November 24, 2012

The Scramble for Asia's Resources

By Daniel McGroarty

With Washington skepticism near an all time high, it's no surprise that the Obama administration's recent travels have the town's talking heads buzzing. After all, just as Congress convenes hearings on the Sept. 11 Benghazi attack, it seems everyone who's anyone is jetting off to Asia.

And yet, to paraphrase that shrewd war correspondent Sigmund Freud, sometimes a ministerial visit is just a ministerial visit -- even if it does take the president plus his secretaries of State and Defense halfway around the world the very same week Congress was clamoring for their attendance.

The attraction in Asia is two-fold: AUSMIN -- the Australia-United States Ministerial Consultations (and for the record, 2012 marks the second straight Australian session to command the presence of both Secretaries Hilary Clinton and Leon Panetta) -- followed by the ASEAN Summit, with a precedential presidential visit to Burma sandwiched in between. All of which underscores the Pacific Pivot announced to great fanfare by President Obama a year ago.

But alongside America's Pacific Pivot comes the other piece of the Pacific picture: Asia's own pivot -- away from China. This is not a case of breaking from security relationships involving the PRC -- whose closest allies in the region remain North Korea's Kim Jung-un and Cambodian strong man Hun Sen, now that Myanmar's dictatorship has given way to Burma's fledgling democracy -- but rather a repositioning of commercial relationships that have grown with China's rise into economic dependencies creating varying degrees of discomfort on the part of China's regional neighbors.

Consider Japan, caught now in a replay of the 2010 tug-of-war over a string of uninhabited islets in the East China Sea, and the rights to the seabed resources surrounding them. Resource-poor and dependent on China's willingness to export critical metals, Japan recalls all too well the de facto rare earths embargo of late 2010. Japan undertook then to loosen its resource ties to China; today, the pace is accelerating. In the past month alone, Japan's Toyota Tsusho purchased 49 percent ownership of a Canadian rare earths deposit, Sumitomo Corp. partnered with Kazakhstan's Kazatomprom to extract rare earths from uranium waste tailings and Japan's foreign minister hosted his Turkmen counterpart in Tokyo, unveiling a development package to the five resource-rich former Soviet Central Asian Republics. With these overtures in play, Japan's trade minister announced this week Japan's intent to cut its near-total dependence on Chinese rare earths to 50 percent by mid-2013.

In South Korea, where the government's stockpile of rare earth elements is a scant 19-day supply, KORES -- Korea's state-run resource corporation -- has partnered with a South African rare earths miner. The move is just one step in an $8 billion effort to establish strategic stockpiles involving a range of metals for which China is currently a leading supplier.

The same quest for strategic distance drives the Philippines and Vietnam, fearful of China's expansive claims to 90 percent of the South China Sea. Each nation is looking for buffers against Chinese power, including the prospect of a stronger relationship with the United States. In the Philippines, this takes the form of a new appreciation for the 60-year old Mutual Defense Treaty. For those who recall the divisive days of the Vietnam War, there is no stronger sign of the potential sea change than Secretary Panetta's discussions concerning a potential U.S. naval basing arrangement during his June visit to Cam Ranh Bay.

The reset radiates even beyond the Pacific, out toward the Indian Ocean. Indeed, Secretary Clinton took her first opportunity on Australian soil to encourage her hosts to conduct joint naval exercises with India. For its part, the U.S. Navy is strengthening its own Indian Ocean presence, joining forces with the Netherlands and six African nations in the just-completed Cutlass Express naval exercise, operating out of Djibouti -- where a squadron of the U.S. JSOC drone fleet can be seen sitting on the tarmac in full view of the civilian side of Djibouti International Airport.

Draw a line from Djibouti on the Indian Ocean's western shore to Australia's HMAS Sterling naval base at Perth on the east, and the midway point runs past the UK's Diego Garcia base -- long a prominent port for U.S. Navy vessels. What with China winning approval from the UN's International Seabed Authority to commence exploration for seabed metals, the Indian Ocean is getting to be crowded.

Meanwhile, back in Washington, far from the formal dinners and Sherpa sessions of AUSMIN, the American political class jaws over the looming "fiscal cliff," and the risk of a defense sequester that would bone-saw fully half of all funding cuts from military budgets.

A dozen Asian nations will be watching closely, to see whether November's diplomatic demarche will be followed by a sustained commitment to the power projection necessary to make the promised Pacific pivot a reality.

Daniel McGroarty, principal of Carmot Strategic Group, an issues management firm in Washington, D.C., served in senior positions in the White House and at the Department of Defense.

No comments: