CNBC analysis provide critical pathway to political economy of why Vietnam must resist

CNBC.com breaks the official press silence on the real issue behind China’s bold move into Vietnam’s coastal waters

CNBC breaking the official media silence on the real issue of the current phase of the China bold move into Vietnam waters is very important and timely because a new layer of Americans are now engaging the reality of the strategic situation in the South China beyond the controlled of the selective information of the RT.Com, New York Times, BBC, The Diplomat and Wall Street Journal. Few Americans have been brief by the main stream press on the strategic importance of South China Sea energy to Vietnam immediate development. CNBC offer a gateway to a new matrix to view the Vietnam/China conflict The Diplomat by design, refused to share.

Vietnam is reaching the next critical phase of its development of gas and is developing the Da Nang region as the next New York City in Asian. The emerging natural gas power grid in Da Nang will make the region cleanest city in Asia and a powerful emerging computer integrated manufacturing center. The immediate key to Da Nang and southern Vietnam next phase of economic growth is the use of gas from the ExxonMobil gas field from blocks 117, 118, and 119 off Vietnam’s central coast.

The military deployment of the Chinese oil rig HD-981 by Beijing in striking distance of the ExxonMobil oil and gas field is designed to force Vietnam to make a political deal in exchange for development of southern Vietnam power grid.

May 21, 2014, the Wall Street Journal‘s article “Vietnam Says Chinese Oil Rig Poses 'Serious Threat' to Security” Prime Minister Dung Says Rig's Installation in Disputed Waters Violates International Law, had a picture China placed an oil rig near the Paracel Islands in the waters of the South China Sea that China and Vietnam both claim. The Vietnamese Coast Guard showed a video clip of one of its ships trying to get near the rig but being rammed by a Chinese ship. Nowhere in its analysis, is the WSJ readership informed of the relationship or distance between the Chinese rig and the massive ExxonMobil oil and gas field nearby or any pipe lines. ExxonMobil is one of 23 international companies helping Vietnam develop its energy sector. Exxon Mobil has accelerated the pace of its investment in the US$20 billion worth gas-electricity complex in Viet Nam.

The investment plan was initiated several years ago when Exxon Mobil discovered offshore gas reserves in central Viet Nam. Exxon Mobil and PVN have jointly planned to build a 200ha gas-electricity complex in the central region, using gas products from Lots 117, 118, and 119.

The Diplomat and the world were aware of ExxonMobil and Vietnam plans

The Diplomat omission of Vietnam southern power grid development is conspicuous.Three days before the CNBC posting, The Diplomat posted in China's Oil Rig Gambit: South China Sea Game-Changer? Analysis, “China’s placement of a state-owned oil rig in the South China Sea was unexpected, provocative and illegal. A second interpretation posits that China’s actions were in response to the operations by ExxonMobil in nearby blocks..This interpretation seems unlikely. ExxonMobil has been operating in Block 119 from 2011. While China protested the award of an oil exploration contract to ExxonMobil, China has not stepped up its objections in recent months. It is also unclear how the placement of a Chinese oil rig in Block 143 would deter ExxonMobil from operating elsewhere. Finally, China’s actions appear to be disproportional and very likely counterproductive. Block 143 does not directly affect U.S. interests. Chinese interference with ExxonMobil would be a direct challenge to the Obama administration’s statement that U.S. national interests included “unimpeded lawful commerce.”

Rather than targeting an energy-rich zone, Beijing is simply interested in pushing its neighbors as much as possible to maximize the swath of sea it ultimately will control, experts told CNBC. In effect, China is inserting a physical presence that gives it the upper hand over wide ranges of territory and forces Vietnam to react defensively rather than focus on its own expansions. While the CNBC analysis did not detail the “wide ranges…(Chinese) forces” a blind man can see the Vietnamese national pipe line is being targeted by the massive 90 ship HD-981 placement.

Chinese troops have reportedly been spotted heading towards the China-Vietnam border

A large number of People’s Liberation Army troops have reportedly been spotted heading towards the China-Vietnam border as tensions between the two countries continue to escalate, reports Hong Kong’s Sing Tao Daily. Sing Tao Daily is generally considered to be aligned to Chinese state media.

While the BBC and western news centers are still suggesting to their readership –“ It is a dispute over territory and sovereignty over ocean areas and the Paracels and the Spratlys - two island chains claimed in whole or in part by a number of countries. Alongside the fully fledged islands, there are dozens of uninhabited rocky outcrops, atolls, sandbanks and reefs, such as the Scarborough Shoal” CNBC is breaking the media silence on the real issue of the current phase of the China bold move into Vietnam waters. CNBC has jointed an emerging school of thinking within the oil and gas industry that suggest China’s move is driven by Chinese failure to develop deep sea energy and not the Paracels and the Spratlys. The most remarkable aspect of the CNBC analysis is the critical discussion of the China lack of deep sea pipe lines and China’s gross failure to find oil or gas.CNBC.com breaks press silence makes the economic gas pipe line connection to the current crisis between Vietnam and China water war. According to CNBC.com posting What’s really behind China's clash with Vietnam Everett | @Ev Rosenfeld

Thursday, 15 May 2014 | 10:54 AM ETCNBC.com

According to the posting China is years behind  Vietnam in oil and gas development of the South China Sea and faces major infrastructure problems even if China were to strike oil or gas off the coast of Vietnam. Vietnam is reaching the next critical phase of its development of gas and is developing the Da Nang region as the next New York City in Asian. With a natural gas power grid in Da Nang would make the region cleanest city in Asia and a power emerging computer integrated manufacturing centers. The immediate key to Da Nang economic growth is the use of gas from the ExxonMobil gas field from blocks 117, 118, and 119 off Vietnam’s central coast in the waters administered by Da Nang City, Quang Ngai Province, and Quang Nam Province.

