More on BP´s Russian deal

Kim Zigfeld, writing in the American Thinker, thinks that BP has made the wrong move in Russia:

Oil major BP has announced another foray into the Russian market despite being burned many times in the past by Russia's fundamental corruption.  It should reconsider. Both the empirical facts and basic morality dictate disengagement from the Russian market.

A look at Russia's most recent national report card ought to be more than enough proof for any investor that Russia is no-man's land.

From the Heritage Foundation emerges Russia's score in economic freedom: an F.  Russia is ranked #143 out of 183 countries reviewed, roughly the bottom quartile of the planet.  The instructor opines that the student (Russia's judicial system) is "unpredictable, corrupt and unable to handle technically sophisticated cases."  Did somebody say "dunce cap"?

After pointing out the sorry state of affairs in Russia, Zigfeld notes the sad truth:

Sadder still, though, is the craven reaction of the Western democracies. Despite pleas to act, they have ignored for instance the brutal persecution of former first deputy prime minister Boris Nemtsov and Russia's Bill Gates, Mikhail Khodorkovsky, for no other reason than their public criticism of the Kremlin.


Read the entire article here.

Corruption in Greece: The "4-4-2 system"

Forbes magazine recently published an article about widespread corruption within some EU countries. The Greek "4-4-2 system" is just one telling example:

A senior Greek government official once said that the problem with the country is its "4-4-2 system:" an individual or company that owes 10,000 euros in taxes, pays 4,000 to the inspector, keeps 4,000, and pays 2,000 to the state. It is no surprise that in Greece during 2009 only 2,000 citizens declared incomes more than 250,000 euros, and only 15,000 more than 100,000 euros. This coming from a population of 11 million!.

PS
The "4-4-2" system shows that the present-day Greeks have not forgotten their revered ancient forebears, who were famous for introducing a clear system of rules that made their society function efficiently.

(image by antiqueprints.com)

Krugman thinks China on its way to economic crisis

To my great surprise, I have again started reading Paul Krugman´s columns in the New York Times. First he surprised me by a good critical assessment on the eurozone a few days ago; now he joins the ranks of those who think that China is heading for an economic crisis:

Could all of this really turn into a full-fledged crisis? If I didn’t know my economic history, I’d find the idea implausible. After all, the solution to China’s monetary muddle is both simple and obvious: just let the currency rise, already.
But I do know my economic history, which means that I know how often governments refuse, sometimes for many years, to do the obviously right thing — and especially when currency values are concerned. Usually they try to keep their currencies artificially strong rather than artificially weak; but it can be a big mess either way.
So our newest economic superpower may indeed be on its way to some kind of economic crisis, with collateral damage to the world as a whole. Did we need this?

Read the entire column here.

"BP´s laundering job" in Russia

 BP´s new deal with Russian Rosneft shows that the British company does not adhere to any kind of moral principles. BP is according to the former chief financial officer of Yukos participating in a form of money laundering of Rosneft’s stolen assets. Two years ago it was a different story:

Photographs of BP’s new CEO, Robert Dudley, smiling next to Putin and Sechin at Putin’s Novo-Ogaryovo residence Friday were shown in newspapers all over the world. But just two years ago, in 2008, BP’s Moscow offices were being raided by gun-wielding police in what was thought to be an attempt to make BP discard its Russian joint venture. Then, Dudley wasn’t smiling. He was forced to flee the country after being questioned by police over alleged tax fraud. It appears that Dudley has a very short memory.
Since the deal was announced, BP and Rosneft have both emphasized that it gives them the unique opportunity to jointly explore for offshore oil and gas, particularly in the Arctic, that was previously reserved for Russian oil companies only. Dudley said it sends a “strong signal about the possibilities of investment cooperation in Russia.”
Meanwhile, BP Russia’s president Jeremy Huck said on Ekho Moskvy: “The projects we’re planning with Rosneft are sanctioned by the Russian government. The question about where those assets are from, that’s better asked of Rosneft or the government.” That’s called burying one’s corporate head and corporate ethics in the sand.
Some say Rosneft’s actions are likely to scare off Western investors, depriving Russia of Western investment capital that it desperately needs. Shareholders and investors have no guarantee of the security of Rosneft’s ethics and ownership. Yukos has more than 55,000 shareholders, more than 50,000 of whom are Russian. They are still waiting for answers.
The truth has not changed one iota after BP’s investment in Rosneft. BP is calling its own business ethics into question. How will the international finance community now start treating BP once it has become clear that BP is participating in a form of money laundering of Rosneft’s stolen assets? Many BP shareholders have already answered this question, showing their understandble concern about Rosneft’s reputation and the fact that BP sold itself out in terms of the company’s reputation and its stated commitment to  corporate governance and transparency.

