China's Nexen Deal Tangled Up with Keystone Pipeline

[This is the text of my October 6, 2012 piece for Asia Times Online.  It connects the dots between a) the dispute over extending the Keystone pipeline (which carries Canadian oilsands crude) to the US Gulf Coast b) Canadian PM Stephen Harper's encouragement of CNOOC's bid for Nexen in order to generate a plausible Asian-export alternative to Keystone as a bargaining chip c) a growing inclination by US and Canadian conservatives to end the charade, blow up the CNOOC deal, and reaffirm Canada's orientation toward the United States as its sole export market.  The piece can be reposted if ATOl is credited and a link provided.]

An interesting side product of globalization is how China bashing has become a staple of domestic politics in nations around the world, from America to Zambia, from Sydney to Tokyo. Best practices also propagate with remarkable speed and efficiency.

It may not be a coincidence that, just as the United States finally gets the memo that the Chinese currency is no longer significantly undervalued, the commentariat turns on a dime (or jiao, if you prefer) to announce that the real problem is the market-distorting, security-undermining shadow of China's state-owned enterprises (SOEs) over the world economy.

This is certainly true, to a certain extent. On the infinitely long list of legitimate China gripes, the antics of inefficient, credit-hogging, deep-pocketed SOEs is near the top. But a good case can also be made that China bashing is, above all, good politics.

President Barack Obama might have legitimate concerns that a wind farm located near a super-secret US navy basis might be a locus of espionage, thereby compelling him to evoke a little-used presidential power to force Ralls Corp - a Delaware corporation co-owned by one of China's richest people - to divest its interest in response to a ruling by the Committee on Foreign Investment in the United States or CFIUS. [1]

However, judging by an aggrieved lawsuit filed by Ralls, President Obama seemed to have short-circuited the CFIUS process (which usually involves a certain amount of back and forth on "mitigation", ie joint discussion of the possibility of allaying US security concerns) before dropping the hammer. [2]

Beating up on the Oregon windfarm also gives Obama some maneuvering room on the next hot button China issue, the acquisition of oil sands company Nexen by the China National Offshore Oil Corp, or CNOOC.

In 2005, CNOOC's purchase of Unocal fell apart thanks to a political uproar in Washington and the congressional demand to steer the transaction to CFIUS for review on the unprecedented and dubious pretext that foreign ownership of Unocal's energy reserves, 70% of which were outside the United States, was a "national security" issue.

Since then, CNOOC has sidestepped the "predatory red capitalist" issue by limiting itself to less than 100% stakes in US and Canadian companies.

Now, with energy companies hurting for capital, CNOOC has returned to the mergers and acquisition hunt with an offer to purchase 100% of Nexen, a Canadian company with an important but not dominant position in Canada's titanic oil sand reserves, for US$15.1 billion in cash, as well as assuming C$3 billion in Nexen debt (the US and Canadian dollars are practically at parity).

Perhaps 10% of Nexen's assets are in the United States, particularly some difficult-to-exploit offshore reserves in the Gulf of Mexico that the US Department of the Interior licensed royalty-free in order to encourage development. Reliably China-bashing Democratic congresspeople Charles Schumer and Edward Markey have tried to make political hay out of the Gulf properties by calling on Treasury Secretary Timothy Geithner to subject the Nexen transaction to the CFIUS process to forestall a "massive transfer of wealth" to China.

On national security and economic merits, this argument is balderdash, as Forbes' energy columnist Christopher Helman impatiently pointed out in a piece titled "Another Economically Illiterate Politician Seeks to Block CNOOC-Nexen Deal". [3]

But politics is politics, China-bashing is good politics, and liberal Democrats Markey and Schumer were seconded in their opposition by hard-right Republican senators John Cornyn, James Inhofe, Richard Shelby, and John Hoeven. [4]

However, US developments are merely preliminary sparring. The main event is in Canada, where Stephen Harper's Conservative government has to shepherd the Nexen transaction though its own version of CFIUS, an internal review within the next month or so as to whether the deal delivers an amorphously defined "net benefit" under the Investment Canada Act.

Certainly, Nexen's stockholders and the Canadian business community are convinced of the deal's net benefits.

CNOOC and Nexen had a previous history of cooperation on oil sands investment, Nexen needed cash it was unable to get elsewhere (Nexen had been on the block for some time but no other serious bidders emerged to take on the sizable equity plus debt package), and 99% of Nexen's shareholders approved the generous purchase terms, a marked contrast to the rancorous competition between Chevron and CNOOC that characterized the Unocal deal.

CNOOC also provided explicit assurances that Nexen's Canadian footprint would not shrink, per Canada's The Star:

CNOOC has moved carefully to court Canadian approval of its takeover bid. It has pledged to retain all Nexen employees and establish Calgary as headquarters for $8 billion of the Chinese firm's other assets in the Americas. The company also promises to seek a listing on the Toronto Stock Exchange and maintain Nexen's social responsibility efforts globally. [5]

CNOOC drew a lesson from the disapproval by the Canadian government on "net benefit" grounds of BHP Billiton's bid to buy Potash Corporation in 2010. The deal was apparently torpedoed by the provincial business and political interests in Saskatchewan and Alberta that form Harper's political base after it transpired that BHP intended to move corporate operations out of country.

The prospect that Nexen will herald a flow of foreign capital into the Canadian resource sector has sparked undisguised enthusiasm in the Canadian business community, and well-bred drooling by the M&A set. Despite CNOOC's efforts, however, the deal is not popular with the Canadian public, as it feeds into a growing interest in resource-nationalism issues and anxiety about China.

A survey conducted in September found opposition to the deal by over two-thirds of those polled - 12% more than the previous month. Opposition was across the board:

When asked whether the federal government should approve the deal, 69% said the deal should be rejected while 8% believed it should be approved. Opposition to the deal was uniform across most subgroups. There were few regional or partisan differences. In fact, respondents who said they voted Conservative in 2011 were almost as likely to say the deal should be rejected as those who voted Liberal or NDP (Conservative 68%, NDP 72%, Liberal 73%). [6]

The opposition NDP, while courageously declining to take a stand on the transaction, noted that public opinion is "crystallizing" against the deal, and urged public consultations. [7]

A liberal case against the Nexen deal was laid out by Globe and Mail national affairs columnist Jeffrey Simpson in a commentary titled "What if Nexen coveted CNOOC?" Mr Simpson seized upon the issue of reciprocity, declaring:

China plays by one set of rules, Canada and other open economies by another. Their state-owned companies can buy here and elsewhere, while our private companies can't buy there in sectors the state considers vital to its future ...

… This double standard is worth remembering in connection with the Chinese National Offshore Oil Corp's proposed takeover of Calgary-based energy company Nexen Inc. If an American company, say, had bid for Nexen, that bid might be good or bad for the company and Canada's energy industry; but a Canadian company could do likewise in the United States if the terms of the purchase were right for both parties. But there's no price a Canadian company could pay for a state-owned Chinese company, because the state deems them vital to the country's future and thus off limits for purchase ...

In unwelcome news for Simpson, by the way, the countries that Canada is trying to lure into its oil sector - outfits like Saudi Arabia and Kuwait - all have unpurchasable national oil companies. And those regimes in Iraq and Libya created with the generous support of Canadian lives and munitions all have national oil companies as well.

"Reciprocity" on a less exalted level has also emerged as a buzzword for the Harper administration, which seems to be looking for some conspicuous win in China for Canadian business to prove it fully exploited the power of the "net benefit" process to stick it to the red mandarins in Beijing.

Unfortunately, Canadian investment activity in China is extremely sparse, and it is possible that Harper will have to make do with the obtaining the long-delayed approval of Scotiabank's acquisition of Guangzhou Bank for $726 million - about one-twentieth of the Nexen deal - as his trophy. [8]

However, the Nexen issue also plays into a broader debate as to whether Canada will define itself as a managed-investment destination, doling out access to its resources on a "national interest", ie "net benefit" basis, as opposed to the "level playing field", ie "money talks and b - sh - t walks" language of unfettered global capitalism.

In an interesting perspective on Simpson's whinging on reciprocity, the debate seems to be moving in terms of making Canada more like China, instead of the other way around:

"Some Chinese investment in the oil sands would be in our country's interest," said Mr Edwards, a leading industry figure with ties to Prime Minister Stephen Harper. "We want to make sure we have access to capital but, as a country, we want to ensure a strong Canadian presence in the oil sands." Mr Harper said that the government will set out guidelines for foreign acquisitions by state-owned enterprises when it announces its decision on the proposed Nexen takeover.

Executives did not stipulate which companies should be considered off limits to foreign buyers, but such a roster would likely include Canadian Natural, Suncor Energy Inc, and Cenovus Energy Inc, which is the largest producer using in situ - rather than mining - techniques. [9]

This situation presents an interesting dilemma for Prime Minister Harper, an avowed free trader who is championing Canada's entry into the Trans Pacific Pact trade regime. But he is probably more concerned about the impact that hostility to Chinese investment will have on his difficult dealings with President Obama.

It could be argued that a major impetus for Harper's pivot to China was the perceived need for a counterweight to a less than satisfactory relationship with Obama, particularly the US president's unwillingness to give full-throated support for extending the Keystone pipeline (the primary outlet for Canada's prodigious oil sands reserves, which now terminates in Oklahoma) to the US Gulf Coast.

There is little question that Harper would prefer to see Mitt Romney in the White House. Aside from ideological leanings, Romney supports Keystone unequivocally, as in: Romney: Keystone pipeline will happen "if I have to build it myself". [10]

US environmental groups adopted the Keystone pipeline as a metaphor for mainlining fossil fuels to feed America's energy addiction while boosting global warming through the emission of greenhouse gases. Environmentalist Bill McKibben reported that influential NASA climatologist James Hansen told him that burning up the hundreds of billions of tons of tar sands in Alberta would be "game over for the planet". Environmentalists, an important and not particularly happy Obama constituency, embarked on a campaign of civil disobedience that led to a delay in US approval of the pipeline extension.

When Obama announced a delay in the approval process until 2013, Harper decided to create a resource-nationalist rumpus of his own.

Harper also told Harman that Canada has been selling its oil to the United States at a discounted price.

So not only will America be able to buy less Canadian oil even if Keystone is eventually approved, the US will also have to pay more for it because the market for oil sands crude will be more competitive.

"We have taken a significant price hit by virtue of the fact that we are a captive supplier and that just does not make sense in terms of the broader interests of the Canadian economy," Harper said. "We're still going to be a major supplier of the United States. It will be a long time, if ever, before the United States isn't our number one export market, but for us the United States cannot be our only export market. That is not in our interest, either commercially or in terms of pricing." [11]

Ironically, Harper sounded just like the lord of another free-market resource barony - President Elbegdorj of Mongolia - who thirsts to create an alternative destination (Russia) to his domineering neighbor ( China) for his mineral riches.

Also, ironically, American environmentalists seem unable to come up with a suitable political riposte to Harper's proposal to outsource the end of the world to China instead of the United States. Establishing an alternative to US consumption means finding a plausible channel to Asian markets, and that means a) planning a multi-billion dollar pipeline, "Northern Gateway", from Alberta to the Pacific and b) a bankable buyer's commitment that will make the pipeline buildable.

Enter, of course, China, which apparently has the main refineries in Asia capable of handling sulfurous oil sand crude. Harper jetted to China in February with the publicly declared mission of luring Chinese investment. The first fruit of Harper's policy was CNOOC's announcement that it would abandon its previous program of cautious minority stakes to pursue the 100% acquisition of Nexen.

It is easy to speculate that CNOOC also jollied Harper along on the Northern Gateway pipeline as the cost of obtaining Canadian government support for something as big and potentially provocative as the Nexen purchase. In return, Canada could claim to the United States that the Obama administration's lack of Keystone enthusiasm was driving Canada, its energy resources, and its pipeline plans into China's waiting arms.

CNOOC, which despite sneers at its state-owned pedigree runs its business like a business, would probably prefer to sell Nexen crude to the United States via the Keystone pipeline at a healthy profit. With Mexican and Venezuelan output faltering, the United States via Keystone is the logical destination for Canadian oil sands, no matter who owns them.

The Northern Gateway scheme would burden CNOOC's oil sands business with capital and shipping costs to get the Nexen crude (whose production cost is about double that of conventional Middle Eastern crude) across Canada, across the Pacific, and through its refineries in order to sell it for less or no profit within the price-controlled environment of China.

The commitment of the Harper administration, on the other hand, to continue with its quixotic Asian scheme as anything more than a bargaining chip in its Keystone negotiations with the United States is open to question.

Will this arranged marriage endure the political stresses of Canadian and North American politics despite the differing agendas of the partners? Certain indicators from the Canadian side are not promising, at least for CNOOC. There are dark murmurings that Harper's cabinet and the Conservative caucus, usually a tractable bunch, are "divided" on the issue. This probably means the "Snack Pack" is throwing its weight around.

The "Snack Pack" is the nickname given to a group of hard-charging, youthful, and rather chubby politicians who are more American-style movement conservatives than traditional pro-business warhorses, and who rose to prominence in the past 10 years serving as Harper's political centurions. Their ideology is driven by conservative social, religious, and political values and is reflexively anti-People's Republic of China.

