Chinese Vessel Rams Vietnamese Ships Under Air Support; Water Cannon Used
Submitted by Tyler Durden on 05/07/2014 08:58 -0400
With all eyes firmly focused on WWIII in Ukraine (oh, and don't forget Al Qaeda's pivot to attacking Saudi Arabia), China - as we noted here - decided now was theappropriate time to send an oil rig into Vietnamese (admittedly uncertain) territorial waters. The Vietnamese are not happy and is blasting China this morning after a Chinese vessel intentionally rammed two of its ships. As Reuters reports, the foreign ministry in Hanoi said the collisions took place on Sunday and caused considerable damage to the Vietnamese ships with six people sustaining minor injuries. Vietnam's foreign minister noted, "Chinese ships, with air support, sought to intimidate Vietnamese vessels. Water cannon was used," adding that "Vietnam won't fire unless China fires first." China has not yet responded to the Vietnamese allegations of ramming, but did have this to say, "The United States has no right to complain about China's activities within the scope of its own sovereignty."
As we noted here, China sent an oil rig into disputed Vietnamese waters...
An oil industry official in China said the deployment of the rig owned by China's CNOOC oil company to waters near Vietnam appeared to be a political decision rather than a commercial one."This reflected the will of the central government and is also related to the U.S. strategy on Asia," said the official, who spoke on condition of anonymity because of the sensitivity of the issue."It is not commercially driven. It is also not like CNOOC has set a big exploration blueprint for the region."
But as Reuters reports, tensions are rising...
Vietnam said on Wednesday a Chinese vessel intentionally rammed two of its ships in a part of the disputed South China Sea where Beijing has deployed a giant oil rig, sending tensions spiraling in the region...."On May 4, Chinese ships intentionally rammed two Vietnamese Sea Guard vessels," said Tran Duy Hai, a foreign ministry official and deputy head of Vietnam's national border committee."Chinese ships, with air support, sought to intimidate Vietnamese vessels. Water cannon was used," he told a news conference in Hanoi. Six other ships were also hit, other officials said, but not as badly.Dozens of navy and coastguard vessels from both countries are in the area where China has deployed the giant rig, Vietnamese officials have said."No shots have been fired yet," said a Vietnamese navy official, who could not be identified because he was not authorized to speak to media."Vietnam won't fire unless China fires first."
The US will have to decide if this is a red line being crossed after Obama's recent visit... but China is already putting him straight...
China has not yet responded to the Vietnamese allegations of ramming, but Foreign Ministry spokeswoman Hua Chunying said earlier on Wednesday that the deployment of the rig had nothing to do with the United States, or Vietnam."The United States has no right to complain about China's activities within the scope of its own sovereignty," she said.
Vietnam concludes for now... we assume knowing the US has its back?
"We are a peace-loving nation that has experienced many wars," he said. "If this situation goes too far, we will use all measures in line with international law to protect our territory. We have limitations, but we will stand up to any Chinese aggression."
So Russia vs US in Ukraine, check! Al Qaeda vs Saudi Arabia, check! China vs Vietnam, check! Must be time for all time highs in stocks!!
China Sends Oil Rig To Disputed Waters
Submitted by Tyler Durden on 05/06/2014 22:35 -0400
Submitted by James Burgess viaOilPrice.com,
Over the weekend of May 3 and 4, Chinasent an oil rig into disputed waters of the South China Sea to begin oil exploration. The rig is near the Paracel Islands, inside the 200-mile exclusive economic zone of Vietnam, which angrily protested the decision. The Vietnamese government insists that the waters, as well as the oil and gas reserves held beneath, belong to Vietnam.
- VIETNAM CANNOT ACCEPT AND STRONGLY OPPOSES CHINA RIG PLACEMENT
Where boundaries are drawn in the South China Sea has long been a source of regional tension, but China has escalated the conflict by moving to drill the first well inside disputed territory. China said the oil rig would be operating from now until August 15.
Some observers see the move as a careful calculation by Beijing, which believes Vietnam won’t be willing to risk war over Chinese drilling. “It's going to be one more of these small, incremental steps that individually won't lead to conflict, but collectively, over time, gradually will change the status quo,” said Admiral Mike McDevitt U.S. Navy (Ret.),according to Foreign Policy.
For its part, Vietnam is demanding that China cease drilling operations. “All foreign activities in Vietnam's seas without Vietnam's permission are illegal and invalid,” Vietnam’s Foreign Ministry said in a statement. “Vietnam resolutely protests them.”
The move may also be a response to U.S. President Barack Obama’s recent trip to Southeast Asia, which included a deal with the Philippines to allow for a greater American troop presence in the region. The U.S. and the Philippines kicked off atwo-week long military exercise on May 5.
The U.S. Energy Information Administration estimates that the South China Sea holds 11 billion barrels of oil and 190 trillion cubic feet of natural gas, most of which is located in disputed territory. China believes the oil and gas reserves could be much larger.
The question now becomes, after his recent Asia trip, is this another red line being crossed for President Obama?
Why Hasn't The U.S. Gone After Gazprom?