 In 2005 Vietnam built a 399-kilometer underwater pipeline, the world's longest, began to carry natural gas onshore from the Nam Con Son basin. The pipeline's anticipated capacity is 2 billion cubic meters per year, while the basin has an estimated 59 billion cubic meters of natural gas reserves. The Naw Con Son basin is the backbone of a national oil and gas pipe line network moving energy to industrial locations in Vietnam. The ExxonMobil gas field is phase three of this massive national Vietnamese natural gas pipe line.

HD-981 placement is conspicuous

According to CNBC analysis-“ the area near the Paracel Islands where China National Offshore Oil Corporation (CNOOC) has placed a rig, known as HD-981, is conspicuous not for the oil and gas resources that lie there, but for the oil and gas that don't.

Rather than targeting an energy-rich zone, Beijing is simply interested in pushing its neighbors as much as possible to maximize the swath of sea it ultimately will control, experts told CNBC. In effect, China is inserting a physical presence that gives it the upper hand over wide ranges of territory and forces Vietnam to react defensively rather than focus on its own expansions. While the CNBC analysis did not detail the “wide ranges…(Chinese) forces” a blind man can see the Vietnamese national pipe line is being targeted by the massive 90 ship HD-981 placement.

The CNBC goes on to said-“"[The placement of HD-981 is] less about practically developing that specific block, and more about the Chinese sending a calculated and pretty aggressive warning to the Vietnamese that they aren't OK with the Vietnamese developing there," said Ernest Bower, a Southeast Asia expert with the Center for Strategic and International Studies.

But after years of planning to exploit the oil and gas reserves in the South China Sea, CNOOC could hardly have placed the rig in a less promising location. The area has less than 1 million barrels of oil equivalent in proved and probable reserves, economist Alexander Metelitsa of the U.S. Energy Information Administration said in an email to CNBC. “

The CNBC analysis point out China crisis-“The U.S. Geological Survey study "did not assess this part of the South China Sea to have any significant oil or gas containing basins," Metelitsa said.

State-owned CNOOC has aggressively moved forward with plans to get into the deepwater drilling business, said Kang Wu, vice chairman for Asia at international energy consultancy Facts Global Energy. That means stretching out into new territory.

"China has been [drilling] offshore for many years, and they've been producing OK … but that kind of oil is running out," said Wu. "If you want to expand your production base, you have to go out."

CNOOC did not respond to CNBC's request for comment.

Ultimately, Bower does not expect that China will be in a position to set up a firm drilling operation so close to Vietnam's coast, as it would be expensive to set up a pipeline back to the Chinese mainland, and the cost of international criticism would be too great. China, however, may have gained more leeway for other deepwater operations with its recent move.

Vietnam, meanwhile, can hardly afford to lose any of the reserves on its continental shelf. Although it was a net petroleum producer as recently as 2010, its consumption numbers have skyrocketed: It now consumes 413,000 barrels per day, compared with 352,000 produced, according to the EIA.

Despite previously designating two hydrocarbon blocks in the area immediately around HD-981, state-owned PetroVietnam has not made any public attempt to capitalize on the resources there.

The critical question the CNBC analysis  leads it readership to but fails to pose or answer is the strategic situational reality of the massive Vietnam under water oil and gas pipe line system.

On January 24 in the head office of Vietnam's oil-and-gas group, PetroVietnam in Hanoi, agreements were signed regarding implementing changes to the Production Sharing Agreement (PSA) on blocks 05-2 and 05-3 on the shelf of the Socialist Republic of Vietnam.

According to the documents signed by Valery Gulev, managing director of Gazprom International, which is the single operator of foreign upstream-projects for Gazprom, and President of VNG PetroVietnam Do Van Hau, the Russian side becomes a duly authorized participant in these Agreements.

The signing ceremony was attended by Ambassador to Russia in Vietnam, Andrey Kovtun, Deputy Minister of Industry and Trade Le Duong Quang, Chairman of PetroVietnam's Board of Directors Phung Dinh Thuc, and representatives from the Ministry of Industry and Trade of Vietnam, VNG PetroVietnam, Gazprom International, joint operating company Vietgaaprom, and operating company Bieng Dong (subsidiary of PetroVietnam).

"Today's agreements will promote strategic cooperation between Gazprom and PetroVietnam at a new level. Gazprom is officially entering the exploitation process of these oil fields. Gazprom's inclusion in the project ensures the fulfillment of the operational schedule on blocks 05-2 and 05-3, where in June of this year we expect the first gas discharge," Do Van Hau said during the ceremony.

According to V. Gulev, out of more than 18 countries where Gazprom is currently working, Vietnam is one of the most favorable for doing business. The head of Gazprom International further assured that the company will do all it can to fulfill its responsibilities in the exploitation project for blocks 05-2 and 05-3.

REFERENCE

With a total area of 4342 cubic kilometers, blocks 05-2 and 05-3 are located in the southeastern part of the South China Sea, in the Southern Konshonsky oil-and-gas-bearing basin 300 kilometers from Vung Tau. The underwater gas pipeline Nam Con Son is in close proximity to the blocks. Two gas condensate fields are open within the blocks, Moc Tinh, 05-3, and Hai Tchach, 05-2 and 05-3, as well as one oil field, Kim Cuong Tay, 05-2. The ultimate reserves of the two gas condensate fields is measured at more than 55.5 billion cubic metres of gas and 25 million tonnes of gas condensate. In order to develop them, 16 exploitation wells with depths from 2000 to 4600 metres must be built.

PSAs on blocks 05-2 and 05-3 were signed in 1992. PetroVietnam acting on behalf of the government, signed the agreements -- for block 05-2 with BP and Norweigian Statoil; and for block 05-3 with the Japanese AEDC Vietnam Oil Development Co. and Teikoku Oil Co. As a result, the contents of the participants in the PSA changed, and by 2008 included PetroVietnam, BC ConocoPhilips and the Vietnamese PVEP. In 2009, contracting organizations announced their departure from the project, and to continue the work in PetroVietnam an operating company Bieng Dong was created.

On April 5, 2012, as part of the acting Agreement on Strategic Partnership between Gazprom and VNG PetroVietnam, an Agreement on Beginning the Project for Combined Exploitation of Blocks 05-2 and 05-2 was signed, according to which Gazprom receives 49% of the PSA under the conditions of the project implementation.

In April 2010, the State Expert Committee of Vietnam confirmed the plan for co-development of Hai Tchach and Moc Tinh. It's implementation will enable the assurance of the beginning of exploitation until the completion of the exploitation drilling and the development of fields, as well as the advance supply of gas in the main pipeline.

In April 1995, a 125-kilometer natural gas pipeline connecting Bach Ho with a power plant near Vũng Tàu went into operation. With the subsequent addition of compressors, the volume pumped rose to more than 1 billion cubic meters per year. In 2005 a 399-kilometer underwater pipeline, the world's longest, began to carry natural gas onshore from the Nam Con Son basin. The pipeline's anticipated capacity is 2 billion cubic meters per year, while the basin has an estimated 59 billion cubic meters of natural gas reserves.^[12] Vietnam has 28 km of condensate pipeline, 10 km of condensate/gas pipeline, 216 of natural gas line, and 206 km of pipeline for refined products.

The block is being developed in three phases. The first phase was completed in 2002-2003 and the Lan Tay field started production in January 2003. The second phase was completed in 2008 and included installation of compression facilities at the Lan Tay platform. The third phase consisted of the development of the Lan Do field and drilling of the fifth well on Lan Tay.

Nam Con Son project details and Phu My complex

"Block 06.1 produces about 30% of the nation's natural gas and condensate needs for power generation."

The Lan Do field was developed as part of an integrated gas-to-power project, the Nam Con Son Gas Project. Its development cost more than $306.5m. Lan Do field compensates for the deteriorating output from the Lan Tay. The estimated recoverable reserves at both the fields are about six trillion cubic feet (tcf).

Offshore gas from both the fields is transferred to onshore gas processing facilities and then to Phu My power complex through Nam Con Son Pipelines (NCSP).

NCSP consists of a 362km long, high pressure offshore subsea pipeline and a nine kilometre-long onshore pipeline. The pipeline is owned by BP (32.67%), PetroVietnam (51%) and ConocoPhillips (16.33%). The Lan Tay platform is also operated by TNK-BP.

TNK-BP ownership of the offshore gas field

The Russian oil company TNK-BP is equally owned by BP and the AAR consortium, consisting of Alfa Group, Access Industries and Renova. TNK Vietnam, a subsidiary of the BP Exploration Operating Company Vietnam (TNK-BP), is the operator of the Lan Do field.

TNK-BP acquired an additional 35% stake from BP in offshore Block 06.1 for $1.8bn, in October 2010, to become its sole operator. The acquisition also included a 32.7% stake in the NCSP and Dinh Co Gas Process Terminal, along with a 33.3% stake in the 739MW Phu My 3 power complex located in the Ba Ria-Vung Tau province. The Vietnamese Ministry of Investment and Trade gave licence to the company to operate the offshore gas Block 06.1, in October 2011.

Development and production from Vietnam's Block 06.1

Block 06.1 currently has a production capacity of 4.7bcm per annum. The Lan Do field will have a capacity to produce two billion cubic metres (bcm) of gas a year. A 32-day subsea intervention campaign was completed at the Lan Tay field in November 2011 to facilitate production from Lan Do.

"The Russian oil company TNK-BP is equally owned by BP and the AAR consortium, consisting of Alfa Group, Access Industries and Renova."

TNK Vietnam successfully completed drilling of two subsea development wells at Lan Do field in April 2012. The drilling works were started in January and took about 94 days for completion. The two subsea wells are located at about three kilometres offset.

The two wells are tied back to the existing Lan Tay offshore platform on the block. It is situated at about 28km east of the Lan Do field in Block 06.1. The wells were connected to the platform via a single 28km, 12-inch flow line and a control umbilical.

The Lan Do field flowed first gas through the pipeline in October 2012. The wells were finished with a seven-inch tube to increase gas recovery.

Reserves at the field are estimated to be 72-89 million barrels of oil equivalent (mmboe) of gas and 0.2-0.3 mmboe of condensate. Lan Do is expected to have a maximum output of 175 millions of standard cubic feet each day (mmscfd). It is also expected to have a life of 20 years.

Contractors for the Lan Do and Lan Tay gas fields

The two subsea wells (Lan Do-2P) were drilled using the Ocean Monarch (UDW semisub) from Diamond Offshore. The engineering, procurement and construction contract for subsea equipment and topside controls for the field was awarded to FMC Technologies, in June 2010.

The fixed platform was fabricated by the company's office in Singapore. Its service base is located in Labuan, Malaysia. The scope of work included installation of two UWD-15 rigid lock wellhead systems, two enhanced horizontal subsea tree (EHXT) systems and a topside controls master control station (MCS).

FMC also provided rental installation workover and control systems (IWOCS), production flowline tie-in systems, vertical jumper kits as well as a Torus III connector. The subsea distribution systems include one umbilical termination assembly (UTA), two subsea distribution units (SDU) and electrical and hydraulic flying leads (EFLs and HFLs). The company was also responsible for integration, testing, installation, maintenance and service of the entire system.

The contract to supply the main and infield umbilicals was awarded to Duco, a subsidiary of Technip. The value of the contract was $18.6m. The umbilicals are based on Duco's hybrid technology.

Exxon Mobil (XOM) is preparing to invest ~$20B in a gas-fired power complex with Vietnam's state oil and gas group Petrovietnam.The project would involve construction of two power plants with a combined capacity of 6K-6.5K MW, in a deal which could make the U.S. one of the top four foreign investors in Vietnam along with Japan, South Korea and Taiwan, according to the report. The US group Exxon Mobil has accelerated the pace of its investment in the US$20 billion worth gas-electricity complex in Viet Nam.

