Image: William Engdahl, courtesy of William Engdahl website
By Charles F. Moreira, Editor
There is more to China’s One Belt, One Road (OBOR) strategy than a few then thousand kilometres of high-speed rail and deep water ports in different parts of Asia, according to American geopolitical analyst and strategic risk consultant F. William Engdahl. In the bigger picture, China sees it as a means to enable nations of the world to move away form their dependence upon the US dollar as the world’s key reserve currency.
“As they rightly see it, so long as the US dollar remains the key reserve currency for the vast value of world trade, world central banks will be forced to accumulate dollars to purchase oil, commodities, machinery even gold and to unwillingly finance America’s wars, wars ultimately against their own national interests, whether against Iran or Qatar or North Korea,” wrote Engdahl on his website following his visit to China in June 2017 to gather information for his forthcoming book on the Eurasian Century.
China has not forgotten its history and the OBOR strategy is very much influenced by what German geographer Ferdinand von Richtofen dubbed the ‘Silk Road’ in 1870. This ancient Silk Road was the overland trade route to trade valuable Chinese silks with the Mediterranean and the Roman Empire which Han Dynasty Emperor, Zhang Qian, opened more than 2,200 years ago,which linked the then-highly advanced cultures and civilisations of China, India, Persia (now Iran), Arabia with Greece with and Rome.
“It is clear to me after many conversations with Chinese of all backgrounds that they realize acutely how significant the potential of this OBOR development is becoming to lift the world out of ever-more destructive wars into a long term period of rising living standards and peace”, Engdahl added.
Former US President Obama’s ‘Pivot to Asia’ announced in November 2011 intended to contain China both both militarily and economically and this was the catalyst behind China pursuing the OBOR strategy. In September 2013, China’s President Xi Jinping went to Kazakhstan where he first announced his vision collaborate with regional neighbours to build a Silk Road economic belt which benefit people in countries along its route.
Then following the US-inspired coup d’etat in Ukraine in early 2014 which overthrew its democratically elected and Russia-friendly president President Viktor Yanukovych, Russia turned towards strategic co-operation with China and its new Silk Road which would bring together the nations of Eurasia in peaceful economic cooperation for mutual benefit.
Renminbi to replace the US dollar
After the Nixon administration took the US dollar off the gold standard in August 1971, control on the supply of dollars and on dollar inflation rested exclusively with the US Treasury and the Federal Reserve. This allowed the US government to run unending Federal budget deficits with low interest rates, leaving nations such as Japan, China, Russia or Germany with no choice but to convert their trade surplus dollars for interest-paying US government debt, which allowed the US to extend its dominance of the world using this foreign “borrowed money”. This era of recycling of petrodollars seemingly worked well for the United States for over 40 years but are now coming to an end.
Whilst China is being discreet about replacing the US dollar with the Renminbi as a reserve currency,it has made this objective an integral part of the OBOR strategy.
“A leading Chinese academic involved in the conceptualisation of OBOR and who is close to the state planning organisation told me in private remarks in Beijing that China is carefully building a foundation of a Renminbi unit of account in world trade alongside the dollar, ‘by filling in the blank spots where the dollar does not dominate’. He noted a critical difference between the economy of China and that of the Federal Reserve and US Treasury: ‘The US dollar today is not mainly for goods trade, but for trading debt’,” wrote Engdahl.
This Chinese economics expert then pointed out that Iran no longer sells its oil to China in dollars; that China and Russia use their national currencies to settle energy purchases, and that even Qatar sells its LNG (liquefied natural gas) to China in renminbi, not dollars. This expert also pointed out that China’s recent membership in the five-nation reserve asset – I.E. a basket of currencies known as SDRs (Special Drawing Rights) under the auspices of the International Monetary Fund (IMF), is primarily a means to gain more acceptance in other countries and markets for trade directly in renminbi, not dollars.
According to the IMF’s website, the SDR was created by the IMF in 1969 to supplement its member countries’ official reserves. As of March 2016, 204.1 billion SDRs (equivalent to about US$285 billion) had been created and allocated to members. SDRs can be exchanged for freely usable currencies. The value of the SDR is currently based on a basket of five major currencies — I.E. the US dollar, the Euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.
