China’s Compromise of Duterte, the Selling of Philippine Sovereignty, and Risk to Western Market Share in Southeast Asia

Journal of Political Risk, Vol. 6, No. 2, February 2018

By Anders Corr, Ph.D.

In his visit to China in October 2016, President Duterte of the Philippines broke with the United States and all but pledged allegiance to China. In February 2018, he joked that China could make the Philippines into a Chinese province, “like Fujian.” This joke was made at an event for the Chinese Filipino Business Club Incorporated (CFBCI), members of which stand to benefit from closer China-Philippine ties. Ambassador from China to the Philippines Zhao Jianhua (趙鑒華) reportedly smiled at Duterte’s jokes. Duterte again brought up an unfounded fear of war with China, which serves to justify his negotiations with the country. Duterte’s actions are destabilizing the Philippines and regional stability, and could threaten the regional market share of western companies.

Philippine President Rodrigo Duterte (L) and Chinese President Xi Jinping shake hands in Beijing on May 15, 2017, on the second day of the Belt and Road Forum for International Cooperation. Source: Kyodo News via Getty Images.

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China’s $60 Trillion Estimate Of Oil and Gas In The South China Sea: Strategic Implications

U.S. hydrocarbon estimates imply a maximum of $8 trillion worth of oil and gas in the region, explaining part of the strategic divergence of the two superpowers.

Journal of Political Risk, Vol. 6, No. 1, January 2018

By Anders Corr, Ph.D.

China’s estimates of proved, probable and undiscovered oil and gas reserves in the South China Sea imply as much as 10 times the value of hydrocarbons compared with U.S. estimates, a differential that has likely contributed to destabilizing U.S. and Chinese interactions in the region. While China estimates a total of approximately 293 to 344 billion barrels of oil (BBL) and 30 to 72 trillion cubic meters (TCM) of natural gas, the U.S. only estimates 16 to 33 BBL and 7 to 14 TCM. Considering that the inflation-adjusted value of oil vacillated between approximately $50 and $100 per barrel (in 2017 prices) since the mid-1970s, U.S. estimates imply a hydrocarbon value in the South China Sea between $3 and $8 trillion, while Chinese estimates imply a value between $25 and $60 trillion. In addition to other factors, China’s greater dependence on oil imports and higher estimates of hydrocarbons in the South China Sea have driven it to invest more military resources in the region. An overly economistic approach by the Obama administration probably led the U.S. to allow China’s expansion in the South China Sea too easily.

Photo taken on June 13, 2015 shows the Xingwang deep-sea semi-submersible drilling platform at Liwan3-2 gasfield in the South China Sea. China’s largest offshore oil and gas producer CNOOC Ltd. announced on July 3, 2015 that its Xingwang deep-sea semi-submersible drilling platform started drilling at 1,300 meters underwater in Liwan 3-2 gas field in the South China Sea. Credit: Xinhua/Zhao Liang via Getty Images.

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Nepal milestone towards increased stability

Nepal passed a modest milestone today in its attempts to improve stability . The four top political parties named Supreme Court Chief Justice Khilraj Regmi as head of an interim government. The main goal of Regmi will be to hold elections by June 21 for a new parliament empowered to adopt a constitution (ABC News).

However, we are not overly optimistic. Smaller political parties led violent riots in opposition to Regmi, it is unclear whether elections will actually be held, and even if elections are held, it is unlikely they will lead to a constitution. The last parliament elected for the purpose of deciding on a constitution — in 2008 — was unable to agree on one during its four-year tenure. Nothing fundamental has changed in Nepalese politics to suggest that a constitutional breakthrough will occur in the near future.

Increased Unrest in Bangladesh

Journal of Political Risk

By Anders Corr, Ph.D.

A few weeks ago Corr Analytics predicted a likely increase in Bangladesh unrest due to steps leading to the criminalization of the Islamist political party, Jamaat-e-Islami (canalyt.com).

With today’s arrest of a Jamaat-e-Islami party official, the predicted unrest materialized. A demonstration that clashed with police resulted in at least 61 injured. Demonstrators threw crude bombs at police, who responded with tear gas and rubber bullets. The Bangladesh Nationalist Party (BNP) — the main opposition in parliament — is now more closely allied with Jamaat-e-Islami. The BNP called for a General Strike on Thursday (Associated Press).

Given the extensive business interests and relatively strong alliance of Bangladesh with the West, it is paramount to maintain the country’s relative stability. Given the pro-Islamist outcomes of the Arab Spring events, it would not be advised to risk another such movement in Bangladesh. The US and other Western ambassadors to Bangladesh should encourage moderation of the Bangladesh Government with respect to Islamist political parties. Not doing so risks further increases in unrest, a less stable investment environment, and potential increases in Bangladesh-originated terrorism.

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