Historical Record

Breton Woods Roots

In 1944, with the approaching defeat of Germany all but certain, representatives of forty-four nations met in Bretton Woods, New Hampshire to create a new international monetary system. This Bretton Woods System, which became fully operational in 1958, was essentially a mechanism to settle international accounts in dollars that were convertible to gold by the U.S. government at a fixed exchange rate of thirty-five dollars per ounce. Other currencies were pegged to the dollar, and the dollar to gold, therefore this committed the U.S. to back every dollar overseas with gold. The system seemed practical, logical and secure, for at the end of World War II the U.S. owned over half the world’s official gold reserves. But between 1950 and 1969, as Germany and Japan recovered, the U.S. share of the world’s GDP dropped from 35 percent to 27 percent. In the 70’s, a persistent negative balance of payments, inflation caused by the Vietnam War, Great Society programs, military budgets greater than the next seven nations combined and by the Federal Reserve caused the dollar to become increasingly overvalued. France, which viewed the scheme as “America’s exorbitant privilege, an asymmetric financial system whereby the rest of the world supported American living standards and subsidized American multinationals,” wanted the dollar pegged to gold at a fixed price . Even American economist Barry Eichengreen noted, “It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries have to pony up $100 of actual goods in order to obtain one.” In May 1971 West Germany was the first to leave the Bretton Woods system, and shortly thereafter other nations began to demand redemption of their dollars for gold. On August 5, 1971, with unemployment and inflation rates of 6.1% and 5.84% respectively, the U.S. Congress issued a report recommending devaluation of the dollar. On August 15, 1971 President Nixon ordered the suspension of the convertibility of the dollar into gold or other reserve assets, imposed a 90-day freeze on wages and prices, and enacted an import surcharge of 10 percent. Thus, after thirteen years of effective life (1958-1971), Bretton Woods ceased to exist.

The Petrodollar

Following Nixon’s Shock, as his actions regarding the end of the convertibility of the dollar to gold became known, the dollar plunged by a third. This imperiled the dollar’s credibility as a safe depository of wealth, its status as RCW, and the global economy. In an effort to prevent that from happening, on Nixon’s instructions, in 1974 Henry Kissinger Treasury Secretary William Simon negotiated a deal with the House of Saud of Saudi Arabia so that in exchange for arms and protection the Saudis would denominate all future oil sales in U.S. dollars, and other OPEC countries soon followed suit. The deal created a permanent global demand for “petrodollars” that did not circulate within the U.S. and were thus not part of the domestic money supply. Thus, the dollars used to pay for oil were henceforth deposited in U.S. banks loaned them to developing economies so they could, in turn, buy U.S. manufactured goods and agricultural products. Essentially this allowed the U.S. to export some of its inflation, to overspend, and to print however many dollars it saw fit without international acquiescence. The Saudi deal meant that every oil consuming nation would have to earn dollars to pay for its oil. That created a permanent recurring demand for dollars and forced nations to keep dollar reserves. Thus, as a matter of convenience rather than a legally enforceable international agreement as Bretton Woods had been, the dollar became the common currency to settle almost all other international transactions.

The Debt

Chronic overspending and deficits have pushed the accumulated debt to $31 trillion, and counting . To put this in perspective, that is equivalent to $93,939.39 per person (including babies and the indigent), or the combined value of the economies of China, Japan, Germany and Great Britain. That much money would pay for a four-year degree for every graduating U.S. high school student for 73 years, an absolute necessity just to hold our own with the vast numbers of Chinese and Indian STEM (science, technology, engineering & math) students that are projected to graduate in the next few years . One point that is not often discussed is that most of the debt –$24 trillion- is carried by private individuals, not foreign governments. Given the yawning gap in wealth inequality, it’s safe to say that most of these investors, who represent a tiny minority of the population, stand to lose the most should the dollar lose its RCW coveted status. This of course has happened to other nations before , and it was never a pleasant experience for them.

Incipient Changes

The world is changing, and the speed and scope at which it is doing so in terms of economic and military dominance has not been seen in centuries. For starters, gone are the days when Saudi Arabia was unquestionably in sync with the needs and wants of the U.S. The former has been negotiating with China to price some oil transactions in yuan, not dollars; in addition, it has joined the Shanghai Cooperation Organization as a “dialogue partner” and expressed interest in joining BRICs. The relevance of these organizations cannot be overstated. Not only do they exclude the United States, in time they will likely acquire, in the aggregate, the capacity to challenge the dollar’s status as reserve currency of the world (RCW). Given the degree to which America’s economy depends on oil, and barring the introduction and deployment of a new mechanism to perpetuate today’s quasi-infinite global demand for dollars, the day is approaching when the inexorable depletion of existing petroleum reserves will leave the U.S. with no choice but to elbow out friends and foes alike for control of the commodity.