This Beijing economist stressed that whilst the United States trades in money–derivatives, options and making money out of money; China on the other hand trades in physical goods and that this difference is the foundation behind the Silk Road idea and is what OBOR is all about.
Contrary to oft-stated fears and allegations, the purpose of building high-speed train links across Eurasia is not to steal markets, but to build trade networks linking real economies and to build entire new markets.
One Belt, One Road Sites
Engdahl visited several Belt and Road sites, including Xi’an, a bustling modern city of nine million and home of the largest high-speed railway terminal in Asia which was completed in 2011. From this terminal. sleek trains constantly come and go in every direction towards Mongolia, Beijing, Kunming in the South to Kazakhstan and Russia on to the European Union. Xi’an also home to major research and development labs, to installations of national security, and China’s space programme.
From Xi’an trains connect to the port of Qingdao in Shandong Province on China’s east coast opening to the Yellow Sea. It is one of the new deep water ports being developed as the “belt” component of the One Belt, One Road. Qingdao harbour consists of Dagang Port Area and the Qianwan Container Terminal, at present is China’s fourth largest port. It already handles more annual freight container traffic than the ports of Hamburg and Antwerp combined. In 2015 Hamburg, Germany’s largest port, handled 9-10 million TEU of containers. Qingdao did 18 million TEU.
Qingdao port is currently being massively expanded as part of the OBOR sea lane development. It can handle the world’s largest container ships as the first fully-automated container port in Asia. The port also is linked by rail to European Union markets via Russia.
“I was told by Port authorities that the present sea route to Europe from Qingdao takes much longer, 40 days compared with 15 days by rail. However rail costs per weight about twice as much. The strategy then is to ship low value added bulk commodities by sea and high-value such as computers, smart phones and such by rail”, said Engdahl. “The port complex is an all-purpose fully-automated harbour able to handle raw commodities such as iron ore, coal, oil or even LNG from Qatar and elsewhere. The port, outside the City is connected to the industrial city centre by a 41 kilometre long bridge, Qingdao Haiwan Bridge, part of the Jiaozhou Bay Connection Project, the world’s longest bridge over water, completed in 2011”, he added.
Meanwhile, the city of Qingdao has been one of China’s designated Special Economic and Technology Development Zone (SETDZ) since 1984, and is now China’s tenth city in terms of annual GDP.
With a degree in politics from Princeton University and graduate study in comparative economics at Stockholm University, F. William Engdahl worked as an economist and investigative freelance journalist in New York and Europe.
He has lectured on contemporary geopolitics as Visiting Professor at Beijing University of Chemical Technology and delivers talks and private seminars around the world on different aspects of economics and politics with focus on political risk. He has given talks at the Ministry of Science and Technology Conference on Alternative Energy, Beijing; London Centre for Energy Policy Studies of Hon. Sheikh Zaki Yamani; Turkish-Eurasian Business Council of Istanbul, Global Investors’ Forum (GIF) Montreaux Switzerland; Bank Negara Indonesia; the Russian Institute of Strategic Studies; the Chinese Ministry of Science and Technology (MOST), Croatian Chamber of Commerce and Economics.
Engdahl has been researching and writing about the world political scene for more than thirty years. His various books on geopolitics—the interaction between international power politics, economics and geography—have been translated into 14 foreign languages from Chinese to French, from German to Japanese. His most recent works trace the strategies and events that led to the rise of the US as an international superpower.
He describes the emergence after 1945 of an American power as a new kind of empire not based upon sole military occupation of land, but control of vital resources. Domination was through creation of an informal empire where control of finance, of the basic food chain, of energy—above all of oil, would be the basis for what would become the greatest concentration of power in history, an American sole superpower after the collapse of the Soviet Union. Engdahl also writes on oil and geopolitics exclusively for the online magazine New Eastern Outlook. – https://journal-neo.org
F. William Engdahl also posts his articles on his website at http://www.williamengdahl.com