Asia roundup: Oil producers get slippery, and the West gets tough on India.
Vivek's news and notes from Asia
Oil
The most significant news from Asia today was economic—oil. OPEC is steadfastly refusing to pump more oil, even as the US has said it will release 180 million barrels from its oil reserves. Saudi Arabia seems unperturbed by the steep Russian discounts, and the prospect of oil prices falling in the near term remains unikely. OPEC+ refused to give much credence to IEA’s oil demand estimates—which signifies that its anti-Western stance is hardening.
OPEC+ sticks to modest oil output rises, ditches IEA data.1
OPEC and allies including Russia agreed on Thursday to another modest monthly oil output boost, resisting pressure to pump more, and ditched the Paris-based International Energy Agency as a data source in a sign of a hardening standoff with the West.
The group has resisted repeated calls by the United States and the IEA to pump more crude to cool prices that climbed close to an all-time high after Washington and Brussels imposed sanctions on Moscow following its invasion of Ukraine.
Saudis hike oil prices twice in a row despite record discounts on Russian crude.
Asia-bound April OSPs were increased by US$2.15-2.70 per barrel, coming on the back of record-high Dubai backwardation2 as the M1-M3 Dubai spread rose above US$4 per barrel; i.e., almost US$2 per barrel higher than last month. The main Saudi export streams—Light, Medium, and Heavy—all saw the same US$2.15 per barrel jump, breaking previous all-time highs. Whilst Saudi Arabia, in general, is still some way off bringing aggregate crude production back to pre-pandemic levels, its exports to Asia have already moved in there, hovering around 5.7 million b/d this month.
Houthi attacks expose Saudi Arabia’s defense weakness. Recent attacks on an oil depot in Jeddah are bringing Saudi Arabia’s vulnerability into sharp focus. Analysts are beginning to fear damage to the Kingdom’s reputation as a secure place for global investment.
Oil purchases curdle India’s relationship with the West. Just as the West is trying to reduce its imports of Russian energy, India is seeking to buy more, taking advantage of the steeply discounted price.
South Asia
Imran Khan won’t resign, calls his opponents foreign stooges:
Pakistan’s Prime Minister Imran Khan stubbornly refused to resign even though his party has nearly lost its majority in the National Assembly:
“Three stooges are sitting here working with foreign powers. They want Imran Khan to be ousted and want this certain person to take this place and everything will be fine then,” he said. “If you think that your conspiracy will be successful, I want to tell you I will fight with this. They can’t do anything,” he said.
Sri Lanka to turn off street lights as economic crisis deepens:
Sri Lanka is turning off its street lights to save electricity, a minister said on Thursday, as its worst economic crisis in decades brought more power cuts and gloom to its main stock market, triggering a halt in trade as prices slid.
The island nation of 22 million people is struggling with rolling power cuts for up to 13 hours a day as the government is unable to make payments for fuel imports because of a lack of foreign exchange.
Lavrov in India to discuss currency workaround:
The Indian government is considering a proposal from Russia to use a different system developed by the central bank of the latter to make bilateral payments in response to the harsh sanctions that have been slapped on Moscow by the West due to the invasion of Ukraine.
The plan, according to those with knowledge regarding the matter is to use a rupee-rouble-denominated payment with Russia’s messaging system SPFS (the Russian equivalent of the SWIFT financial transfer system)
Why patients are flocking to India for surgery.3
China
India is snapping up cheap Russian oil, and China could be next.
“China really would prefer much cheaper oil … prices are way too high even in the $90 range that’s too high for China,” [the analyst] added. “If they can buy Russian oil at a discount, and some of these discounts are pretty significant—US$30 off the benchmark, then I really don’t see what would be stopping China from purchasing a lot of Russian oil.”
“I would not be surprised if we do see more Russian oil shifting to China and then potentially other suppliers like Kuwait, UAE, even some Saudi oil shifting away, but the fact that that China will be able to get a good discount, I think will impact prices globally,” she said.
CCP purges former justice minister:
Beijing has expelled its high-profile former justice minister and deputy police chief from the ruling Communist party. Fu Zhenghua reportedly helped bring down China’s former security chief Zhou Yongkang a few years ago. Here’s the English-language announcement in the state media organ Xinhua, in its entirety:
A former official who had served as China's deputy police chief and justice minister was expelled from the Communist Party of China (CPC) and removed from public office over serious violations of Party discipline and laws.