HA NOI (VNS)— The US group Exxon Mobil has accelerated the pace of its investment in the US$20 billion worth gas-electricity complex in Viet Nam. The Ministry of Industry and Trade noted that the group has completed site investigation and selection. Exxon Mobil was expected to submit relevant documents and implementation plan to the Viet Nam National Oil and Gas Group (PetroVietnam) and the ministry for approval.

The investment plan was initiated several years ago when Exxon Mobil discovered offshore gas reserves in central Viet Nam. Exxon Mobil and PVN have jointly planned to build a 200ha gas-electricity complex in the central region, using gas products from Lots 117, 118, and 119. Half of the area will be used for building a 1,500MW power plant. In the second phase of the project, the area will be expanded up to 200ha for building a 4,000-5,000MW power plant and gas processing facility. The central Quang Ngai Province is emerging to be a viable destination for the project. The province has recommended four locations some 75-85 kilometres from the lots.

A representative from PVN was quoted by the Tien Phong newspaper as saying that they were unable to announce official information as it is a huge project with extremely high capital demand. The sites are all in the Ca Voi Xanh (Blue Whale) platform, for which PetroVietnam and its US counterpart signed a development deal during President Truong Tan Sang's visit to the US last year. Vo Tien Dung, the head of Management Board of the province's Dung Quat Economic Zone informed the newspaper that Exxon Mobil and PVN have made efforts in choosing the site for construction.

Cao Khoa, the chairman of the provincial People's Committee added that the province meets the requirements set by the investors in areas, such as land, roads, electricity, and water. The province also has the requisite port infrastructure to support the project.

The province has introduced the proposed sites to Exxon Mobil and PVN, Khoa stated.

Khoa emphasised that any investors interested in investing in the province will enjoy special preferential treatment from the Government, adding that the province and the group had a meeting and agreed on all the issues.

A memorandum of understanding for the project was signed by the two parties during Vietnamese State President Truong Tan Sang’s visit to the U.S. in July 2013.

The American firm has finished a field survey to select a site for the gas-powered complex and will probably place it in Quang Ngai Province. Exxon Mobil now pays close attention to a location northeast of Vietnam’s sole oil refinery Dung Quat, located in Binh Son District, although the province has introduced four sites to the company, Dau Tu newspaper, a publication under the Ministry of Planning and Investment, reported. The project is said to be fueled by gas exploited from blocks 117, 118, and 119 off Vietnam’s central coast in the waters administered by Da Nang City, Quang Ngai Province, and Quang Nam Province.

 Previously, Exxon Mobil and PVN sought a site with a total area of about 200ha, half of which would be set aside for a 1,500 MW power plant in the first phase. In the second phase, 4,000-5,000 MW power plants and a gas processing facility will be established there. Next month the energy giant will share documents related to the project, including the assessment of gas reserves, site selection, and an implementation plan with PVN, and submit them to the trade ministry for consideration and approval, Tien Phong newspaper said. Quang Ngai authorities have promised to offer special incentives to the developers of the proposed project, suggesting they should choose a location at the local 10,300-hectare Dung Quat Economic Zone.

They also expressed hopes that the planned power complex would help transform the province into a national oil refining hub.

The ExxonMobil gas power plants will be fueled by gas exploited from blocks 117, 118, and 119 off Vietnam’s central coast in the waters administered by Da Nang City, Quang Ngai Province, and Quang Nam Province.

He praised Da Nang’s achievements during the past three years, with its average annual GDP growth rate of 10 per cent and per capita income of VND56 million (US$2,660), 1.6 times higher than the national average.Earlier the same day, Trong visited TCIE Co., Ltd, an auto assembly joint venture between Malaysia and Japan – and the Hoa Tho Veston factory. — VNS

China can not escape its deepening energy without peace with Vietnam

There is no scenario in which China’s economy can escape the deepening energy crisis; it is in China strategic long-term energy goals to allow Vietnam to peacefully develop deep sea oil and gas, trading with Vietnam, as China trades with Saudi Arabia for its share of Vietnam oil exports.

 There is no scenario in which Vietnam militarily defeats China, even with tactical nuclear weapons. Vietnam may win a few battles, sink many ships but still lose the war badly. As stated above, Vietnam best chance is in demonstration of national resistance to Chinese aggression and building a strategic alliance with the United States, ExxonMobil and Saudi Arabia at its core and wait for a strategic moment for peace.

 The Nubian Observer analysis suggests the Chinese/Japanese crisis was the first phase of a Chinese rue or deception, for taking the ExxonMobil project. Taking Japan would not solve China’s deepening oil and gas problem and would bring the United States into play in the proactive way China can deal with. The Chinese must cover their Japanese flank and the Japanese naval must look like it going to war in order to force China to cover it flank. The USN forward elements will be positioned to support the Japanese forward positions. The matrix of taking the ExxonMobil will change, but will not stop the Chinese military. China can still defeat Vietnam while watching the Japanese and USN, the critical question is at what political cost. One of the costs of a military defeat of Vietnam is the nuclear arming of Japan and other Asian countries.

According to World View: U.S. Naval Intelligence Chief Confirms Worst Fears of China's Military Buildup, by John J. Xenakis. This concept of a "short, sharp attack" is quite credible, as the Chinese people widely believe that America has become weak because of the Iraq and Afghanistan wars, and that, particularly under President Barack Obama, Americans have little will to oppose China. Thus, they could quickly overwhelm Japan's forces, America would do nothing, and Chinese ownership of the Japanese islands would be part of the new status quo.

History has shown that this is a disastrous assumption.

CNBC analysis pathway to reality

 CNBC breaking the media silence on the real issue of the current phase of the China bold move into Vietnam waters is very important because a new layer of Americans are now engaging the reality of the strategic situation in the South China Sea. CNBC has jointed an emerging school of thinking within the oil and gas industry that suggest China’s move is driven by Chinese failure to develop deep sea energy and not the Paracels and the Spratlys. The most remarkable aspect of the CNBC analysis is the open critical discussion of the China lack of deep sea pipe lines and China’s gross failure to find oil or gas.CNBC.com breaks press silence makes the economic gas pipe line connection to the current crisis between Vietnam and China water war.

