Tag: Eurasia

Yuan inclusion in SDR basket inevitable

An integrated Eurasian block will dominate the world. The Chinese are acting upon that insight.

The IMF is due to re-examine the composition of its currency basket for Special Drawing Rights, a foreign-exchange reserve asset for fund members, later this year says Zhao Yongsheng.

“Our assessment now is that the substantial real effective appreciation [of the yuan] over the past year has brought the exchange rate to a level that is no longer undervalued,” the IMF said last week after it concluded its 2015 Article IV Consultation Mission to China.

Does this mean that the yuan is about to be included in the SDR currency basket? We can consider a “signal” sent by IMF Managing Director Christine Lagarde during a speech at Fudan University in Shanghai in March: “It’s not a question of if, it’s a question of when.”

Her speech, and the IMF’s announcement, indicate that the yuan is quite likely to be included in the SDR basket when it is reviewed this year.

But merely joining the SDR basket is not the only important step for the yuan, even if it is already a significant development in the currency’s internationalization.

Actually, the inclusion of the yuan in the SDR basket is not just a question of “if” or “when,” but a question of “how much.”

Let’s look first at the composition of the SDR basket, which now includes the four strongest currencies in the world: the dollar, euro, yen and British pound.

When the SDR was launched in 1981, the shares for the five currencies in the basket were 42 percent, 19 percent, 13 percent, 13 percent and 13 percent for the dollar, Deutsche mark, French franc, yen and pound, respectively. The basket is adjusted every five years.

Looking at this original composition, we can divide the basket’s basic structure into two blocks: the “Deutsche mark-French franc block” (or the “euro block” after the adoption of the European single currency in 2001) and the “dollar-pound-yen block.”

This division is based on differences in culture, historical links and even military relationships.

It is true that Germany and France are not the same, as one is a Germanic culture and the other is a French or half-Latin culture.

Nevertheless, these countries had no choice but to work together to establish and expand the European Union. Especially since the birth of the euro, monetary and financial relations between Germany and France have become closer. They are both countries of Europe’s continental culture.

For their part, the UK and US share an “Anglo-Saxon” culture, and their relationship is that of siblings. With regard to Japan, it has close links to the US due to its post-WWII occupation and rebuilding by the US. That’s why we put these three countries and their currencies together.

Originally, the combined share of the mark and franc was 32 percent.

Even if we assume this European continental culture block increased to 37.4 percent for 2011-15, it would still lag far behind the dollar-pound-yen block, which stands at 62.6 percent for the same period.

How can we maintain balance in the SDR basket?

Balance is essential for any game with multiple players, and that is also true of currency baskets.

In the case of the above division, obviously the gap of 25.2 percentage points between two blocks is too huge to be good for stability.

If we assume a share of 10 percent for the yuan in the SDR basket, the euro plus the yuan will make up 47.4 percent of the basket, against a new share for the dollar-pound-yen block of 52.6 percent. Now, the gap is not so large.

Why do we put the euro and yuan together? This implies the necessity for Europe to find another force to implicitly provide balance against the “American hegemony.”

The increasing closeness of Europe and China will be gradually reinforced with the adoption of China’s “One Belt, One Road” initiative and the operation of the China-initiated Asian Infrastructure Investment Bank.

This solution can also be a moderate and acceptable reform for the current players in the SDR basket, whatever their position, because even with the new composition, the dollar-pound-yen block will retain a dominant position with 5.2 percentage points more than the euro-yuan block.

Finally, in China’s pursuit of inclusion, France will play a major role – and not only because the IMF’s president is usually a French national.

It is also because France needs China, probably much more than do other countries, to recover from the lingering effects of the financial crisis and keep its economy growing.

Source:Global Times

The author is a Paris-based economist and vice-president of the Paris-based China-France Association of Lawyers and Economists. bizopinion@globaltimes.com.cn

China inks huge arms deal with Russia

China and Russia, as part of closer strategic ties, have finalized a long-awaited deal for very long range S-400 surface to air missile (SAM) system. The deal is not only the largest Sino-Russian arms deal in over a decade, but S-400 missile defense capabilities would provide China with a quick missile defense upgrade at the moment neighboring states like North Korea acquire more ballistic missiles, and the U.S. and Japan look to buy stealthy anti-ship missiles.

In April 2015, both Anatoly Isaikin, CEO of Russia’s arms sales Rosoboronexport agency, and Du Wenlong, a senior member of the PLA Academy of Military Science, have stated that China will take delivery of the S-400 SAM. The Moscow Times reports that the deal was negotiated for $3 billion, to deliver 6 S-400 battalions. With each battalion consisting of 6 transport erector launch (TEL) vehicles, China would have 36 launch vehicles.

