China and the Final War for Resources
Bill Ridley
February 9th, 2005
"What's coming will be more devastating to the U.S. economy than any
nuclear strike..." - The Asia Times
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 than 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
"Financial war is a form of nonmilitary warfare which is just as
terribly destructive as a bloody war, but in which no blood is
actually shed... When people revise the history books... the section
on financial warfare will command the reader's utmost attention."
-Unrestricted War: China's Master Plan to Destroy America
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.
"We are beholden to the Chinese by our Treasures. That worries me."
Carla Hills Former U.S. Trade Representative
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?
"All Beijing has to do is to mention the possibility of a sell order
going down the wires. It would devastate the U.S. economy more than
any nuclear strike."
Asia Times, Jan. 23, 2004
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 than
most.
In the final war for resources there are no clear winners. Everyone on
the globe will feel the pinch. Some countries will fare better than
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.
"The era of the resource war has arrived"
-Alexander Haig, Former Secretary of State
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, ***** 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
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