The strategic dream of the People’s Liberation Army Navy is to extend its zone of influence out to the so-called “second island chain,” and it’s pushing hard to force settlements of territorial disputes closer to home. The fact remains that China does not have the might to take these islands by force in the face of the US and Japanese navies, and on an economic level, the region cannot afford a war. For these reasons, all this sabre rattling tends to make people cringe.

China Daily Mail

China is expanding its long-neglected fleet of supply ships and heavy-lift aircraft, bolstering its military prowess in support of missions to enforce claims over disputed territory and to defend Chinese interests abroad.

These transport workhorses are unlikely to arouse the same regional unease as the steady rollout of high performance fighters, long-range missiles or potent warships, but they are a crucial element of the People’s Liberation Army’s (PLA) three-decade military build-up, defense analysts say.

Over time, the air and sea support will give the world’s second-largest navy greater geographical reach and will enhance the PLA’s capacity to assist troops on distant battlefields, potentially including Taiwan if Beijing were to launch a military assault to take control of the self-governing island.

China’s state-owned shipyards last year launched two 23,000-tonne type 903 replenishment ships, according to reports and photographs published on Chinese military affairs websites and blogs, with further orders in the…

View original post 1,017 more words

Energy Security Through the Eyes of the World Energy Outlook

I had the pleasure of attending Dr. Fatih Birol’s presentation at the Canadian launch of the 2012 World Energy Outlook, the International Energy Agency’s annual analysis of the state of the global energy market. I had planned to write earlier, but the crucial factors for energy security remain quite timely.

The message of the IEA is loud and clear: the energy sector is shifting rapidly, and traditional expectations are being rapidly overtaken by events. Energy is a constant fixture in security policy, and in the next few years, the energy sector will transform in such a way that many of our existing assumptions will prove obsolete.

Rising United States

Every major economy in the world is set to increase its reliance on imports, except the United States. The rise of unconventional oil and gas technologies has been a dramatic success story for the United States. By 2017, the IEA predicts that the United States will overtake Russia as a producer of natural gas, and dethrone Saudi Arabia as the world’s largest oil producer. This will not only have major implications for the American economy, but will change how the United States looks at the regions on which it has traditionally depended for oil.

The Middle East Pivot

Middle Eastern exports of fossil fuels are in the process of a dramatic shift away from traditional markets in Europe and North America and toward India and China. OECD countries will decline to one third share of world energy use by 2035 as compared with two thirds in 1975, while China and India take the lion’s share of the difference. 90% of Middle Eastern fossil fuel exports will soon go to Asia. At the same time, American imports from the Middle East will drop to an all-time minimum as the United States develops unconventional oil sources with new extraction technologies.

Rising Iraq

Iraq has huge oil resources that were unexplored under the old regime. It has been inviting foreign investment in the energy sector, and enjoys comparative advantages that should help it to do rather well. Production costs per barrel of oil are much lower than in other countries (15 times cheaper than Russia, 13 times cheaper than the Canadian oilsands) due to a lack of geological obstacles.

Because China is the largest expanding market, it is expected that most of Iraq’s oil will go to China. Chinese investment in the country has risen accordingly, and 30% of expanding oilfields in Iraq are owned directly or indirectly by Chinese companies. One cannot help but think of the old charge that the United States went to war in Iraq to get oil. It seems that China will be the main beneficiary.

When China Coughs, the World Shakes

When China closed a series of coal mines due to unsafe working conditions last year, China’s share of imported coal rose by 2.7%. It was an unnoticeable difference domestically, but for a six-month period, global average coal prices jumped to $120 from $90. This was a taste of things to come. As China grows, it will become the lynchpin of the global energy market, and its policies and decisions will have global repercussions.

The good news is that China has invested heavily in renewable energy, so much so that it will account for almost a third of its added power generation capacity by 2035. In that time, China will have added the equivalent of the entire US and Japanese power grids to its capacity. Given such enormous expansion, any measure taken by China to reduce its call on limited resources is good news for the world. Better still, its massive investment in renewable and efficient technologies will yield global benefits as the price of these technologies drops and development costs are absorbed.

