Freeport digging deep for new Grasberg mine deal

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Freeport McMoRan Copper & Gold (FCX) chairman Richard Adkerson has twice flown to Jakarta this year as he tries to persuade President Joko Widodo’s administration to make an early decision on extending the American mining company’s contract over the fabled Grasberg mine beyond 2041.

Adkerson wants a guarantee of a 20-year extension in planning the future development of the four rich ore bodies comprising one of the world’s most lucrative mines lying 3,500 meters up in Papua’s rain-swept Central Highlands.  

Under production since 1988, the bottomless Grasberg still has proven and probable reserves of 15.1 million tonnes of copper and 28.3 million ounces of gold, making it the world’s third-largest copper reserve and biggest gold deposit.

Consolidated sales from the mine amounted to 4.2 billion pounds of copper and 1.7 million ounces of gold in 2022, the first year it returned to full production after converting from a vast open pit to a fully underground, rail-fed operation.

Adkerson and president and treasurer Kathleen Quirk met personally with Widodo on one of their two trips to Jakarta, an indication of the importance FCX attaches to retaining the glittering jewel in the Phoenix-based company’s crown.

Insiders describe the discussions as “fluid” and say they revolve around three conditions, which include boosting the government’s stake in PT Freeport Indonesia (PTFI) subsidiary from 51.2% to 61.2%, the completion of a long-delayed US$3 billion smelter at Gresik, East Java, and adding a second Papuan to the PTFI board.

FILE PHOTO: Freeport McMoRan Chief Executive Officer Richard Adkerson gestures during a press conference with Indonesia's Finance Minister Sri Mulyani Indrawati and Mineral Resources Minister Ignasius Jonan (not pictured) at the Ministry of Energy and Mineral Resources in Jakarta, Indonesia August 29, 2017. REUTERS/Darren Whiteside
Freeport McMoRan chairman Richard Adkerson gestures during a press conference in a 2017 file photo. Image: Agencies

Investment Minister has indicated progress is being made. “The discussions are nearly complete, and the focus is on ensuring that the state acquires the additional shares at the lowest possible cost,” he said earlier this month.

Lahadalia expects state-owned mining holding company PT Mineral Industry Indonesia (MIND-ID) to make the final payment of the $3.8 billion it laid out for its 51.2% stake in PTFI in 2024, five years after sealing the deal.

“It is personally gratifying to experience the markedly more positive attitudes there (in Indonesia) about Freeport than in the past,” Adkerson said in an upbeat presentation to a first-quarter earnings conference call last month.

Apart from the growth of the electric car industry driving a positive outlook for copper, he said FCX’s relationship with Indonesia had improved greatly since the government took the majority interest in PTFI in 2018.

Up until then, Freeport had been treated as public enemy No 1, under attack from environmental groups for its in-river tailings (rock waste) disposal system and often blamed for past human rights abuses committed by the Indonesian military in the mine’s vicinity.

It was also criticized for the cozy relationship between legendary Freeport CEO Jim-Bob Moffett, who died in 2021, and president Suharto, the authoritarian leader who was always grateful for the gamble Freeport took on Papua in the late 1960s.

In previous years as well, traffic on the steep 100-kilometer road between the lowland logistics center of Timika and Freeport’s high-altitude Tembagapura mining camp had been the target of sniper fire from Papuan rebels.

S&P Global estimates that Grasberg represents an earnings concentration for FCX of 35-40%, but the firm also owns more than 50% of each of its two less profitable copper assets in Peru and Chile and 72% of the Morenci copper mine in Arizona.

“As resource nationalism appears to be rising around the world, we believe the globally important Grasberg mine could be exposed to further changes in economics (for FCX), particularly as permits are reconsidered for extension in the next decade or two,” the ratings agency said in a note last month.

Although MIND-ID posted a $1.45 billion profit last year, Center for Energy and Mining Law executive director Bisman Bakhtiar feels the company will be taking on an unnecessary burden by buying a further 10% stake in PTFI.

Papuan students display placards during an anti-Freeport rally in front of the US giant Freeport-McMoRan office in Jakarta on April 7, 2017.The students demanded an end to mining by Freeport in Papua and the freedom of Papua from Indonesia. / AFP PHOTO / Bay ISMOYO
Whipping boy: Papuan students display placards during an anti-Freeport rally in front of the US giant Freeport-McMoRan office in Jakarta on April 7, 2017. Photo: AFP / Bay Ismoyo

FCX will continue to retain operational control of the world’s biggest underground hard-rock operation, and along with it the lucrative supply contracts that make it an enticing prize for political interests in Jakarta.

