Tag Archive | "oil"

China Upholds Conviction of American Geologist

The following article by Andrew Jacobs appeared in the New York Times here.

BEIJING — In a case that has prompted a number of appeals from the White House, a Chinese court on Friday upheld the conviction of an American oil geologist sentenced to eight years in prison on charges of industrial espionage.

Xue Feng, a naturalized American citizen born in China, was convicted last July of violating the country’s vague state secrets laws after he obtained an oil industry database for his employer, IHS Energy, a consulting company in Colorado.

His lawyers say the information was classified as secret only after he purchased it. Given the government’s control of domestic petroleum production, several Western industry experts have questioned whether possessing such data could have any impact on China’s security.

The American ambassador, Jon Huntsman, who attended the hearing at the Beijing Municipal High People’s Court in Beijing on Friday, said he was disappointed by the ruling, which included a fine of about $30,000. “This has been a long, difficult and painful ordeal for Xue Feng, but not only for Xue but also for his wife Nan and his two kids,” he said in a statement. “We ask the Chinese government to consider an immediate humanitarian parole of Xue Feng, thereby allowing him to get back to his family and his way of life.”

The prosecution of Mr. Xue has raised troubling questions about the country’s judicial system, which is often seen as capricious and rarely explains its rulings. Mr. Xue told American officials that his interrogators burned him with cigarettes and he was jailed for five months before being formally charged, a violation of Chinese law.

The case was rife with other irregularities, including restrictions on his access to family and lawyers. During his appeal hearing last December, the American Embassy was barred from the courtroom despite a Sino-American agreement that guarantees defendants consular representation.

In the more than three years since Mr. Xue was detained, American officials visited him dozens of times and President Obama raised his case with President Hu Jintao, most recently during his visit last month to Washington.

Given the Chinese government’s effective control over the judiciary, human rights advocates said the court’s rejection of the appeal underscores the United States’ limited ability to influence Beijing on matters that, on the face of it, would appear to have minimal impact to the country’s rulers.

“There was a period of time when prisoners were part of the calculus of U.S.-China relations and raising cases at the highest levels would sometimes result in people being released,” said Joshua Rosenzweig, a Hong Kong-based researcher at the Dui Hua Foundation, a group that advocates on behalf of political prisoners. “It’s been a long time since we’ve seen that work.”

Although the motives behind the harsh sentence are nearly impossible to decipher, some analysts have viewed Mr. Xue’s prosecution as a reflection of China’s sensitivity to matters regarding natural resources, especially those it deems essential for economic growth.

Last year a Chinese-Australian mining executive, Stern Hu, was sentenced to 10 years, partly on charges of stealing commercial secrets involving China’s iron ore purchases.

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Daniels open to VAT, oil tax hike

The following article by James Hohmann appeared at Politico.com here.

Indiana Gov. Mitch Daniels opened the door Thursday to supporting both a value added tax and a tariff on imported oil, bold proposals that could cause trouble for him with conservatives as he flirts with a long-shot bid for the presidency.

The Republican, staying mum about his 2012 plans, was the guest of honor at a dinner sponsored by the conservative Hudson Institute. He received an award named for Herman Kahn, the legendary nuclear theorist who founded the respected institute 49 years ago and helped inspire the character “Dr. Strangelove” in the movie by the same name.

Daniels, once the Hudson Institute’s chief executive, described himself as an acolyte of Kahn’s and marveled at the creative thinking evident in his 1982 book, “The Coming Boom.”

Daniels recited from Kahn’s book: “It would be most useful to redesign the tax system to discourage consumption and encourage savings and investment. One obvious possibility is a value added tax and flat income tax, with the only exception being a lower standard deduction.”

“That might suit our current situation pretty well,” said Daniels, who served as George W. Bush’s Office of Management and Budget director and was a senior adviser in Ronald Reagan’s White House. “It also might fit Bill Simon’s line in the late ‘70s that the nation should have a tax system that looks like someone designed it on purpose.”