The bad news is that China is destined to depend heavily on imported fossil fuels, a situation in which neither China nor anyone else feels secure for reasons that are all too familiar to security analysts. The Chinese economy depends on oil coming through the Indian Ocean and the Malacca Strait, a strategic supply line which China is keen to protect. It also makes China all the more hungry for closer fossil fuel resources, bad news for the region as disputes over oil chains with offshore drilling potential heat up.

China currently imports about 15% of its natural gas and about 50% of its oil. By 2035, it will import more than 80% of its oil with a corresponding increase in gas. Some of this will come from overland pipelines, but much will still have to transit the Indian Ocean, and China has already begun to expand its involvement in oil-producing countries throughout the Middle East and Africa.

The Big Picture is in the Details

At the moment, world oil prices are at an all-time high, going by annual average rather than daily prices. This high, however, is not consistent. Developed economies are introducing carbon taxes, making oil more expensive to the consumer, while developing countries pour in fossil fuel subsidies. In this tug of war, carbon taxes lose, imposing a $10 cost per ton of CO2, as compared with a $110 per ton incentive from subsidies.

The IEA’s message, however, is that efficiency measures pay for themselves by reducing costs and increasing energy security. The United States’ expected shift toward energy self-sufficiency is possible not only because of new extraction technologies, but because it has been underwritten by new efficiency standards, which are reducing domestic consumption.

Natural gas prices remain indexed to oil, which in turn raises household heating and power costs as well as input costs for industry, degrading the competitiveness of the most-affected regions. This indexing may not last much longer, however, as many new countries become exporters of natural gas using unconventional extraction technologies and the market becomes more competitive.

The outlook is worst for Europe. Europe’s economic state may have much to do with energy prices, and particularly with natural gas prices, which are vastly higher than in North America or China. Still, the IEA predicts that household utility prices will continue to rise in Europe even as they fall in China and elsewhere.

Renewable energy sources will account for half of new global capacity by 2035, but the central questions are where this growth will take place and how efficient we can make our continued use of fossil fuels. 1.3 billion people in countries with high and rising populations have no access to electricity, notably in Sub-Saharan Africa and India. The pollution generated by rising economies, notably China, is already an international issue, and with the continued expansion of automobile ownership and road transportation, things will certainly get worse before they get better.

On the Eve of the Big Chop: Time for the US Military to address some deep-seated problems

With sequestration looming, painful cuts in US defence spending are regarded as all but certain. The services are starting to get their cosmetic cost-cutting measures lined up- furloughs, personnel cuts, a program here, a few fighters there. The great danger is that no one seems to be looking at why defence needs cutting back. One would almost think that America’s budgetary problems had nothing to do with the two very expensive wars of the past decade, still less with massive systemic waste inherent in the way defence is done in America. According to SIPRI numbers, the United States spent 4.7 percent of its gross domestic product on defence in 2012, or 41 percent of all acknowledged global defence spending. Adjusting for inflation and including defence-related debt, the defence budget is bigger today than it was at either of the Cold War peaks. This is a truly ridiculous excess in today’s economic climate.

The nub of the issue is, and it would take a very ignorant or disingenuous person to dispute this, the US doesn’t need to spend that kind of money to maintain its current level of defence. Not only could it maintain its position but it could do substantially better for a lot less money, if only it would stop defending the indefensible in the defence and procurement systems.

Why Is Defence So Darned Expensive?

1. Lack of Competition:
Since the end of the Cold War, there has been an unavoidable string of mergers and takeovers in the defence industries worldwide. Unfortunately, this has meant that there is a virtual monopoly going on in several sectors, most notably fighter aircraft and shipbuilding. That means that the only way to restore any sense of competition, and thus assert control over spiralling costs, is to be willing to import, or at least licence-produce, overseas designs. This will never happen so long as the revolving door between government and industry and the place of defence industries in campaign financing go unaddressed.

2. Preparing for the Last War Syndrome:
Since the late 1990s, and especially under Secretary Gates’ leadership, the Pentagon has funnelled vast amounts of money into re-orienting toward the kind of equipment the descriptions of which could include “light,” “agile,” “littoral,” “air-transportable” or any of a hundred similar buzzwords. In other words, they were investing in the kind of wars they were presently engaged in, as though the US military’s future was in brush wars and counterinsurgency.