Sources familiar with the way the mine is operated say the government has no practical mining expertise at all to replace the existing Freeport team, despite an obvious divergence of objectives between Phoenix and the state.

Analysts say if FCX is not granted an early extension, considered unlikely at this stage, planners may be tempted to “high grade” the mine, giving priority to exploiting the more profitable ore deposits over the next 18 years.

Freeport’s new $3.4 billion smelter at the Java Integrated Industrial Park Estate (JIPE), north of Surabaya, was originally planned to be commissioned by mid-2024 but construction is reportedly running behind schedule.

When complete, the facility and Mitsubishi’s existing Gresik smelter, PT Smelting, which began commercial operations in 1999, will process the bulk of the three million tonnes of copper concentrate the Grasberg produces each year.

About 60% of PT Smelting’s output currently goes to overseas markets, but the Widodo government plans to impose a ban on all copper exports next year in line with its strict policy of adding value to its vast mineral wealth.

Nickel ore exports were banned in 2020 with official data showing that the three new Chinese-funded processing facilities in Sulawesi and Maluku had increased the commodity’s value from $1.1 billion to $20.8 billion in 2021 alone.

The Energy and Resources Ministry was forced to delay its plan to ban copper concentrate exports in June after Freeport warned it would have to cut back production until the new 1.7 million-tonne smelter is in operation.

Amman Mineral, a subsidiary of Indonesian-owned conglomerate Medco Energy, may be in worse shape because it exports all its concentrate from Sumbawa’s Batu Hijau copper and gold mine.

Executives said in an October 2022 presentation that Amman’s $1.4 billion smelter, with a production capacity of 220,000 tonnes of copper cathode, would not be operational until the end of 2024.

Bauxite is on the export ban list next month, with mining officials confident the country’s four existing bauxite smelters are sufficient to absorb 12.5 million tonnes of bauxite and produce 3.9 million tonnes of alumina.

Eleven new plants are also under construction. They will eventually churn out a combined 12.6 million tonnes of chemical and smelter-grade alumina, the precursor for the manufacturing of aluminum.

The ministry puts total bauxite reserves at 1.27 billion tonnes, or about 4% of the world’s total, mostly concentrated in West Kalimantan. That places Indonesia in sixth place among the countries with the largest reserves.  

China’s state-owned ENFI Engineering Corp and PT Rasamala Metallurgy Indonesia (RMI) have signed a preliminary deal to build a fourth, $2.3 billion copper smelter at Fakak in Papua’s western Bird’s Head region.

Trucks haul raw earth materials from copper mine site. Photo: AFP, PT Newmont Nusa Tenggara
Trucks haul raw earth materials from a copper mine site in Indonesia. Photo: AFP

PTFI and MIND-ID have been cited as strategic partners, but PTFI president-director Tony Wenas told Asia Times that the company had yet to talk to ENFI about where it would source its concentrate from.

Fakfak lies 550 kilometers west of Timika and only a short distance overland from BP’s Tangguh LNG complex in Bintuni Bay, a potential source of power for both the new plant and to replace Freeport’s current coal-fired generators.

Only known up to now for its auto-cleaning and courier services, PT RMI is making its first venture into minerals. It is headed by Hence Carlos Kaparang, a member of the Suharto family’s Berkaya Party which failed to gain a seat in the 2019 legislative elections.

State power utility Perusahaan Listrik Negara (PLN) recently signed an MOU with a French technology company to build a hydrogen manufacturing plant in Fakfak as part of the proposed industrial complex. 

Bintuni Bay is also the site of Genting Oil and Gas Ltd’s Kasuri block, which will supply 230 million cubic feet (MCF) of gas a day to a floating LNG terminal, the first time the process will be used in Indonesian waters.

A further 101 MCF will go to a $1.5 billion ammonia and urea plant to be built by state-owned fertilizer company PT Pupuk Kalimantan Timur on the south coast of Bintuni Bay in Papua’s Bird’s Head region.

Discovered in 2011, Kasuri contains proven reserves of 2-3 trillion cubic feet (TCF) and is expected to come on stream in 2025, adding to Indonesia’s existing LNG production of 32.2 million tonnes a year and giving West Papua another economic anchor.

