China’s maturation in the energy sector proceeds, and reminds us of the need for a non-zero-sum game on the far side of any military intervention
WORLD STOCK MARKETS: “China Oil Firms Gain Favor: PetroChina Closes Value Gap With Rivals Such as Exxon,” by Shai Oster, Wall Street Journal, 30 October 2006, p. C10.Four years ago Chinese oil companies traded at 3/4ths the value of classic Western international energy firms, when price-to-earning ratios were compared. Why? Global investors didn’t see the desired transparency and feared the management wasn’t up to snuff.ARTICLE: “China and Iraq Plan to Resurrect Oil-Field Deal Set in Hussein Era,” by Associated Press, Wall Street Journal, 30 October 2006, p. A9.
“Today, that discount has narrowed to almost nothing.”
Exxon is trading at 9.9 and PetroChina is trading at 9.9.
Sure, there’s the potential for growth factor. China’s oil demand will continue to grow like all those new cars, like 1,000 a day hitting the streets in Beijing. But then there’s China’s big push to reduce its huge dependency on dirty coal for electricity, so Goldman Sachs says ‘we believe the natural-gas business remains the main potential source of upside surprise in our near- and medium-term forecasts.”
With that kind of demand, China needs to be working every possible Gap source of energy. So, not surprisingly, it seeks to resurrect old oil-field deals it had with Saddam in Iraq.
Did I not say this would happen? Our blood, their oil. When I was in Beijing in 2004, I told everyone I met with that China should have 50k peacekeepers in Iraq, because in the end, it would mostly be their oil. No one contested that notion then (the oil part), and no one contests it now.
Instead, I can sit around a table in Beijing with PLA officers and speak with a firm conviction that the U.S. and China will be military and strategic partners within a decade throughout most--if not all--of the Gap, and no one taking notes gasps in shock. Of course, if I tried that in the Pentagon, most would simply freak, but that only shows you that we have a longer road to travel in terms of altering long-held strategic assumptions.
But more to the point of the A-to-Z rule set on processing politically-bankrupt states, remember my point in the brief that the first half is all about allies but that the second half is all about investors. If you scare potential allies about being shut out of second-half investment opportunities, you’re gonna find you have only a coalition of the unwitting.
Sooner we get smart on that, the better we’ll perform--the Core as a whole--from A to Z.
Or we can keep pretending the U.S. military can get beyond C all by its lonesome.
Comments
Does the CCP want to get rid of US strategic assumptions regarding their long-term trajectory? The solution is right in front of their face. Legalize the KMT and you trigger a system perturbation through US assumptions that completely changes the dynamic. Given the imbalance of physical bodies available, a huge portion of the KMT cadre is going to be friends, relatives, and former members of the CCP cadre.
The relationships that the US left has with the CCP are mirrored by the relationships that the US right has with the KMT. Legalize the KMT and you end up with a situation where the PRC has old friends across the US electoral spectrum and a much more secure geopolitical situation for the long haul.
And all this ignores the huge domestic payoff. With the KMT legalized, there is no reason not to reunify Taiwan with the mainland. In fact, a nice way to put the problem would be to pass a bill legalizing all parties represented in the Taiwanese parliament the moment a bill seeking reunification passes that legislature.
So why won't they do the one thing that would seal the deal and put the US and the PRC on the same side for the long haul? It can't be ideology. And national self-interest would argue for the gesture even if it were not also a nice thing for the US.
So what's the barrier?
Posted by: TM Lutas![[TypeKey Profile Page]](http://www.thomaspmbarnett.com/weblog/nav-commenters.gif)
|
November 3, 2006 2:32 PM
Electricity from the Three Rivers Dam project should be starting to come on line about now. That is a whole lot of power, something like 14 Hoover Dam's worth.
At first, it is mainly going to displace diesel generators that factories use to stay in production when the electric utility blacks out or browns out due to inadequate generating capacity due to everybody underestimating how fast the Chinese economy would grow.
Natural gas generators might make sense if the gas is available and cheap, but as long as the Chinese regulators don't adopt the insane policies of the United States, they should be able to generate plenty of electricity from coal while producing anywhere near the pollution that they currently spew from their power plants.
Posted by: Mark in Texas | November 3, 2006 6:01 PM
Dear Thomas,
I'm not finished reading PNM but I just read your piece about China oil business ventures and bringing the US into economic relationship with China in a mutually profitable way for the good of both parties. If I understand any of this, I think we need to guard against even the slightest hint of perpetrating a scheme for our gain at Chinese expense. The Current Administration and Pentagon rhetoric clearly act suspiciously and frieghtened. I believe your philosophy is about changing this attitude in the Pentagon and in this administration. We need to recognize the arrogance the Americans displayed on the bow of the Missouri. Our past behavior is not lost on the Chinese leaders. I see the Chinese as very patient adversaries in any negoitiations with blue eyes. Having said that, it is clear we must present ourselves as respectfully as possible and act with integrity. Does any integrity exist in DC currently?
We would both benefit from a peaceful partnership in handling any "Bad boys" in the Western Pacific. As you said, 50K Chinese peace keeping troops in Iraq or Sudan would be a splendid surprise if that could be arranged. This goes without mentioning North Korea. We need arrogance-free communications throughout the region. How does one muzzle the White House in the current administration or am I just ignorant of the battle of opposing opinions between State, Defense, Roveville and military contractors?
You don't need to respond as I'm still reading and I'm over my head.
Posted by: Bob_1633 | November 3, 2006 6:09 PM