China and the Final War for Resources
I.
Unrestricted War
Unrestricted War: China’s Master Plan to Destroy
America is a treatise for world
domination written in 1999 by People’s Liberation Army Colonels Qiao Liang and
Wang Xiangsui. In order for China to become a dominant global power over the
United States, the PLA emphasizes “The
Final War over Resources”, must be won.
The Colonels state that the aggressor nation “must adjust its own financial strategy,
use currency revaluation or devaluation as primary weapons, and combine
means such as getting the upper hand in public opinion and changing the rules
sufficiently to make financial turbulence and economic crisis appear in the
targeted country or area, weakening its overall power, including its
military strength. Whether it be the intrusions of hackers, a major
explosion at the World Trade Center, or a bombing attack by bin Laden, all of
these greatly exceed the frequency bandwidths understood by the American
military..."
Can you imagine if U.S. military leaders or
politicians made such threatening comments? People would be up in arms and
demanding resignations and Congressional inquiries!
However, in another case where truth is stranger then
fiction – for the most part the U.S. media and government officials are keeping
a lid on this volatile story. As you are about to read, the Chinese have
already positioned themselves to inflict major damage to the U.S. economy. For
those few brave souls in Washington and the media who are talking, their words
are ominous.
Writing in the Los Angeles
Times, Gal Luft, executive director of the Institute for the Analysis of Global
Security, said: "Without a
comprehensive strategy designed to prevent China from becoming an oil consumer
on par with the U.S., a superpower collision is in the cards." The New
York Times has also weighed in stating that China’s actions threaten “the very stability of the global economy.”
The final war for the
planet’s resources has already started. You name the commodity and China’s
buying it and consuming it in HUGE quantities. Last year they consumed nearly
half of the world’s cement, twice the world’s consumption of copper, and nearly
a third of the world’s coal, 90% of the world’s steel plus nearly every other
commodity you can think of has been in
greater demand by China.
However in order to propel
such furious economic growth, there is one key commodity you need above all the
others. And if you can’t get enough of it, having all the other resources won’t
matter. The most prized and sought after commodity which makes the world tick
is oil. With out it, you have nothing. Your economy would be frozen and your
military would be left inept.
As China’s
Master Plan to Destroy America manifesto outlines, the multifaceted battle
plan recommended by the Chinese military has taken shape..…
Financially:
Using Currency as the Primary Weapon
I hate to admit it, but the Chinese have done a
masterful job. While America’s media is hypnotizing us with frivolous
entertainment such as American Idol or The Amazing Race, they are totally
ignoring the perilous economic time bomb the Chinese have placed against us.
The Government of China is holding U.S. currency and Treasury notes in a $1.9 trillion
Treasury bond trap. When they pull the trigger on their “primary weapon,” the
dollar will crash and gold will break $600 in a heart beat and just keep going.
Political
and Military Alliances
China has made several deals
with OPEC countries whose ideology is very much anti-American. Headlining the
list is Iran who President Bush recently singled out as "the world's primary
state sponsor of terror pursuing nuclear weapons while depriving its people of
the freedom they seek and deserve."
Also alliances have been made with Venezuela who are
threatening to cut off oil exports to the U.S. entirely while giving China as
much as it wants. These new deals China is making with these and other hostile OPEC
countries also involve trading oil in euros not U.S. dollars. The dumping of
U.S. dollars for euros would be devastating to an already weakening dollar.
China’s plan is both
brilliant and deviously well planned. New alliances with radical groups, arms
for oil deals with Iran, a new military build up, major acquisitions of large
western resource companies such as Noranda are just a few of the multifaceted
maneuvers now taking place.
In my last issue I reviewed
the fact the U.S. oil demand is soaring while domestic supplies are dwindling
forcing imports to increase to 60%. However many of America’s foreign suppliers
are hostile countries whose ideology and hatred have been forged over the
decades and now have reached a boiling point in the Mid East.
Before we get into how the
final war for resources is building momentum let’s recap the supply and demand
scenarios of the U.S. and China.
II. The Growing Demand from a Dwindling Supply
According to the International Energy
Agency (IEA), global demand for oil grew last year at its fastest pace since
1980, now averaging 88.1 million barrels a day. Out of that, about 20
million barrels of oil demand comes from the United States.
