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October
09
2023

WAR FEVER: Why China Should Prepare for the Worst
Mike Whitney

Washington is positioning its assets at chokepoints across Central Asia to block critical rail corridors that link Beijing to Europe. It’s part of a US plan to isolate China from western markets following an outbreak of hostilities in Taiwan.

The destruction of Nordstream is the key to understanding how Washington plans to deal with China. The pipeline effectively erased the geographic borders between Russia and Germany creating a de facto free trade zone that spanned the continents and increased the prosperity of both trading partners. The arrangement anticipated a much larger commons area that would extend from “Lisbon to Vladivostok”, in fact, that was Vladimir Putin’s explicit goal. Washington saw this as a threat to its regional hegemony and set about to scuttle the partnership and the pipeline. As we pointed out in an earlier article:

In a world where Germany and Russia are friends and trading partners, there is no need for US military bases, no need for expensive US-made weapons and missile systems, and no need for NATO. There’s also no need to transact energy deals in US Dollars or to stockpile US Treasuries to balance accounts. Transactions between business partners can be conducted in their own currencies which is bound to precipitate a sharp decline in the value of the dollar and a dramatic shift in economic power. This is why the Biden administration decided to destroy Nordstream, because Nordstream was the main artery linking the two continents together into a mutually beneficial relationship that operated independent of the United States. Thus, Nordstream was a clear threat to the unipolar world and the “rules-based order”.

Bottom line: Nordstream had to be destroyed.

The question is: What does the Nordstream incident tell us about Washington’s plans for China?

What we’ve shown is that Washington is prepared to take radical action to defend its hegemony in Europe. But, of course, Germany was not the only victim of Biden’s attack. It was also a blow to Russia which not only suffered serious economic losses, but was also effectively blocked from western markets. Russia was clearly the more important of the two targets because it was Russia that challenged the central tenet of US foreign policy, which is “to prevent the re-emergence of a new rival, either on the territory of the former Soviet Union or elsewhere, that poses a threat on the order of that posed formerly by the Soviet Union.”

The quote above is excerpted from the Wolfowitz Doctrine that has appeared in numerous foreign policy documents including President Biden’s 2022 National Security Strategy. The words have been slightly tweaked in newer iterations, but the meaning remains the same. The US is going to prevent any “hostile power from dominating a region whose resources would, under consolidated control, be sufficient to generate global power.” In practice, this means that Russia cannot engage in commercial activities with its neighbors if those activities are perceived to pose a threat to US regional preeminence. In the case of Nordstream, the Biden administration was quite clear that they thought the pipeline was a problem; they even admitted as much. And the only reliable way to eliminate the problem, was to blow it up. This is the logic that precipitated the sabotage of Nordstream.

But what does this tell us about Washington’s “China policy”?

It tells us that US powerbrokers are going to identify emerging threats in Central Asia and then remove those threats by hook or crook. And, while China does not have large supplies of natural gas and oil to sell to Europe, it is creating a vast network of China-to-Europe freight corridors that have economically integrated the Eurasian landmass while linking to major capitals across the EU. This far-flung cobweb of newly-laid track has put Beijing at a decided advantage over the US in local competition and is rapidly reinforcing its position as regional hegemon. Once again, we need to remember that the United States is fully-committed to preventing the re-emergence of a rival in the region it considers vital to its national security, that is, Central Asia. And, yet, China’s rapidly expanding freight rail system creates just such a rival. Take a look:

The China-Europe Freight Train (CEFT)

A crucial precursor to the Belt and Road Initiative (BRI), and arguably its most prominent flagship project, the China-Europe Freight Train (CEFT) has already run through its first decade of 2011-21. With 82 routes currently connecting nearly 100 Chinese cities to around 200 cities across 24 European countries and more than a dozen Central, East, and Southeast Asian countries, the CEFT has formed a vast transcontinental freight system spanning both ends of Eurasia. While only 17 freight trains ran from China to Europe in the CEFT’s inaugural year of 2011, 60,000 trains cumulatively will have traversed the Eurasian landmass and its maritime margins by October 16, 2022….Eurasia’s Freight Infrastructure vs. Russia’s War in Ukraine, Global Affairs

Here’s more:

Any large-scale transport system takes a long time to develop and mature. The CEFT may be an exception in that it has expanded rapidly and extensively over a mere decade, from a few places into arguably the world’s largest logistics network linking hundreds of cities across the vast continent of Eurasia, as the most prominent flagship project of China’s Belt and Road Initiative (BRI), launched in 2013….