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Turkish election less risky than the market thinks

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The implied volatility of emerging market currencies during the past six months has tracked world market conditions. The main macro determinant of volatility in the whole EM currency complex is American monetary policy.

As rates peaked at the end of 2022, so did emerging markets’ currency volatility, and volatility fell with US bond yields during 2023 – with the exception of Turkey. Hedging in the advent of the country’s May 14 presidential election has pushed the implied volatility of short-term options above 40% and the interest rate on overnight deposits to above 80%, as the central bank squeezes the money market to discourage shorts.

Noteworthy is that the cost of default protection against the Turkish sovereign hasn’t moved while the cost of hedging the Turkish currency has jumped.

We think concerns about Turkey are overdone. In fact, Turkish policy has very little room to change. Financially, Turkey is dependent on the Gulf States and China. A great deal of attention was focused on China’s role in mediating the restoration of diplomatic relations between Saudi Arabia and Iran. But Turkey was a de facto partner to this agreement, in several ways. Turkey’s role in containing the long-simmering civil war in Syria is central.

On April 25, Turkey, Russia, Iran and Syria held “constructive” talks. Turkey has been the main sponsor of anti-government Sunni rebels during the past dozen years, and the main bulwark against Shia militias supported by Iran.

Turkey’s role in containing Iran’s expansionist ambitions is an implicit feature of the Iran-Saudi agreement. It follows a year of rapprochement between Turkey and the Gulf States, and establishes Turkey’s role as an economically dependent but militarily dominant force in Western Asia.

Turkey’s economic relationship with China is the cement that holds this together. China’s exports to Turkey have tripled since 2019. Some part of the increase reflects indirect exports to Russia. Turkey has emerged as a key economic intermediary between Russia and the rest of the world, including electronic equipment from China and Russian hydrocarbons shipped via Turkish pipelines.

We expect Erdogan to win the election given the blandness of his main opponent, an elderly retired civil servant heading a coalition of six mutually antagonist parties. But whoever wins will have to stay in the groove that China, the Gulf States and Russia have carved out for Turkey.

Rather than become a hegemonic neo-Ottoman Empire, as Erdogan once hoped, Turkey is settling into a role as the most powerful nation-state in Western Asia. It is well suited for this and unlikely to deviate from the course that Erdogan has charted for the past two years.

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The dirty five laundering Russia’s oil

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SINGAPORE – Western nations have taken major steps to cut energy ties with Russia by cracking down on imports of seaborne crude oil and refined petroleum products while imposing a US$60 price cap on sales to non-Western countries in a bid to crimp the Kremlin’s ability to finance its war in Ukraine.

At the same time, nations that sanctioned Russian oil have dramatically increased imports of refined oil products from countries that have become the largest importers of Russian crude since Moscow invaded Ukraine last February, according to a recently released report by the Finland-based Center for Research on Energy and Clean Air (CREA).

The organization tags five non-sanctioning countries – China, India, Turkey, United Arab Emirates (UAE) and Singapore – as “launderers” of Russian oil, which is blended with non-Russian origin crude and re-exported globally, including to the very nations enforcing the price cap and embargo in what CREA describes as a “major loophole” in the sanctions regime.

Isaac Levi, an energy analyst at CREA and the report’s co-author, told Asia Times that the EU’s oil ban and price cap, imposed in December and February respectively, have cost Moscow an estimated 160 million euros (US$175.3 million) per day, but were cautiously designed to allow Russian oil flows onto global markets to keep prices down and avoid supply disruptions.

“Now that the bans are in place, Russia’s revenues are starting to rebound,” he said, describing the loophole as a “legal way” for sanction-imposing countries to buy oil products previously bought directly from Russia, which are now being sold by third countries at a premium. “This process provides higher demand for Russian oil, creating higher export volumes and prices.”

In November, the International Energy Agency (IEA) projected that Russian oil output would fall by 1.4 million barrels per day (bpd) in 2023 following the EU’s ban on seaborne exports of Russian crude. But with more than 90% of Russian crude now finding buyers in Asia, exports averaged 3.76 million bpd in April, 22% above the average pre-war level of 3.1 million bpd, according to S&P Global.

Graphic: Asia Times

CREA’s report shows seaborne imports of Russian crude oil to China, India, Turkey, UAE and Singapore increased by 140% in volume terms, or 182% in value from the year prior, since the eruption of the Ukraine war. The total value of their imports was 74.8 billion euros ($82 billion) over the 12 months, with the five countries accounting for 70% of Russia’s crude oil exports since the war began.