THAT'S A LOT OF OIL! And remember, once it's
burned, it's gone for good!
Over the next twenty years the global demand
for oil will increase sharply, hitting 120 million barrels by 2025. Asia is
expected to consume 80% of that output – that is if there is that much extra
supply capacity. Today production is barely keeping pace with the world’s
consumption needs as it is.
What is even more concerning is that peak
oil production has already hit all the world’s oil producing nations with
the exception of Iran, Iraq and Saudi Arabia.
Colin Campbell, one of the world’s
leading oil geologists, estimates global production will hit its peak this
year. Campbell has stated that the world started using more oil then it found
since 1981 and consuming from reserves of past discoveries ever since.
Oil
Supply Shortages Likely After 2007, New Report Shows
Global oil suppliers could start to have
difficulty meeting growing demand after 2007, according to a study of existing
and planned major oil-recovery projects published this month in Petroleum
Review.
While a flood of new production is set to
hit the market over the next three years, the volumes expected from anticipated
new projects thereafter are likely to fall well below requirements, the report
says.
"There are not enough large-scale
projects in the development pipeline right now to offset declining production
in mature areas and meet global demand growth beyond 2007," said Chris
Skrebowski, author of the report, editor of Petroleum Review and a recently
appointed Board member of the Oil Depletion Analysis Centre (ODAC) in London.
Major Oil Firms Actions Reflect a Peak Oil Market
Credit
Suisse First Boston reported that major oil companies are replacing dwindling
reserves by acquiring other oil companies instead of exploring for new fields,
a strategic shift with implications for global oil supplies, according to a
recent report.
“If the actions - rather than the words - of the oil
business' major players provide the best gauge of how they see the future, then
ponder the following.. Crude oil prices have doubled since 2001, but oil
companies have increased their budgets for exploring new oil fields by only a
small fraction. Likewise, U.S. refineries are working close to capacity, yet no
new refinery has been constructed since 1976. And oil tankers are fully booked,
but outdated ships are being decommissioned faster than new ones are being
built.”
-
Mark Williams, Technology
Review, February 2005
The
rate of major new oil field discoveries has fallen dramatically in recent
years.
There were 13 discoveries of
over 500 million barrels in 2000, 6 in 2001 and just 2 in 2002, according to
the industry analysts IHS Energy. For 2003, not a single new discovery over 500
million barrels has been reported.
It appears likely that from 2007, the volumes of new production will
fall short of the need to replace lost capacity from depleting older fields.
Look at this imbalance:
The average American consumes 25 barrels of oil a year. In China, the average
is about 1.3 barrels per year; in India, less than one…
The challenge is huge.
For China and India to reach just one-quarter of the level of US oil
consumption, world output would have to rise by 44 percent. To get to half the
US level, world production would need to nearly double. That's impossible. The
world's oil reserves are finite. And the view is spreading that global oil
output will soon peak.
-- The Christian Science
Monitor, January 20, 2005
There’s a historic oil market squeeze coming and it’s clear, not
everyone on the planet will have their oil needs met. The San Francisco
Chronicle predicts
that a “social and economic upheaval across the globe” is coming.
Consumption Statistics
We are living in an age
where oil demand is escalating at an unprecedented rate while global production
is on the decrease. Today one barrel of oil is found for every 6 consumed. The
day of reasonably priced $35 barrel oil has come to an end.
With about 5% of the world’s
population, the U.S. consumes about 25% of the world’s total oil supply. It’s
hard to believe that just 50 years ago, America was producing half the world’s
oil and today we can’t produce even half of our own needs.
From 1970 to date, our
demand has increased from 17.7 million barrels of oil per day to nearly 21
million barrels. At the same time domestic oil production is decreasing, having
dropped from 10 million barrels per day in 1970 to a projected 5.58 million
barrels in 2005.
As a nation, the United
States depends on foreign oil for 60% of its needs and that amount will only
get bigger over time.
The Department of Energy
forecasts consumption demand will be 26 million barrels a day or greater by
2020, imports representing two-thirds of the supply needed.
