`Bad news, I'm afraid, Prime Minister,' General Ogawa said. `I have just had it confirmed that the Shell New World, a 296,000 tonne oil tanker bound for Yokohama, was indeed commandeered by the Chinese navy, as we thought. It's not wholly clear yet but it appears to be making for Zhangjiang e home port of China's southern fleet.'
`Are you sure of this, General?' the Prime Minister asked.
`Absolutely sure, Prime Minister. We have infra-red photographic evidence of the seizure and the Shell New World's subsequent course change. As you can see from the photographs I am passing to ministers which for reasons of security are not allowed to leave this room group of twelve Chinese commandos boarded the ship; they fired what appear to be automatic weapons and took a crew-member prisoner. The fourth photograph, which is an enlargement using the latest enhancement techniques, we believe shows the uniform of a Chinese Marine commando unit. The second series of photographs was taken on a subsequent pass over the area. As you can see the New World, which had been on a north-north-east heading, has changed course and is now on a north-north-west heading.'
`Was this operation sanctioned by Beijing, or is it a freelance operation by the Chinese navy?' Hyashi asked.
`We are not sure. Piracy — under cover of PLA Navy operations — has been a fact of maritime life since China opened its doors fully to foreign trade during the Deng era. This operation bears some similarities with previous freelance operations by the PLA Navy but given what happened in the South China Sea yesterday, I would doubt it.'
`Right. I think we treat it as part of the conflict. Kimurasan, I think you should have another talk to Ambassador Bo. Tell him that the government of Japan will not sit idly by and see its vital national interests violated in this way.'
`Prime Minister, may I suggest that Tanaka in Beijing also seek a meeting with Foreign Minister Song to reinforce the message I give Ambassador Bo?' the Foreign Minister said.
`Agreed. Ishihara-san, I would also like you to prepare some recommendations for us concerning the sort of action, or demonstration, our military forces might be able to manage. I'm thinking here, Ishihara-san, particularly of the project in Ogasawara. Gentlemen, I think we have to consider all our options at this stage. I suggest we reconvene here at 2 p.m.'
The Foreign Ministry, Beijing
Local time: 0900 Tuesday 20 February 2001
GMT: 0100 Tuesday 20 February 2001
Jamie Song squinted as the American technician turned the lights up full. A make-up assistant dabbed sweat off his forehead as he watched the second hand of CNN's clock move towards the hour for the beginning of another live interview.
`We are not looking for confrontation, Foreign Minister,' said the television producer. `We covered your invasion earlier. We are now looking for you to explain China to our viewers – to sell them your style of government. Thirty seconds to airtime.'
ANCHOR: On this evening's show live from Beijing we are talking exclusively for the second time running to the Chinese Foreign Minister, Jamie Song. You're going to get to ask your questions direct. You're all familiar now with the news developments in the South China Sea. Jamie has agreed to come on this show to tell us about China, its value system, and what it's hoping to achieve in the long term. And with me in the studio again is China affairs specialist, Chris Bronowski. Seattle, you're on.
SEATTLE: Could Mr Song confirm that parts for the Boeing 757 and 737 are being made in the same factory in Xian as makes the H-6 bombers which attacked Vietnam? And that many of the workers there are in fact prisoners serving long-term sentences in your gaols? And if so, is that ethical?
ANCHOR: Let's get the facts before we move on to morality. Prison labour to make American airliners?
JAMIE SONG: This is a question for my colleague who deals with trade.
ANCHOR: Since she's not here, let's put it another way. If prison or military labour was being used to make American aeroplanes would you condemn it?
JAMIE SONG: Why should I? Some of America's best denim jeans come from prison labour. Do you condemn it?
ANCHOR: Do we, Chris Bronowski?
Commentator: On military labour, I guess that's one for Boeing. They know what deals they have struck. The other wider prison issue is that thousands of people in Chinese gaols are not muggers and rapists, but political prisoners. Many of them are in labour camps only because they have tried to exercise the freedoms that you and I take for granted.
ANCHOR: Is he right, Foreign Minister?