The line-up of traders dealing with Russian barrels has changed significantly since the war began, said Viktor Katona, lead crude analyst at commodity analytics firm Kpler. “First it was the Western majors that quit the game, then followed the global trading companies, so basically there is very little Western presence in the trading of Russian barrels right now.”

Since the invasion, the EU, G7 and Australia increased their volume of refined oil products imported from China by 94%, India by 2%, Turkey by 43%, UAE by 23%, and Singapore by 33%. The five nations’ exports of oil products increased 80% in value terms and 26% in volume terms to price-cap countries, the report states, with a rise of only 2% in volume to non-price-cap countries since February 2022.

CREA has said it is unable to verify the precise amount of oil products from Russian crude oil that passes through the five “laundromat” countries to nations that abide by the price cap, though it cites the data trends as “evidence that laundromat countries are providing funds to the Kremlin through higher imports for Russian crude on the prior year.”

The trade flows, coincident with the imposition of sanctions, have led to “the inference that the sanctions are being avoided by the export of Russian crude oil to the laundromat countries, where the crude oil is refined into products which are then sold as non-Russian origin products,” said Larry Cantú, an international oil and gas attorney with risk advisory firm Ball PLLC.

In addition to the “laundering” of Russian crude in third countries, Cantú added that the incomplete or false documentation of crude oil shipments and the manipulation of Automatic Identification Systems (AIS) to conceal that a vessel has called at a Russian port are among the suspected practices employed to evade the sanctions.

Irina Tsukerman, a US national security lawyer and the programs vice chair for the American Bar Association’s Oil and Gas Committee, told Asia Times Russia is believed to be adopting evasion schemes used by other sanctioned oil exporters such as Iran and Venezuela, such as the maritime practice of vessels transferring oil ship-to-ship in international waters.

“One of the ways Russia has been able to create an opaque market is by sending out the tankers without a precise destination. That’s how they eventually get to ship-to-ship transfers,” said Tsukerman, who is a geopolitical and business analyst and president of Scarab Rising, Inc, a strategy advisory specializing in security and market research.

“Some of the ‘disguised’ oil is even making its way into the United States as a result of the success of these measures… [Russia] has also engaged in schemes to obscure the real prices it is charging, by putting on paper lower prices that fit under the price cap, as with exports to India, but in reality, charging above the price cap to make profit,” she added.

Cantú noted that trade in products made from Russian crude has become “extremely profitable” since it is more difficult to trace the origins of refined oil products than it is to identify the source of crude oil.

“Consequently, when the sanctions against Russian oil were implemented, the price of Russian crude fell sharply but the price of refined products made from Russian crude did not.”

Tsukerman went on to identify Singapore as “one of the leading trade hubs benefiting from the Russian sanctions circumvention schemes,” with the Southeast Asian trade hub reported to be “one of the locations where that oil is blended with others to begin with, giving traders as much as a 20% profit margin from combining the Russian grade oil with other grades.”

Singapore’s refining industry is one of the largest in the world with a combined processing capacity of over 1.5 million bpd, and it plays a significant role in the global oil market. The business and financial hub is also a leading center for oil bunkering and trading, with the Singapore Exchange (SGX) offering crude oil futures and options, fuel oil derivatives and other energy products.

Singapore has been publicly critical of Russia’s invasion of Ukraine, imposing targeted sanctions and restrictions on Russia covering export controls on military and certain dual-use goods, as well as measures prohibiting financial institutions from dealing with designated Russian banks. The island nation has not, however, banned the import of Russian oil or petroleum products.

Besides refining Russian crude oil, Singapore has sharply increased its imports of refined oil products from Russia in recent months, with April seeing the highest volume since January 2019, said CREA’s Levi. “This increased inflow has not been matched by a corresponding increase in exports, so Singaporean refiners have in fact been squeezed by the inflow of refined products from Russia,” he said.

Graphic: Asia Times

“Refineries in Singapore may be profiting from importing lower-cost Russian crude oil and refining this to then either sell the oil products domestically or exporting these oil products. Singaporean traders and refiners are not only tarnishing themselves morally but also taking a commercial risk by doing business with oil producers closely connected to the Kremlin and its war crimes,” Levi added.

Moral hazard and commercial risks aside, Singaporean businesses are conducting themselves legally and are not apparently breaking any laws in this trade. Authorities in the city-state have said local companies will have to consider and manage any potential impact on their business activities, transactions and customer relationships when dealing with Russian crude oil and refined products.