The so-called VAT, common in European economies which have stagnated, is a toxic acronym to fiscally conservative activists like Grover Norquist and Dick Armey. It slaps a tax on the estimated market value for products at every stage of production. Progressives, meanwhile, loathe flat income taxes because they’re regressive and punish the poor. But some on the right have found the VAT attractive as an alternative to progressive income taxes and levies on capital gains.

Daniels also suggested support for increasing gasoline taxes. Kahn wrote, in a passage Daniels read from Thursday, “One fully justifiable tax would be on imported oil. Any large importation of oil by the U.S. raises security problems. There are, in effect, external costs associated with importing oil that a tariff would internalize.

“Now, maybe that transgresses some philosophical viewpoint of yours,” Daniels told the well-heeled crowd of 250. “But to me, that’s an interesting point today, just as valid as the day he wrote it.

“Now, none of us is Herman’s equal. But we are all his heirs, if we choose to be,” he added.

These comments come on the heels of a September profile in Newsweek, in which Daniels said tax increases might be necessary to tackle the federal deficit. “At some stage, there could well be a tax increase,” Daniels told the magazine. “They say we can’t have grown-up conversations. I think we can.”

Daniels has previously clashed with Norquist over the former’s refusal to sign the “No New Taxes” pledge.

Musing about tax hikes in speeches and interviews isn’t something a serious Republican contender usually does, but the soft-spoken Daniels’ biggest strength may be that he’s not a typical GOP candidate.

Conservative bona fides afford him the credibility to be more candid than other possible 2012 contenders. He inherited a $200 million deficit in 2004 and transformed it into a $1.3 billion surplus. He paid off the state’s outstanding debts, doubled venture capital investment in the state and reduced the number of government jobs by 15 percent. His well-established reputation as a penny-pincher makes it hard to stereotype him as a tax-and-spender.

“He thinks outside the box, and you don’t see that too often today in politics,” said former Vice President Dan Quayle, who introduced Daniels at the Willard InterContinental Hotel, just two blocks down Pennsylvania Avenue from the White House. “Because, you know, you have the conventional campaigns. You’ve got all the consultants. You’ve got things you can do and can’t do. It’s pretty well, many times, scripted. But Mitch has always been a person that would think outside the box. And that’s why, I think, he’s been tremendously successful in Indiana.”

Ironically, Quayle lost reelection in 1992 partly because President George H.W. Bush — who led the ticket — reneged on his pledge not to raise taxes. In that same year, independent candidate Ross Perot, who led what some see as a precursor to today’s tea party movement, proposed a 50-cent-a-gallon tax on gasoline to help eliminate the federal budget deficit and reduce consumption.

Milling about Thursday night were members of the old-guard GOP establishment and neoconservative luminaries from the George W. Bush-era, including Defense Secretary Donald Rumsfeld, Dick Cheney chief of staff Scooter Libby and ex-World Bank head Paul Wolfowitz.

Allan Tessler, the chairman of Hudson’s Board of Trustees, called Daniels “a rare hybrid,” a think-tanker and politician “all wrapped in one.”

That, indeed, is how he sounded in his speech: more theoretical than an average politician but not as aloof as many intellectuals who work in ivory towers.

Daniels, for his part, says he feels optimistic about the country’s future if only its leaders will “think long term and skeptically about what is commonly accepted and (then) practically, openly-mindedly following the facts where they lead.

“The people of Hudson were trained by Herman and his group to think in a way that was principled, yes, but practical, immensely practical,” he said, before receiving a standing ovation at the end of his 26-minute speech.

Former Japanese Prime Minister Shinzo Abe said word of Daniels’ stellar reputation on economic stewardship has reached Asia. “To tell the truth, we could use some of your ingenuity in facing down our fiscal challenges,” he said during the dinner’s program.