The Diplomat dangerous analysis “When China first announced the deployment of its oil rig, it stated that its operations would terminate on August 15. This provides plenty of time for both sides to orchestrate and manage the confrontation in Block 143 and provide a face saving means for ending the confrontation”… This dangerous analysis failed to account for the danger of new Chinese nationalism and its effects on the Beijing military leadership and the political blow back effect of failing to find oil or gas by the Chinese company CNOOC .

 

Austrian Strategic Policy Institute provocative story about Mr.Naw Kham

Last than three weeks before the MH370 hijacking, the Strategist, the Austrian Strategic Policy Institute embedded a provocative posting of the story of Mr. Naw Kham

While the South China Sea military community and the United States was recovering from the shock military China surface naval forces entering the Indian Ocean in force, the ASPI posed a de facto terror message about the ghost of the most feared Burmese drug cartel in modern history, setting the stage for MH370 hijacking.

The idea of the Naw Kham cartel as a player is increasing in its currency value in the Chinese underground and was planted by the ASPI before the hijacking of flight MH370. Naw Kham is a pop hero in Chinese Internet culture, someone who stood up to the system. He was made by Beijing leadership to public enemy number one and then taken down and trailed on TV and then led away on TV and executed last year. Beijing may sure over a billion of the 1.4 billion Chinese know him by names and face. Until the ASPI series of article, the Naw Kham cartel was last year history.

In 2012, four months following Mr.Naw Kham and other high leaders capture, Joshua Kurlantzick is a fellow for Southeast Asia at the Council on Foreign Relations expressed fear in article in the Diplomat Burma’s Drug Problem Gets Worse as Its Politics Get Better, As Burma’s politics open up, it is likely that the drug problem is only going to get worse. In a period of a power vacuum, organized crime will flourish — particularly in the northwest, i.e. Kachin, the major drug production area.

 According to the New York Times “China’s search for Mr. Naw Kham, overseen by its powerful Ministry of Public Security, was a hard-nosed display of the government’s political and economic clout across Laos, Myanmar and Thailand, the three countries of Southeast Asia that form the Golden Triangle. The capture shows how China’s law enforcement tentacles reach far beyond its borders into a region now drawn by investment and trade into China’s orbit, and where the United States’ influence is being challenged. ..Mr. Naw Kham proved to be a formidable target. He had operatives within the Burmese and Thai armies and the Laotian security forces, according to an Asian official who works in the Golden Triangle and who spoke of the delicate case on the condition of anonymity”... His first anniversary was monitored in China and the Golden Triangle region by CIA and Chinese intelligence operatives.

The Strategist, the Austrian Strategic Policy Institute (ASPI) embedded a detailed distorted analysis of the Chinese used drones in the capture of Mr. Naw Klam and a full background briefing of Kachin crisis, less than three weeks before the hijacking. The ASPI articles were followed by two postings in the 15 million readerships, Daily Beast on Mr. Naw Klam days after the MH370 hijacking.

The February issue: The Strategist, the Austrian Strategic Policy Institute

In the 17Feb 2014 ASPI, Posted in: General By Rosalyn Turner Drone strikes in a multipolar world the Chinese official version of the ruthless man hunt and capture of the leadership of the Naw Klam cartel was outline. A sister article: China and Myanmar’s reforms by Trevor Wilson, Guest Contributor was posted to the same issue detailing the Clinton order CIA counterinsurgency black operations inside Burma. To gather ASPI provides the most detailed analysis and insight of the political economy the Naw Klam cartel liquidation and the political configuration that followed. The most shocking aspect of the postings is the fact that ASPI named the CIA and groups it is working with insider Burma, putting them at serious risk of political attack.

According to the China and Myanmar’s reforms posting

“One has to assume I guess that the CIA backing of the KMT in eastern Burma in the early years of independence has faded away in the new generation of generals’ consciousness whereas the Chinese backing of the CPB remains a festering wound. At least Aung February 2012 issue of Council on Foreign Relations, Myanmar’s Drug Problem By Joshua Kurlantzick  and Australian National University professor Desmond Ball, a longtime expert on Myanmar stated “Ball notes —and I concur from my experience— that Myanmar military units are closely involved in the shipping of the drugs out of the country and into Thailand and Laos, where the army units help move the drugs past checkpoints and ensure security from raids by Thai forces and DEA units that work with them”.

 Min referred to it publicly and unashamedly in his ministerial excuse for running rough shod at Letpadaung.

ASSK was certainly not known for cosying up to China in contrast to the West, not so dissimilar to the generals’ seemingly recent change of heart, and again like the generals is acutely aware of the merits of being good neighbours. We can expect the generals to continue playing the China card with effect and likewise the US card on the Chinese.

The “useless careless west” has always been effective and careful in pursuing its geopolitical interests and anti-communist crusade which meant keeping its distance from the faux socialism of Ne Win and patiently biding its time. The 8888 Uprising, the rise and persecution of the Lady changed the game to a necessarily more active role culminating in the sanctions, but now all is practically forgiven and the prodigal sons who have always been closet fans of the West can come out into the open “warmly welcome” to the Western fold of the New World Order.

Then again there is a readymade ARMY of young and listless men in monks’ robe in prestigious position in a Buddhist country being indoctrinated by the Sharp- Helvey-Ackerman crowd with CIA-Soros funding since 1996 on call for any disturbance they want to foment- individual and nationwide agitations ready to sacrifice their lives- to shepherd the said “military”.

“And deliciously stupid, self-important and well bribed (by the same crowd- Soros, NED(read CIA)) 88′s generation, various “dissident” media, etc. All eager to dance to the tune of the piper.