Read the entire article in the Moscow Times here.

One of every five cellphones sold in the world are illegal copies

(China copy of Nokia E 71)

Nokia´s executive board member Esko Aho (former Finnish PM) sends a message to China (and a number of other countries):

HELSINKI (Reuters) - One out of every five cellphones sold in the world are illegal or unlicensed copycats, hurting the position of producers like Nokia in emerging markets, the world top manufacturer by volume said on Friday.
"It is mostly China-originated, but it is global. It is not only in Asia, but also in Latin America and even in some parts of Europe," said Esko Aho, a member of Nokia's executive board.

PS
Cellphones is only one line of íllegal copies where China excels, there are many more. I presume that this was one of the problems that president Obama brought up when he met with his Chinese counterpart Hu Jintao, but he and other western leaders should be much more firm in their demands that China finally takes some real action against its criminal copycat manufacturers.

China expert Stewen W. Mosher: Hu Jintao´s visit cause for concern

China expert Steven W. Mosher thinks that Chinese president Hu Jintao's official visit to Washington is cause for concern, not celebration:

Mosher, who was the first American social scientist allowed into China in 1979, points to China's abominable human rights record, repressive government regime and unfair economic policies as reasons for outrage at the current state visit.

"As Hu Jintao is feted by President Obama, China continues to persecute Christians, lock up dissidents, and brutally enforce the one-child policy," says Mosher. "I was recently in China, gathering evidence of human rights abuses in China's infamous population control program."

Read the entire piece here.

EU Carbon crooks

The eminent Dr. Richard North at the EU Referendum blog comments on another major EU scandal:

Earlier reports on the EU carbon trading suspension were talking about €7 million-worth of permits going missing.Then reports started telling us that the actual figure was €28 million – but that was only what had come out of the woodwork. Now the Estonain Free Press is talking about €40 million.

Despite the intangible nature, of the permits – they are all, selling permission to emit carbon dioxide – this is real money, which is going to come out of our pockets one way or another. Needless to say, the EU is stepping up the damage limitation attempts with Jos Delbeke, director general for climate action at the EU commission, claiming that the number of missing permits is equivalent to 0.02 percent of total allowances in the market.

A lot, lot more than that have gone missing though. This is only the tip of the iceberg. Most readers will recall that in 2009, the Emission Trading System (ETS) had been the victim of fraudulent traders in the past 18 months. This resulted in losses of approximately €5 billion from several national tax revenues. It is estimated that in some countries, up to 90 percent of the whole market volume was caused by fraudulent activities.

Read the entire article here.

China´s president Hu - a liar

(image antiqueprints.com)


At the White House press conference yesterday president Hu Jintao first did not answer a question about human rights in China. Only when an other journalist later reminded him about his refusal did Hu reply with this blatant lie:

"China is always committed to the protection and promotion of human rights, and, in the course of human rights, China has also made enormous progress, recognized widely in the world,"

President Obama did call human rights "a very serious issue", but very carefully avoid criticizing Hu during the press conference. According to an administration official Obama did mention Nobel Peace Prize winner Liu Xiabo in the private meeting with Hu. But as a Nobel laureate himself, Obama should of course have publicly and loudly called for the release of Liu Xiaobo.