The punishment of Fu Zhenghua was announced by the CPC Central Commission for Discipline Inspection and the National Supervisory Commission, China's top anti-graft body, on Thursday.
Fu was deputy head of the Committee on Social and Legal Affairs of the National Committee of the Chinese People's Political Consultative Conference when the anti-graft body announced investigation into his wrongdoings last October.
But hang on to your hats, because here’s the Chinese version this announcement:
After investigation, Fu Zhenghua completely betrayed his ideals and beliefs, never really was loyal to the Party and the people, completely lost the principle of party spirit, had no “four consciousnesses,” deviated from the “two maintenances,” his political ambitions were extremely expanded, his political conduct was extremely despicable, speculative drilling, and made him dizzy, and he did everything he did anything to achieve his personal political goals; participated in Sun Li Military and political groups, gangs form gangs, form party for personal gain; cheat and deceive the Central Committee on major issues, endanger the centralized unity of the Party; delusionally discuss the major policies and principles of the Party Central Committee, and make friends with many “political liars” for a long time, causing bad effects; illegally adopting and carrying guns for a long time, forming serious potential safety hazards; and have no awe of discipline and law. Law enforcement violations, bending the law for personal gain, arbitrary power, arbitrary behavior, causing serious and bad political consequences; long-term superstitious activities and confrontational censorship. Ignoring the spirit of the eight regulations of the Central Committee, the idea of privilege is extremely serious, life is luxurious and enjoyable, and has occupied many houses, office buildings and busses for individuals and families for a long time. Many public officials and active service personnel have been arranged to provide services for individuals and families for a long time, and frequently accept high-end banquets and tourism arrangements. When organizing letters, it is not true to explain the problem. In the selection and appointment of cadres, it seeks benefits for others, which seriously undermines the political ecology of the political and legal team; corruption, engages in power and money transactions, and illegally accepts huge amounts of property.
It goes on for quite some time in this vein. Here’s the Guardian’s interpretation of this event.
Shanghai enters full lockdown:
The decision to enter full lockdown, announced Sunday evening, sparked widespread panic-buying in the city, as well as confusion and anger online. Residents also expressed fear about being forced into centralized quarantine, where facilities are overloaded.
Tesla extends Shanghai plant suspension: Tesla has cancelled plans to resume production at its Shanghai factory.
China’s tech layoffs could become a self-inflicted headache for Xi:
The once-freewheeling industry was long the main source of well-paid employment in China, but major companies are now reportedly downsizing at a scale not seen before as President Xi Jinping’s government continues its crackdown on private enterprise. …
While tech is one of the worst-hit sectors, other industries have also suffered in recent months. Research by Tongdao Liepin, another major recruitment website, found that about 57 percent of Chinese companies surveyed in January laid off between 10 percent and 50 percent of their workforce last year. The job losses were concentrated in education, real estate, and internet-related industries, the survey added.
Shanghai lockdown heaps pressure on China’s GDP growth, with “more uncertainties” to come.
Robot dogs bark out lockdown orders in Shanghai. (paywalled)
Rich people in China are moving their money to Singapore:
More and more wealthy Chinese are worried about keeping their money on the mainland … Since protests disrupted Hong Kong’s economy in 2019, affluent Chinese have looked for alternative places to store their wealth. Singapore proved attractive because of its large Mandarin Chinese-speaking community and, unlike many countries, it doesn’t have a wealth tax.
The trend appeared to pick up last year after Beijing’s sudden crackdown on the education industry and emphasis on “common prosperity”— moderate wealth for all, rather than just a few.
China tries Chinese-Australian journalist for espionage:
… Cheng Lei went on trial in Beijing on Thursday on espionage charges, with diplomats denied permission to attend the proceedings.
Australian Ambassador Graham Fletcher told reporters outside the court that he was told he could not be present on the grounds that the trial involved state secrets.
“This is deeply concerning, unsatisfactory and very regrettable,” Fletcher said. “We can have no confidence in the validity of the process which is conducted in secret.”