The most prominent member is Jason Kenney, who is now Minister for Citizenship, Immigration and Multiculturalism. His anti-communism manifests itself through sympathy with refugee Falun Gong practitioners and other dissidents - on September 29, he achieved an-anti PRC omnibus triumph of sorts, posting a picture on his Twitter feed of his attendance at a "Wonderful event w/ Tibetan, Uyghur, N Korean, Falun Gong & Chinese refugees & human-rights activists" - and is the nexus for anti-CNOOC sentiment inside the cabinet. [12] [13]

The other high-profile Snack Packer is Rob Anders, who holds Harper's old seat in Alberta and made a name for himself by casting the only vote against making Nelson Mandela an honorary citizen of Canada. He also holds strong anti-PRC sentiments, characterizing the Chinese regime as the worst human rights abuser in the world, comparing the Beijing Olympics to Hitler's 1936 Berlin Games, and opposing a memorial to Canadian Norman Bethune on the grounds that taxpayer money should not be spent on a man who was a "fan" of "the biggest mass murderer in history", Mao Zedong. [14]

As for CNOOC:

"There's a lot of people, I would say the vast majority of the country, that [sic] are very concerned about making sure there's conditions [on CNOOC]," said Rob Anders, a Conservative member of Parliament from Alberta, where the oil sands are located. He told reporters on Wednesday that he regarded China as "a non-benevolent actor and a strategic adversary." [15]

Both men have strong ties to American conservative social and political movements. Anders did a term at Norman Blackwell's Leadership Institute, a conservative boot camp that claims Karl Rove and Ralph Reed among its alumni. He achieved notoriety by serving as a paid political heckler in 1994 for arch-conservative (and oil industry advocate and global warming denier) James Inhofe in his campaign to become US senator from Oklahoma. A video of Anders donning a Pinocchio nose to assail Inhofe's opponent, Democrat Dave McCurdy, lives on at YouTube and in the hearts of his constituency. Anders is also credited with introducing US phonebanking techniques - aka robocalling - to Canadian politics. He recently described his attendance at CPAC, the hardcore US movement conservative convention as "the fix conservative political junkies look for". [16] [17]

Jason Kenney attended the Jesuit University of San Francisco in the United States. He responded to the teachings of some intensely conservative faculty members and discovered his political vocation:

Kenney was initially opposed to the life of politics, believing that morality and politics are mutually exclusive. His life was changed when he read the Holy Father's encyclical, "Evangelicum Vitae". Seeing that the Holy Father's notion of politics was a form of charity changed Kenney's perspective. "I felt compelled to enter politics as a vocation. I was called to politics, not qua politics, but as a form of charity as a promotion of the message of the Gospel of life". [18]

He went back to Canada a full-fledged movement conservative in the pro-life/anti-gay rights vein, and served as a youthful advisor to the Christian Coalition of Canada, a clone of Ralph Reed's political powerhouse in the United States.

Kenney and Anders also shared a stint at the Fraser Institute, a conservative think tank and brain trust for Harper, which is also a recipient of significant largesse from America's Koch brothers, the free-spending resource barons who have committed themselves to free markets, global warming denialism, and no-Obama (and are alleged to have major involvement both in Canadian oil sands crude production and their refining in the United States. and therefore have a strong interest in getting Keystone built). [19] [20] [21]

In addition to movement conservatism and sentiments against the PRC and in favor of  Tibet and Uyghur separatism and Falun Gong, the clownish Anders and the cloistered Kenney share another bizarre link: the two unmarried politicians adopted a lifestyle of chastity until marriage, a lifestyle neither has to date publicly renounced. [22]

One thing Anders and Kenney do not share in common is a commitment to hard work. Kenney channels his youthful energy into 20-hour per day marathons of events, hearings, and twittering. By cultivating his original conservative supporters in western Canada and using his cabinet responsibilities to reach out beyond the party's traditional white support to include socially conservative Asian communities in the cities, Kenney is now plausibly considered as a potential successor to Harper.

Anders, on the other hand, holding a safe, ultra-conservative seat, appears to have sunk into sloth and has become famous for his ability to sleep on the job. Aside from embarrassing rhetorical bombthrowing, he apparently does little for his riding and only personal intercession from Harper kept him from facing a challenge from within his own party in 2010. [23] In addition to a shared distaste for the PRC and CNOOC, both Kenney and Anders would prefer to see Alberta's oil go to the United States via Keystone.

As for Kenney and Keystone, as he put it in one of his thousands of Tweets:

Keystone pipeline will offset the US imports of Venezuelan oil w/ CDN oil. Why does the left prefer Hugo Chavez's oil to CDA's [sic] ethical oil?

"Ethical oil" is, by the way, the wonderful PR handle for Alberta's planet-destroying goo, in contrast to Venezuela's depraved socialist glop.

Rob Anders also raised the ethical oil issue in response to a previous Chinese oil sands investment asserting, in the words of the Fort McMurray News, "China Tainting Oil Sands":

"If you have a country that is an ethical producer of oil but directly implicates another government, not just a company but another government that is very unethical in its extraction, where does that leave us, It raises an interesting question, kind of a hypothetical conundrum," said Anders.

Anders says, among all foreign operators in the oil patch, China has the worst human-rights reputation. [24]

As far as I can tell, Anders has not roused himself to issue a formal statement in support of Keystone (though he did update his official website to include a petition opposing the use of parliamentary women's rest rooms by transgendered men), but I think it is safe to say he is for it, having expressed his gratitude for the "many pledges to buy Canada's ethical oil via pipeline" he received while attending CPAC.

In the United States, Keystone and Nexen are emerging as shared conservative talking points. Nebraska Senator Lee Terry, a Republican and a major champion of the Keystone pipeline, went the extra mile and unambiguously linked the two issues in an op-ed titled "Oppose CNOOC-Nexen merger, approve Keystone".

There is a simple way for the United States to maintain control of our energy future and our competitive edge over the Chinese: We can get moving quickly on the Keystone XL pipeline. Approving this pipeline would ensure that North Americans control North American oil. [25]

In a further indication of the emerging crossborder conservative Nexen/Keystone linkage, the four US Republicans who urged that the insignificant US component of the Nexen deal be reviewed (thereby giving US regulators a chance to throw a spanner into the Canadian works) - Inhofe (Rob Ander's former employer), Hoeven, Cornyn, and Shelby - are all energy industry stalwarts and diehard Keystone boosters.

Let us recap.

Prime Minister Harper's political core is conservative movement activism, and is viscerally anti-PRC. His pivot toward China is probably grudging and conditional, impelled by his need for a riposte to the Obama administration's caution on Keystone. Now that the Nexen deal is arousing across-the-board liberal, conservative, and nationalist opposition across Canada, blocking Nexen has become a battlecry among the pro-Keystone Republicans who are Harper's natural US allies, and his closest political associates are also going public with their distaste for the transaction. That US and Canadian conservatives have not yet united to try and blow up the deal openly is probably a sign of their deference to Harper.

But they have done enough to create a handy political bolthole for Harper in case he chooses to exit the deal. The question is, will he?

Ordinary business and diplomatic logic would seem to dictate that the deal go through. And Harper is sufficiently beholden to Canada's business interests to think twice about denying Canadian plutocrats the lucrative payday that Nexen and subsequent Chinese deals might bring.

Political logic, however, is another matter, given extensive public doubts, the dubious strategic underpinnings for the deal, the probable shortage of Conservative sincerity in wanting to strengthen ties with China ...

The determining factor in Harper's decision whether or not to switch sides and start feeding the anti-CNOOC bonfire may be the prospect of Obama's re-election in November. If Mitt Romney were poised to win, Keystone is a done deal and the political liabilities of engagement with China will loom the larger as the benefits shrink. If Obama triumphs - a prospect seen as increasingly likely - the Chinese bargaining chip will retain its value.

But there might be one more thing - a gut-level wave of outrage against the deal, regardless of its merits. Perhaps an idea that permanently blocking China from acquiring a major Western oil company, like sustaining the anachronistic arms embargo against the PRC, is an instinctive exercise in China bashing that feels so good on an atavistic level, it just can't be resisted. The Canadian government will probably make its decision by mid-October.