US Oil Production
and Consumption Versus China–Million
Barrels Per Day
For America to maintain
economic and military dominance, oil consumption will need to sharply increase.
At the same time, other nations are also competing for the same supplies.
The world’s second largest
consumer of oil is China whose oil consumption increased by 40% last year.
Going forward China’s growing oil needs will present one of the largest
obstacles facing the security of the United States. As you will soon read,
their strategy for assuring themselves adequate supplies has been well planned
economically, politically, and militarily.
As Secretary of Energy
Spencer Abraham pointed out, oil and economic strength go hand in hand. “Energy security is a fundamental component
of national security. Military force will be an increasingly important
prerequisite to safe guard the flow of foreign oil.”
Without more oil for the
U.S., the American dream is over. Without more oil for China, their dream of building
a modern economy, strong currency, and a military superpower will be over.
$100 Oil
A startling fact is that world’s
richest 1 billion people - just one-sixth of the world’s population - account
for three-quarters or more of global consumption of oil, steel, cement, copper,
aluminum, timber, coal, and other energy. You could say it’s this group of
consumers who have helped pushed the price of oil up beyond $50 a barrel.
A United Nations report
points out that China’s recent prosperity has raised the living standard of 160
million Chinese who once existed in poverty. Behind them are another 1 billion
who are awaiting their turn to live a life once thought unattainable. As the Chinese
middle class grows so will the demand of goods and services which require oil
to produce them.
Given the projections from
the U.S. Department of Energy and other oil experts, it’s not hard to envision
$100 oil in the not too distant future.
As the global trend for
greater oil demand grows over the months ahead it’s clear there are those in
the world who will get the short end of the oil supply and other commodities.
It’s also clear either the United States or China will not get all the oil they
require. Hence, the Final War for Resources.
III. China and the Final War for Resources
Using
Currency as the Primary Weapon
The U.S. government has been keeping a lid on the brewing problems with
China because of the delicate situation which has the Chinese Central Bank
holding billions in U.S. dollars and treasury bonds which Washington fears they
might stop buying or sell off.
China has been instrumental in helping the U.S. government bank roll its
national debt and consequently, this reliance on the Chinese to support has America
up against a rock and a hard place.
Meanwhile, the United States is financing its ever ballooning budget
deficit, which is officially reported to be $412 billion in 2004 up $35 billion
over 2003.
Adding to the overall debt problem is the trade deficit shortfall of
$575 billion with China accounting for the greatest imbalance last year of $150
billion. So all told, the nation spent
$987 billion more then what it brought in over 2004.
National Debt Increases by over $2 billion
daily.
The Treasury Trap: So with this large
annual trade surplus China enjoys with the United States, billions are spent to buy up Treasury bonds and notes. The total federal
debt in FY 2004 exceeded $7.4 Trillion. By the end of January 2005 it was up to
$7.631 Trillion and it is growing at a rate of over $2 billion a day. Most of
this debt is owed to what the Federal Reserve calls the 'public,' from whom the
federal government borrowed and gave T-Bonds, T-bills, etc. in return. But, the
'public' does not mean only U.S. citizens - - it means anyone in the
world who owns those IOUs, with a right to the principal and interest
pertaining to same.
The United States is the
world's largest DEBTOR NATION, and continue to rely on foreigners to
help finance our over spending. Foreigners hold $1.9 trillion of our debt with China
accounting for 10% or $190 billion. If they or any other major country start a
sell off of the greenback, the U.S. dollar would be in crisis.
Added to the treasury notes
held by China, the U.S. dollar reserves of China’s central bank soared 271% to
$449 billion from 2000 to April of 2004.
Zhu Min, general manager and
advisor to the President for the Bank of China was quoted in the China Daily
last year saying that: “The United States is benefiting from China using its
trade surplus to buy U.S. Treasury paper as a reserve currency, along with
other Asian nations. But in the long run, this is not sustainable.... China
will focus more and more on domestic demand, which is growing fast. Then we
won't be able to finance the U.S. deficit."
So the multi billion dollar
question is what happens when China starts selling U.S. dollars to help expand
their infrastructure and secure their supply of global resources?
