Tuesday, 22 January 2013


Answering China’s takeover of Nexen.
Today there are many debates and opinions about recent takeover of Nexen . One opinion, published on Tuesday, January 8th in Maple Ridge and Pitt Meadows Times (“Questioning China’s takeover of Nexen” by Gordy Robson (read it here: http://www.mrtimes.com/business/Questioning+China+takeover+Nexen/7788693/story.html ) appeals to the matter of trust to the government of China and uses, as an example of their inconsistency, the story with the aircraft carrier Varyag. I have a different opinion about that takeover and related matters. Geopolitics, fighting for influence, for their own values and interests. This is what links Nexen and a story about a Soviet aircraft carrier. I’m not sure that the argument about inconsistency of China actions regarding Varyag and the following conclusion that there is no basis for trust is correct. In general, the story about this ship is correct, however, some very important details are missing. I browsed archives (most of them in Russian and Ukrainian) to find how it happened. The real story looks like this: “Varyag” (called “Riga” before 1990) was designed in 1985. Its construction started in the same year. The ship left the dry dock in 1988 and construction was continued on water until 1992 when it was frozen. After crush of the Soviet Union in 1993 this ship was possessed by Ukraine, according to the agreement between Ukraine and Russia. An interesting fact: Sebastopol along with the biggest naval base on Black Sea remains under control of Russia. Ukrainian forces couldn’t be taken seriously and actually they didn’t need this incomplete ship. China, who planned to construct such ships, and for that purpose collected necessary information for decades, was around at that time and bought the ship body after all equipment and engines were dismounted and sold. There was no auction regarding this deal. The paid price was about three times more that normally is paid for such a quantity of scrap. Approximately at the same time China bought two other aircraft carriers. Regarding the plans about future of Varyag: they were not clear at that time. The purchase was, as we say “just in case”, however from very beginning, China considered its usage as naval training center as one of the possible alternatives. One of the other possible alternatives was entertainment purpose as was announced.
Along with the ship body, China got from Ukraine all documents and blueprints necessary for rebuilding the ship as an aircraft carrier. So, the argument about entertainment only purposes supposedly fixed in the purchasing contract is just a myth. And now we come to the scandalous part of the story. As I said, there were two other aircraft carriers purchased, but only Varyag was found in the center of the scandal. Why? It is because of China’s rising influence in the Pacific region. Whose interests in the region can be significantly disturbed by China’s influence? Let’s guess. Correct: US and Canadian. There was no possibility of the US to disturb the other two deals, but Varyag was locked in Black Sea. The US and Canada made tremendous pressure on Turkey just to ban the Varyag’s passing through the Bosphorus  Straight. Turkey has no interests in the Pacific region, but it is a NATO member. However, at the end the solution was found: China sent over 3 million tourists to Turkey to support the local economy. After 16 months of drifting in Black sea ship passed the Bosphorus Straight. The adventures of the carrier were not yet over. As I noted it was true that one of the alternatives was constructing a floating hotel and casino in Macao, but Macao, controlled by Portugal at that time, resisted to give a permit to keep this ship in the area. Also the cost of the 627 days trip increased by $10 more million. Such cost was too much for entertainment purposes and related promises were canceled. Because business industry keeps promises only until they are not in conflict with benefits. North American businesses are very knowledgeable about it. So, the multi-million piece of scrap drifted to China. The future of the ship was still unclear at that time, it became clear only after endless inspections with respect to suitability of the ship and when in 2005 China bought SU 33 aircrafts from Ukraine and designed its own Shenyang J-15 based on SU 33. So, that’s the true story of Varyag.
Now let’s talk about the present days and approval of the Nexen takeover. Actually there is no too much believing, of course. Everyone firmly stands on guard of its own national interests and values. For a clear understanding of what is going on, we need to consider several facts. So, fact #1: China, with its growing economy, is one of the biggest consumers of natural resources and oil and gas are on top of their priority list.
Fact #2: There are two major suppliers of Russian oil to China: Rosneft and Transneft. Both are state-owned. Right now Russian state corporation Rosneft is doing everything possible to increase its’ oil supply to China, and on January 14th there should be negotiations between Rosneft and CNPC regarding this point. It is not a secret that Rosneft as well as other key enterprises in key industries in Russia controlled by Putin’s clan of former KGB top officers and his close friends and relatives. Originally the idea of a pipeline to China and close co-operation between two states in this industry was developed by M. Khodorkovskij, ex-leader of YUKOS. I think it isn’t necessary for me to remind reader of what happened with the Russian oil manufacturing giant #1 and its leader and top management, and how Rosneft, an outsider, became the leader. Khodorkovskij’s idea was simple and brilliant: it gave Russia the long – term and firm economic link and opportunities to play significant roles in Pacific regional politics.
Obviously, the economic interests are the reasons of the politics in 99%. For those who doubt me, I recommend to keep an eye on John F. Kerry, who was recently nominated and who is going to be the next Secretary of State in US. Keep an eye on his position and behaviour with respect to human rights violation in Russia. In fact Kerry hampered the acceptance of Magnitsky Law which is real danger for Kremlin. Why this person? Just because of his wife, Teresa Heinz, the owner of Heinz, the biggest ketchup producer in the world. Heinz has several production facilities in Krasnodarskij region in Russia and excellent positions and opportunities on that market.
Now we are on fact #3. Here is a quote from a recent essay “A Quiet Ruin. How did our relationship with Russia become so dysfunctional”? by Mr. Christopher Westdal, former Canada’s ambassador in Russia. This essay is useful for those who are interested in history, development, and current situation of Canadian – Russian relationships. Reader can find it here: http://reviewcanada.ca/essays/2012/10/01/a-quiet-ruin/  So, I quote: “For Stephen Harper, Vladimir Putin has been persona evidently non grata from the start. I introduced the two, as it was my job to do, at the 2006 G8 summit at St. Petersburg. From that day to this, despite countless opportunities in multilateral settings, Harper has made no apparent effort to cultivate any relationship (or influence) whatever with Putin. There have been no visits—and none, as I write, is in prospect”. Very clear. I believe the political intuition of our Prime Minister, just because it is similar to mine in many points. So, now, just put together all the facts I mentioned, and the Nexen takeover picture clarifies: it simply secures the current global geopolitical balance and interests of Canada and other western countries in light of modern Russian geopolitical ambitions. Nobody will dig out Canadian oil sources with intent to transfer them to China, nobody will put the red communist flag on oil sands, the pipeline will be built just because there is a very important overseas consumer, and participating provinces will get their interest from this development.
Vladimir Kolosov
(written January 10th, 2013)