"The China show"

Abe Greenwald, writing in the Commentary magazine blog, is not convinced about the Obama administration´s newly found tough line on China. According to NYT´s Helene Cooper, "The more assertive strategy comes after Mr. Obama was criticized as appearing to kowtow to China in his visit there in 2009, and then again allowing Beijing to get the upper hand against the United States at the Group of 20 summit meeting in Seoul late last year".

Greenwald:

A genuine policy shift is certainly welcome, but this is not it. The administration’s new approach on China will likely fail because it is compartmentalized. Without a bold change in America’s larger foreign policy, these feints amount to no more than fleeting imitations of power. Why would Hu Jintao concern himself with a one-day human-rights condemnation from an administration that has spent two straight years softening its human-rights rhetoric? Why would Hu fear the retaliation of a president who is so mild on international trade that now, as the Times puts it, “corporate leaders are pressing” him to “take a tougher stance”? Why would Beijing be concerned with a narrow and localized military investment boost pledged by a White House that has sworn to shrink America’s military posture around the globe?
America cannot simultaneously apologize and intimidate. So long as there remains no connection between this week’s slapdash simulation of American confidence and long-term American policy, we are negotiating without credibility. Which will prove no more effective than asking nicely.

China flexes its muscles despite of talk about peaceful intentions

Chinese leaders visiting Western countries always emphasize the country´s purported peaceful intentions. This article in the Taipei Times shows that China´s recent actions tell a quite different story:

In the year just passed, China loudly, if not rudely, declared its supremacy over the Asia-Pacific region. In March, for instance, it asserted its sovereignty over the South China Sea by declaring it an area of “core national interest” on par with Tibet and Taiwan.
In this way, Beijing simply brushed aside the claims of other regional countries to islands in these waters.
Indeed, a Chinese scientific submarine planted a Chinese flag on the floor of the ocean to announce to all and sundry that it was Chinese waters.
“It [planting the flag] might provoke some countries, but we’ll be all right,” according to Zhao Junhai (趙俊海), a key designer of the submarine.
In any case, he said, “The South China Sea belongs to China. Let’s see who dares to challenge that.”
China, therefore, overrode its own commitment to resolve the sovereignty issue peacefully and through diplomacy with its neighbors. To emphasize Beijing’s seriousness, Chinese ships reportedly seized dozens of Vietnamese fishing boats and arrested their crews.
Months later, in September, China threatened Japan with reprisals when the Japanese coast guard arrested the captain of a Chinese fishing trawler after it collided with two Japanese patrol boats around the Senkaku Islands, administered by Tokyo but also claimed by Beijing and Taipei as the Diaoyutai (釣魚台) Islands.
It halted exports of rare earth metals to Japan, crucial for high-end electronics products, and it demanded an apology and compensation that Tokyo refused. However, Japan caved in by releasing the Chinese captain when it had earlier announced that he would be put on trial.
The point is that through these pronouncements, China was announcing to the world that it was the new boss around the region.
China was also furious with the US-South Korean naval exercises in the Yellow Sea, regarding it as an unwarranted intrusion into what it, more or less, regards as its own waters or regional sphere of influence.
In other words, through its actions and words, China is proclaiming its own version of the Monroe Doctrine for the 21st century.

Read the entire article here.

(map by antiqueprints.com - China 1841)

German business executive suspended for telling truth about Galileo

Telling the truth is not popular within the EU:

BERLIN — The chief executive of the largest satellite company in Germany was suspended on Tuesday for telling American diplomats that the Galileo satellite project in Europe was redundant, cost-inefficient and designed to benefit French business interests, according to cables published by WikiLeaks.
Berry Smutny, the chief executive of OHB-System, was suspended after a Norwegian newspaper, Aftenposten, last Thursday published excerpts obtained from WikiLeaks of his meeting with American diplomats in Berlin on Oct. 2.
Galileo, the seven-year-old program aimed at building a system of 30 orbiting civilian satellites for Europe by 2014, is “a stupid idea” that will only replicate what GPS satellites already provide, Mr. Smutny is said to have told the diplomats. He added that Galileo was “a waste of E.U. taxpayers’ money championed by French interests.”
Galileo is a 3.4 billion euro (or $4.5 billion) project conceived as Europe’s answer to the United States’ system of navigation satellites. (The European Commission said on Tuesday that the program would need an additional 1.9 billion euros to become operational, Reuters reported from Brussels.)