A year ago, the Wall
Street Journal reported that a sell off of U.S. treasuries has already
started. If a small country like Vietnam or Thailand started selling it may not
be the end of the world but if China started selling, the U.S. economy would be
in a tail spin. Long term interest rates would climb and bond yields would sky
rocket. This could start a stampede of selling which would devastate the stock
market. This is the treasury trap America is in.
Though a major sell off hasn’t
happened, it’s clear the U.S. dollar is losing ground to the euro and other
major currencies. Consequently we have seen rising interest rates, a falling dollar
and an upward flight of gold as well as upward pressure on oil, gas, coal,
copper and other key commodities.
The implications of this
fact are staggering. As the demand for commodities increases, insightful
investors who can see this trend and position themselves now in growth oriented
equities holding gold, oil, copper and other key commodities will be sitting
pretty if a few years time and will have weathered the U.S. dollar collapse
better then most.
In the final war for
resources there are no clear winners. Everyone on the globe will feel the
pinch. Some countries will fair better then others. The question remains, how
will the United States come out of this? This is after all the hugest threat to
the national security that the country faces yet it’s hardly ever mentioned by
the mainstream media.
Given the strong economic
growth of China and the uncertain purse strings it holds on U.S. dollars and
treasury bonds, I can’t help but wonder how this might tie in with their
aggressive militaristic actions lately.
Military Maneuvering and Strategic Alliances
As the last War for Resources heats up so does the
military posturing, alliances and build up of arms.
Last November a Chinese
nuclear powered submarine cruised into Japanese territorial waters in an
apparent test of Japan’s will to enforce its own sovereignty. The Chinese navy
tried to stop a Norwegian survey ship (working for Japan) from conducting its
work, and two Japanese naval vessels apparently chased a Chinese submarine
away. A Bloomberg News report from Tokyo says Japan is considering issuing
petroleum leases in the disputed area.
Though the war for resources
includes Japan and its territory, it’s really the Persian Gulf and Caspian
Basin where the biggest power struggles are occurring. This comes in the form
of alliances in order to influence and control the political landscape of an
oil producing nation. What this usually means is supplying military hardware,
troops, or training which the politicians refer to as “aid.” More to the point,
you give us oil and we give you military hardware, training, and protection.
One fact which doesn’t sit
well with the Bush Administration is that U.S. intelligence reports claim
China’s military provided training to both the Taliban and al Qaeda. Though
U.S. officials are at a loss to explain why the Chinese provided this training
some analysts believe it was an attempt to gain influence over these terrorist
groups.
President Bush, Dick Cheney, and Donald Rumsfeld have
all stated that the protection of America’s oil supplies is the most important
national security priority. However, as strong as Washington’s views are, the
same view is held by Chinese leaders in terms of their own county’s national
security.
China’s minister for state land and resources
remarked in 2002 that rising demand for imported oil will “increase supply side
risks…and will damage the country’s capacity to ensure its oil resources as
well as economic and political security.”
In January, Bill Gertz
reported in the Washington Times on a briefing by Booz Allen Hamilton
entitled 'Energy Futures in Asia'. The conclusions of the report state that
China fears
the US is too easily able to disrupt energy supplies in the event of a conflict.
So China has adopted a "string of pearls" strategy of military bases
and diplomatic ties stretching from the Middle East to southern China that
includes a combination of dual purpose naval installations at critical
chokepoints.
A previously undisclosed
internal report prepared for Defense Secretary Donald Rumsfeld reiterated this
point. "China is building strategic relationships along the sea lanes from
the Middle East to the South China Sea in ways that suggest defensive and
offensive positioning to protect China's energy interests, but also to serve
broad security objectives."
The report reflects growing
fears in the Pentagon that China's military buildup is taking place faster than
earlier estimates, and that China will use its power to project force and
undermine U.S. and regional security.
Chinese weapons for sea-lane control include new warships equipped with
long-range cruise missiles, submarines and undersea mines, the report said.
China also is buying aircraft and long-range target acquisition systems,
including optical satellites and maritime unmanned aerial vehicles.
The report states that Chinese believe that the United States as an “unpredictable
country” that violates others' sovereignty and wants to "encircle"
China.