3. Poor Need Identification:
The really pathetic thing about these programs was that they were not only unsuited for future inter-state conflict, they were equally unsuited to Iraq and Afghanistan. The US Army spent millions developing the Future Combat Systems Ground Vehicle family, only to conclude that they were too suceptible to damage. The US Air Force procured the F-35 with the idea that it would take over close air support functions, when every soldier on the ground knew that fast jets are entirely unsuitable for the role.

4. Reaching for the Stars:
America more than any other country is highly susceptible to feature-creep when designing new weapons, even if it makes them uneconomical. The F-22, the DDG-1000, even, pathetically, the Littoral Combat Ship and the F-35 are victims of this line of thinking. As the joke goes, we have the perfect weapon- but only one. The truth, of course, is that in many cases it isn’t the perfect weapon, because minor features have been emphasised over the traditional characteristics of a good weapons system, such as ease of maintenance and low cost of ownership.

5. Failure to Fill the Middle:
The result is that low-priority but critically important aspects of warfare get ignored or underfunded- the Navy will give the DDG-1000 class peripheral vertical launch systems to counteract a threat that has never materialised, but it will not buy supersonic anti-ship missiles in an era when the latter are proliferating rapidly. The Pentagon is often convinced that it can get away with a few super weapons on the one hand and a big equipment roster on the other, without ever settling on the middle ground of a small force with good but not science-fictiony equipment. The last procurement system that thought this way was… Nazi Germany. Way to take a lesson from the losers, folks.

6. The Procurement System
This one really does start in Congress. Procurement money is in the United States what pork-barrel social programs are in other countries. Campaign financing, the revolving door between government (and the Pentagon) and industry, and all of the exquisite legal means of corruption that litter the system, distort each program to the point where procurements are neither economical nor the best thing for the soldier or sailor in the field. During the Civil War, Samuel Colt would present custom-engraved revolvers to generals, secretaries of war and the chief of the ordinance department. Colt’s product, at least, had some value. It was only when Eli Remington offered to produce not only his own revolver but Colt’s as well for less than half of Colt’s asking price that the Union Army began to realise it had been practiced upon. Unfortunately, it is Colt’s practice and not Remington’s that predominates among major defence contractors today.

Cost-Effectiveness, Anyone?

Now above all is the time to cut, or at least cut back on, the pet programs that the Pentagon refuses to admit cost a great deal of money and return little useful capability. Rather than rehashing the argument, I refer you to those who have laid out the information extensively and cogently.

Littoral Combat Ship:
The USA’s New Littoral Combat Ships
Congressional Research Office
Wrong Ship at the Wrong Time

F-35:
The F-35 Air-to-Air Capability Controversy
Canada Preparing to Replace its CF-18 Hornets
The Joint Strike fighter Program
Air Power Australia Technical Analysis

To those who said three years ago that these programs were on track, performed useful missions and that critics just didn’t understand the needs of the US military in the 21st Century- I think the cat’s out of the bag.

Doctrine

You’d think that we’d already got to the most difficult part with procurement, but doctrine is the really sore issue. Remember the Powell-Weinberger doctrine, the one that won the 1991 Gulf War? Unfortunately, that and all the other lessons of Vietnam went by the wayside as the United States dove into the Iraq and Afghanistan Wars, and through lack of effective stabilisation measures created insurgencies in both countries. At the other end of those sorry episodes, it is time to stop and re-evaluate.

Model Doctrine:

1. The United States Military exists to defend the union against aggression, to support peace through global alliances with peaceful states, and to contribute to the defence of global common interests. It does not exist to fight small wars against minor powers. If it is deemed politically necessary to do so, the Powell Doctrine should be applied rigorously.

2. The United States Military will be prepared to intervene in wars of aggression by large powers against their weaker neighbours. To this end, its primary focus will be upon maintaining balanced conventional warfare capabilities on land, at sea and in the air.

3. If it is deemed politically necessary to invade and occupy a country, the United States Military will not do so without obtaining a prior, public political commitment from the Commander-in-Chief to a rational stabilisation plan adhering to established principles of occupation, with a primary focus on rapid and safe return of the civilian population to its normal occupations and the creation of a credible government structure with the expertise to run the country. If any of these preconditions are not met, the United States Military will assume no responsibility for the consequences.

4. It is not the purpose of the United States Military to participate in counterinsurgency operations. Where it may be necessary to do so, it will only be done with the clear support of the majority of the host population and under a firm timeline.