As the CEFT runs into its second decade, it has already sent around 60,000 trains cumulatively between Europe, China, and parts of East Asia and Southeast Asia by October 2022. Every day now, around 40 freight trains carrying hundreds of containers and other forms of cargo shipments run east and west across Eurasia, with extended rail-sea and rail-river intermodal shipping across the Caspian, Black, and Mediterranean seas and along the Rhine and Yangtze Rivers. Connection Meets Disruption: The China-Europe Freight Train and the War in Ukraine, The European Financial Review

So, while the United States was waging its wars in the Middle East and Central Asia, China was opening-up a state-of-the-art railway corridor that shortened the distances between capitals, reduced the overall price of manufactured goods, increased the profits of its trading partners, and built-up good will among its neighbors. And, yes, freight trains are a centuries old technology but—as we’ve seen—that old technology can dramatically impact economic development when it is put to good use. More importantly, it can significantly affect the distribution of global power which poses a serious threat to the existing order. And that is why Washington is so worried.

So, what can we expect from the Biden administration? Surely, they’re not going to roll over and play dead. There must be a plan for countering China’s rapid takeover of Asia and its impressive penetration of European market, but what is it? This is from Politico:

Russia’s war in Ukraine is derailing Beijing’s flagship New Silk Road project. The infrastructure strategy aims to promote freight trains running from China, across Russia and then through Ukraine or Belarus on to the European Union. Now Ukraine is in a bloody war, while Belarus and Russia have been hit hard with sanctions.

“The Ukraine war has completely totaled the China-Europe rail express phenomenon for now,” said Jacob Mardell, an analyst focusing on China’s infrastructure grand plan, known as the Belt and Road Initiative, for the Mercator Institute for China Studies.

The slowdown in growth is in large part due to traders no longer wanting their goods to pass through Russia via the Silk Road’s northern route, lest they run into legal trouble. Russian Railways are under EU and U.S. financial sanctions, and it’s tricky to insure products being transported through Russia because of the war and sanctions’ “chilling effect,” according to Kristian Schmidt, who leads land transport policy at the European Commission.

But there is a rail alternative linking China to Europe that bypasses Russia: A corridor running south of Russia, from China to Kazakhstan, across the Caspian Sea, and then through Azerbaijan and Georgia, known as the Middle Corridor...

In May, Maersk announced it was launching new services on the Middle Corridor. The Danish logistics giant, which has halted freight services through Russia, now sends goods by rail from China, through Kazakhstan, then across the Caspian sea to Azerbaijan, and then on to the Georgian port of Poti on the Black Sea. From there, cargo is loaded onto its network of feeder vessels that can carry it to Constanța in Romania….

The Middle Corridor is now “the only real alternative” to the route crossing Russia, DG MOVE Chief Henrik Hololei said at an event in June. Ukraine war shakes up China-Europe railway express, Politico

Let’s see if I got this right: A significant portion of China’s freight (along the northern corridor) has been blocked due to sanctions (on Russia). So, the only viable alternative is the “Middle Corridor” ..”across the Caspian sea to Azerbaijan” which is currently experiencing an uptick in violence between Azerbaijan and Armenia. Even more suspicious is the fact that on September 25, diehard neocon Samantha Power unexpectedly visited Yerevan, the capital of Armenia, and delivered a statement in which she emphasized the Biden administrations support for country. Not surprisingly, she also called for an “international presence” on the ground which suggests an eagerness on the part of the US and NATO to get involved in yet another foreign territorial dispute. Check it out:

Samantha Power, the United States Agency for International Development administrator, said in Yerevan on Monday that there must be international presence in Nagorno-Karabakh to assess whether Azerbaijan is implementing its commitments…

“All parties must allow an international humanitarian assessment and humanitarian presence to be there, to see whether Azerbaijan is fulfilling its commitments, and for these organizations to be able to report to the international community,” she added.

Power arrived in Armenia with U.S. Undersecretary of State Yuri Kim on mission on Monday to “deliver a message from President Biden,” she said, adding that she presented a letter from the U.S. President to Prime Minister Nikol Pashinyan when the two met earlier in the day. Top U.S. Official Calls for International Presence in Artsakh, Asbarez

Veteran geopolitical analyst Pepe Escobar summed it up like this:

Relations with Moscow are deteriorating fast. Yerevan – a juicy strategic target – is being taken over by the Hegemon (Washington) and its vassals. It’s not an accident that Yerevan hosts the second largest American embassy in the world.

So only one thing is certain: the Transcaucasus will continue to be on fire….

We are convinced that the Armenian leadership is making a huge mistake by deliberately attempting to sever Armenia’s multifaceted and centuries-old ties with Russia, making the country a hostage to Western geopolitical games. We are confident that the overwhelming majority of the Armenian population realizes this as well.”  Nagorno-Karabakh is no more, Pepe Escobar, Strategic Culture

What does it all mean?

It means the US has already picked sides in complicated, regional dispute because it wants to put-down roots in the Central Asia theatre. It also means that the US wants combat troops deployed to an area that can serve as a chokepoint for China’s freight service to Europe. Once again, the US cannot prevail in its war against China unless it is able to weaken China via sanctions, isolation and perhaps military confrontation. That’s the way the US typically approaches these matters. (RE: Cuba, Iran, Venezuela, North Korea) Washington is positioning itself to either block or sabotage China’s trade-flows to Europe just like it sabotaged the flow of Russian gas to Europe. It’s the same policy. 

