The Weekly Wrap: Sept. 30, 2011

Hydrocarbon squabble in the Mediterranean … After the escalating brinksmanship on the South China Sea (more on that below), the Turks and the Greek Cypriots are facing off over natural gas drilling in the Mediterranean. There is grist for this sensitivity over the potential undersea hydrocarbons in the Levant Basin — drillers have discovered commercial volumes of gas just south of the drilling area offshore from Israel. So first we had the Greek south of Cyprus invite the U.S. company Noble Energy to drill off its shores. Then a competing Turkish vessel showed up with an oil seismic research ship (pictured above), escorted by the Turkish navy and air force. Both sides are pounding their chests and emitting threatening grunts. Where will this tough-talk go? While there is plenty of gas for everyone — the basin is far flung — that doesn’t mean the taunts will halt. Look for these waters to be another hydrocarbon flashpoint.

Read on to the jump

… and a Georgian example for the South China Sea … China is raising the temperature in the South and East China seas, which have been the scene of numerous blowups over the last year and more. China asserts historical rights to the potential undersea resources through most of the region, and that would be fine, except that Brunei, Japan, Malaysia, Taiwan, the Philippines and Vietnam disagree. The U.S., whose ships ply the same waters, has attempted to tamp down the friction while making clear it regards China’s neighbors as allies. This week, we get official Chinese newspapers rattling their sabers. An editorial in the People’s Daily appears to urge China’s neighbors not to hide behind the protection of U.S. warships when they also desire continued trade with Beijing. The editorial said:

We don’t deny that some Asian countries have a certain feeling of insecurity in the face of China’s rapid rise, particularly that the development of China’s military power will destroy the balance long meticulously maintained by the U.S. But today’s Asia has changed. … No country wants to give back their ticket for the high speed train of China’s economic development.

A forthright writer in the Party-run Global Times puts aside the allusions and suggests that the Chinese Army attack the Philippines and Vietnam. That would frighten them and all other countries into submission, writes Long Tao. As rationale, Long cites the example of Russia’s short 2008 war with neighboring Georgia, which had the result of eradicating what many had seen as a protective U.S. security umbrella over the greater Caspian Sea region. Russia suffered opprobrium for its actions, but later gained advantage, the writer said. "[Military] action by a big country in the international arena may result in initial shock, but in the long run, regional stability can be achieved through great power strategic reconciliation," Long Tao wrote.

… and don’t forget Cuba: In the United States, companies are blamed for potential and real oil spills. As for the tiny island just south of the Florida coast, it is the government that is the whipping boy. We are speaking of the plans of Spain’s Repsol to begin drilling for oil off of Cuba’s shores. Estimates are that there may be billions of barrels of oil in Cuba’s undersea region, and numerous foreign companies are hoping to work there. Repsol is the first, using a Chinese-made drilling rig. But U.S. lobbyists and bloggers suggest that an environmental disaster is in the works, and that if it happens, it will be all Cuba’s fault, along with that of the U.S. trade embargo against the island nation. I urge some calm heads. The Cubans say that Repsol is going to adhere to U.S. drilling standards. That seems right —  publicly traded Repsol is smart enough to have prepared for a possible spill, being fully aware of BP’s disaster in the Gulf of Mexico in 2010, and wishing to avoid a company-threatening black eye such as BP has suffered. Instead this issue seems to have brought out the shrill worst in a number of existing lobbying groups, from environmentalists to anti-Castro groups.

Back on shore

Even China is frightened in Pakistan: Around the world, China has gone where others fear to tread both financially and politically. That has included Afghanistan, where the China National Petroleum Company has won the country’s first oilfield auction, and where Chinese companies are also going to mine for coal and copper. And it has included Pakistan, whose largest single investment has been from China’s coal-mining Kingho Group, which signed a $19 billion deal to mine coal in Sindh province. But now, Kingho says it’s withdrawing from the deal, report the Wall Street Journal’s Tom Wright and Jeremy Page. For the geographically challenged, Sindh, while rent by periodic violence over the years, is nowhere near the western Tribal Zones, Peshawar or Baluchistan, the areas associated with the Afghan war, the Taliban and remnants of al-Qaeda. So does this mean that China has lost its nerve? Should one be led to doubt the idea that China, with its appetite for risk, could step in and be a much-needed leading economic force in both Pakistan and Afghanistan? I have argued that a significant Chinese financial role in both countries would be to the West’s advantage  — a business boom could be a stabilizing influence. One trepidatious company does not amount to a wholesale exit (as evidenced by CNPC’s deal in northern Afghanistan). But it does mean that China is not leaping blindly into the maw. Until now, the U.S. has seemed ambivalent at best and hostile at worst to a Chinese role in the region. If the U.S. and the rest of the West want an eventually stable Subcontinent and Afghanistan, they will need help. China is the most logical partner.