Read the entire NYT story here.

That Galileo is both stupid and expensive (especially for European tax payers) has been obvious already for many years. And the 1,9 billion will not be enough according to Richard North at the EU Referendum blog, which has covered the Galileo project already since 2003:

This was a project that the commission originally told us would cost €1.1 billion of public money. It then gave a solemn guarantee in the year 2000 that no public subsidy would be needed after 2007, when the system was supposed to be up and running. Four years down the line from then and it is nowhere near - the latest fiction is 2014 ... in your dreams.

At the time, of course, the commission was hoping for €2.5 billion of private investment, but when that arrangement fell through (largely because of the totally unrealistic projections for cost recovery), the whole of the development costs were dumped on European taxpayers. The British have paid a substantial share – probably in the order of about £1 billion so far, over and above normal contributions - although it is difficult to be exact. The euroslime, as always, cook the books.

To ask merely for another €1.9 billion, though, is to perpetuate the lie. In January 2008 a secret report leaked from the German government, long before Wikileaks was in business, estimated the total development and deployment cost could rise to €10 billion. But, given that the US is having to pay about €5 billion just to upgrade its GPS system – which has long been in operation – even €10 billion looks wildly optimistic.

Smutny himself told US officials that in his opinion the final cost would balloon to around €10 billion, yet the commission is still playing its dire game of underestimating the total cost.  The strategy is then to come back for more, in dribs and drabs, applying moral blackmail at each stage.

In spite of all the growth, expect the China bubble to burst

Wherever they go, Chinese leaders are nowadays greeted as saviours by clueless Western political and business leaders. As often before, some of the cleverest hedge fund managers know the reality behind the rhetoric:

The manager, who wanted to remain anonymous, said: “The Chinese delegation has said all week that there will be double-digit growth for years to come and the Brits have lapped it up. But the data doesn’t add up. We think we’ve experienced credit bubbles over the past few years, but China is the biggest. And yet the global economy is looking to China as not just a crutch but a springboard out of the recession. It’s crazy.”

Read the entire Telegraph article here.

Fortunately, the Financial Times reports that there is a growing backlash against the Chinese form of globalisation, even in countries like India:

For a start, India and many other developing countries are aware of the risk of being steamrollered by China’s manufacturing machine, especially when it is bolstered by a quasi-mercantilist economic strategy that keeps the Chinese currency undervalued against those of many of its emerging peers.
One Indian executive reflects that his country ships plastic pellets to China that are then made into buckets. If India cannot even make plastic buckets competitively, he implies, its battle will be tough.
Dilma Rousseff, Brazil’s new president, has meanwhile indicated that one of her first priorities will be holding talks with China about its currency and trade policies. “This is an issue not only for Brazil but for all emerging countries,” says Fernando Pimentel, her new trade minister.

PS
I have always been a firm believer in global free trade. However, it is quite possible that a protectionistic approach is the only way to limit the damage created by the Chinese form of globalisation - and the Big Bubble that eventually will burst.

Addendum (1.50 PM, 18.1.)
I just noticed that an Australian professor also seems to be advocating some kind of protection against the Chinese:

True, if a small economy like Hong Kong manipulates its exchange rate, the harm to the rest of the world is mild. But when it is an economy like China's — already enjoying the advantages of cheap, hardworking labor and the economies of scale provided by a large domestic market — the damage to others can be enormous. The U.S. lost much of its industrial base back in the 1980s as Japan used its undervalued yen to wipe out competing U.S. companies. Now it faces the same risk from China.