Daniels also caused a stir among social conservatives in June when a Weekly Standard story reported his proposal for a “truce” so that the country could focus on pressing economic issues. He backed off his comments, but not before serious damage was done.

In a brief interview after his speech, Daniels downplayed the significance of his comments. He stressed that he would support a VAT “under only the right circumstances,” reiterating his desire for it to be paired with  a flat income tax.

“If you think that the paramount problem for the country is the debt, and we’ll never get on top of it without really robust growth, one of the things you want is a very different, more pro-growth tax system,” Daniels told POLITICO. “And a quarter century ago, (Kahn) was writing about one. That’s all. There are other ways to get at it.”

“The point here is: think about solutions, think about outcomes,” Daniels added, when pressed on whether he’d back oil tariffs.

An aide said Daniels’ chief political focus this month is on winning control of the Indiana state House. Republicans need just three seats to claim the majority. The governor, with two years remaining in his second term, personally recruited several candidates and hopes to use them to push through significant reform legislation.

POLITICO reported last month that Daniels has been holding a series of private dinners with top Republican business leaders, policy types and donors at the governor’s mansion in Indianapolis since this spring.

Reflecting his stature, C-SPAN filmed Daniels’ speech for airing at a later date.

And Max Eden, a senior at Yale, just started what he calls the “Student Initiative to Draft Daniels” for a presidential run. He said there are eight students in New Haven already behind the effort, and that they’re already setting up chapters at 20 other colleges. The Ohio native, who met Daniels for the first time Thursday, hopes to build a large grassroots network after the midterms.

The only problem: Eden’s a registered Democrat.

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BP’s blowout preventer: Modified in China

Bob Hall (who produced Dollar to the Giant) sent this to me.  From the UK press.  Funny no U.S. press picked it up.

Do you remember BP?  Of Gulf of Mexico/Deepwater Horizon/big oil spill fame?  The blowout preventer - the last line of defense against an out of control well - was modified by engineers in China.  To save money.

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Oil demand

Oil demand fell in the U.S. by 2.6 million barrels per day, which puts us down to 1995 levels.  Thirteen years ago.  Astounding.

Posted in TradeComments (1)

Oil producing countries’ financial troubles?

Stock markets in the Arab countries are down about 40%.  Oil futures in New York hit $64 last Friday.  In March 2002, per barrel prices were $25 or so.

The Arab countries have benefitted from a huge transfer of wealth because of soaring oil prices.  But now they are bailing out their own financial institutions in the global recession.

In Saudi Arabia, always on guard against potential unrest, King Abdullah said that 10 billion riyals, or $2.7 billion, would be placed in an account in the Saudi Bank of Credit and Saving to enable the bank to help hundreds of thousands of citizens obtain loans for family needs, including marriages and home repairs. …

In Kuwait, the central bank also said it was moving toward guaranteeing deposits at local banks.

If oil drops below $60, the countries are presumed in financial trouble.

“This shows the gulf countries are not immune to the overall problems in the financial system,” Olivier Jakob, an oil analyst at Petromatrix in Zug, Switzerland, said during an interview Sunday. “If we get below $60 a barrel, some of these countries will suffer.”

Odd.  They did not seem to be in trouble with $25 oil six years ago.  The lower oil prices should reduce our trade deficit.  But we need to balance our deficit and produce a trade surplus to offset years of negative numbers. 

It is urgent that we Fix America’s Economy so this does not happen again.  Sign on to help.

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Commodity markets tumble

The huge surges in the commodities markets have ended, at least temporarily.  Oil has dropped by 44%.  Gasoline prices have fallen by 24 cents in the last week to a national average of $3.21/gal (in July, prices were $4.11/gal). 

Corn, soybean and wheat prices have also dropped tremendously.  

Big increases in world wheat production because of increased acreage in the United States, Canada, Russia and much of Europe have brought wheat prices to less than $6 a bushel today from nearly $13 in March.

Soybean prices have dropped to $9 a bushel from $16 since July, in part because of a record crop in China and a slowdown in Chinese imports. Corn prices are also easing amid expanded supply.