And, that’s just ‘for starters’, because the ultimate goal of the policy is to “de-couple” from China entirely which will have catastrophic effects on the global economy but will (supposedly) preserve the primacy of western elites and their exalted “rules-based order.” This is an excerpt from an article at Freight Ways:

In 2022, the Word Trade Organization (WTO) warned about a worst-case scenario it called “long-run decoupling” that involved the “disintegration of the global economy into two separate blocs”….

Geopolitics is cleaving global shipping systems into two, with the U.S. and EU leading one side and China and Russia leading the other, and some countries trying to stay in the middle, play both sides and keep their options open….

Geopolitics has also caused a bifurcation in the tanker fleet, a physical manifestation of the decoupling scenario laid out by the WTO….. The splitting of the fleet seen in tanker shipping is also apparent, albeit to a much lesser degree, in container shipping…

“How do you take the proportion of global trade that moves through the South China Sea today and say, ‘OK, we’re just going to stop that because there’s a live war going on?’” said Paul Bingham, director of transportation consulting at S&P Global, in an interview with FreightWaves last year.

America remains extremely dependent on containerized imports from China. U.S. Customs data shows that imports from China represented 30% of total U.S. imports in 2022.

…. Add it all up and it looks like cargo flows and shipping fleets are on a path toward fragmentation. As the WTO warned in its new world trade outlook, released Wednesday, “Fragmentation … remains a significant threat, which could hinder economic growth and reduce living standards over the long term.”
China-Russia vs. US-EU: How global shipping is slowly splitting in two, Freight Waves

This excerpt should give readers a good idea of what to expect in the future when the US provokes a war in Taiwan as it did in Ukraine. The knock-on effects will not be a slight uptick in inflation accompanied by moderately-higher interest rates, but a greatly-accelerated global realignment away from the United States followed by the crashing of equities markets, the loss of reserve currency status, a severe and protracted economic slump, and a catastrophic plunge in living standards.

Readers who follow news about China closely, know that elite powerbrokers in the West have already decided that the only way to preserve their grip on global power is to goad China into attacking Taiwan so they can implement the riskier elements of their strategy.

And what are the riskier elements of their strategy?

To prevent China from accessing western markets or transacting business in western currencies. To seize China’s foreign reserves and freeze its accounts in foreign central banks. To ban all foreign investment and block China’s access to hard cash. To set up chokepoints in the South China Sea, the Taiwan Strait and Central Asia all of which would be used to stop the flow of manufactured goods to China’s trading partners. And, finally, block all oil shipments from the Middle East to China. Take a look:

As the dominant power in the Middle East, the United States maintains a great deal of leverage over China, which is dependent on the region for its energy needs. In the event of a conflict between China and the United States, U.S. Central Command (CENTCOM) could direct U.S. military forces to block energy shipments to China, thereby preventing the country from accessing resources to fuel its economy and military forces...

There are several maritime oil transit chokepoints in the region, including the Suez Canal, the Bab al-Mandab, and the Strait of Hormuz. Any disruption to these chokepoints could significantly affect countries that depend on the region’s oil….

“Seventy-two percent of all Chinese oil is imported,” Kurilla explained. “That can make them vulnerable.”...

Among China’s oil imports, about half comes from the Middle East. For some time, Saudi Arabia has been China’s largest source of oil imports, only to be recently surpassed by Russia….

During previous eras of great power competition, the United States has been willing to move against oil-dependent rivals. One precedent for the current situation is U.S. action against Japan in the months prior to U.S. entry into World War II. Months before Japan launched its attack against the United States at Pearl Harbor, the United States cut off oil exports to Japan, putting the country’s economy and military power at risk. U.S. officials made the move knowing that it might lead to war….

A particular focus of any U.S. military action would be the Strait of Hormuz, the region’s major oil transit chokepoint. Nearly all of China’s energy imports from the Middle East are shipped through the strait.

“Ninety-eight percent plus goes through by ship,” Kurilla said. “That makes them vulnerable.”…

“I believe CENTCOM is literally and figuratively central to competition with China and Russia,” Kurilla said. “We’ve been there in the past… We’re there today, and we’ll be there in the future.” How the US could cut off Middle East oil to China if it wanted, Responsible Statecraft

“Strategic Denial”?

The foreign policy BrainTrust has put a plan in place that will be activated following any Chinese retaliation to US provocations in Taiwan. By necessity, the plan will include the denial of access to western markets and the blocking of critical resources to China. Western powerbrokers believe that they can derail China’s expansionist Belt and Road project and deliver a withering blow to its economy without triggering a nuclear conflagration. That, of course, is left to be seen.

In any event, the transition to a multipolar world will not be peaceful, which is why China should prepare for the worst.

Mike Whitney writes on politics and finances and lives in Washington state. He can be reached at [email protected]

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