August 06, 2010

Chinese missile could shift Pacific power balance

Source: http://news.yahoo.com/s/ap/20100805/ap_on_re_as/as_china_us_carrier_killer

By ERIC TALMADGE, Associated Press Writer Eric Talmadge, Associated Press Writer – Thu Aug 5, 5:43 pm ET

ABOARD THE USS GEORGE WASHINGTON – Nothing projects U.S. global air and sea power more vividly than supercarriers. Bristling with fighter jets that can reach deep into even landlocked trouble zones, America's virtually invincible carrier fleet has long enforced its dominance of the high seas.

China may soon put an end to that.

U.S. naval planners are scrambling to deal with what analysts say is a game-changing weapon being developed by China — an unprecedented carrier-killing missile called the Dong Feng 21D that could be launched from land with enough accuracy to penetrate the defenses of even the most advanced moving aircraft carrier at a distance of more than 1,500 kilometers (900 miles).

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EDITOR'S NOTE — The USS George Washington supercarrier recently deployed off North Korea in a high-profile show of U.S. sea power. AP Tokyo News Editor Eric Talmadge was aboard the carrier, and filed this report.

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Analysts say final testing of the missile could come as soon as the end of this year, though questions remain about how fast China will be able to perfect its accuracy to the level needed to threaten a moving carrier at sea.

The weapon, a version of which was displayed last year in a Chinese military parade, could revolutionize China's role in the Pacific balance of power, seriously weakening Washington's ability to intervene in any potential conflict over Taiwan or North Korea. It could also deny U.S. ships safe access to international waters near China's 11,200-mile (18,000-kilometer) -long coastline.

While a nuclear bomb could theoretically sink a carrier, assuming its user was willing to raise the stakes to atomic levels, the conventionally-armed Dong Feng 21D's uniqueness is in its ability to hit a powerfully defended moving target with pin-point precision.

The Chinese Defense Ministry did not immediately respond to the AP's request for a comment.

Funded by annual double-digit increases in the defense budget for almost every year of the past two decades, the Chinese navy has become Asia's largest and has expanded beyond its traditional mission of retaking Taiwan to push its sphere of influence deeper into the Pacific and protect vital maritime trade routes.

"The Navy has long had to fear carrier-killing capabilities," said Patrick Cronin, senior director of the Asia-Pacific Security Program at the nonpartisan, Washington-based Center for a New American Security. "The emerging Chinese antiship missile capability, and in particular the DF 21D, represents the first post-Cold War capability that is both potentially capable of stopping our naval power projection and deliberately designed for that purpose."

Setting the stage for a possible conflict, Beijing has grown increasingly vocal in its demands for the U.S. to stay away from the wide swaths of ocean — covering much of the Yellow, East and South China seas — where it claims exclusivity.

It strongly opposed plans to hold U.S.-South Korean war games in the Yellow Sea off the northeastern Chinese coast, saying the participation of the USS George Washington supercarrier, with its 1,092-foot (333-meter) flight deck and 6,250 personnel, would be a provocation because it put Beijing within striking range of U.S. F-18 warplanes.

The carrier instead took part in maneuvers held farther away in the Sea of Japan.

U.S. officials deny Chinese pressure kept it away, and say they will not be told by Beijing where they can operate.

"We reserve the right to exercise in international waters anywhere in the world," Rear Adm. Daniel Cloyd, who headed the U.S. side of the exercises, said aboard the carrier during the maneuvers, which ended last week.

But the new missile, if able to evade the defenses of a carrier and of the vessels sailing with it, could undermine that policy.

"China can reach out and hit the U.S. well before the U.S. can get close enough to the mainland to hit back," said Toshi Yoshihara, an associate professor at the U.S. Naval War College. He said U.S. ships have only twice been that vulnerable — against Japan in World War II and against Soviet bombers in the Cold War.