Minister of State for Trade and Industry Low Yen Ling told parliament in February that while Singapore is “not a participant of the EU ban, companies and financial institutions in Singapore have been informed of the ban imposed by the EU and other countries, via circulars issued by relevant government agencies.”

In addition to Russian diesel imports hitting their highest volume in more than a year, official data showed Singapore’s imports of Russian naphtha, which is used in gasoline blending and also a key ingredient in plastics and petrochemicals, nearly tripled in the first quarter of 2023 to 741,000 tons, up from around 261,000 tons in the fourth quarter last year.

Demand for oil storage tanks in Singapore has also reportedly increased, which analysts see as an indication that Russian fuel is being blended and re-exported globally, clearing the way for ship insurance and financing that would otherwise be banned under sanctions. “Because the whole product is no longer of Russian origin, some oil companies have accepted it,” Tsukerman said.

“The demand for Singapore’s onshore tanks as well as offshore floating storage has been on the rise. A six-month lease for Singapore fuel oil or crude oil storage rose by as much as 17-20% in costs over the course of last year,” the veteran lawyer and analyst added. “This points to the fact that Russia’s oil – and petrol blends meant to obscure its origins – are likely flooding the markets.”

Skeptics of the West’s efforts to deny the Kremlin an energy export windfall may interpret the existing loopholes and evident sustained Western demand for Russian oil as proof that Russia is, in fact, too big to sanction. CREA, however, argues that the price cap countries continue to wield strong leverage to ratchet down the price cap level and close the exploited loopholes.  

Under the price cap system, companies shipping Russian oil outside of Europe are only able to access EU insurance and brokerage services if they sell the oil at or under $60. According to CREA’s report, 56% of Russian crude oil shipped to the five “laundromat” countries has been transported by vessels owned or insured by the price cap nations from December 2022 to February 2023.

The Helsinki-based research organization suggests the price cap countries use their clout in insurance and shipping industries to ban imports from refineries receiving any Russian crude, deny imports of refined oil products of Russian origin, as well as ban maritime services in perpetuity to vessels used to transport Russian crude without complying with the price cap.

An oil pump-jack at an oil and gas field in the Krasnodar region of Russia. Vitaly Timkiv / Sputnik

“The penalty for violating the price cap policy is exclusion from insurance and financial services for three months. This amounts to a slap on the wrist compared with the initial proposal, which was exclusion in perpetuity. The punishment should clearly be toughened,” said CREA’s Levi, who said he was not aware of any companies that have yet been caught in the dragnet for sanctions violations.

Mike Salthouse, head of external affairs at marine mutual liability insurer NorthStandard P&I Club, told Asia Times that the vessels which we insure “are aware of the requirement to obtain an attestation [of compliance with the price cap] from their contractual partner before lifting the cargo. Whilst it is difficult to be sure, the attestation system appears to be effective.”

Russia, which has banned deals that involve applying the price cap mechanism, and its partners are now “investing in ships, that are flagged, classed and insured in jurisdictions beyond the reach of the EU and G7 […] to avoid price cap constraints,” he added. “Of concern is that the safety and inspection regime is likely to be less rigorous and the insurance less reliable than we have been used to.”

Follow Nile Bowie on Twitter at @NileBowie

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Russia in 180-degree flip from West to East

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On March 31, 2023, Russia published its new Foreign Policy Concept. Rapid growth in Asia has fuelled Russia’s drift toward the East and the pivot has now been integrated into official policy. This is a tectonic shift for Russia domestically but the material effects in Asia will be felt gradually.

Russia lists global regions in order of priority in the Foreign Policy Concept. The West has been relegated to penultimate priority before the Antarctic, which signals a 180-degree flip. Moscow asserts its desire for “peaceful coexistence” but the ball is in the West’s court.

Russia’s first strategic priority after former Soviet Union states is the Arctic region. It is only now bringing its plans for the North Sea Route out of the cold. Russia’s moves in the North Sea will have a direct effect on logistics from China, easing its geo-economic difficulties and allowing more efficient transit of goods via Southeast Asia.

The Arctic is also a confrontation point with circumpolar states, which will likely further delay thawing of relations with the West.

While seeking “peaceful coexistence”, Russia does not see a detente with the United States and other Western states in the foreseeable future. This sentiment is illustrated by high-ranking officials including Deputy Secretary of the Security Council Dmitry Medvedev.