In 1941 Japan went to war because it needed oil from the (then) Dutch East Indies to offset America’s oil embargo, and Germany tried to pry the Caucasus from the Soviet Union and the Persian Gulf from Britain. Though both failed, after the war they and most of Europe ended up relying on the U.S. to keep the sea lanes to the Persian Gulf open and on the Soviet Union/Russia to provide them with cheap pipeline oil and gas. That era is coming to a screeching halt because the U.S. and Europe, with some exceptions, intend to stop importing Russian oil and gas as part of a response to the latter’s invasion of Ukraine. However, other powerful forces are at play. Not only is depletion inevitable, the current high rate of inflation in the U.S. and Europe, and the specter of a looming recession in the U.S. and Europe (but not in China) may force the collective West to eventually reconsider the rejection of Russian fossil fuels. But there’s a silver lining. Climbing interest rates in the U.S. and high energy prices in Europe have caused the dollar to appreciate relative to the world’s major currencies meeting. Clearly the market still views the dollar as the safest depository of wealth, a perception that all but guarantees a continued strong global demand for it. Whether intentional or accidental, for the foreseeable future this is a de facto genial defense of its status as RCW. Therein the nexus between the dollar and Jamie Dimon’s statement regarding oil.

Chinese Navy – DOD 2022 Report

Excerpt from the 2022 China Military Power Report to Congress

PEOPLE’S LIBERATION ARMY NAVY (PLAN)
Key Takeaways
• The PLAN is numerically the largest navy in the world with an overall battle force of approximately 340 ships and submarines, including approximately 125 major surface combatants. As of 2021, the PLAN is largely composed of modern multi-mission ships and submarines.

•In 2021, the PLAN’s overall battle force shrank due to the transfer of 22 early flight JIANGDAO class corvettes to the China Coast Guard.

•The PLAN commissioned its fourth RENHAI class cruiser (CG) in late 2021 and resumed series construction of the JIANGKAI II class frigate.

•The PLAN commissioned two YUSHEN class amphibious assault ships, one each in April 2021 and April 2022. The PLAN launched a third hull in the class in January 2021, which is currently undergoing sea trials prior to commissioning.

•In the near-term, the PLAN will have the ability to conduct long-range precision strikes against land targets from its submarine and surface combatants using land-attack cruise missiles, notably enhancing the PRC’s power projection capability.

The PRC’s 2019 defense white paper described the People’s Liberation Army Navy (PLAN) as adjusting to changes in the strategic requirements of near seas protection and far seas protection, noting that it was “speeding up the transition of its tasks from defense on the near seas to protection missions on the far seas.” The PLAN is an increasingly modern and flexible force that has focused on replacing its previous generations of platforms that had limited capabilities in favor of larger, modern multi-role combatants. As of 2021, the PLAN is largely composed of modern multi-role platforms featuring advanced anti-ship, anti-air, and antisubmarine weapons and sensors. The PLAN is also emphasizing maritime joint operations and joint integration within the PLA. This modernization aligns with the PRC’s growing emphasis on the maritime domain and increasing demands for the PLAN to operate at greater distances from mainland China.

The PLAN organizes, mans, trains, and equips the PLA’s naval and naval aviation forces, as well as the PLAN Marine Corps (PLANMC), which is subordinate to the PLAN. The PLAN continues to implement structural reforms that began in late 2015 and early 2016. Similar to the other services, the PLA-wide reforms removed the PLAN headquarters from conducting operations, which became the purview of the PLA’s joint Theater Commands, and focused the PLAN on organizing, manning, training, and equipping naval forces.

Missions. The PLAN continues to develop into a force increasingly capable of global operations, gradually extending its operational reach beyond East Asia. The PLAN’s latest surface and subsurface platforms enable combat operations beyond the reach of the PRC’s land-based defenses. In particular, China’s growing force of aircraft carriers extend air defense coverage of deployed task groups beyond the range of land based defenses and will enable operations at increasingly longer ranges. The PLAN’s emerging requirement for sea-based land-attack systems will also enhance the PRC’s ability to project power. Furthermore, the PLAN now has a sizable force of highly capable logistical replenishment ships to support long-distance, long-duration deployments, including two new FUYU class fast combat support ships (AOEs) built specifically to support aircraft carrier operations. The PLAN’s expanding fleet of large modern amphibious warships will enable it to conduct a wide range of expeditionary operations wherever PRC interests are threatened or in support of PRC participation in internationally sanctioned operations. The expansion of naval operations beyond China’s immediate region will also facilitate its non-war military activities and further legitimize the PRC’s growing global military posture, including at its base in Djibouti.

