Turkey's choice of a Chinese air defense system continues to dominate the agenda between Turkey and its Western partners in NATO. Turkey's foreign minister, Ahmet Davotoglu, is in Washington this week and that issue is on the agenda. And the deal was also the hot topic at a NATO Industry Forum last week, organized by NATO and Turkey's Undersecretariat for Defense Industries, which your Bug Pit was able to attend.
If you haven't been following, the controversy began in September, when after a drawn-out competition, Turkey announced that it had chosen the Chinese HQ-9 air and missile defense system. The Chinese system was competing against ones from Russia, the U.S., and Europe, so the competition appeared to have -- rightly or wrongly -- a geopolitical component. So the pick of the Chinese system renewed fears that Turkey, under the leadership of Prime Minister Recep Tayyip Erdogan, was drifting away from the West toward the East. More specifically, NATO partners are concerned that the system won't be able to be securely integrated into the NATO air defense system in which Turkey already participates (though many in Turkey claim that is merely a pretext by Western companies and governments who resent losing business and influence to China).
The launch of commercial production at Kashagan, Kazakhstan’s supergiant Caspian Sea oilfield, has been delayed again and will not begin until 2014.
Christophe de Margerie, chief executive of France's Total, one of the consortium partners, made the unwelcome announcement that the storied project would miss its latest target of starting commercial production in 2013. He said Kashagan “will not restart before the end of the year” following the suspension of production in October to deal with a gas leak. “It's more than simply repairing pipes,” Reuters quoted him as saying this week.
The North Caspian Operating Company (NCOC) – which also includes Kazakhstan’s state energy firm KazMunayGaz; oil majors ExxonMobil, Shell, and Eni; China’s CNPC; and Japan’s INPEX – has not confirmed that production will not re-start this year, but Hans Wenck, NCOC’s external communications manager, told EurasiaNet.org that “inspections and investigations will take some weeks to conclude.”
“The Kashagan oil and gas production remains shut in until the inspections are completed and results of the expert studies are available, and restart of the facilities can be carried out safely,” he said in an emailed statement on November 12. “Until such investigations are completed it will be too early to discuss any possible remedial actions and time required to implement them.”
Reuters quoted an unidentified industry source on November 11 as saying that Kashagan exports would restart in March “in a best-case scenario.”
As criticism from NATO allies continues to pour in, Turkey appears to be reconsidering its decision to buy a Chinese air defense system. Last week, Prime Minister Recep Tayyip Erdogan, who made the final call to buy the Chinese system over American, European and Russian competitors, suggested there were some conditions under which Turkey would change its mind:
Despite criticism from its NATO allies, Turkey would only give up co-producing a long-range air and missile defense system with a Chinese firm currently under US sanctions if the company were to decide to pull out of the deal, leading Turkey to talk to other bidders, Prime Minister Recep Tayyip Erdoğan said...
"The Chinese system will be checked to see if it fits NATO standards,” Erdoğan said.
And on Tuesday, Reuters reported that Turkey has asked the American bidder, Raytheon, to not give up quite yet.
The sources familiar with the US proposal to supply a Raytheon-built Patriot missile defense system said Turkish officials had requested an extension of the pricing included in the bid while their talks continued with China.
"It's clear that they are trying to hedge their bets," said one of the sources.
U.S. Navy Adm. Samuel J. Locklear, commander of U.S. Pacific Command, returns a salute to Mongolian service members during Khaan Quest 2013 in Ulaanbaatar, Mongolia. ((U.S. Navy photo by Mass Communication Specialist 1st Class Danny Hayes)
Chinese hackers have been planting malware in documents associated with U.S.-Mongolia military exercises in an apparent attempt to interfere with Mongolia's ties to the West, a private American cybersecurity company claims.
According to a recent report by the company ThreatConnect, Chinese hackers created a decoy "weaponized Microsoft Word document" appearing to be an official U.S. Army announcement related to the annual Khaan Quest exercise that Mongolia hosts, and the U.S. supports.