Notes:
1. Obama blocks Chinese wind farm purchase, USA Today, Sep 29, 2012.
2. Chinese-Owned Company Sues Obama Over Wind Farm Project, Bloomberg Businessweek, Oct 2, 2012.
3. Another Economically Illiterate Politician Seeks To Block Cnooc-Nexen Deal, Forbes, Jul 30, 2012.
4. Four Republican senators raise concerns over Cnooc-Nexen deal, World Oil, Sep 14, 2012.
5. Nexen takeover decision a crossroads for Canada and China, The Star, Sep 29, 2012.
6. Canadians Continue to Oppose Nexen Takeover; Opposition Driven by Strategic Considerations, Abacus Data, Sep 20, 2012.
7. Public opinion 'crystallizing' against Nexen deal, NDP says, Globe and Mail, Oct 2, 2012.
8. Scotiabank in China Influences Harper on Nexen, Bloomberg, Sep 6, 2012.
9. Protect Canadian ownership of oil sands firms, executives urged, Globe and Mail, Sep 25, 2012.
10. Romney: Keystone Pipeline will happen "if I have to build it myself", CBS, Jun 14, 2012.
11. Canadian oil going to Asia, no matter what: Harper, CNews, Apr 2, 2012.
12. Click Here For Jason Kenney's Twitter.
13. Looming Nexen deal reveals fault lines in Tory camp, Globe and Mail, Sep 14, 2012.
14. Tory MP calls Bethune memorial a 'bow' to China, CBC News, Jul 14, 2012.
15. Canada Ruling Conservatives Split Over CNOOC's Bid for Nexen, CNBC, Sep 26, 2012.
16. When Tory MP Rob Anders Was A Paid Political Heckler, Buckdog, Apr 19, 2008.
17. CPAC 2012, Prince Arthur Herald, Feb 12, 2012. 18. Jason Kenney and Absolute Truths, Religious Right Alert, Jun 5, 2010.
19. Fraser Institute co-founder confirms 'years and years' of US oil billionaires' funding, Vancouver Observer, Apr 26, 2012.
20. The Fraser Institute: 100% political and still a registered charity! Explain, please..., Rabble.ca, Feb 7, 2012.
21. Koch Brothers Dishonest About Keystone XL, Tar Sands Interest, De Smog Blog, Oct 5, 2011.
22. From the vaults: Parliament Hill is alive with celibate cries, Ottawa Citizen, Oct 1, 2012.
23. Why does Tory MP Rob Anders keeps falling asleep on the job?, Globe and Mail, Mar 2, 2012.
24. China tainting oil sands, Fort McMurray Forum, Jan 7, 2012.
25. Oppose CNOOC-Nexen merger, approve Keystone, The Hill, Sep 19, 2012.

China pushes back against Japan

[This is my September 28, 2012 article for Asia Times Online, with a correction explained in the endnote.  It can be reposted if ATOl is credited and a link provided.]

China's strategy on the Diaoyu Islands, or Senkakus as Japan calls them, appears to reflect careful calculation of risk and reward by the Beijing leadership, rather than the spasm of counterproductive nationalism sometimes described in the Western press. As a matter of equity, China has a pretty strong claim on the Senkakus. As a matter of geopolitics, the People's Republic of China (PRC) is not holding as weak a hand as one might think.

This is something that the administration of US President Barack Obama, to its chagrin, knows well.

Careful readers of The Japan Times (presumably including strategists in Beijing) may remember this passage from August 17, 2010:

The Obama administration has decided not to state explicitly that the Senkaku Islands, which are under Japan's control but claimed by China, are subject to the Japan-US security treaty, in a shift from the position of George W Bush, sources said Monday. The administration of Barack Obama has already notified Japan of the change in policy, but Tokyo may have to take countermeasures in light of China's increasing activities in the East China Sea, according to the sources. [1]

The Japanese "countermeasure" occurred less than three weeks later, on September 8, 2010, when Japan's ambitious minister of the interior, Seiji Maehara, instructed the coast guard to turn over the captain of a Chinese fishing boat to prosecutors for trial under Japanese law for ramming a pair of coast-guard vessels while trying to evade them near the Senkakus.

The rest is "contain China" history, as the spat escalated to a crisis in Sino-Japanese relations and lip service in favor of Japan's rights to the Senkakus became an important element of US East Asian policy and justification for the Obama administration's pivot into Asia.

Discreet silence also played a role, when the United States declined to contradict Maehara (by this time foreign minister) when he claimed, perhaps untruthfully, that he had obtained assurances that the Senkakus were covered by the US-Japan Security Treaty. [2] [3]

However, US enthusiasm for using the Senkaku dispute as a useful diplomatic lever appears to be reaching its limit.

Two major US dailies, The New York Times and the Los Angeles Times, recently weighed in with reviews of the history of the islands that may cause the Japanese government some heartburn. Nicholas Kristof turned his NYT column over to a Taiwanese scholar, Han Yishaw, to lay out China's historical claims to the islands. [4]

The LA Times' Barbara Demick also looked skeptically at the Japanese provenance of the Senkakus with a piece describing the research of scholar Unryu Suganuma, who found several references in Japanese government documents describing the Chinese character of the islands. [5]

A glance at a map confirms the impression that the Senkaku/Diaoyu Islands are in Taiwan's backyard, and Japanese efforts to claim them are almost as risible as China's infamous South China Sea-swallowing nine-dash line.

Japan's claim to incontestable sovereignty over the islands goes back no further than their seizure, together with Taiwan and the Ryukyu Islands, from the Qing empire in the 1895 Sino-Japanese War, and not being forced to give them back in the post-World War II muddle.

The "spoils of war" argument, aka we got 'em and by golly we're gonna keep 'em approach, is an awkward one for Japan. It would dearly like to get back four islands on the southern end of an archipelago stretching between the Kamchatka Peninsula and Hokkaido, which are now occupied by Russia as heir to the Soviet Union's spoils of war.

The short form of this imbroglio is the "Kurile Islands dispute", but the two southernmost islands are more Hokkaido-esque, and Russia has signaled a willingness to give them up. The two more northerly islands are bona fide members of the Kurile chain. Russia wants to keep them. Japan wants them. Awkwardly for Japan, in 1956 it promised to surrender its claims to these two islands if a formal peace treaty were concluded.

Given this unfavorable position, Japan must contest the "spoils of war" argument and rely on emotive, historical claims to the islands - the exact opposite of its position on the Senkaku/Diaoyu Islands.

The "exercised sovereignty" argument also provides no comfort to Japan in its dispute with South Korea over the Dokdo Islands (Takeshima to the Japanese). After the conclusion of World War II, the United States supported the historical Japanese claims to the islands but declined to put their defense within the scope of the US-Japan Joint Security Treaty.

Since 1991, the main island has been home to a family of South Korean octopus fishermen and about three dozen Republic of Korea Coast Guard, fishery, and lighthouse personnel. President Lee Myung-bak has visited, as well as thousands of South Korean tourists who take a US$250 ferry trip to the island.

In July 2008, the administration of then-US president George W Bush acknowledged South Korean control over the islands by designating them as ROK territory.

