re moving away from the diktat of the market that denominates all commercial flows in U.S. dollars. We’re encouraging in every way the use of national currencies”. The direct challenge to the U.S. dollar as global reserve currency cannot but be interpreted by the indispensable nation as the ultimate affront.[15]

Bye bye, unipolar moment

All these interlocked developments conform a massive geopolitical tectonic shift which U.S. corporate media cannot even begin to understand.

Predictably, U.S. establishment is in panic. That good ol’ exceptionalist moment is “unraveling”.[16] The U.S.-China Economic and Security Review Commission has nothing better to do than to blame China for being “disloyal”, adverse to “reform” and an enemy of the “liberalization” of their economy.[17]

The usual suspects carp that upstart China is upsetting the "international order"[18], will finish with “peace and prosperity” for good and may be creating a "new kind of Cold War" in Asia.[19]

And China remains a “threat” even as the Pentagon spends almost $1 trillion a year and keeps the sprawling Empire of Bases intact. It’s never enough to remember that China is encircled by myriad U.S. bases, and China’s military bases exist only inside China. 

None of this is surprising when we know that Obama shaped his foreign policy speech at a West Point graduation ceremony to appease this superpower elegy.[20] As for the “upstarts”, they were already being vilified way back in 2009.[21]

Of course China must face titanic problems. Energy supply and transit security are seen in Beijing as extreme threats to stability; thus the massive investment in Pipelineistan – from Central Asia to Siberia; the “escape from Malacca” diversification of suppliers to include Africa and South America; and the offensive in the East and South China seas, which Beijing is betting could become the “second Persian Gulf” – ultimately yielding 130 billion barrels of oil.  

Here is a decently summarized road map of China’s “must do” reforms ahead.[22] Here is Xi’s latest major outline of China’s “results-oriented” path for the next ten years.[23] And here is a reasonably fair evaluation of areas in which China will continue to excel.[24]

Xiaolu Wang and Yixiao Zhou, authors of the academic paper Deepening Reform for China's Long-term Growth and Development contend it will be very hard for China to jump from middle-income to high-income status - a key requirement for a truly global power. This will imply an avalanche of government funds to social security/ unemployment benefits as well as healthcare, which only account for 10.5 percent and 6.1 percent of the 2014 budget, respectively.

Still, anyone who has closely followed what China has accomplished for these past three decades knows that China won’t fall apart.[25]

SPOT on

So the facts are stark. China is proposing Eurasia integration (for a quick summary of what Xi is planning check out the biographer of former president Jiang Zemin).[26]

The Washington/Wall Street elites are proposing what I have chosen to call Empire of Chaos[27]; a dysfunctional system that breeds chaos (Libya, Syria, Ukraine, the 2008 financial crisis) and is simultaneously devoured by chaos blowback (Afghanistan, Iraq.)

So no wonder New Cold War is very much in the air (see here).[28] Still, Washington’s seemingly bipartisan agenda to ‘isolate’ Russia is doomed to failure. First of all because Moscow is the only power capable of negotiating a global strategic balance with Washington.[29] NATO puny “threats” don't count even as a bad joke. And China still lacks that strategic clout.[30]

Russia - like China – is betting on Eurasian integration; no less than 40 nations are interested in clinching free trade agreements with the Eurasian Economic Union (EEU), which complements the Chinese New Silk Road(s) strategy.[31]

But what’s really at the heart of the great story from now on until 2025? Let’s talk about SPOT. SPOT involves two key vectors.  

1) The Washington/Wall Street elites are planning what strategy, policy, operations and tactics (SPOT) must be deployed, urgently, now, to bomb the development of China-Russia instruments of national and world power.

2) The Washington/Wall Street elites are planning what SPOTs are essential to maintain U.S. hegemony - financial and military - even as the BRICS advance all sorts of mechanisms, from currency swaps to trade in a basket of currencies, to bypass the U.S. dollar, the T-Bill and the petrodollar.

Meanwhile, the global systemic crisis keeps metastasizing – still under of the aegis of the casino capitalism/neoliberalism world-system.[32]

A change in dynamics, already perceptible in Germany, may lead Europe to eventually distance itself from the warmongering logic of the US-led West. After all German business/industry want to do business across Eurasia, which means essentially Russia and China; the endgame will arguably be the future BMB (Berlin/Moscow/Beijing) alliance.[33]

So the choice, once again between two “models”, is stark: it’s Eurasia integration or Empire of Chaos. Ladies and gentlemen, the die is cast.