But dear, oh- dear, Than Shwe currently busy hosting is best bud Shinawatra (who seems oblivious to the deaths and fuss due to and by him) has some moves the “West” may have not thought of. Like fomenting a national anti-Kalar crisis at a loss of lives of thousands of people – Burmese citizens- and getting prime estates in the affected areas for the usual “cronies” to “develop”. And their very own Aung San Suu Kyi seems suspiciously too much in cahoot with the very military she was supposed to counter-balance for the “West” and to protect the very populace with blind faith in her.

And now the very Than Shwe is not letting that woman anywhere near the position the “conscientious” (more like nervous/ jumpy)investors of the multinationals of the “West” require for much touted “Direct Foreign Investment”- a code word for total destruction, devastation and most importantly unravelling of the social structure reducing the hither-to admirable, peaceful and contented suppressed people to rootless, landless, family-less, religion less, social structureless, helpless isolated junkies and automatons. (Go see in South America)

And no one knows what is exactly happening with the most vital instrument of command and control structure- telecommunication. Soros spent 36 millions and failed to get outright control thus far even though he will engineer to get in through the cat-flap. But who will really control it? There surely will be no law to protect any action spawn from that powerful control structure. Leave alone rule of the law in places like Thailand, even Sierra Leone would look like Geneva compared to the Burma.

It appears by double crossing the Kackins about the Dam and getting the “People’s Champion” exactly where he wants along with hijacking the Revolutionary Army of Monks to do his bidding rather that the Sharp/ Helvey/ Ackerman crowd (one could hardly think Sharp-Helvey-Ackerman- CIA-NED crowd would use their trained dogs to go after poor Kalars), old fox is running through all the hoops.

It may now seem so petty/ churlish to start calling this “reforms” thing (Dr Cohen does not seem to approve the reform as real) as not reform. And even though their man Aung San Suu Kyi at the Plinth would not really mean anything, that requirement will not now be fulfilled to assuage the fear of the jittery investors.

Open racism the natives must be pacified one way or another

True the natives must be pacified one way or another through its own investment strategies in partnership with the Burmese military or by a direct PR approach. Myitsone Dam Project was a temporary glitch for China that turned the frog of a pariah state into a prince, to the mutual benefit of the generals and the West making the most important (to them) reconciliation (détente) happen. Letpadaung carries on with the Lady’s blessing. Shwe Gas pipelines were duly completed behind the smokescreen of riots in Western Burma. Other dams are under way. There’s mutual business interests in Kachin state. They have the UWSA card to play. How can China really complain?”

In the 17Feb 2014 ASPI, Posted in: General By Rosalyn Turner Drone strikes in a multipolar world the Chinese official version of the ruthless man hunt and capture of the leadership of the Naw Klam cartel was outline.

“ The combination of persistent surveillance and strike capabilities of UAVs such as the US’ Predator and Reaper make them one of the most precise platforms for targeted killing purposes. They also remove the risk of troop casualties and the messiness that comes with boots on the ground. The Long War Journal reports that last year drone strikes killed a senior al Qaeda intelligence chief as well as a key paramilitary commander.

These incentives don’t apply exclusively to the US. In a speech in 2012, CIA Director John Brennan highlighted the drive by many militaries to acquire capabilities to conduct drone strikes. It has been reported that international investment into UAV technology is set to soar, with predictions of it almost doubling in the next decade. A variety of states are pursuing drone technology, which might erode the West’s current dominance.

One of those is China, which has been actively pursuing advanced UAV capabilities. China’s Yi Long drone (aka Pterodactyl), heavily modelled on the US Predator, appears to be one of the People’s Liberation Army’s basic attack UAVs, with the capacity to carry a payload of 200kg. The WJ-600  jet-powered UAV is a faster drone with an even greater 600kg payload and with strike capability. Finally, China has also been developing a stealth combat UAV (called Li Jian or Sharp Sword) that mimics the American X-47B and may eventually launch from aircraft carriers.

ASPI distorted and discredited analysis of the Naw Kham cartel

According to the ASPI analysis “The question is, however, in what kinds of situations China might consider using its growing fleet. In late 2011, we were given a rare insight into one possible scenario. A violent drug-lord from Myanmar named Naw Kham had just killed 13 Chinese sailors. In response, Beijing promised to bring the man to justice, beginning a manhunt to locate and capture him inside Myanmar.

After weeks of attempting capture, the Chinese authorities faced a set of calculations that are now familiar to governments like the US. Naw Kham had gone into hiding in a remote and lawless north eastern region of Myanmar, supported by sympathetic locals and protected by over 100 heavily armed subordinates. Attempting capture would risk more lives. It could also potentially embroil authorities in a messy armed stand-off and raise concerns about sovereignty. According to an interview with the leader of the group assigned to capture Naw Kham, the use of an armed UAV to strike his residence was considered as a viable option.

In the end, the Chinese authorities chose not to pursue this tactic and instead managed to capture their man and transport him back to China for trial. A drone strike would have denied Chinese authorities the opportunity of parading him in front of the media and triumphantly handing down the death penalty. In fact, the lead up to Naw Kham’s execution was televised on live TV.

Despite the plan being quashed, the case highlights the possibility that China could turn to the use of armed drones.  This episode may be a signpost of the shape of things to come as more militaries acquire UAVs with strike capability; Pakistan, India and Russia all have drone programs that indicate they’re heading toward a fleet of armed drones. It increasingly appears that it’s a question of when – not if – China or someone else will use drone strikes.

On one level, the concern for both the US and Australia will relate to who the Chinese are targeting.  A notoriously violent drug-lord hiding within a lawless region is one thing, but China considers as enemies of the state a variety of actors within and outside its borders who may not represent acceptable targets to the West.

Separatist movements in Tibet and Xinjiang are potential examples. Beijing has persistently tried to align the domestic struggle against separatist groups with the US global war on terror to support heavy-handed counterterrorism approaches.”

The ASPI analysis of the Naw Kham capture used the official Chinese account rather than the New York Times account the reveal CIA, Thai black operations.

According to the New York Times:

“Other Thai officials say that nine members of an elite Thai military unit were also involved in the killings of the Chinese seamen. Mr. Liu said that he agreed with that assessment, and that the nine Thai soldiers should be prosecuted.