A favorite argument of the free traders is that if China wants to provide us with cheap manufactures, then let it. We will concentrate on advanced manufactures. But by exporting those cheap manufactures, China improves its industrial base so that soon it can compete in advanced manufactures. Meanwhile, the rest of us weaken our industrial base as cheap manufacturing dies out. Soon we cannot produce anything.

Read the entire arcticle.

A reminder from democratic Taiwan to president Obama

The Taipei Times urges in its editorial president Obama to act like a democratic leader when he meets with Chinese president Hu Jintao later this week:

Furthermore, just as Beijing has red lines it will not cross, the US should have its own, and based on its historical foundations, the US ought to make freedom and human rights, and by extension Taiwan, Tibet, Xinjiang and human rights in China, its own lines of intransigence. Wishy-washy half truths and obfuscation on what we are told remain core principles of the US just won’t work and in fact will make it easier for unyielding forces to open wedges in the US system.
There is little time left. Before Hu sets foot on US soil, the latter should unreservedly state its goals and expectations. Take it or leave it, Mr Hu.

Professor Richard Lindzen on global warming alarmism

MIT professor Richard Lindzen has for many years been a voice of reason in the global warming debate. Now, when it has become clear that the most hysteric alarmism is declining, one must hope that the most rational political leaders will start to listen what he has to say:

The notion of a static, unchanging climate is foreign to the history of the earth or any other planet with a fluid envelope. The fact that the developed world went into hysterics over changes in global mean temperature anomaly of a few tenths of a degree will astound future generations. Such hysteria simply represents the scientific illiteracy of much of the public, the susceptibility of the public to the substitution of repetition for truth, and the exploitation of these weaknesses by politicians, environmental promoters, and, after 20 years of media drum beating, many others as well. Climate is always changing. We have had ice ages and warmer periods when alligators were found in Spitzbergen. Ice ages have occurred in a hundred thousand year cycle for the last 700 thousand years, and there have been previous periods that appear to have been warmer than the present despite CO2 levels being lower than they are now. More recently, we have had the medieval warm period and the little ice age. During the latter, alpine glaciers advanced to the chagrin of overrun villages. Since the beginning of the 19th Century these glaciers have been retreating. Frankly, we don’t fully understand either the advance or the retreat.

Read the entire article here.

China - "home to the biggest counterfeit and piracy market in the world"

Chinese president Hu Jintao will this week visit the US. One of the items that most certainly will be discussed during the visit is the Chinese counterfeit and piracy market. Western business leaders have for years urged the Chinese goverment to crack down on intellectual property theft - without any real results. Before important events, like Communist party congresses or the Shanghai Expo the Chinese goverment organizes campaigns against product piracy. But these crack-downs do not lead to any real improvements.

Now, a few days before president Hu Jintao is to visit the US, China´s commerce minister Chen Deming has again promised action ....

BEIJING — US and European business leaders said Friday that Beijing needed to do more to respect intellectual property rights, as China's commerce minister admitted enforcement of copyright laws could improve.
The comments from the foreign executives came at a government forum organised ahead of Chinese President Hu Jintao's visit to the United States next week, during which copyright infringement is likely to be discussed.
"Despite improvement, inconsistent and ineffective IPR enforcement is still a serious concern for our members," the president of the American Chamber of Commerce in China (AmCham), Ted Dean, told the audience.
"There is more work to be done, and we are eager to engage in dialogue... to address these issues together."
Intellectual property rights are widely flouted in China, which is home to the biggest counterfeit and piracy market in the world.
The United States and the European Union have repeatedly called on China to crack down on intellectual property theft. US Trade Representative Ron Kirk said last month that "concrete and measurable results" were needed.
Beijing said this week that it had detained more than 4,000 people suspected of violating intellectual property rights since November as part of a six-month nationwide crackdown on fake goods launched in late October.

Read the entire story here.


The Finnish daily Helsingin Sanomat recently published a realistic report:

China has been promising for years that it would root out the thriving industry in pirated goods. However, nothing appears to have changed at street level.
      High-quality versions of the latest DVD films are available for about two euros apiece. The Chinese version of the iPad, with 64 gigabytes, is available for EUR 230.
      A hard drive with 180 Nintendo Wii games copied onto it goes for just over EUR 40. Furniture stores and clothing retailers copy products on the basis of photographs brought in by the customer.
     