JAMIE SONG: You have in American gaols black kids, many of whom were born into broken families. They grew up in an environment of crime and drugs. Your social and political system doesn't allow for them. If it did, they wouldn't be gaoled as outcasts, they would be helped.
ANCHOR: But isn't it the-
JAMIE SONG: No, Mike, let me finish. This is a very important point. We don't have that problem. We have a handful, and I stress a handful, of people who we believe are a threat to the stability of our country. They are advocating the collapse of the Communist Party and multi-party elections. We in the Chinese government believe that if they had their way our country would fragment into warlordism, separatism, and possibly civil war. That handful of people is being confined so that 1.3 billion people have a chance of the best life we can give them. And I'm not talking about the vote. They have that in Russia and India, and I'm not seeing great hospitals, schools, roads, housing. We are seeing dead bodies in provinces like Chechnya and Kashmir which the central government is failing to control. There is instability, violence, and economic quagmire. And one final point. We don't seek to interfere in the internal affairs of the United States. May I respectfully suggest that you butt out of ours?
ANCHOR: Chris Bronowski, civil war if there are elections?
COMMENTATOR: The Foreign Minister is expressing a view which is prevalent throughout China. And he has got some plausible evidence, say from Russia or even Yugoslavia in the nineties, to back him up.
ANCHOR: So you're arguing that the Chinese one-party system is the most suitable for that country.
COMMENTATOR: I don't advocate, Mike. I explain.
ANCHOR: Bombay, India, your turn for Foreign Minister Song.
BOMBAY: Mr Song, why are you afraid of democracy?
ANCHOR: Have you answered that, Jamie?
JAMIE SONG: I think I did.
BOMBAY: You're talking absolute rubbish if I might say so. Our stock market capitalization is far higher than yours in Shanghai and Shenzhen. The fund managers in Schroders and Merrill Lynch attract American pension money to India far more than to China. It takes an average of three months to sign a joint venture in my country. Two years in yours. Our courts are not beholden to the ruling party. They are impartial. Both our countries are corrupt and you talk about Kashmir and war. Yes, we have problems, but our people know about them. You keep secret the body bags coming out of Tibet and Xinjiang.
ANCHOR: And your question?
BOMBAY: What is the point? The man is a bloody liar.
ANCHOR: Foreign Minister?
JAMIE SONG: Rivalry between India and China is traditional. It will be a hundred years before anyone can say for certainty which system is right.
ANCHOR: Bangkok, Thailand. Do you have a question?
BANGKOK: Yes. We in South-East Asia are worried about the attacks in the South China Sea. I would like to ask Mr Song, why was it necessary? Why is China destabilizing our region?
ANCHOR: That's back to lunchtime's session, Jamie?
JAMIE SONG: I know there is concern. But China is a superpower. Our defence forces will have to reflect that. You have the word of my government that trade which is the business of the Pacific Rim countries will not suffer. But as we have stated many times, we are only reclaiming sovereign territory which is rightfully ours.
ANCHOR: Gansu, China. You want to talk to your Foreign Minister.
GANSU: [Inaudible]
ANCHOR: You're live with the Chinese Foreign Minister.
GANSU: W
hy can't my government feed its people? [disconnect]
ANCHOR: Did you get that, Jamie? Why can't you feed your own people?
JAMIE SONG: The agreement for me to speak on your show was that I did not take calls from Chinese citizens.
ANCHOR: It slipped through, Jamie. I'll ask it. Are people starving in China?
JAMIE SONG: No.
ANCHOR: Are there food shortages?
JAMIE SONG: Absolutely not.
ANCHOR: Iowa, you have a question for Jamie Song.
MADISON COUNTY: Foreign Minister, I'm a grain farmer. Eighty per cent of my crop is sold to your country. To be frank, I'm scared. If things get really bad, will you stop buying my grain?
ANCHOR: Are you going to honour your grain contracts?
JAMIE SONG: We have never initiated a threat of sanctions against the United States. We have only ever said that if America starts a trade war we will retaliate.
ANCHOR: Is that going to hit grain?
JAMIE SONG: How can I say? Why don't you ask the President what sanctions he has in mind?
ANCHOR: Can China survive without American grain?