The S-400 is the longest range SAM system in the world. It first entered into Russian service in 2007, and has capability to intercept ballistic missiles and high speed aircraft, while its 91N6E can locate and track stealth aircraft at standoff (100km+) distances. The most infamous of the S-400’s three missiles is the 40N6, which has an astounding range of 400km. The 40N6’s extreme range would allow S-400 TELs on China’s coast to shoot down aircraft anywhere over Taiwan. The smaller 250km-ranged 48N6 and 120km-range 9M96E2 missiles are also equally lethal against fighters, bombers, early warning and electronic warfare aircraft, as well as cruise and ballistic missiles.

The S-400 will supplement China’s Russian-made S-300 and domestic HQ-9 long-range SAMs, while its 30K6E command system can even interlink with other Russian made SAMs, like the S-400 and TOR-M1, both of which China already fields. The S-400s would likely be operated by the PLA Air Force (PLAAF), which has historically operated China’s land based long-range air defense systems. While the 40N6’s long range could theoretically cover all of Taiwan’s air space, they would most likely protect major bases like the Hainan submarine pens, important cities such as Beijing and Shanghai, or hide within the inland mountains of Fujian and Guangdong Provinces.

The deal is significant to regional security as well as geopolitics. China’s improved air defense capabilities will greatly complicate any efforts to conduct aerial operations or missile attacks against the Chinese mainland, even with stealthy drones, longer-ranged cruise missiles, or new bombers, all part of the new US “third offset” plan. In wartime, the S-400 could even support Chinese airstrikes by knocking out enemy fighters flying above their own bases and cities. On the strategic level, the S-400 sale would facilitate Sino-Russian cooperation, as well as facilitate other sales and joint projects like submarines and space operations.

Source: Popular Science

From the pages of Orwell and 1984

By Wayne Madsen.

«Oceania was at war with Eurasia: therefore Oceania had always been at war with Eurasia. The enemy of the moment always represented absolute evil, and it followed that any past or future agreement with him was impossible». These are the words from «1984», George Orwell’s fictional novel and eerily correct prognostication of future events from geopolitics to the loss of privacy and the rise of the surveillance state. Oceania fictionally represented the British Isles, North and South America, southern Africa, and Australasia. In Orwell’s world, Eurasia was comprised of Russia and Europe while another power, Eastasia, included China, Korea, and Japan.

Today, a modified form of the dystopian future world map of Orwell is becoming reality as Russia and China increasingly cooperate economically, politically, and militarily to ensure that the forces of Oceania – centered in Washington, London, Berlin, and Paris – do not overrun Eurasia.

At last month’s third annual International Security Conference in Moscow, a conclave sponsored by the Russian Defense Ministry, Chief of Staff of the Russian armed forces, General Valery Gerasimov stated that Western-financed and organized «color revolutions», such as those employed twice in Ukraine and once in Georgia, represent a form of irregular warfare against Eurasia. Gerasimov’s statement about North Atlantic Treaty Organization (NATO) countries, which resemble Orwell’s Oceania, launching irregular warfare against Eurasia could have been torn from the pages of «1984». Gerasimov cited information warfare, economic sanctions, and support for «proxy criminal organizations» and extremist groups as part of the West’s irregular warfare construct directed against Eurasia.

Gerasimov also said that color revolutions were part and parcel of Western military strategy against Eurasia since the non-military tactics employed were often followed by military force to bring about regime change. This is now the case with the Ukrainian government’s NATO-supported military offensive against federalists in eastern Ukraine, as well as in NATO support for Islamist rebels battling against the government of Syrian President Bashar al-Assad. Military intervention, including air attacks, was also employed by NATO after the Islamist uprising in eastern Libya that eventually forced Libyan leader Muammar Qaddafi from power.

Gerasimov’s comments about color revolutions was supported by none other than Anthony Cordesman of the Center for Strategic and International Studies (CSIS), a non-profit think tank that often reflects the views of the Central Intelligence Agency and U.S. State Department. Cordesman said color revolutions sponsored by the West were a new form of warfare against Russia and China.

Belarusian Defense Minister Yury Zhadobin cited the «godfather» of George Soros- and CIA-financed themed uprisings and revolutions, Gene Sharp, the director of the Albert Einstein Institution in Boston as the prime motivator of the uprisings witnessed in Europe and the Middle East. The armed forces of Russia, China, and Belarus now consider the West’s support for regime change through color revolutions as being part of the military doctrines of the United States and NATO. The military planners in Moscow, Beijing, and Minsk also view Western private military contractors – mercenaries — such as the former Blackwater, now Academi, as being part of the West’s regime change scenario after the outbreak of color revolutions.