Therefore, Japan's attempts to hold on to the Senkakus on the principle that their effective de facto control, by itself, constitutes de jure sovereignty undermines its arguments on Dokdo and the Kuriles. This inconsistency, one might assume, does not make an ironclad case to the United States to encourage a regional confrontation over Japanese dismay over Chinese pretensions to the rocks.

This year, the Japanese government is also facing a cannier and better-prepared PRC government than the flustered and panicky regime it confronted in 2010.

At that time, Beijing overreacted verbally and administratively and made the mistake of intervening as a government to disrupt trade with Japan to retaliate for the threat to put the skipper of the offending Chinese fishing vessel, Captain Zhan Qixiong, on trial in a Japanese court.

It tried to package its moves to pressure Japan as enforcement of trade regulations, particularly in the wild and wooly rare-earths business, but this was seen as a distinction without a difference, and the PRC was widely condemned by foreign governments and media. As a public relations bonus, China also stood accused of threatening the free world's full enjoyment of iPads and green energy and, indeed, attempting to bring America's high-tech defense industries to heel by exploiting its dominance over precious rare-earth oxides.

The ruckus over export and import restrictions - and the possibility of retaliation - also threatened China's access to the global free-trade regime, a critical matter given the its reliance on exports for growth and social stability. Beyond the threat of bilateral retaliation, there was the possibility that the issue would internationalize, with some sort of coordinated sanction against China.

This year, things are different.

When the Japanese right wing (which feels it got shortchanged by government appeasers who released Captain Zhan in 2010) served up its latest provocation - the campaign by Tokyo Governor Shintaro Ishihara to purchase the Senkakus - the central government tried to defuse the situation by purchasing the islands itself.

Nevertheless, the Chinese government decided to make an issue of it, apparently to demonstrate to Japan's elite the high cost of pursuing an agenda of confrontation with the PRC over the pretext of the Senkakus.

As usual, Beijing is staying away from anything that might be construed as a direct military threat to the Japanese forces arrayed near the Senkakus.

Indeed, its first aircraft carrier, the Liaoning (originally Ukraine's Varyag, then repurposed as a floating casino and now destined to become an instantaneous and expensive artificial reef if it ever attempts naval operations against the United States or Japan), entered service on September 25. However, it is not going anywhere near the Senkakus and will need years and billions of yuan before it is a viable military air-operations platform.

Out of consideration for its key North Asia ally, the United States has declined to follow through on its previous intention to treat the Senkakus as it did the Dokdo and place them outside the scope of Article 5 of the US-Japan Security Treaty. Recently, Defense Secretary Leon Panetta affirmed that an attack on the Senkakus would evoke a US military response on behalf of Japan.

However, the fact that Beijing apparently has no intention of attacking the Senkakus has understandably given more weight to Panetta's statement that the United States has no position on the conflicting sovereignty claims and hopes that the Chinese and Japanese governments will work out the issue peaceably.

This time around, the Chinese government is not only avoiding inflammatory moves that would internationalize the dispute; in important ways, it is even de-bilateralizing it. In contrast to 2010, China is not directly interfering in foreign trade with Japan. Instead, Japanese interests inside China have been threatened directly by Chinese citizens, albeit egged on by their government.

This is a distinction that has been carefully drawn in Sino-Japanese confrontations over the past century and is probably well understood by current strategists.

Before World War II, "boycott" was an all-purpose descriptor for two different activities: what we would now call a popular boycott of people declining to buy certain goods, and also what is now called official government economic sanctions instituted by fiat.

It was a matter of some anxiety for the Chinese government to draw a line between the two, particularly during the "Great Boycott" in 1931 protesting the Japanese incursion into Manchuria (whose anniversary by coincidence occurred on September 19, at the height of this year's anti-Japanese rumpus), since the Japanese government at the time was inclined to engage in real warfare to retaliate for what it deemed economic warfare by China.

Today, with the anti-Japanese measures framed as a popular boycott, as long as the Chinese demonstrations stay away from red lines as defined in the Vienna Convention on Diplomatic Relations - which obligates the PRC to uphold the inviolability of the premises, personnel and property, both official and personal, of the Japanese diplomatic mission - then offenses against Japanese persons and property fall into the black hole of Chinese domestic civil and criminal law.

Ministry of Commerce spokesman Shen Danyang carefully made the distinction in a statement to reporters on September 19 (in a rather garbled translation):

Shen Danyang released three-point statement, the Ministry of Commerce strongly supports legitimate, rational, patriotic action, firmly opposed to all illegal thwarted grab [of the Diaoyutai Islands]; the legitimate rights and interests of foreign-invested enterprises in China are protected by law. China is a country ruled by law, the legitimate rights and interests of foreign-invested enterprises are protected by Chinese laws. Third, I believe that the vast majority of people can be calm, rational, legal and orderly express their demands. Foreign-invested enterprises, such as suffered violations should seek help in a timely manner to the relevant departments of the public security departments, including the business sector. [6]

For the historically minded, this allows the Chinese government to present the demonstrations as the spiritual heir to the series of protests against Japanese aggression that occurred between 1908 and 1931.

And if the Japanese government itself wants to reawaken memories of its detested extraterritorial privileges in China under the Qing and Kuomintang regimes, it is welcome to call on the PRC government to moderate the behavior of the demonstrators, and implore the Chinese courts to improve their efforts to protect the persons and property of Japanese citizens inside the PRC.

The Japanese newspaper Asahi Shinbum did its best to rekindle the spirit of 2010, if not 1931, mischaracterizing the Ministry of Commerce's statement of support for private boycotts as "economic sanctions", as in "China suggests economic sanctions over Senkakus". [7]

In the same article, Asahi also tried to get some geopolitical mileage by playing the rare-earths card with an anxious description of an announcement of restructuring in the Chinese rare-earths industry, while admitting the changes had long been expected, but then tried to have it both ways:

China Central Television said September 19 that the Ministry of Land and Resources will slash the number of companies licensed to mine rare-earth elements by 40%, from 113 to 67.

That policy was published six days earlier and the companies to be affected were informed in August. In addition, cutting the number of mining companies is not expected to directly affect rare-earth exports to Japan.

However, the state-run broadcaster's report could be taken as a warning of stronger measures against the Japanese government for its purchase of three of the Senkaku Islands in the East China Sea from a private owner on September 11.

Actually, the Chinese government has done a pretty good job of erecting a defense against the accusation of rare-earth economic warfare this time, as the lead from an article by David Stanway for Reuters in July demonstrates:

China, the world's biggest producer of rare-earth metals, is likely to turn an importer of the vital industrial ingredients by as early as 2014 as it boosts consumption in domestic high-tech industries rather than just shipping raw material overseas. [8]

The "economic warfare" dog doesn't appear to be hunting internationally, since boycotts against Japanese companies inside China will be just as harmful to the Chinese economy as they are to Japan's.

Perhaps the most remarkable canine element of the current Senkaku/Diaoyu dustup, however, is the dog that didn't bark. Or, to be more accurate, the two dogs that didn't bark and the one that did ... but on China's behalf.