This activity represents Chinese Computer Network Exploitation (CNE) activity against organizations that China perceives to be jeopardizing its interests in Mongolia. As evidenced in the weaponized Khaan Quest document described above, Chinese APT groups will likely continue targeting US military entities involved in cooperation activities with the Mongolian military. Also, western European and other governments that engage with Mongolia diplomatically will be considered CNE targets as well.
Another document, in Mongolian and discussing a joint military exercise with Vietnam, was also found with the same bit of code. ThreatConnect suggests some sort of connection between this operation and the famous Chinese People's Liberation Army hacking operation, Unit 61398. It's hard to tell how seriously to take this -- threat inflation is endemic in the cybersecurity world -- but it's an interesting little look into how Washington and Beijing might be looking at this.
Turkey's American and NATO allies have not responded well to the announcement that Turkey plans to buy an air defense system from China, bypassing American and European systems.
State Department spokeswoman Jen Psaki told reporters: "We, of course, have conveyed our serious concerns about the Turkish government’s contract discussions with a U.S. sanctioned company for a missile defense system that will not be interoperable with NATO systems or collective defense capabilities. Our discussions will continue." (The Chinese manufacturer of the winning system, China Precision Machinery Import and Export Corp., is under U.S. sanctions for doing business with Iran, but it seems unlikely that is Washington's real issue with the deal.) And the U.S. ambassador to Turkey added: "Turkey is a NATO ally. When we see the need for its defense we act as an ally and we are going to do that for as long as we are allies... We hope you will choose a NATO compatible system so that you will have the best air defense system in the world.”
And officials who spoke anonymously were significantly more negative. From Defense News:
“How could Turkey, protected by NATO assets, ignore the alliance’s concerns and opt for an air defense system to be built by a non-friendly country?” asked a NATO defense attaché in Ankara....
The Chinese HQ-9 air defense system, just chosen by Turkey. (photo: Jian Kang, Wikimedia Commons)
Turkey has chosen a Chinese air defense system over Russian, American, and European competitors, apparently prioritizing business concerns over the wishes of its allies. Reports Hurriyet Daily News:
Ankara has granted a long-awaited tender for long-range missile and air defense systems to Chinese contenders, dismissing bids from major NATO allies as the United States, France and Italy.
With the decision, announced today following a meeting of the Undersecretariat for Defense Industries' executive council, which is headed by Prime Minister Recep Tayyip Erdoğan, Ankara has approved the lowest offer despite worries about the Chinese system’s ultimate compatibility with NATO-owned early warning assets.
The Chinese offer of the HQ-9, at $3 billion, was significantly cheaper than the competing U.S. Patriot, Russian S-400, and French-Italian Eurosam Samp-T systems. And perhaps more importantly, China was willing to co-produce the HQ-9 together with Turkey, a key factor for Ankara, which places a high priority on building up its own defense industry.
Chinese President Xi Jinping, who has opened his wallet to the tune of tens of billions of dollars on his four-nation tour of Central Asia this month, didn’t run out of money before he arrived in Kyrgyzstan. Beijing has offered Bishkek a much-needed cash infusion reportedly totaling about $3 billion.
During his trip, Xi helped inaugurate the world’s second-biggest natural gas field, in Turkmenistan, which will help triple China’s imports from what is already its largest foreign supplier. In Kazakhstan, he reportedly signed energy deals worth $30 billion. In Uzbekistan, AFP reported $15 billion in vague energy and mining deals.
In resource-poor Kyrgyzstan, Economics Minister Temir Sariev said Beijing’s credits and investments would total $3 billion. About half will be used to build a 225-kilometer pipeline across the country for the Turkmen gas, from which Kyrgyzstan will eventually receive transit fees.