Russia’s Foreign Policy Concept lists China and India as its first and second priority relationships with Southeast Asia as its third. China’s importance is obvious, deep and enduring. 

So is India’s, considering the tight relationship between Moscow and New Delhi since India’s independence. The long history of cooperation in the military and economic spheres has created significant institutions of cooperation — for example, the joint missile program BrahMos requires deep mutual trust throughout the verticals of government.

Crowded out of global fora, Russia is reprioritizing its relations with regional organizations such as ASEAN going forward, juxtaposing them with Western-dominated groupings including the Quad, Chip4 and AUKUS. The strategy may resonate with Chinese policymakers and roughly half of Southeast Asian decision-makers.

The interest expressed towards joining the BRICS format by 19 states, mostly from the Global South, is evidence that Russia’s bet on non-global decision-making fora can be a winning strategy.

Russia’s foreign policy strategy places economics first. Russia is shifting its economic attention to Asia and will likely concentrate on the rapidly growing nations of Southeast Asia.

Russia–Asia links began to develop long before Russia’s official pivot to greater focus on Asia and prior to the hostilities between Russia and Europe. Links include the Power of Siberia pipelines, increases to the Trans-Siberian railway’s capacity and rejuvenation of the North–South Transport Corridor into Iran.

Gazprom’s Power of Siberia gas pipeline to China came online on December 2, 2019. Photo: Gazprom

Frequent references to infrastructure projects now pepper Moscow’s strategy. New market access initiatives in sectors where Russia has an advantage or is on par with the West should be expected. Some of these market initiatives are already visible — for example, India contracted Russia’s Transmashholding corporation in April 2023 to produce trains.

Russian energy, commodities and niche specialties like nuclear technology may be a boon to energy-poor but relatively cash-strapped Southeast Asian states. India becoming one of Russia’s major oil customers is a case in point.

While Russia has no state ideology, its many peoples have long been traditional and conservative. Russia has found itself the de facto defender of thought that is seen as reactionary in the West. As Western values evolve, Western countries find themselves distancing from the Global South.

Russia, in contrast, is moving closer to its southern counterparts and has now made “traditional spiritual and moral values” part of its foreign policy.

This is a significant shift after three decades without explicit value-led foreign policy. Russia will likely use the soft power of tradition to pave the way for market access through press and diplomatic campaigns. In Moscow’s eyes, Russia’s success in Africa shows that backing primary exports by bolstering traditionalist governments is a functional foreign policy model.

Since the first Far Eastern Economic Forum in 2015, Russia has been taking steps to increase capacity, interest and opportunities with Asia. Changes in education, social attitudes and business relationships have laid the groundwork for the pivot that Moscow has now put in writing.

Economies in Southeast Asia are growing and so are potential markets for Russian exports. Russia’s turn to the East is a long time coming and not the effect of conflict in Europe.

The lack of sanctions toward Russia from most Asian states is an advantage and Moscow’s strategy maintains that current negative perceptions toward Russia may yet be overturned to facilitate increased cooperation.

Russia’s foreign policy structure is compatible with China’s Global Civilizational Initiative — both argue for multipolarity in international relations, the importance of resisting hegemony and the need to respect different civilizations.

Compatibility between Russia and China may have a multiplier effect on multipolarity. The entente between Beijing and Moscow in Africa and the Middle East sets a precedent for Asia. Russian and Chinese resources and industry may yet prove mutually reinforcing in Asia.

Despite Moscow’s intentions, Russia’s presence in Asia has been low. But Russia has been laying the groundwork for the pivot for over a decade and Asia is becoming even more vital. Russia’s shift toward Asia may be gradual, taking place in a select range of sectors and focusing on a limited number of countries to start with — but the direction has been set.

Oleg Yanovsky is Lecturer in the Department of Political Theory at Moscow State Institute of International Relations (MGIMO).

This article was originally published by East Asia Forum and is republished under a Creative Commons license.

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China, Canada expel each other’s diplomats

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China has ordered a Canadian diplomat to leave the country after a Toronto-based Chinese diplomat was expelled and accused of trying to intimidate a lawmaker.

The Chinese Foreign Ministry announced on Tuesday that Shanghai-based Canadian envoy Jennifer Lynn Lalonde has to leave China by May 13. It said the move is a reciprocal countermeasure to Canada’s “unscrupulous move” to expel China’s Zhao Wei.