One would have thought that the PRC's tussle with Japan would have been the perfect opportunity for Beijing's two major South China Sea adversaries, the Philippines and Vietnam, to put the boot in, to draw attention to China's habitual high-handedness in island matters and strengthen the argument for the US-led pivot. That hasn't happened, perhaps because the United States has taken itself out of the game by limiting its involvement to exclusively military scenarios against the Senkakus.

The Philippine and Vietnamese governments have been relatively silent on the issue, perhaps because of some special Chinese attention.

To smooth over the disagreements with the Philippines, some high-profile emollient was personally applied by Vice-President Xi Jinping to the Philippine interior secretary in Beijing on September 21. In a practical and obliging vein - and in contrast to the huffing and puffing over the Scarborough Shoal - the Chinese government agreed to reschedule repayment of a US$500 million loan for a canceled rail project and discuss selling its stake in the Philippine national power grid, and promised to go easy on inspection of banana imports. [9]

Xi was also present at the China-ASEAN trade expo in Guangxi. Vietnamese Prime Minister Nguyen Tan Dung attended and for whatever economic or geopolitical reason, China-bashing apparently was not on the menu there either, as Voice of Vietnam reported:

Mr Dung's participation in CAEXPO and CABIS [China-ASEAN Business and Investment Summit] showed Vietnam's keen interest in promoting friendly neighborliness and comprehensive cooperation with China and encouraging its businesses to seek investment opportunities in China and expand economic, trade and investment cooperation with Chinese border provinces. [10]

As for Taiwan, it sowed confusion in the ranks of China-bashers and, one expects, a certain dismay in the hearts of Japan's diplomats by sending 40 fishing vessels and 12 patrol boats into Senkaku waters to engage in a water-cannon fight with the Japan Coast Guard, thus muddying the heretofore pristine narrative of Japanese maritime professionals vs mainland Chinese aggressors. The Telegraph posted video of the thrilling display. [11]

Taiwanese President Ma Ying-jeou, for whom the Senkakus has been a signature issue throughout his career, was clearly behind the provocation. In fact, it was alleged that the confrontation had been carefully scripted among Taiwan, the PRC and Japan to make sure things didn't get out of hand. [12]

One can speculate as to whether President Ma's main motivation was to provide aid and comfort to his political supporters in Beijing or he felt compelled to make a protest against Japan for nationalizing the Senkakus and, in the process, ignoring his political interests and sensibilities.

In any case, at the end of the day Japan found itself with a less-than-slam-dunk case for the Senkakus in the court of (non-Japanese) opinion, backed with limited and conditional US support, receiving little if any enthusiastic backing from its neighbors, and taking it on the chin financially from the anti-Japanese demonstrations inside China.

With this context, it looks as if the PRC regime decided after the 2010 debacle that, next time the Senkaku issue surfaced, it was going to be ready with an integrated strategy of mass mobilization, economic harassment, avoidance of direct government-to-government economic and military confrontation, a regional charm offensive, and an expectation of US forbearance.

This appears to be a more plausible scenario for the current Senkaku dynamic than the dissident and China-bashing-fueled claim that the PRC ginned up the dispute to distract attention from domestic political unrest in the run-up to the 18th Communist Party Congress and leadership succession.

Allowing large crowds of disgruntled Chinese citizens to flood on to the streets - quite a few of them waving pictures of Mao Zedong in an implied expression of solidarity with purged "Red Mayor" Bo Xilai and a rebuke to his current persecutors in the power structure, and others willing to engage in criminal behavior and mix it up with security forces in order to make a spectacle of their atavistic nationalist fervor - is not a recipe for political calm.

It is more likely that the regime decided to roll the dice and enable widespread demonstrations in pursuit of its geostrategic strategy against Japan, and breathed a sigh of relief when things didn't get completely out of hand.

In other words, the viability of the Chinese-mass-opinion weapon - which such outlets as Global Times have been touting for the past few years - albeit applied in carefully controlled anti-Japanese doses, has been demonstrated to the Japanese government and business community.

Therefore, it isn't too surprising that Japanese Deputy Foreign Minister Chikai Kawai has gone to Beijing to try to ease the dispute. The Chinese Foreign Ministry position is that Japan has to "make strong efforts to improve Sino-Japanese relations", though one has to wonder what those efforts are supposed to involve.

Those "efforts" probably include a Japanese undertaking to coordinate and consult with China on regional affairs instead of maintaining a united front with Washington on matters related to the US pivot and trade blocs. Whether a geopolitical and economic reset can be negotiated, let alone survive the expected change of national administration in Japan - and the Senkakus can fade into deserved insignificance - remains to be seen.






Endnote: After carefully discriminating between "popular" boycotts and official economic sanctions in my discussion of the Chinese approach, I gormlessly and incorrectly used the term "economic sanctions" in my summary of China's current strategy in the 7th paragraph from the end.  I've corrected it to "economic harassment" here, and asked ATOl to make a correction in the article posted on their website.
Notes:
1. U.S. fudges Senkaku security pact status, Japan Times, Aug 17, 2010.
2. Clinton says disputed islands part of Japan-US pact: Maehara, Energy Daily, Sep 24, 2010.
3. Japan poured oil on troubled waters, Asia Times Online, Oct 2, 2010.
4. The Inconvenient Truth Behind the Diaoyu/Senkaku Islands, The New York Times, Sep 19, 2012.
5. The specks of land at the center of Japan-China islands dispute, Los Angeles Times, Sep 24, 2012.
6. Ministry of Commerce: "Share island" farce damage to Sino-Japanese economic and trade, Stock Market Today, Sep 24, 2012.
7. China suggests economic sanctions over Senkakus, Asahi Shimbun, Sep 20, 2012.
8. China reshapes role in rare earths, could be importer by 2014, Reuters, Jul 10, 2012.
9. Phl, China drop North Rail, PhilStar, Sep 26, 2012.
10. PM Dung attends China-ASEAN Expo, Voice of Vietnam, Sep 21, 2012.
11. Japanese and Taiwanese ships in water cannon battle over Senkaku Islands dispute, The Telegraph, Sep 25, 2012.
12. Ma lauds fishermen in islands protest, Taipei Times, Sep 27, 2012.

China Test Drives Senkaku Strategy

...While Events in Benghazi and Beijing Show Limits of Soft Power

[This piece originally appeared in a slightly different form at Asia Times Online.  It can be reposted if ATOl is acknowledged and a link provided.]

It has been a rough couple of weeks for the international neo-liberal adventure.

The most obvious bump in the road occurred in the Middle East. The North Atlantic Treaty Organization (NATO) facilitated deposition of Muammar Gaddafi in Libya was supposed to be the "shake the Etch-a-Sketch" moment (Mitt Romney campaign-speak for wiping away accumulated negative memories and replacing them with new, favorable impressions) that established the United States as the principled champion of democracy and popular aspirations in the Arab world.

It turned out that plenty of people (and, apparently, at least one government) still remembered the whole invasion of Iraq/support of Israel against the Palestinians/backstopping Gulf autocrats/we were for Hosni Mubarak before we were against him/magillah.

On the anniversary of 9/11 and on the pretext of outrage at the crudely provocative video Innocence of Mohammed, angry mobs appeared before US embassies and consulates throughout the region and trashed numerous US-related businesses.

