August 22, 2011

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TSG IntelBrief: Chinese Checkers: Beijing’s Geopolitical Moves in the Middle East and an Important Piece of Technology for Israel?

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Overview

The already sensitive geopolitical and socio-economic relationships between the U.S., China, Pakistan and Israel are about to become even more complex.

Not only does China own, and therefore control a significant portion of $1.115 trillion of U.S. sovereign debt, but its political position in the Middle East towards Pakistan and Iran in particular causes further concern to Washington.

Beijing's economic armlock is painful: Chinese entities control some $1.115 trillion of U.S. government debt.  According to U.S. government data released on June 15, this equates to some 26% of Washington issued paper.  Therefore 1 in 4 papers of government debt is controlled by Beijing.

Following the recent downgrade of the U.S. by Standard and Poor, the Chinese were quick to castigate Washington's economic policy.  The U.S. is in no position to rebut China's claims thanks to Beijing's huge U.S. Treasury holdings.  If Beijing sold the debt in a block, then U.S. interest rates would skyrocket and with it inflation.

In the meantime, China is maneuvering in the Middle East to seek a position of geopolitical advantage, especially in the energy sector, but also in its political positioning to seek regional advantage, calculating that the U.S. is in no position to respond.  This maneuvering has been assisted by the recent dramatic frosting of U.S. - Pakistan relationships following the killing of Usama bin Laden on Pakistan territory on May 2, 2011.

And it is this freezing of relationships that has caused the Pakistanis to share the secrets of the crashed helicopter with the Chinese, which will give them potentially hugely useful insights into the manufacture of the stealth skin that allows the helicopters to minimize the chances of detection.

Through a series of diplomatic initiatives this may raise the stakes in the potential for an Israeli military strike on the Iranian nuclear facilities. If Israel picked up the stealth technology, it would give the Israeli Air Force (IAF) a valuable edge in any air strike to be carried out against Iranian nuclear facilities.  The stealth technology would almost certainly defeat the Iranian air-defence radar systems.

This analysis examines a possible sequence of events.

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