JAMIE SONG: Absolutely.
ANCHOR: Iowa, if all your grain sales to China stop, what happens?
MADISON COUNTY: I go bankrupt. The banks will recall the loans. I reckon that would be for most of the farms around here. That's why we need things sorted . . .
ANCHOR: Foreign Minister, how much can you hurt America in a trade war?
JAMIE SONG: I haven't sat counting, Mike. But it's going to be bad.
ANCHOR: [pausing and adjusting his glasses to read a report put in front of him] Now we have some horrifying news just in. Jamie Song, please stay with us for your comment. All we know so far is that Chinese aircraft attacked a civilian convoy leaving Haiphong. Dozens of people have been killed, many of them Americans.
Briefing
Oil (II)
Hidei Kobayashi, Nomura Securities' Head of Strategy and Trading, hated public speaking. But on the morning of Tuesday 20 February he was asked to make a presentation to Nomura's board of directors about the crisis in the South China Sea.
He began by explaining that Dragonstrike was only partly about territory, and partly about teaching a lesson in real-politik to the lesser powers that shared a border with or harboured a claim to the South China Sea. Always at the forefront of concerns of China's leaders was the need to secure the oil and gas below the sea. By the end of the twentieth century there had been a fundamental change in the world oil market and a redirection of the market towards East Asia and away from Europe and North America. First of all there had been an important change in the relative power of the Organization of Petroleum Exporting Countries (OPEC) to influence oil prices. The mid-1980s were the nadir of OPEC's power, and its share of the market for oil fell to just 30 per cent in 1985 – down from 50 per cent in the mid-1970s, when it was at its peak of power and influence. But during the 1990s it rebuilt its position. This was not because of anything it did in particular but because of the rapid growth in the East Asian economies. As former exporters of oil -- like China and Indonesia -- began to grow rapidly domestic consumption absorbed more and more of their oil production. Discoveries of fresh oilfields could not keep pace with the speed of their industrialization.
For China the problem was particularly acute: by the turn of the century, after years of an average growth of 7 per cent in demand, it was facing a shortfall in oil of 3,500,000 tonnes a year and this had to be met by imports. Its efforts to find oil in home waters had been to little avail: the East China Sea produced some modest gas finds but no oil to speak of. The best find was a huge gas reservoir off the south coast of Hainan Island at the northern end of the South China Sea, and an 800 kilometre submarine pipeline had been constructed to pipe 2,900,000 cubic metres of gas a day to fire a power station in Hong Kong. Onshore, the application of new drilling techniques succeeded in extracting more oil from the Daqing field in the north-east, China's most productive deed the north-eastern oil-fields accounted for 70 per cent of onshore production. The Tarim basin in the far north-west proved prospective, but it was just about as far as you could get from where it was needed on the coast and transportation costs added $3 a barrel. Against that background, Kobayashi told Nomura's directors, it was not difficult to understand the attraction to the leadership of seizing the South China Sea, especially when briefing papers were telling them of the untold riches of the sea. `According to estimates,' one official document opined, `Nansha's oil reserves total over 10,000,000,000 tonnes. Geologists believe that the area of the Zengmu Reef belongs to a shallow continental shelf, with sedimentary rock thickness of around 15,000 metres, and is one of the zones with abundant oil and gas resources. It is very likely to become the second Persian Gulf.' By way of comparison, in its heyday Daqing produced 1,490,000,000 tonnes of oil during the thirty-five years to the end of 1995. With estimated reserves of 10,000,000,000 tonnes available for exploitation China would not need to import a drop of oil for the foreseeable future.