Security officials from Laos arrested the trafficker, Mr. Naw Kham, but the international manhunt that led to his capture was organized in Beijing, by top Chinese government officials intent on making him pay for the killings of 13 Chinese seamen on the river, which has become a major trade route into China.

The bodies of the Chinese, the crew of two cargo boats, were found badly mutilated on the Thai side of the river in early October 2011. The killings, the worst slaughter of Chinese citizens abroad in recent memory, angered the Chinese public. Chinese investigators insist that Mr. Naw Kham was the mastermind of the murders.

China’s search for Mr. Naw Kham, overseen by its powerful Ministry of Public Security, was a hard-nosed display of the government’s political and economic clout across Laos, Myanmar and Thailand, the three countries of Southeast Asia that form the Golden Triangle. The capture shows how China’s law enforcement tentacles reach far beyond its borders into a region now drawn by investment and trade into China’s orbit, and where the United States’ influence is being challenged.

Other Thai officials say that nine members of an elite Thai military unit were also involved in the killings of the Chinese seamen. Mr. Liu said that he agreed with that assessment, and that the nine Thai soldiers should be prosecuted”.

CIA secret plan, Clinton signed off on

Following signs of democratization and economic liberalization, Hillary Clinton, as Secretary of State, and others called for the mending of America's relations with Burma in 2011. Clinton was being pressured to address the Naw Kham cartel issue. Because of the cartel super banking connections, the Bush policy was having little effect on their international growth. There was little the Secretary could offer short of billions of dollars of aid which would be viewed by Burmese leadership as enabling the cartel. As a result of the refurbishment of ties, the American authorities in 2012 planned for the re-establishment of ambassador-level relations with Burma for the first time since 1990.The Naw Kham cartel remained on the CIA hit list. Once of the first jobs of the US ambassador was creating a Naw Kham hit team.

US Secretary of State Hillary Clinton travels to Burma to promote democratic reforms, she got a status briefing on the CIA Naw Kham hit operation. She signed off on freezing the cartel assets.

Clinton removed office from authorizing Chinese drone use against Burmese population

In Washington, the Naw Kham affair was viewed with deep concern and contributed to Hillary Clinton being dropped from the White House inner policy circle. Hillary Clinton was credit with the Naw Kham capture and the purported destruction the cartel. In 2012, four months following Naw Kham and other high leaders capture, Joshua Kurlantzick is a fellow for Southeast Asia at the Council on Foreign Relations expressed fear in article in the Diplomat Burma’s Drug Problem Gets Worse as Its Politics Get Better, As Burma’s politics open up, it is likely that the drug problem is only going to get worse. In a period of a power vacuum, organized crime will flourish — particularly in the northwest, i.e. Kachin, the major drug production area. Clinton has no plan to deal with the political vacuum created by the CIA liquidation of the Naw Kham cartel in the political economy of Kackin. Washington insiders questioned disappearance of the billion dollars of cartel money and the mark increase in drug flow. CIA Naw Kham operation protected the CIA position insider Burma military leadership, but opens the door to massive Beijing arming pro Chinese insurgency armies. Part of the refurbishment of ties with Myanmar was the removal by the strategic change in the use of drones. Clinton approval of the use of Chinese Special Forces, US satellites and first time deployment of Chinese attack drones inside Burma against the Burmese populations change the political economy of the whole region. Clinton and the CIA poor micro management and Beijing exposure of the CIA Thai Special Forces murder was a major political cost to the United State.

The MH370 hijacking is the political blow back of Clinton failure to develop as strategic connection with the Naw Kham cartel when the cartel was seeking a western counter balance to China.

The world intelligence community knew with Mr. Naw Kham execution on March 1, 2013 there would be a major ruthless counter insurgency campaign in Kachin. China would political repositioned its Kachin interest and leverage the void created by the destruction of the cartel leadership. A blind man could see something special was up in Kachin. Few saw the MH370 hijacking coming.

Few also saw Naw Kham cartel elimination would created the current nightmare situation in which China would be forced to increase its arming of  UWSA to project military force in northern Kachin. In 2000, taking advantage of the ongoing conflicts in Shan state in Myanmar, China persuaded the ethnic Wa to relocate with their drug production units from the Myanmar-China border to the Myanmar-Thailand border. The UWSA, aided by the Tatmadaw, had wrested the new acquired territory from the control of the SSA of Khun Sa, the opium warlord and ‘King’ of the Golden Triangle. This move reduced drug trafficking into China and at the same time dumped the problem on Thailand. China armed the Wa with weapons and supplied money. In return the Wa would control the entrance and exit regions of Shan state and ‘help’ the Chinese in constructing roads through the territory giving China the much desired access to the Myanmar coast. The Tatmadaw also formed an alliance with the UWSA to first defeat the Shans and second to serve as proxies in fighting the Thai army at the border.

The UWSA ordered repositioning on the Thailand border, aided by the Tatmadaw

Myanmar’s Wa ethnic group is the largest producer of Amphetamine-Type Stimulants (ATS). The United Wa State Army (UWSA) is sustained by narcotics money in addition to arms contraband. Increases in the use of methamphetamine in Thailand have contributed to regional instability and Thailand’s National Security Council now recognizes narcotics smuggling as a critical threat to its national security. Thailand accuses Myanmar of unleashing “narcotic aggression” on Thailand and with the stupendous increase of methamphetamine production within Myanmar, drug trafficking into Thailand from Myanmar is on the rise.  Ethnic militias like the UWSA and Shan State Army (SSA) control most of the 1800 km Myanmar border with Thailand and corruption within the Thai security forces has abetted a thriving narcotics trade. Within Myanmar, the UWSA has emerged as the largest producer of methamphetamine. Mong Yawn, the drug base of the UWSA in the Shan state in Myanmar, enjoys direct access to the Thai province of Chiang Mai, emerging as one of the biggest drug boom towns near the Myanmar-Thailand border. Methamphetamine smuggling from Myanmar into Thailand by UWSA amounts to 200 million pills per year. Besides tackling border corruption within its ranks, the Thai military has a dangerous task, challenged as it is by the Shan and Wa armies complicit with narcotics crossing the border.