Some commentators said the incidents will fuel Canadians’ anti-China sentiment, which has grown since five Chinese police overseas stations were identified in the country last December.

Background: Trudeau under pressure

In March 2021, China sanctioned Canadian MP Michael Chong, the Tory shadow minister for foreign affairs, in Canada, over his involvement in a subcommittee that studied the situation of the Uyghurs and other Turkic Muslims in China’s Xinjiang region. The subcommittee had urged the Canadian government to sanction four Chinese officials and a Chinese entity.

Canadian Prime Minister Justin Trudeau said in a tweet at that time that “China’s sanctions are an attack on transparency and freedom of expression – values at the heart of our democracy.”

In the same year, the Canadian Security Intelligence Service (CSIS) wrote in a document that an officer with the Chinese Ministry of State Security had sought information on a Canadian lawmaker’s relatives, who might be located in the People’s Republic of China, for further potential sanctions.

The strictly-confidential report said the Chinese officer’s effort was to “make an example of this MP and deter others from taking anti-PRC positions.”

The report was made public by the Globe and Mail on May 1. Citing an unnamed national security source, the Canadian newspaper said the targeted lawmaker was Chong while the Chinese officer was Zhao.

Zhao Wei (left) is accused of targeting the family of Michael Chong, Canada’s ‘third Michael.’ Image: Dimsum Daily

Chong said in a statement on May 1 that he was disappointed to learn that the Trudeau government had known two years before that Zhao was targeting his family in Hong Kong. 

“When the government became aware an elected MP was being targeted for an intimidation campaign by a PRC diplomat here in Canada, they should have taken two actions,” he said. “First, they should have informed me. Second, they should have declared the diplomat persona non grata.”

“The fact that the government neither informed me nor took any action is indicative of its ongoing laissez-faire attitude toward the PRC’s intimidation tactics,” he said.

Trudeau said he learned of the Chong case only after reading the Globe and Mail story. He said the CSIS had not shared the report outside of the agency before.

Chong later told Parliament that while the CSIS report might not have reached the prime minister, if similar cases happen again they need to be evaluated to higher levels in the government. Meanwhile, the Royal Canadian Mounted Police reportedly is investigating the source of the leaked CSIS documents.

It took a whole week for the Canadian government to make a decision to expel Zhao because of the authorities’s fear of China’s economic, consular and diplomatic retaliation, according to Margaret McCuaig-Johnston, a senior fellow at the Graduate School of Public and International Affairs at the University of Ottawa, writing in an article published Tuesday. 

If all Sino-Canada trade were to stop, Canada would face a debilitating blow, she says. However, the Canadian government must not weigh the safety of an MP, or any Canadian, against economic losses the country may incur, she adds.

Canada should encourage the development of new markets in other countries, which respect the rule of law, across the Indo-Pacific region, she says.

The third ‘Michael‘

On Monday, Mélanie Joly, Minister of Foreign Affairs, announced the Canadian government’s decision to expel Zhao.

“We will not tolerate any form of foreign interference in our internal affairs,” Joly said in a statement. “Diplomats in Canada have been warned that if they engage in this type of behavior, they will be sent home.”

“This decision has been taken after careful consideration of all factors at play,” she said. “We remain firm in our resolve that defending our democracy is of the utmost importance.”

Chong was the third “Michael” from Canada targeted by the Chinese government. In December 2018, Canadian consultant Michael Spavor and former Canadian diplomat Michael Kovrig were detained in China on charges of espionage, shortly after the arrest of Huawei Technologies’s chief financial officer Meng Wanzhou in Canada.

A protester outside a court appearance for Huawei CFO Meng Wanzhou at the British Columbia Supreme Court in Vancouver demonstrates in early 2020 against China’s alleged treatment of Uighurs while holding a photo of detained Canadians Michael Spavor (left) and Michael Kovrig – both of whom were described as hostages taken by China in the hope of gaining leverage in the Meng case. Photo: Asiaa Times files / AFP / Jason Redmond

After Meng reached an agreement with US prosecutors and was released in September 2021, both Spavor and Kovrig were freed.

Anti-China sentiment

Simon Lau, a Canada-based Hong Kong commentator, says Trudeau has no choice but to expel Zhao as the Liberal Party he represents needs the support from the New Democratic Party to maintain a majority in the Parliament.

Lau says the book Claws of the Panda, written by a former Canadian security agent in 2019, revealed that Beijing had launched campaigns to influence Canada since the 1990s but the Trudeau government turned a blind eye.