The reasons for the West’s color revolution and regime change project for Eurasia are clear. With Russia and China at the forefront of developing new Eurasian energy schemes involving natural gas and new transportation routes evoking memories of the old Silk Road, the West feels threatened by the emergence in Eurasia of a dynamic new market that could not only rival but eclipse the European Union and Washington’s proposed Trans-Pacific Partnership (TPP).

The emergence of a new Eurasian identity has alarmed the political leaders of de facto Oceania. Eurasia places economic development and respect for traditions over what many in Russia, China, Kazakhstan, Belarus, and other countries of the region see as a Western «culture» that emphasizes pop culture, homosexuality, destruction of social safety nets, disrespect for religion, destruction of the traditional family unit, and unbridled vulture capitalism that promotes draconian austerity.

The Moscow security conference met at about the same time that Russian President Vladimir Putin and Chinese President Xi Jinping met at the fourth Conference on Interaction and Confidence Building Measures in Asia (CICA) held in Shanghai. There, Xi emphasized that Asia has entered the 21st century at that the Cold War mentality should be abandoned. Observers from Japan and the United States looked on as Asian delegates roundly rejected President Barack Obama’s Cold War military «pivot to Asia» and Japanese Prime Minister Shinzo Abe’s revanchist imperial military buildup in east Asia. In many respects, the United States Pacific forces and Japan, the Philippines, and South Korea represent the militaristic «Eastasia» of «1984», an entity that was allied for a period of time with Oceania.

Not only was the «Power of Siberia» natural gas pipeline, which will begin pumping natural gas from Siberia to China in 2018, agreed upon in Shanghai but there are plans to restore the old Silk Road as a major trans-Eurasian highway that will link China to Europe via the trans-Siberian highway and Europe’s E-30 highway. Eventually, an A-class motor highway will link Amsterdam with Beijing via the Asian Highway Network. This network of modern highways will restore the ancient Silk Road of Asia and move goods and passengers throughout Eurasia and, in the process, build new infrastructures in the remotest parts of the Eurasian heartland. This prospect has the banking houses of Europe and America concerned since they will be locked out of the financial sweepstakes.

Eurasia’s leaders, from Putin and Xi, to Iranian President Hassan Rouhani and Afghan President Hamid Karzai are well aware that the color revolutions that have wracked Ukraine, Georgia, and Kyrgyzstan have been financed by George Soros’s Open Society Institute and Foundation and that Soros’s hedge fund empire is nothing more than a front for the international House of Rothschild banking cartel. NATO and the Obama administration, which represent the interests of Soros and the Rothschilds, will stop at nothing to destroy the Eurasian initiative. The «Euromaidan» overthrow of Ukrainian President Viktor Yanukovych, who rejected a union with the European Union and appeared ready to forge ties with Eurasia, was part of the West’s (or «Oceania’s) first indirect military aggression against Eurasia.

Some Eurasian leaders are aware that the West is trying to derail the developing Eurasian Union. Kazakh President Nursultan Nazarbayev proposed transforming CICA into a new Organization for Security and Development in Asia (OSDA), which would be the closest thing to a Eurasian counterpart to NATO. Stressing Eurasia’s rejection of Western «values», Nazarbayev stressed that OSDA would be built upon Asian «tradition and values». Nazarbayev appeared to be speaking for a number of Eurasian leaders in rejecting the lewd permissiveness of Western culture as witnessed by «Pussy Riot’s» and FEMEN’s displays of vulgarity and gratuitous nudity in places of religious worship in Russia, Ukraine, and other countries.

There is a new competitor to America’s version of Oceania now emerging in Orwell’s Eurasia. Halford John Mackinder’s «Heartland Theory», which was espoused in his book «The Geographical Pivot of History», postulated that the power that controlled Eurasia’s heartland between the Volga and Yangtze and the Arctic Sea and Himalayas would control the destiny of the world. If the Eurasian Union becomes a successful political and economic union, the United States, Britain, Western Europe, and Japan will be confined to a economically anemic and socially decadent coastal «Rimland» where the few remaining assets will be fought over by the hungry jackals of the banking houses of Wall Street, City of London, and Frankfurt. The outbreak of wars in Syria, Ukraine, and Iraq are but the first shots of the impending war between «Oceania» and «Eurasia».