Carrier-killing missiles "could have an enduring psychological effect on U.S. policymakers," he e-mailed to The AP. "It underscores more broadly that the U.S. Navy no longer rules the waves as it has since the end of World War II. The stark reality is that sea control cannot be taken for granted anymore."

Yoshihara said the weapon is causing considerable consternation in Washington, though — with attention focused on land wars in Afghanistan and Iraq — its implications haven't been widely discussed in public.

Analysts note that while much has been made of China's efforts to ready a carrier fleet of its own, it would likely take decades to catch U.S. carrier crews' level of expertise, training and experience.

But Beijing does not need to match the U.S. carrier for carrier. The Dong Feng 21D, smarter, and vastly cheaper, could successfully attack a U.S. carrier, or at least deter it from getting too close.

U.S. Defense Secretary Robert Gates warned of the threat in a speech last September at the Air Force Association Convention.

"When considering the military-modernization programs of countries like China, we should be concerned less with their potential ability to challenge the U.S. symmetrically — fighter to fighter or ship to ship — and more with their ability to disrupt our freedom of movement and narrow our strategic options," he said.

Gates said China's investments in cyber and anti-satellite warfare, anti-air and anti-ship weaponry, along with ballistic missiles, "could threaten America's primary way to project power" through its forward air bases and carrier strike groups.

The Pentagon has been worried for years about China getting an anti-ship ballistic missile. The Pentagon considers such a missile an "anti-access," weapon, meaning that it could deny others access to certain areas.

The Air Force's top surveillance and intelligence officer, Lt. Gen. David Deptula, told reporters this week that China's effort to increase anti-access capability is part of a worrisome trend.

He did not single out the DF 21D, but said: "While we might not fight the Chinese, we may end up in situations where we'll certainly be opposing the equipment that they build and sell around the world."

Questions remain over when — and if — China will perfect the technology; hitting a moving carrier is no mean feat, requiring state-of-the-art guidance systems, and some experts believe it will take China a decade or so to field a reliable threat. Others, however, say final tests of the missile could come in the next year or two.

Former Navy commander James Kraska, a professor of international law and sea power at the U.S. Naval War College, recently wrote a controversial article in the magazine Orbis outlining a hypothetical scenario set just five years from now in which a Deng Feng 21D missile with a penetrator warhead sinks the USS George Washington.

That would usher in a "new epoch of international order in which Beijing emerges to displace the United States."

While China's Defense Ministry never comments on new weapons before they become operational, the DF 21D — which would travel at 10 times the speed of sound and carry conventional payloads — has been much discussed by military buffs online.

A pseudonymous article posted on Xinhuanet, website of China's official news agency, imagines the U.S. dispatching the George Washington to aid Taiwan against a Chinese attack.

The Chinese would respond with three salvos of DF 21D, the first of which would pierce the hull, start fires and shut down flight operations, the article says. The second would knock out its engines and be accompanied by air attacks. The third wave, the article says, would "send the George Washington to the bottom of the ocean."

Comments on the article were mostly positive.

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AP writer Christopher Bodeen in Beijing and National Security Writer Anne Gearan in Washington, D.C., contributed to this report.

October 08, 2009

Peak Oil: The End Of the Oil Age is Near, Deutsche Bank Says

Source: The Wall Street Journal

By Keith Johnson

Here’s an intriguing thought: Global oil supplies are indeed set to peak within a few years, and no, that is not bullish for oil. Quite the contrary—it will spell the end of the “oil age.”

That’s the take from Deutsche Bank’s new report, “The Peak Oil Market.” In a nutshell: The oil industry chronically under invests in finding new supplies, exemplified both by Big Oil’s recent love of share buybacks and under-investment by big oil-producing nations. That spells a looming supply crunch.

That will send oil to $175 a barrel by 2016—and will simultaneously put the final nail in oil’s coffin and send prices plummeting back to $70 by 2030. That’s because there’s an even more important “peak” moment on the horizon: A global peak in oil demand. That has already begun in the world’s biggest oil-consuming nation, Deutsche Bank notes:

US demand is the key. It is the last market-priced, oil inefficient, major oil consumer. We believe Obama’s environmental agenda, the bankruptcy of the US auto industry, the war in Iraq, and global oil supply challenges have dovetailed to spell the end of the oil era.