Submitted by Tyler Durden on 05/06/2014 21:29 -0400
Submitted by John Daly via OilPrice.com,
Amidst the deepening war of words over Moscow’s annexation of Crimea, U.S. President Barack Obama on April 28 added more Russian individuals and companies to a sanctions list that already included influential members of Russian President Vladimir Putin’s inner circle and Bank Rossiya, which has close ties to the Russian leadership. The new list freezes the assets of Igor Sechin, head of Russia's major oil company, Rosneft, six other individuals and 17 companies.
Significantly, the new U.S. list does not include Alexei Miller, CEO of the Russian natural gas state monopoly, Gazprom.
Although the European Union has imposed its own tough sanctions on 48 Russian individuals, Gazprom is arguably where daylight exists between the Obama administration and the EU on the issue of penalizing Moscow for its actions in Ukraine.
The numbers make it clear why. Russia is the EU’s third-biggest trading partner, after the U.S. and China; in 2012, bilateral EU-Russian trade amounted to almost $370 billion. The same year, U.S. trade with Russia amounted to just $26 billion.
More than half of Russia's exports go to Europe, and 45 percent of its imports come from Europe, according to the EU EUROSTAT agency. Out of 485 billion cubic meters of gas consumed by the EU annually, Russia supplies about 160 billion cubic meters, or almost one-third the total volume.
Germany, the EU’s economic powerhouse, has been explicit about the costs for the German economy from increased sanctions. Anton Börner, the president of Germany’s main trade group, BGA, warnedthat more than 6,000 German businesses with $105 billion of turnover are interlinked with Russia and stand to lose if sanctions are ratcheted up.
U.S. Representative Lois Frankel (D-FL), who recently visited Ukraine with a Congressional delegation, has offered the likeliest official explanation for why the White House left Gazprom and CEO Miller untouched in the most recent round of sanctions.
In an April 28 appearance on MSNBC, Frankel said, "I think our president is taking a cautious approach warranted because our European allies are...trade partners with Russia, they depend on Russia's energy. And so we have [to] be careful because sanctions against Russia also have the good probability of hurting our allies.”
Other members of Congress have shown less willingness to accommodate the EU’s delicate economic position. In recent days, senior members of the U.S. Senate have increased their calls for the White House to move against Gazprom. Carl Levin (D -MI), John McCain (R-AZ) and Bob Corker (R-TN)want Obama to use an executive order that allows him to punish broad sectors of the Russian economy in response to Russia’s actions in Crimea.
The lawmakers’ statements on the issue have been widely covered in the Ukrainian and Russian press.
In an April 12 letter to Obama, Corker, a ranking member of the Senate Foreign Relations Committee, said, “Unless Russia ends its destabilization of eastern Ukraine and drastically reduces troop levels on the Ukrainian border immediately, further sanctions against strategic sectors of the Russian economy, particularly targeting Gazprom and additional important financial institutions, should be imposed within days.”
After the latest round of U.S. sanctions this week, Corker repeated that call in a joint statement with Senator Kelly Ayotte (R-NH), the ranking member of the Senate Armed Services Readiness Subcommittee, in which he said, “Until Putin feels the real pain of sanctions targeting entities like Gazprom, which the Kremlin uses to coerce Ukraine and other neighbors, as well as some significant financial institutions, I don’t think diplomacy will change Russian behavior and de-escalate this crisis.”
During an April 25 visit to the Ukrainian capital, Kiev, Levin told reporters, “The existing authority is sufficient to take very strong sanctioning action against Russian banks that have correspondent accounts in the United States. The authority exists. It should be used, and that includes Gazprom.”
McCain advocated in an April 25 press release, “The United States needs to expand sanctions to major Russian banks, energy companies, and sectors of its economy, such as the arms industry, which serve as instruments of Putin’s foreign policy. NATO needs to move toward a robust and persistent military presence in central Europe and the Baltic countries, including increased missile defense capabilities. We need a transatlantic energy strategy to break Europe’s dependence on Russian oil and gas,” which would include sanctions against Gazprom, according to his office.
McCain recently suggested he has a broader agenda in mind when he said, “The strategy of the U.S. for saving Ukraine must be built in opposition to Russia's gas strategy, as this will be the end of Putin and his empire."
Given Gazprom’s centrality to the Russian economy, it’s unlikely that Putin won’t react if and when the company comes in for Western sanctions. In preparation for that possibility, Gazprom’s subsidiary, Gazprombank, Russia’s third largest, last month transferred nearly $7 billion to the Central Bank of the Russian Federation.
Gazprom has already warned that further Western sanctions could disrupt gas exports to Europe.
And Russian Natural Resources Minister Sergei Donskoi has made it explicit that there will be consequences for Western energy firms that comply with sanctions. Speaking on April 24 to journalists in Russia’s far eastern city of Birobidzhan, Donskoi said, "It is obvious that they won't return in the near future if they sever investment agreements with us, I mean there are consequences as well. Russia is one of the most promising countries in terms of hydrocarbons production. If some contracts are severed here, then, colleagues, you lose a serious lump of your future pie."
Donskoi also expressed the certainty that if Western firms leave Russia, other foreign energy companies would take their place.
That kind of threatening rhetoric will only make it harder for U.S. officials to sell an already nervous Brussels on the idea of more sanctions, if it comes to that, and on targeting Gazprom, in particular.