Land:

Following re-organisations in the 2000s, the Army is configured primarily for multiple prolonged low-level conflicts, while claiming to be able to adapt to any situation. This configuration is personnel-intensive, but does not concentrate key resources in a way suitable for high-intensity warfare. The Army has to all intents and purposes forgotten the lessons of AirLand Battle, the manoeuvre doctrine that was so successful in 1991. Even its opposing force training has re-oriented away from manoeuvre warfare and toward counterinsurgency. In an era of rising tigers, the Army has put down its spear and is training intensively to crush ants. There is every danger that this will become another instance of the common military error of training to fight the last war.

The technology of armoured war is changing and developing rapidly, and the United States, which has essentially stood still for the past decade, risks losing its pre-eminence. Although armoured forces are expensive in terms of equipment, a concentrated armoured force with the right training and doctrine does not need to be large to be effective. The Armoured Cavalry Regiment was the most effective armoured formation ever developed by the United States, and though now abandoned, its mission remains as timely as ever. A small and concentrated force based around even three ACRs would be a far better investment in conventional war than Stryker Brigade Combat Teams, which cannot convincingly bear the burden of a real land campaign.

None of which is to say that the expertise accumulated over the past decade should be abandoned. Rather, it should be concentrated into a second arm of “light” formations, which would be capable of operating in environments and situations where heavy mechanised forces are unsuitable, in any kind of operation from war to peace support.

Both arms would focus on building and retaining the vast array of specialised expertise that makes the US Army distinct from smaller forces, but in a much more concentrated package. This, frankly, will help to deter the misuse of the forces in extended wars of attrition. New soldiers can be raised, but expertise and equipment take time and money to develop. The bottom line is that the US Army is not a fire brigade, to be used in every small conflict that crops us. Putting aside political considerations, in a military sense, counterinsurgencies and brushfire wars are purely optional engagements. The serious conflicts that may well emerge as the world changes will not be. How much better to prepare for the latter.

Air

The Air Force would do well to consider that its basic and irreplaceable mission is to establish air superiority over United States territory and anywhere where US forces may fight. Brushfire wars seem to have given some people the idea that the USAF will automatically be able to operate when and where it chooses without serious opposition. The rapid proliferation of advanced fighters and surface-to-air missiles contradicts that assessment. The first order of business must be air superiority, closely followed by suppression of enemy air defences. If the USAF allows its superiority in these two areas to slip, it will massively complicate matters for every other mission.

This does not mean buying as many fifth-generation aircraft as possible. It means, first, that F-22 production should be restarted at any political cost. Second, it means that the balance of US fighter forces should be at least on par with the Generation 4.5 standard. There are many ways to do this that, while politically difficult, are far more cost-effective than the current approach, which stakes the future of the air force on replacing an aging fleet with a fighter that is experiencing massive cost overruns and capability underruns. Total number of airframes is always negotiable- if you have to trade numbers for quality, do it.

The Air Force would also do well to consider that the one tactical service it provides that has ongoing political and military relevance even in smaller conflicts is close air support. It is time for the Air Force to get over its institutional distaste for that mission and start investing in it, rather than merely pretending to do so.

Sea

The US Navy has two indispensible tools, the carrier strike group and the submarine force. Everything else is negotiable relative to these two priorities. The vast array of ships which do not fall into these categories or support these arms should be regarded as optional.

The bottom line for the Navy- and now is the time for bottom line thinking- is that to maintain US alliance commitments and presence, there must be a minimum of 8 carriers and strike groups available (not in refuelling), distributed roughly as follows:
1 Atlantic
2 Mediterranean
2 Pacific Circuit
1 Japan-Based
2 Pearl- Indian Ocean Circuit

Note the emphasis on the Pacific and Indian Oceans. To escort these eight carriers, roughly sixteen cruisers, thirty-two destroyers and sixteen submarines. Of course, there are other missions that require more of each of these types, but the good news is that the Navy enjoys substantial leeway in hull numbers relative to this minimum and to any potential adversary. Its regional superiority in the most likely theatre for naval warfare, the Pacific, remains considerable. This gives the Navy the ability (though certainly not the inclination) to make substantial cuts while retaining the ability to invest in key areas.