The big driver? The coming-of-age of electric and hybrid vehicles, which promise massive fuel-economy gains for short-hop commuting but which so far have not been economic.

Deutsche Bank expects the electric car to become a truly “disruptive technology” which takes off around the world, sending demand for gasoline into an “inexorable and accelerating decline.”

In 2020, the bank expects electric and hybrid vehicles to account for 25% of new car sales—in both the U.S. and China. “We expect [electric propulsion] will reverse the dynamics of world oil demand, and spell the end of the oil age,” the bank writes.

But won’t cheaper oil in the future just lead to a revival in oil demand? That’s what’s happened in every other cycle. Au contraire, says the bank: Just as the explosion of digital cameras made the cost of film irrelevant, the growth of electric cars will make the price of oil (and gasoline) all but irrelevant for transportation.

In a report filled with interesting tidbits, one in particular stands out: The cost of the Iraq war at the pump. Deutsche Bank figures the cost of the war at $1.5 trillion. Amortized over 20 years, that works out to $75 billion a year. “If the US government taxed US gasoline consumers purely to reflect the financial cost of the war in Iraq, gasoline prices should be some 54 cents per gallon higher,” the report notes.

October 07, 2009

Leading article: The end of the dollar spells the rise of a new order

This radical proposal is a reflection of a changing economic world

Tuesday, 6 October 2009

Last autumn's global financial crisis set off an economic earthquake. And we are still feeling the tremors. The latest sign of the ground shifting beneath our feet is our report today of plans by Gulf states, China, Russia, France and Japan to end their practice of conducting oil deals in US dollars, switching instead to a diverse basket of currencies.

It is not hard to see the motivation for oil exporters to move away from the dollar. The value of the US currency has fallen sharply since last year's meltdown. And fears are growing, in the light of a spiralling US government deficit, that a further depreciation is likely. They do not want to sell their wares in return for a currency with an uncertain future.

It is also easy to see why China would like a world trading system that is underpinned by other currencies as well as the dollar. For the past decade Beijing has been recycling the proceeds of its giant national trade surplus into purchases of US government bonds and other dollar-denominated assets. China too stands to make a significant loss if the value of the dollar falls. For China, however, the timing is much more sensitive. Beijing needs to reduce its dollar holdings, but if it does so too quickly it will bring about the very devaluation it fears. This explains why Chinese officials appear to want this transition to take place gradually over the next decade.

But the significance of this development goes much further. Since the end of the Second World War the dollar has been the bedrock of world trade. The pre-eminence of the American currency flowed naturally from the economic dominance of the US. Virtually everyone traded with America so it made sense to use their currency.

But the US is not the dominant power that it once was. The financial crisis has left it hobbled with significant government and household debts and sharply reduced prospects for growth. Developing nations such as China, Brazil and India, on the other hand, have weathered the economic storm significantly better. So while this latest proposal is born of financial calculation, it is also a reflection of a new economic world order.

We should not be sentimental for the dollar. It makes economic sense for world trade to be conducted in a variety of currencies. Relying on one only has the advantage of clarity, but it also creates instability if the economy that underpins it faces uncertain prospects.

Yet we need to understand that exchange rate volatility is a symptom, rather than a cause, of what truly ails the world economy. The biggest driver of global economic instability in recent years has been the determination of China to boost its export sector at all costs. Beijing's persistently large trade surpluses and manipulation to prevent its own currency from appreciating have effectively forced Western nations into running persistently large trade deficits. It was this pressure that blew up various asset bubbles that burst with such disastrous effect last year.

A gradual move away from the dollar makes sense. But without a commitment from world governments – both in the rich and developing world – to reduce these destabilising global trade imbalances we will enter an uncertain new era; and one that could yet make us pine for the days of the dominant greenback.

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