But will commodities continue tanking, or are will they generally go up.

A theory among economists is that commodity prices are still at the
beginning of a steep fall as the credit squeeze takes the world economy
into a deep recession. …

 But many economists say a lasting price collapse is unlikely because the emerging middle class and growing populations in developing economies will continue to have strong appetites for fuels and metals.

In the 1970′s, they said grains and oilseed prices would not come down because of world population.  They were wrong.  The cause and effect of consumer demand vs. farmer supply is often outweighed by many other factors.

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Biggest wealth transfer ever

Sovereign wealth funds are reshaping ownership of commerce in the world.  The opposite of privatization.  Foreign governments have huge slush funds, overwhelming hedge funds.  China does it with a multi-faceted policy of generating huge exports with currency manipulation, taxes and vast subsidies to its industry.  The Middle East does it with oil.

The U.S. trade policy funds our geopolitical rival… China.  U.S. energy dependency funds our other geopolitical rivals - the oil dictators.  Our Founding Fathers would be pleased.

This from the Washington Post:

Those markets are producing what one economist calls the "greatest
wealth transfer the world has ever known." In a single year, the
revenue of oil- and natural gas-producing Persian Gulf states have
nearly doubled — giving nations in the region hundreds of billions of
surplus dollars to play with. Recent Saudi promises to increase oil
production may help ease prices. It is also the profitable
accommodation of an addiction.

How much money are we talking about? Because the Gulf monarchies are
extravagantly secretive, the estimates vary. The Saudi Arabian Monetary
Agency declares official reserves exceeding $300 billion, but the real
number is probably much larger. And this does not include the wealth of
individual royals. Brad Setser, my colleague at the Council on Foreign
Relations, estimates that Middle Eastern sovereign wealth funds have
perhaps $1.5 trillion set aside for a rainy day.

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Chinese government funds $200 billion in new company

The Chinese government just started a new government company to buy
assets abroad.  The company could buy U.S. strategic assets with
our money, since it one of America’s largest creditors.  The
country already bought a major stake in Blackstone Group, which it can
use as a front to buy abroad.

Our government currently has the
Committee on Foreign Investment in the United States (CFIUS) in place.
This multi-agency committee was created in 1988 to analyze foreign
acquisitions of privately owned entities to determine their affect on
national security.  But most agree the Committee is asleep at the

William Hawkins of the U.S. Business and Industry Council has the full report after the fold.



Article published Jul 8, 2007
Capitalist warfare

by William Hawkins

China’s government took the first official step June 27 to inject $200
billion into a new sovereign company that will buy equity assets
abroad. Beijing announced its plan in March to make more profitable use
of $1.2 trillion in hard currency reserves, much of which are now kept
in U.S. Treasury securities. The Finance Ministry will capitalize the
fund, to be run by a former Finance official.

What will distinguish this Chinese fund is not just its size but that
it will be a government entity. As its agents scout the world for
lucrative investments, it will act to draw private enterprises into
government control. It will enter the market to subvert the market.

Beijing’s foreign direct investment has focused so far on energy and
raw materials to support its expanding industries. China would prefer
to import from itself, owning its overseas supplies to assure security
and avoid market fluctuations. Importing at the internal cost of
production, rather than a price set by rising global demand, will give
China’s industry another global edge.

The attempt by China National Overseas Oil Company (CNOOC) to buy the
American energy producer Unocal in 2005 set off alarm bells in
Washington. Unocal then accepted a rival bid from Chevron.

To avoid another such confrontation, the new Chinese fund initially may
settle for minority stakes administered by front companies like the
Blackstone Group, into which China’s new agency poured $3 billion just
before Blackstone launched its initial public offering.

In the longer run, a state-run agency with such enormous reserves will
likely try to use those funds to advance broader national objectives
than merely a few extra percentage points of return on capital.