To make matters worse, in Benghazi, the epicenter for love of all things American in the Arab Middle East, the demonstrations coincided with a ferocious assault on the US consulate that overwhelmed both the consulate's security and whatever resources the local authorities could bring to bear. The US ambassador to Libya, Christopher Stevens, and three other Americans perished in the attack.

The Libyan national government put aside, at least publicly, whatever differences it has with the fractious lords of Benghazi, apologized profusely in the name of the Libyan people, and obligingly arrested 50 suspects.

The Egyptian government, less eager to present itself as the protector of American interests, physical and otherwise, was more laggard in its condemnation of the outrages committed against the US embassy in Cairo, thereby earning it a pointed rebuke from President Barack Obama.

The less obvious but far more significant setback occurred in China.

On the anniversary of the Mukden Incident, and on the pretext of outrage at a crudely provocative purchase of the Senkaku/Daioyu Islands by the Japanese government, angry mobs appeared before Japanese embassies and consulates throughout the country and trashed numerous Japan-affiliated businesses.

Fortunately, Chinese security kept the demonstrators on a tight leash for the most part, and no outrage comparable to the Benghazi murders occurred.

Both the Middle East and Chinese events send important signals to Western policymakers. Hopefully, these signals are getting through. But if they are, that is no thanks to the media and the public affairs commentariat, whose first priority appears to be to denigrate, delegitimize, and - dangerously - downplay the significance of these demonstrations.

As to the Benghazi incident, the University of Michigan's Juan Cole has established himself as something of a pro bono goodwill ambassador for the new Libyan government. He appears eager to promote the success of the new Libyan order to vindicate his support for the NATO-led intervention and promote it as a precedent for intervention in other places, like Syria.

To that end, he journeyed to Libya this summer to counter arguments that the deposition of Gaddafi had created a power vacuum that had been filled with all sorts of unsavory, heavily armed militia.

When the Benghazi outrage occurred, Professor Cole once again urged Western opinion to put it in the proper perspective:

What happened in Benghazi was the action of a tiny fringe, sort of like Ku Klux Klan violence in the US. It isn't typical of the new Libya, and Benghazi is not a lawless or militia-ridden city. [1]

France's Le Figaro and France24 looked into matters a little more deeply and painted a picture that looked something like chaos in a...well, in a lawless, militia-ridden city. It appears that the first responders to the attack were Benghazi's apparently ubiquitous militias, and even they were taken aback by the violence of the situation:

[A] fighter with the Shuhada Libya al-Hurra brigade, who declined to be named, said he witnessed the assault on the US consulate and he was sure it was a planned attack.

"They knew the embassy [consulate] very well. They came with heavy weapons and they overtook the place very fast, it was very quick. You can't do something like that without planning," he said.

... he was unable to get near the consulate premises due to the heavy fighting Tuesday night. Instead his group of fighters were stuck a few blocks away from the by-now burning building, vainly awaiting orders from their commanders. [2]

Ambassador Stevens suffered a fatal case of smoke inhalation at the embassy. He was transported to the hospital in extremis by some civilians who discovered him while rummaging through the debris.

Other embassy and security personnel withdrew to another location about a mile away - the "safe house". To evacuate them, the United States and the new Libya turned to US Marines and more Libyan militiamen, this time from the Dernaa Brigade, flying them into Benghazi from Tripoli. Nevertheless, three more Americans died.

Contrary to Cole's assertion, the correct analogy for the Salafists does not appear to be the Ku Klux Klan. For one thing, to my recollection the Ku Klux Klan has never mounted a successful four-and-a-half-hour heavy weapons assault against a well-defended target in the heart of a major city.

Another issue is the demographics.

Cole points out that only 28% of Bengahazis have a favorable opinion of the Salafis, versus 60% for the United States. He is apparently citing an IRI poll from last autumn (which also pointed out that Benghazis' affection for the United States pales before their love of democracy powerhouse Qatar, which booked a 94% approval rating).

Unfortunately, a 28% favorability rating for a relatively extreme religious and social philosophy translates into about 100,000 adults in a city of 700,000 and is not the recipe for political irrelevance.

For purposes of comparison, there are fewer than 10,000 acknowledged members of the Ku Klux Klan in the United States. Roll in the membership of all the myriad splintered hardcore white supremacist groups, add their on-line sympathizers and fellow travelers: maybe 150,000 to 200,000 in a nation of 314 million people. It would be safe to say that white supremacists today enjoy a favorability rate of perhaps 0.1%.

The Salafis' 28% favorability in Benghazi, interestingly, is in the same ballpark for the current favorability of America's politically powerful Tea Party movement. (Favorability for the Muslim Brotherhood clocked in at a similar level, 31%, in the IRI poll.)

A more recent Oxford Research poll of the whole country found only 29% of respondents in that suspicious and fractured land wanted to live in a democracy (presumably because national elections could deliver national dominance to partisans of the wrong city/region/clan) and 35% expressed preference for rule by a strongman.

Add to the political mix the finding that 16% of Libyans stated they were willing to take up arms to advance their political beliefs. The pollsters helpfully calculated:

This would mean that around 630,000 people were potential fighters, in addition to the 280,000 who previously took up arms. [3]

Regionalism, alienation, distrust, militancy, access to weapons ... The correct framing for Libya is not burgeoning democracy with a KKK problem. It is "powderkeg with a hundred fuses waiting to be lit".

Boxing in the Salafists is a messy, dangerous, and polarizing exercise. That it has gone as well as it has is a tribute to rare US persistence and skillful execution of a nation building objective.

To argue that the Salafists represent merely a marginalized fringe is perhaps a useful exercise in spin to sell Libya to the US public as a suitable destination for American blood, treasure, and attention, but is not as useful to policymakers - or politicians or the public trying to make sense of things if and when the Libyan situation blows up again.

A similar dynamic is unfolding in East Asia, this time involving two nuclear weapons powers (one declared, the People's Republic of China, another on the threshold of weaponization, Japan) 1.5 billion people and the economic future of the planet.

In the Western media a considerable, perhaps excessive, amount of time and energy has been spent denigrating the anti-Japanese demonstrations for their allegedly unspontaneous character. Chinageeks' Charles Custer perhaps went the furthest, titling his post on the subject, "China's Anti-Japan Riots Are State-Sponsored. Period." [4]

He justified his assertion with the declaration that no Chinese security forces were present at the demonstrations, indicating that the demonstrators were docile stooges marching against Japanese facilities on regime orders.

This was demonstrably incorrect, as photos showing protesters mixing it up with security forces in Shenzhen and Chengdu indicate, and the comments section contains some unedifying wrangling between Custer and some of his commentators. [5]

That the anti-Japanese demonstrations are condoned and facilitated by the Chinese regime is incontrovertible. Applications to demonstrate were expeditiously approved, making it safe, easy and convenient for people who were encouraged to leave their places of employment to join the crowds.