He says most Chinese people in Canada are afraid to speak out against China as they don’t want their relatives in Hong Kong and mainland China being intimidated. As a result, he says, pro-Beijing groups now dominate the voice of Chinese in Canada.

According to Statistics Canada, there are about 1.71 million Chinese people, or 4.7% of the 36.32 million population, in Canada.

Lau also says many Canadians are worried after Madrid-based human rights campaigner Safeguard Defenders revealed last December that Beijing has set up more than a hundred overseas police stations globally, five of them based in Canada.

Citing its latest survey, Angus Reid Institute, an opinion research foundation in Canada, said in March that 62% of Canadians say their federal government should view the Beijing regime as a threat or an enemy. By comparison, 72% of surveyed Canadians say that Russia should be viewed as a threat or an enemy while 58% have a positive impression of the US.

Chinese statements

Beijing’s response to Zhao’s expulsion was bitter.

“China never interferes in other countries’ internal affairs,” a spokesperson of the Chinese Embassy in Canada said in a statement. “Instead of protecting China’s diplomatic and consular personnel’s legitimate rights, the Canadian side has chosen to condone and echo the anti-China forces’ hype-up and conduct extreme actions against a Chinese consular official. China does not accept this completely.” 

The spokesperson added that if Canada continues to act wantonly and arbitrarily, it will be met with China’s resolute and strong reactions.

“The Canadian side ignored China’s diplomatic discontent and declared a Chinese envoy persona non grata on the grounds of the lies of China’s interference in Canada’s internal affairs,” Wang Wenbin, a spokesperson of the Chinese Foreign Ministry, complained during a media briefing on Tuesday. “China strongly condemns and resolutely opposes this, and has expressed diplomatic discontent and lodged strong protests against Canada.”

Wang said it is ridiculous that Canadian media and politicians spread fake information by citing some so-called confidential documents and smear China with their political manipulation driven by ideological bias. He said the expulsion of Zhao violated a basic international principle and undermined Sino-Canada relations.

He said it is just and necessary for China to expel Lalonde. He said if Canada does not stop its unreasonable provocations, China will definitely fight back while Canada will face the consequences.

Read: China ‘will talk,’ but only if US changes its tune

Follow Jeff Pao on Twitter at @jeffpao3

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Resumption of live pig exports from Indonesian island could take up to a year: SFA

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SINGAPORE/PARIS: The resumption of live pig production and exports from Indonesia’s Pulau Bulan could take up to a year, said the Singapore Food Agency (SFA) on Tuesday (May 9).

Singapore stopped the import of live pigs from the island after African swine fever (ASF) was detected in some pig carcasses, said the agency last month.

The carcasses were from a consignment of live pigs from Pulau Bulan and have been removed from the abattoir line.

The World Organisation for Animal Health (WOAH) on Tuesday said Indonesia had confirmed an ASF outbreak on a farm on Pulau Bulan.

In a Facebook post, SFA said Singapore authorities would continue to assess the situation.

“Such food supply disruptions can happen from time to time. We will continue to work with the industry to diversify our import sources and strengthen our food resilience,” it said.

For example, Mexico was recently approved to export chilled pork to Singapore, SFA noted.

President of the Meat Traders Association in Singapore Alvin Kwek also added that its members have activated “more than 20 sources” of chilled and frozen pork from different countries.

They have sufficient stock of frozen pork to last for “months” should the supply chain for pork be disrupted, he said in a press release.

“We urge industry players and consumers alike to be open to alternative supply sources and remain flexible by considering using chilled or frozen pork from alternative sources.”

SFA also urged consumers to explore “other protein options”.

Citing Indonesian authorities, the Paris-based WOAH said the ASF outbreak had killed 35,297 pigs in a herd of 285,034 on a farm on Pulau Bulan.

The outbreak was detected on Apr 1 and confirmed on Apr 28.

Pulau Bulan is located within the Riau Islands and adjacent to Batam island.

ASF is not dangerous to humans but is fatal for pigs. It has plagued China for years, with an initial wave during 2018 and 2019 killing millions of pigs and leading to a dramatic decline in meat output that roiled global markets. China is facing a recent surge in infections this year.

The source of the Indonesian outbreak is still unknown but veterinarian authorities told WOAH that humans, vehicles, feed, flies and wild boar may have played an important role in the introduction of ASF on the farm.

They also confirmed that the investigation started after the disease was detected by Singapore’s SFA in imported pigs.

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