The package announced on September 11 includes a loan to build a new highway connecting Kyrgyzstan’s north and south, KyrTAG reports, citing Sariev, a $400 million loan to modernize the ailing Bishkek heating plant, and $400 million toward a long-delayed Chinese-built oil refinery. There’s even a promise to open a hospital specializing in Chinese medicine.
Armenia is seeking to become an observer in the Shanghai Cooperation Organization, as Yerevan seems to be establishing its own unique brand of multivector diplomacy.
Armenian Prime Minister Tigran Sargsyan made the announcement on a visit to China, and Chinese PM Li Keqiang said he would bring the issue up with other SCO members.
The SCO is a China-dominated political-military bloc that also includes Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. The SCO has been expanding west, though, recently: Turkey became a "dialogue partner" earlier this year, a status Belarus also holds.
Sargsyan offered no explanation of what Armenia might be looking for with the SCO, so it's up to us to speculate. Armenia, of course, raised eyebrows when it came out that it had gotten multiple-launch rocket systems from China, and Armenia could be casting around for new partners, Emil Sanamyan, editor of the newspaper Armenian Reporter, told The Bug Pit. "My sense of this is an extension of the outreach to China that is made relevant by the recent diplomatic setbacks with both Europe and Russia. The recent leak re fresh weapons purchase from China seems to also be part of that," Sanamyan said. "With the EU association document killed by Russian pressure, there will be some new entity to fill the airwaves with." (Sanamyan also noted that Armenia is an observer in the Arab League, another organization whose connection to Armenia looks somewhat tenuous.)
China’s president clinched another round of multi-billion-dollar oil and gas deals in Uzbekistan on September 9 as he continued vacuuming up the region’s energy resources on his tour of Central Asia.
Xi Jinping and his Uzbek counterpart Islam Karimov signed agreements worth $15 billion in Tashkent, AFP reported.
Details were not immediately released, but the report said the deals included contracts in the oil and gas industry, where Sino-Uzbek economic cooperation has been expanding since Uzbekistan started exporting gas to China in September 2012, and also agreements in the uranium sector, which Tashkent is eager to develop.
Other deals covering trade, energy, investment and financing were also signed, a report on the People’s Daily website added. Uzbek media, which are notoriously slow to react to events, had not reported the deals by late evening on September 9; neither had the presidential or Foreign Ministry websites.
During his visit Xi called for China and Uzbekistan to boost bilateral trade, which stood at $3.4 billion last year, to $5 billion by 2017. Xi suggested opening negotiations to set up a Sino-Uzbek free trade zone, and looking at measures to promote infrastructure connectivity between the two countries, which do not share a direct border but are linked via Kazakhstan or Kyrgyzstan.
As Chinese President Xi Jinping continued his tour of Central Asia in Kazakhstan on September 7, Beijing and Astana were set to sign a raft of lucrative business deals that will further boost China’s presence in its hydrocarbon-rich neighbor’s energy sector.
Key among them was a deal giving China’s state energy company, CNPC, a stake in the super-giant Kashagan oilfield, which is about to start commercial production. The agreement, announced in July, is a coup for CNPC, which usurped India’s ONGC Videsh to acquire a stake put up for sale by Houston-based ConocoPhillips.
Under the deal, CNPC will pay approximately $5 billion for an 8.33 percent share in the consortium developing the field, which also includes Kazakhstan’s state energy company KazMunayGaz (KMG); oil majors ExxonMobil, Shell, Total, and Eni; and Japan’s INPEX.
The agreement cements China’s grip on oil and gas resources in Kazakhstan (where it already controls around a quarter of oil output) just as Kashagan is about to come on stream after years of delays. On September 7 KMG head Sauat Mynbayev said commercial production would start in three to four weeks.
Mynbayev also unveiled what Kazakhstan stands to gain: CNPC will dig deep to finance half of KMG’s investment obligations in Kashagan, and it will also build a pipeline plant and an industrial center to produce equipment for the oil industry.