The former military junta in Myanmar had been at war with the ethnic rebel groups of the Wa and the Shans interspersed with periodic ceasefires. The UWSA had earlier supported the Tatmadaw (Burmese military) but later retreated to the northern part of Shan state. The Tatmadaw also propped up several ethnic militias as a check against the ceasefire rebels. These various ethnic armed groups struck deals amongst themselves to facilitate the profitable narcotic trade.

China’s Yunnan province has a 1997-km border with Myanmar and narcotics have adversely affected many Chinese border villages. Previously heroin use made Yunnan suffer the highest HIV rate of any Chinese province or autonomous region. Ruili, the border town in Yunnan, suffers from two-thirds of drug users infected with HIV due to sharing contaminated injections. This situation is further aggravated by the presence of guns and a heightened risk of border related violence.
However China still suffers narcotics trafficking, with 3.2 tons of ATS seized in the Yunnan province in 2009. China has taken measures in the pharmaceutical industry to deter illegal drug production. The latest seizure of 3.3 tons of crystal methamphetamine in South China, Guangdong province, was made in early 2014. However, China is far from ensuring that the flow of drugs remains limited, and its own provinces escape its lethal effects.

The political cost to Beijing of removing the Naw Kham cartel was stability in northern Kachin. By allowing itself to be played by the CIA and brutally suppressed the Naw Kham cartel, Beijing lost the third choice and important political leverage within the Burmese military leadership. Within a year the two most important insurgency groups were either liquidated or restructure. Mr. Mr. Hsang Maha Ngeun Wiang died and the leadership of the Naw Kham was liquidated.

According to Wikipedia, the free encyclopedia

Bao You-Xiang ordered a forced relocation, away from the poppy fields, of six northern WA districts south to mainly Shan and Lahu areas. The Godfather Mr. Hsang Maha Ngeun Wiang died at the age of 78 in Mandalay on 29 October 2011 just months before Mr. Naw Klam capture. Chinese cabal within the UWSA was able was able to consolidated a stronger position when they switched the production line from heroin to amphetamine -type stimulants (ATS) such as yaa baa. UWSA was more dependent on Chinese international banking. The United States government labeled the UWSA as a narcotic trafficking organization on May 29, 2003. On November 3, 2005, The Department of the Treasury's Office of Foreign Assets Control listed 11 individuals and 16 companies that were "part of the financial and commercial network of designated significant foreign narcotics trafficker Mr. Wei Hsueh-kang and the United Wa State Army (UWSA)." The UWSA is said to be the largest drug-producing organization in Southeast Asia. The US financial campaign pushed the UWSA cartel further into Beijing Chinese banking. The UWSP on its part blamed both the Ne Win military government and the CPB for using the Wa as "pawns in the violent destructive games" and encouraging them to grow the opium poppy.

After the CIA black operation provoked the Beijing to capture of Naw Kham and other top leadership of the cartel, critical elements of the cartel’s distribution network were taken over by the United Wa State Army and KIA Army. The UWSA replaced the Naw Kham cartel as the central clearing house of Golden Triangle drug exports but was unable to gain control of the emerging Kachin drug trade. The once integrated Naw Kham cartel controlled distribution express network was compartmentalized and sold as parts. Beijing was able to consolidated UWSA banking and cutting cash floods to the remnants of the Naw Kham cartel but in the process the order within the drug trade was lusted, the drug trade with India expanded via Kachin.

The strategic issue is Beijing has yet to replace the Naw Kham cartel physical or political presence in northern Kachin, giving KIA a new life. The KIA military lacks the tactical means to either defend the pipe line or resist the Burmese military. According to Janes IHS reported that several Mil Mi-17 helicopters armed with TY-90 air-to-air missiles were supplied to UWSA by China is to address the logistical problem of UWSA projecting force toward critical Chinese development projects in northern Kachin.

The Council on Foreign Relations expressed fear over the CIA’s Naw Kham liquidation

Three month before Mr. Naw Klam capture, the February 2012 issue of Council on Foreign Relations, Myanmar’s Drug Problem By Joshua Kurlantzick  and Australian National University professor Desmond Ball, a longtime expert on Myanmar stated “Ball notes —and I concur from my experience— that Myanmar military units are closely involved in the shipping of the drugs out of the country and into Thailand and Laos, where the army units help move the drugs past checkpoints and ensure security from raids by Thai forces and DEA units that work with them”.

In 2012, four months following Naw Kham and other high leaders capture, Joshua Kurlantzick is a fellow for Southeast Asia at the Council on Foreign Relations expressed fear in article in the Diplomat Burma’s Drug Problem Gets Worse as Its Politics Get Better, As Burma’s politics open up, it is likely that the drug problem is only going to get worse. In a period of a power vacuum, organized crime will flourish — particularly in the northwest, i.e. Kachin, the major drug production area. Clinton has no plan to deal with the political vacuum created by the CIA liquidation of the Naw Kham cartel in the political economy of Kackin. The Council on Foreign Relations expressed fears became the political reality.

The Strategist, the Austrian Strategic Policy Institute knowingly embedded a detailed but distorted analysis of the Chinese used drones in the capture of Mr. Naw Kham timed for the celebrations of the first anniversary of Naw Kham execution.

While the South China Sea military community and the United States was recovering from the shock military China surface naval forces entering the Indian Ocean in force, the ASPI posted  a de facto terror message about the ghost of the most feared Burmese drug cartel in modern history, setting the stage for MH370 hijacking.

The idea of the Naw Kham cartel as a player is increasing in its currency value in the Chinese underground and was planted by the ASPI. The fact that the provocative posting by ASPI was 18 days before the hijacking of flight 370 is remarkable strategic timing.