This was not lost on China's neighbours, least of all Vietnam. Since 1987, when it pulled its door ajar and allowed in foreign investment, Vietnam made the development of its offshore oil and gas industry its top priority. Fully one quarter of all foreign investment was channelled into the industry. Hanoi had big plans. It set a target of annual production of 20,000,000 tonnes of oil by 2000 target which it met with ease. It now set its sights higher and was aiming to extract 25,000,000 tonnes a year by 2005. This was not to say that to find oil in the South China Sea all one had to do was sink a well and hook it up to a tanker. Environmentally, the South China Sea was a difficult area to work in. Typhoons made drilling hazardous while strong currents led to the loss of many unmanned underwater vehicles. Adding to oilmen's difficulties the geology of the terrain under the sea was also complex and difficult to assess. Indeed the reserves for an early find at Dai Hung, in waters adjacent to the Spratlys, had been downgraded to around 200,000,000 barrels from more than 500,000,000 barrels. However, the Vietnamese authorities had encouraged the world's leading oil explorers to try their luck in the region, and it had paid off. British Petroleum had made major gas discoveries some 360 kilometres off the south coast of Vietnam, sufficient to power Ho Chi Minh City for twenty-five years, at least. BP was also a partner with Nippon Oil in a major oil-production facility in the Paracel Islands.
The Japanese interest in the South China Sea was two-fold. There were companies like Nippon Oil, Mitsubishi, and Mitsui, which were exploring for oil. Their investments were sizeable. But the greater interest was in the South China Sea's role as a thoroughfare for trade with Europe and the Middle East. The South China Sea was arguably the most important stretch of water for Japan, bar none. It was the lifeline along which travelled more than 90 per cent of the oil and liquefied natural gas (LNG) together with at least 70 per cent of the coal it used. The trade in oil was a $500 billion a year business. Asia accounted for more than a third of it and Japan in turn accounted for half of Asia's consumption. Virtually all of the trade passed through the South China Sea. The economic significance of the South China Sea was not just confined to the trade in energy, important as that was. There were other cargoes to consider — agriculture and manufactured goods — and when these were added to the equation it became apparent that more than a quarter of the world's seaborne trade passed through this waterway.
Kobayashi reported to the meeting that the price of oil had risen $5 a barrel on Monday. With the South China Sea fields shut down and Brunei and Indonesia out of the supply chain, he said the price of oil in the short term was bound to rise further. Although Japan had ample stockpiles currently there was no telling what damage could be done to production facilities now under Chinese control. He reminded directors that Saddam's retreating armies had put every oil well in Kuwait to the torch. Against such an uncertain background he said he thought the yen and the Tokyo stock market had nowhere to go but down. It had opened down 1,267 point
s at 38,033. US funds were big sellers of the market, as were Japanese investors who were switching into the US dollar en masse. The yen had continued to come under speculative attack as well. It had fallen 10 per cent on Monday and had lost a further (5 per cent) to .2 in early Tokyo trading.
Kobayashi concluded gloomily. The big expansion in markets was over. Inflation was on a rising trend before the Chinese took their action. If the price of oil stayed high for long enough it would feed through to prices throughout the world economy. Stock markets were at their most vulnerable since 1987. New York, London, and Tokyo had all set all-time highs in January. Interest rates would be sure to rise as central banks sought to dampen the inflationary impulse from oil with dearer money. Already the Bank of Japan was tightening money to try to support the yen, though to little avail. `In times of such uncertainty, gentlemen, it is hard to escape the conclusion that "cash is king",' he said.
Briefing
The ravages within China of her war policy
Jamie Song had pleaded genuine ignorance of the attack on the Haiphong convoy during the CNN interview, but he noticed the red light on the studio camera go out as his voice was run over the graphic video of the cannon fire slamming into the vehicles by the river. It would not make his job at Zhongnanhai any easier. The Chinese President had little interest in the nuances of international relations unless they had a direct influence on his stature within the country. The issue he faced was the strength of the AmericanJapanese security treaty and whether China had the nerve and military strength to stand up to it. If Dragonstrike was to be a propaganda success, Song would have to persuade the generals to rein in their troops' excesses against civilians.
The new spending policy had been in place for enough years for its effects to be felt. The sudden switch of funding from development to the military had created a confident and more streamlined fighting machine. China's missile capability and submarine force gave her a power projection which would have been unimaginable ten years earlier. This was one of the most guarded secrets of China's long-term planning. After President Clinton sent two carrier groups to protect Taiwan in March 1996, the PLA high command insisted that they be allowed to defend China's sovereignty and dignity.
Dragon Strike -- A Novel of the Coming War with China (Future History Book 1) Page 13