Eighty percent of China's
oil currently passes through the Strait of Malacca, and China believes the sea
area is "controlled by the U.S. Navy." Oil-tanker traffic through the
Strait, which is closest to Indonesia, is projected to grow from 10 million
barrels a day in 2002 to 20 million barrels a day in 2020, the report said.
Chinese specialists interviewed for the report said the United States has the
military capability to cut off Chinese oil imports and could "severely
cripple" China by blocking its energy supplies.
Throughout the 1990’s as the neoconservatives started
becoming more vocal about national security issues focusing on rouge states
such as Saddam’s Iraq but China was always on the top of the list as being the
most potentially troublesome.
The primary concern was oil and getting our fair
share in the face of raising demand from China. Furthering the national
security issue was China’s support of rouge states.
Very troubling for the
United States is the fact that China has negotiated a new oil supply deal with
Iran which would see Iran receiving both arms and cash. China has long standing
alliances with Iran and has supported Iran’s efforts to develop nuclear power
amid much protesting from the U.S. and Western Europe allies.
As President Bush embarks on
his second term in office, news agencies from around the globe are commenting
that Iran could be the next target for Bush’s war on terror campaign. In his
State of the Union address President Bush characterized Iran as "the
world's primary state sponsor of terror pursuing nuclear weapons while depriving
its people of the freedom they seek and deserve."
Another troublesome
situation is with Venezuelan President Hugo Chavez whose hatred for the U.S. is
well known. He has signed an energy pact with China and has publicly stated he
will divert as much oil as possible to the Chinese. As Venezuela is the fourth
biggest supplier of oil to the U.S., Washington has instructed the Government
Accountability Office (GAO) to investigate the potential impact this could
have.
Seth de Long, a senior
research fellow with the U.S.-based Council on Hemispheric Affairs, is also
concerned with China's quest for energy security:
"China's recent
initiative towards Venezuela comes at a time when Beijing has just recently
indicated that it has similar designs on Canadian oil markets that today are
dominated by the U.S.," he said in an analysis published this week.
"In other words, not only is Beijing poking its nose in 'our backyard,'
but Washington's front yard as well."
China is aggressively forging alliances and attempting
mergers with other countries as well through it’s national oil corporations.
“China’s energy security is the first concern” stated a China National Petrochemical
Corp. executive. Deals have also been made with Angola, Burma, Ecuador, Egypt,
Indonesia, Iraq, Kazakhstan, Kuwait, Libya, Nigeria, Oman, Peru, Russia, Saudi
Arabia, Sudan, Thailand, and Yemen.
“The
relative fortunes of any power in this epic contest will rest on a combination
of military strength, geographic advantage, economic might, strategic prowess,
diplomatic cunning, and many other factors.” Blood and Oil, Michael Klare
Conclusion
There is no question that
China is a booming economic powerhouse with a huge appetite for global
commodities and primarily oil. Just how far will China go in following their
master plan to destroy America in order to secure their energy requirements?
Only time will tell.
Despite what Washington may
say about Iran, it’s China is the primary number-one national security threat
for these reasons:
-
China and the United States are
the largest users and competitors for the world's rapidly diminishing oil
reserves. Going forward, the US and China’s projected requirements will consume
60%-70% of the world’s production. This demand cannot be met and one country
will experience brown outs, gasoline shortages, factory shutdowns as a result
of having a lack of energy.
-
China has aligned itself with
Iran, cited by Bush as the world’s leading terrorist exporting nation and nuclear
threat. Military alliances with Iran coupled with a massive naval build up have
Washington concerned.
-
The Chinese have the United
States in a dollar and Treasury note trap which could put the economy in a tail
spin with one news announcement that they are no longer buyers of U.S. debt.
The war for final resources
is the ultimate global showdown. The People’s Liberation Army Colonels have developed
a blueprint to destroy America. Actions, not words, seem to be bearing out this
fact. China is merging financial, economic, political, and military forces together
in a pursuit to dominate the world’s resources, particularly oil.
Regardless of the unknown
factors, the facts we are aware of support the premise that in order to protect
ourselves as a private investors, diversification into gold, oil and other key
commodities makes good sense not only to profit but help keep your wealth
intact in the face of a depreciating dollar.
Bill Ridley
Publisher
www.jameswinston.com
8 February 2005
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