The Navy seems at times to have conceded that its primary mission is to support operations ashore. Today, numerous powers are developing advanced and capable navies, and if anything, the relevance of blue-water operations is rising fast. While the US Navy can muster more hulls than any potential adversary, it is falling behind in key technologies, notably supersonic anti-ship missiles and anti-submarine warfare. Its fleet of Super Hornets, though better for the addition of AESA radar and supported by a dedicated Electronic Warfare version, will increasingly find the world’s fleets of Generation 4 and 4.5 fighters tough nuts to crack. The other long-term problem, though, is developing a realistic successor to the Arleigh Burke class, now that DDG-1000 has been capped at three ships. As Flight III and even IV designs have skyrocketed in cost while encountering significant design limitations, it is time to start from scratch, with a hull that is a warship first and stealthy second.

News from China: Barbecue ban

The South China Morning Post reports that after smog choked Beijing and much of northern China last month, authorities are considering legislation to ban barbecues. To think of all that time and money my country spent cleaning up factory and transportation emissions, when all along it was the darned barbecues…

In other news, a spate of Animal Farm-related jokes has spread across China after it was reported that the Guangzhou Zoo is testing job applicants on their knowledge of Marxist-Leninist thought. It’s good to see that political humour isn’t quite dead yet.

China’s Migrant Workers Stay Home: The trend continues

China’s migrant workforce, the backbone of coastal manufacturing industry, is following through on its determination to stay home.

Following the Global Financial Crisis, there was a brief drop in export orders, which resulted in many migrant workers being laid-off, but this situation reversed by late 2009. However, though there was again a need for workers, their pay declined, often by around one third. As a result, many migrants decided they could no longer afford to live and work in the city, and a dire labour shortage, particularly of semi-skilled labour, became apparent. It was in the context of this disjuncture of labour demand and low wages that major incidents occurred at Honda and Foxconn plants.

And the trend is continuing. According to China Daily, former migrant workers are being actively courted through job fairs in their home provinces. Typically, migration ran from the poorer interior to the developing coast. Now, businesses situated on the coast are increasingly worried about labour shortages. According to one factory manager, “More than 10 percent of workers have not returned after the Spring Festival each year since 2009. We’ve asked employees this year about their willingness to stay or not and 15 percent of them said they would not come back.”

Migrant workers have been unequal partners in China’s development, abused in every concievable way by the companies they worked for, from short pay to crippling exposure to toxic substances, and, as non-urban residents, they have been unable to use the services available to everyone else in the cities, from education to healthcare. Now, they are increasingly demanding change. The number of labour protests has grown geometrically each year since the mid-2000s.

A shortage of migrant workers drew notice even before the Global Financial Crisis, leading the central government to put pressure on employers to raise wages and to begin actually paying them as announced, far from a foregone conclusion in many enterprises. Labour increasingly has the market advantage as structural labour shortages set in. As more enterprises relocate inland, more workers choose to accept lower-paying jobs nearer home rather than moving to coastal areas. Simultaneously, Chinese officials such as then-human resources and social security minister Yin Weimin are acknowledging the twin issues of higher wage and benefit expectations and an ageing population.

Taken together, these changes add up to a new shift in worker mentality, which demands of foreign capital a modest but more proportionate share of the benefits of their labour, and more importantly, a future. While this trend may cause some capital to turn to cheaper labour elsewhere, it may also be a sign that the race to the bottom is not so inexorable as some have assumed. Finally of course, migrants endured great hardship in hopes of building a better life for themselves and their families. They have learned that this will not happen working in coastal industries. Whether they stay home in hopes that their voices will be more easily heard or simply out of resignation, the point is that the incentive to move has disappeared.

Crisis, Planned Transition or Both?

Of course, none of this is terribly surprising or unlooked-for. Believe it or not, the Party foresaw this trend several years before it kicked off. Their prepared answer was twofold. First, when the country reached a certain level of wealth, it would be time to transition to domestic markets. Reliance on exports alone was never viewed as a sustainable strategy in a country with growing standards, and cost, of living. Business is already being lost to cheaper labour in Southeast Asia, and so there is ultimately no choice but to develop a domestic market.

Second, the problem is viewed as an opportunity to address regional inequality, a persistent problem in China’s development. The very fact that their native regions are trying to get migrants to stay home indicates that they may finally have the resources to make use of that labour. The Party may well hope that this augurs the beginning of a long-awaited rebalancing of regional economies, a partial solution to a persistant headache for the ruling elite.