China’s top leadership says cause of plane crash must be found soon.
Information about the March 21 crash, which killed all 132 people onboard, must be released in an open, timely and transparent manner, state media said in a report on the meeting of the seven-person Standing Committee of the Communist Party’s politburo, China’s top leadership.
A nationwide safety inspection should also be launched to prevent as much as possible the occurrence of safety accidents, state media said. If accidents do happen due to negligence, not only will the personnel in charge be punished, the relevant top officials will also be investigated, state media said.
What will China’s Metaverse look like?
A metaverse with Chinese characteristics is being built—and it may end up becoming a US$8 trillion market….
One key aspect that differentiates this Chinese metaverse is government control and political censorship within a yet-to-be-defined regulatory strategy – making Chinese companies cautious after a year of regulatory constraints targeting ed tech, children’s gaming time, personal data protection, cryptocurrencies, and tech monopolies in the government’s shift to “common prosperity.” … While many Western apps focus on best-in-class functionality, Chinese apps tap into consumers’ desire for human connection.
Australasia
Australian editor: Australia should invade Solomon Islands.
Australia must be willing to invade the Solomon Islands and topple its government if that’s what is necessary to stop a proposed security pact between China and the Pacific nation going ahead, one commentator has argued.
David Llewellyn-Smith, founding publisher of MacroBusiness and former owner of leading Asia Pacific foreign affairs journal The Diplomat, says this is “Australia’s Cuban missile crisis” and chillingly warns a Chinese naval base in the Solomons would be “the effective end of our sovereignty and democracy.”
Australian general: Solomon Islands deal “changes the calculus.”
One of the Australia Defense Force’s most senior officers has warned that if China manages to station warships in Solomon Islands it would “change the calculus” for Australia’s military …
Concern is growing that Honiara and Beijing will soon sign a new security pact allowing Chinese personnel and equipment to be stationed in the Pacific nation, which is less than 2,000 kilometres off the Queensland coast. Lieutenant General Greg Bilton says a greater Chinese military presence would change day-to-day Australian Defense Force operations.
Solomon Islands prime minister says foreign criticism of China security deal “very insulting.”
Solomon Islands prime minister Manasseh Sogavare has dismissed foreign criticism of the country’s security negotiations with China as “insulting” and called those who leaked the draft agreement “lunatics.”
Map of the day
From Claire—let me take this opportunity to recommend CDR Salamander’s newsletter. For those who don’t remember, he explains the significance of the Solomon Islands. (He is mighty displeased that this requires explanation):
You know the names; Guadalcanal, Savo Island, Cape Esperance, Santa Cruz, Tassafaronga. …
… Let me help everyone out. As always, meet me in the map room.
Here is the great circle route from our southern California ports, through Hawaii, to Australia.
Find the Solomon Islands.
Read the whole thing and weep.
Your stern lecture from the Chinese Foreign Ministry
China and the Solomon Islands signed a bilateral security cooperation framework agreement on Wednesday, the Chinese Foreign Ministry confirmed, which focuses on social security, safeguarding people’s lives and properties, human rights aid and other fields.
… In order to seek a hegemonic position in the South Pacific region, Australia and its allies have been paying attention to and are worried about China’s normal security cooperation with the Solomon Islands and other island countries, Yang Honglian, a senior researcher at the Pacific Islands Research Center of Liaocheng University based in Fiji, told the Global Times. …
“Australia wants the Solomon Islands to just follow what it says. But after all, it's the US behind all this pushing,” Frank Sade Bilaupaine, Policy Consultant at the Foreign Policy Advisory Secretariat at the Solomon Islands Government, told the Global Times. …He pointed out that the security cooperation between China and the Solomon Islands “came about because of the riots in Honiara for the past years and Chinese business is always the victim.”
As of now, OPEC+ is Algeria, Angola, Congo, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.
Backwardation is when the current price of an underlying asset is higher than prices trading in the futures market.
Claire—Want to know? I can tell you exactly why. I was so impressed I wrote a book about it, inspired by the time a dog bit my nose off in Delhi and an Indian doctor calmly sewed it back on.
After a decade plus of alienating our Middle Eastern allies for a bum bomb deal, the chickens are coming home to roost.