Occasionally China cracks down on product piracy. Such campaigns occur before key events such as party congresses or the last year’s Shanghai Expo.      However, even the crackdowns do little to change the situation. Customers buying DVDs are simply guided to the back of the store through a secret doorway. The front of the store is reserved for official goods, which gather dust as nobody buys them. When the big event is over, the counterfeit goods are soon in the front of the shop again.
     
Consumer goods are not the only items that are copied. Western companies have lost much potential income from the theft of technology used in cars, bullet trains, and wind power turbines.
      The European Union estimates that 70 per cent of European businesses operating in China say that they have suffered from the piracy of their products. A study from a few years back concluded that such companies lost an equivalent of one fifth of their income to the pirates.  

What Hu Jintao needs to hear in Washington

Examination of a prisoner in China (1858) 
(image by antiqueprints.com)



The Washington Post has published an excellent article by Michael J. Green ja Daniel M. Kliman about what president Obama needs to tell his Chinese counterpart when they meet in Washington later this week:

When Chinese President Hu Jintao visits Washington this week, there will be lots of ruffles and flourishes. Both governments will refer to the "positive, cooperative and comprehensive" relationship they seek to build. There is nothing wrong with positive diplomacy, but President Obama should not shy away from highlighting an area where the United States and China sharply diverge: political values. This is not just a matter of managing U.S. domestic politics but also an issue of long-term strategy as China rises.

This is what Obama´s message should be, according to Green and Kliman:

 But Washington and Beijing must recognize that economic interdependence and statements of strategic reassurance are no substitutes for evidence of greater transparency and liberalism within China.
This message should be delivered clearly by the White House and the State Department, with consistent demonstrations of support for human rights, media freedom, the rule of law and civil society in China.
In Asia's burgeoning milieu of regional institutions and informal networks, the United States should work with other like-minded democracies to stress that meaningful confidence-building depends on transparency and participatory government with neighboring states, not on Beijing's outdated principle of "non-interference in internal affairs." The case must be made in the region that stronger institutions and citizen participation will ultimately create stronger states; the democratic transitions of South Korea and Indonesia are key examples.
In the short term, this approach could exacerbate tensions between the United States and China. But those tensions will ease if Washington remains consistent about its expectations of Chinese leaders and works with states that share our concerns and an interest in positive relations with Beijing. Much is risked by continuing to assume that economic integration and diplomatic engagement will ensure a peaceful rise. History shows that regime type matters. Ignoring this paves the way for the United States and China to evolve into strategic competitors

Obama meets his Chinese counterpart in Washington

President Obama has met with five China human rights advocates as part of his preparation for the meeting with Chinese president Hu Jintao in Washington this week. According to American officials, human rights will be on the agenda - which is a good thing:

Obama will speak about human rights in his public appearance with Hu and also bring up the issue during their private meetings, the Post reported, citing one administration official who attended Thursday's meeting with the human rights advocates.
"The meeting was very pluralistic; many different opinions were shared," one of the administration officials told the Post. "But the consensus was that human rights has to be on the agenda even if it is awkward. And it makes a difference when it is."

Read the entire story here.

However, human rights will probably not be very high on the agenda, if one is to believe this writer:

So, while the idealist will call for America to flex its moral muscle, the pragmatists will win out as today China shares the American aim of global stability, eradication of terrorists, nuclear nonproliferation; and most of all, a growing world economy.

These issues have united China and the U.S. and will trump all else.

Further, when you are $14 trillion in debt, it is not wise to insult your banker (China holds over $900 billion in U.S. debt).

These are the shifting realities of the 21st century.

PS
I certainly hope that the "pragmatists" will not "win out" in the way the article describes. In spite of its current economic difficulties, the US must continue to be a moral leader in a world where values seem to mean less and less. Obama should not bow too deeply to his Chinese counterpart!