On June 26, China created an initial $1 billion fund to finance trade
and investment by Chinese companies in Africa to advance ties with that
resource-rich continent. The fund is part of Chinese aid promised by
President Hu Jintao at a Beijing summit with African leaders in

Chinese state oil companies have expanded aggressively on the
continent, signing deals in Nigeria, Angola and Sudan. After a 2004
Latin American tour, Mr. Hu promised $100 billion in investments for
that region, mostly in energy, mining and infrastructure projects (the
latter to help ship resources to China). These will be paid for with
Chinese manufactured goods in classic colonial style.

Chinese investments have often gone to shore up radical regimes, thus
becoming part of Beijing’s diplomatic offensive to build coalitions
against American "hegemony." At a Darfur conference in Paris the same
week the Africa fund was launched, the Chinese envoy argued against
imposing sanctions on Sudan for its genocidal policies.

Washington needs to shore up its own economic defenses in case Beijing
turns its attention again to buying strategic American assets. Besides
resources, China wants advanced technology and has shown interest in
acquiring high-tech firms. Beijing has made no secret of its desire to
obtain "dual use" technology with military applications, whether
through trade, acquisitions or espionage. It protested new Commerce
Department security measures on U.S. high-tech exports announced June
15. The measures are much weaker than originally envisioned, due to
lobbying by certain business groups that seek to profit by helping
China’s rise to great-power status. Beijing and its "business" partners
cannot be trusted when U.S. security is at stake. Public authorities
must be vigilant and have the authority to act to guard the national

On June 29, the Foreign Investment and National Security Act of 2007
(S. 1610) was passed by the Senate on a voice vote. The work of Senate
Banking Committee Chairman Christopher Dodd, it would strengthen the
Committee on Foreign Investment in the United States (CFIUS). This
multi-agency committee was created in 1988 to analyze foreign
acquisitions of privately owned entities to determine their affect on
national security. There is wide agreement — including a scathing 2005
report by the Government Accountability Office, that CFIUS has not done
its duty, rubber-stamping deals without much serious investigation. Mr.
Dodd’s bill is a good start, but Chinese reserves are likely to reach
$2 trillion by the end of the 110th Congress. Stronger action is needed
to keep Beijing from using its vast store of purchasing power
strategically against the American economy in an attempt to shift the
global balance of power.

Beijing is well aware of how foreign investment can be used in this
regard, remembering how China was divided into spheres of influence by
the imperialist powers of the 19th century. Last August, its Commerce
Ministry set new limits on foreign investment that could transfer
control of leading enterprises or traditional Chinese brands, threaten
companies with more than 2,000 employees, or pose risks to "economic
security" — not just military security. Beijing uses the term
"comprehensive national power" to unite economic and military concerns,
and Washington must think in the same way.

William Hawkins is senior fellow for national security studies at the U.S. Business and Industry Council.

Posted in TradeComments Off

On Trade Policy; Corn and Oil

According to a recent New York Times editorial, cheap oil is at least partly responsible for cheap corn.

However, that which
has kept corn cheap hasn’t been cheap oil but government cheap
corn policy.  We’ve had expensive oil
before and it didn’t elevate the price of corn because government farm
policy was to maintain corn supply above usage. Farmers had no choice
but to absorb the higher costs of corn production.
Today’s policy is to turn everything into petroleum by converting as much as possible into energy
to elevate energy supply above usage. Accomplishing that feat will
continue to keep corn inexpensive when compared to everything else.

Oil is nearly 3 times higher today than its fairly recent 5
year low of
$20. In the same cycle corn has had lows near $2. Three times
the $1.99 five year low puts corn at $6. Corn today is $4. Soybeans at the
oil price ratio should be $12. Today soybeans are priced slightly above
$7. Applying oil exchange rates to cattle and hogs prices them at $200
and $90 respectively.

For the time being, nearly everything is cheap compared to oil. Take an Oilman to lunch today. Let him


Posted in AgricultureComments Off

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