Caixin reported this amusing exchange between one of their reporters and police at a demo:

A nearby street was filled with police, most of them relaxed. When I photographed the protest, he smiled and said: "You can join the protest."
"Can I? Won't I be pulled out?" I asked.
"Since it is me who let you in, who dares pull you out!" he said.
"But I haven't applied for permission," I said.
"It is OK. The organizer has applied," he said.
A middle-aged policeman also encouraged me to join the parade.
"Can I shout 'Punish corruptions'?" I inquired.
"No, you can't!" the middle-aged officer said, suddenly seriously.
"Only slogans concerned with Diaoyu Islands are allowed," a young policeman chimed in. [6]

However, trying to parse the issue of the degree of sincerity of the demonstrations would appear to be futile. It is quite plausible that the offer of a day off, a ride downtown, and a free lunch-box could induce quite a few Chinese to join an anti-Japanese demonstration.

But that's only because anti-Japan sentiment is already rife within China and confrontation with Japan arouses genuine passion for many Chinese. In several cities, the police and paramilitaries had their hands full trying to keep the demonstrations against Japanese businesses in bounds.

China Daily and a Japanese think-tank, Genron NPO, have conducted an annual survey of Chinese and Japanese attitudes for the past eight years. This year, 31% of Chinese respondents held a favorable opinion of Japan, with the unfavorable north of 60% (the Japanese breakout toward China is even worse, with favorable of only 15.6% and the unfavorable probably over 80%). [7]

A quick scamper through some dissident blogs on Weibo did not turn up any posts along the lines of "Stop picking on Japan and go back home, you stupid demonstrators". One may speculate that few dissidents, in addition to his or her other worries, are interested in enduring an orchestrated web-wide accusation of treason to the Han race.

Instead, there seems to be a veiled hope that, since the Chinese government has allowed people to get on the street en masse to abuse Japan, perhaps the demonstrators will start shouting anti-government slogans as well, and the mass anti-regime movement that the dissidents have never been able to kickstart themselves will grow out of the anti-Japanese protests.

That doesn't seem to have happened.

The demonstrators appear to have the mindset of a violence-prone crowd of soccer fans presented with irresistible and vulnerable targets. They displayed little interest in going beyond the easy exercise of anti-Japanese prejudice for the life-changing perils of turning their ire on the Chinese Communist Party (CCP).

The preoccupation with attempts to prove the insincerity of the anti-Japanese demonstrations by demonstrating their government links is, I believe, a dangerous distraction.

Because it seems to imply that, if the demonstrations are government-organized/facilitated/supported/condoned, they can be dismissed and, if the demonstrations are removed from the equation, the PRC's strategy on the Senkakus/Diaoyu can be dismissed as a futile exercise in Astroturfing (simulation of a grass-roots movement).

This, I think, draws from the preconception that impassioned popular demonstrations against authoritarian regimes in the Middle East, in Russia, and in China are the only ones that matter, and if they advance the agenda of authoritarian actors, they can be ignored.

However, the regime's intention is not to try to manufacture a false Chinese simulacrum of Tahrir Square.

I believe the CCP is sending a series of messages to Japan and the United States via these demonstrations, and to send the message it is important that everybody is aware that they actually were state-managed.

First, the CCP is determined not to back down in the Senkaku/Diaoyu conflict. Although Japanese Prime Minister Noda stepped in to purchase the islands as a conciliatory measure in order to short circuit a carnival of provocation planned by Shintaro Ishihara, the governor of Tokyo, the CCP whipped up anti-Japanese sentiment and demonstrations on the announcement of the purchase regardless, in order to demonstrate its deterrent capabilities in economic and diplomatic warfare or, in old-fashioned terms, fire a shot across Japan's bow.

Second, China does not intend to provoke a military confrontation at the islands that would viscerally alarm Japan's populace and elite, and allow Japan to deploy its unanswerable geostrategic advantage: the military alliance with the United States. China's provocative movements in the waters around the islands are carried out by maritime surveillance vessels and fishing boats, not the navy.

Instead, Japan will be confronted at its most vulnerable point: the economic interests of its corporations and the well-being of its citizens inside China.

Third, the CCP is conveying that it can manage the unrest that goes hand-in-hand with a mass campaign, and will be prepared to escalate the damage it inflicts on Japanese businesses in China as needed despite the losses suffered by the Chinese economy and Chinese employment.

Finally, the ultimate purpose of the furor over the Senkaku/Diaoyu Islands is to demonstrate that Japan must rely on accommodation with China, as well as its alliance with the United States, to achieve peace and prosperity.

With this background, US Secretary of Defense Leon Panetta's recent remarks in Japan can be taken as an acknowledgement - at least for now - of the limits of American power and the challenges facing the pivot into Asia:

The United States, in all cases of disputed territory involving Pacific waters, urges "calm and restraint on all sides," the secretary said.

"United States policy with regards to these islands is well known, and obviously, we stand by our treaty obligations," Panetta said. "But the United States, as a matter of policy, does not take a position with regards to competing sovereignty claims." [8]

In other words, the threshold for active and open US involvement in the controversy is a military clash over the islands between Japan and China. Short of that ...

Panetta's remarks are not a matter of throwing Japan under the bus, but they do reflect the reality that there are limits to what the United States can, will, and wishes to do about the Diaoyu/Senkaku islands. And they reinforce the signals sent by the Chinese demonstrations.

It looks like the Japanese government - at least the current, relatively cautious and non-confrontational government, which may not be in power very much longer - got the message:

"We do not want anything that would affect the general bilateral relations between Japan and China," Chief Cabinet Secretary Osamu Fujimura said at a press conference Tuesday. He emphasized that the government has paid special consideration to China, in putting three of the five islets under state control.

The government will not construct any port facilities as shelters for fishing boats or improve the lighthouse, but keep the three islets as they are, at least for the time being. [9]

It would appear that, at least for the time being, China has come up with a diplomatically and economically costly but effective pushback to the cycle of provocation that was driving the Senkaku/Diaoyu confrontation. If and when the Noda government falls and is replaced by a new hardline Japanese government with a mandate for confrontation with China, the US will be trying to hold it back, not egg it on.

The anti-Japanese formula may also be applied to dealings with Vietnam and the Philippines over the South China Sea disputes.

In other words, China's anti-Japanese demonstrations are not a pathetic charade. They are dead serious - and successful.

Notes:
1. Romney Poses, as Militants Burn Benghazi Consulate, killing Ambassador, 3 staffers, & Demonstrate in Cairo, over Islamophobic Film, Informed Comment, Sep 12, 2012.
2. Mystery surrounds attack on Benghazi's US consulate, France24, Sep 18, 2012.
3. University of Oxford: National Public Opinion Poll of Libya, Business Journals, Feb 14, 2012.
4. China's Anti-Japan Riots Are State-Sponsored. Period., ChinaGreeks, Sep 17, 2012.
5. Anti-Japanese protests in China turn violent, Journal Star, Sep 19, 2012.
6. Closer Look: How a Protest in Beijing Stuck to the Script, Caxin, Sep 17, 2012.
7. Sino-Japan ties important, but not satisfactory, China Daily, Jun 20, 2012.
8. Panetta Addresses Osprey, Territory Disputes in Japan Visit, US Department of Defense, Sep 17, 2012.
9. Govt drew up multiple plans for Senkaku, Yomiuri, Sep 13, 2012.