China continues to learn lessons from operating its first aircraft carrier, Liaoning. Its first domestically built aircraft carrier, Shandong, was launched in 2017 and commissioned in December 2019—the beginning of what the PLA states will be a multi-carrier force. China’s next generation of carriers, including one that began construction in 2018, will have greater endurance and an electromagnetic catapult launch system making it capable of launching various types of specialized fixed-wing aircraft for missions such as early warning, electronic warfare (EW), and anti-submarine warfare (ASW). This will increase the striking power of a potential PLAN carrier battle group when deployed to areas beyond China’s immediate periphery. China’s newest aircraft carrier, the Fujian, is expected commission in 2024.

The PLAN’s newest amphibious ships, the YUSHEN class Landing Helicopter Assault (LHA) and YUZHAO class Amphibious Transport Docks (LPD) are modern platforms capable of regional and global expeditionary missions in support of both wartime and non-war contingency operations either singly or as part of capable and flexible task groups composed of multiple amphibious ships and surface combatants.

The PLAN’s ability to perform missions beyond the First Island Chain is modest but growing as it gains more experience operating in distant waters and acquires larger and more advanced platforms. China’s experience in extended range operations primarily comes from extended task group deployments and its ongoing counterpiracy mission in the Gulf of Aden. Notable deployments in 2021 included the following:

• In April 2021 and December 2021, the PRC aircraft carrier Liaoning conducted deployments to the Philippine Sea and South China Sea accompanied by escort ships including the RENHAI class cruiser Nanchang during both deployments. According to the Japanese Self-Defense Force, the December deployment included night flight operations almost 200 miles southeast of Okinawa with the task group accompanied by a FUYU class AOE.

•In May of 2021, a PLAN task group operated in the South China Sea, Java Sea, and Celebes Sea, and conducted an exercise with the Indonesian Navy.
In August and September 2021, a PLAN task group that included a RENHAI class cruiser and an AGI deployed to the North Pacific and operated inside the U.S. EEZ in Alaskan waters.

•In October 2021, PLAN and Russian warships exercised in the Sea of Japan and then sailed into the Pacific Ocean through the Tsugaru Strait that separates the Japanese Islands of Honshu and Hokkaido.

•The PLAN sustained its counter-piracy task groups in the Gulf of Aden through 2021, a 13-year effort that is the PRC’s first enduring naval operation beyond the Indo-Pacific region.

Force Structure. The PLAN is the largest navy in the world with a battle force of approximately 340 platforms, including major surface combatants, submarines, ocean-going amphibious ships, mine warfare ships, aircraft carriers, and fleet auxiliaries. In 2021, the PLAN’s overall battle force shrank due to the transfer of 22 early flight JIANGDAO class corvettes to the China Coast Guard. This figure does not include approximately 85 patrol combatants and craft that carry anti-ship cruise missiles (ASCM). The PLAN’s overall battle force is expected to grow to 400 ships by 2025 and 440 ships by 2030. Much of this growth will be in major surface combatants. The PLAN’s force structure consists of three fleets with subordinate submarine flotillas, surface ship flotillas, aviation brigades, and naval bases. The PLAN’s Northern Theater Navy is subordinate to the Northern Theater Command, the Eastern Theater Navy is subordinate to the Eastern Theater Command, and the Southern Theater Navy is subordinate to the Southern Theater Command.

Submarines. The PLAN has placed a high priority on modernizing its submarine force, but its force structure continues to grow modestly as it works to mature its force, integrate new technologies, and expand its shipyards. The PLAN currently operates six nuclear-powered ballistic missile submarines (SSBN), six nuclear-powered attack submarines (SSN), and 44 diesel-powered/air-independent powered attack submarines (SS/SSP). The PLAN will likely maintain between 65 and 70 submarines through the 2020s, replacing older units with more capable units on a near one-to-one basis.

The PRC continues to increase its inventory of conventional submarines capable of firing advanced anti-ship cruise missiles (ASCM). Between the mid-1990s and mid-2000s, the PLAN purchased 12 Russian-built KILO class SS units, eight of which are capable of launching ASCMs. China’s shipyards have delivered 13 SONG class SS units (Type 039) and 17 YUAN class diesel-electric air-independent propulsion attack submarine (SSP) (Type 039A/B). The PRC is expected to produce a total of 25 or more YUAN class submarines by 2025. In late 2021, the PLAN retired the first two KILO class submarines purchased from Russia in the 1990s.

Over the past 15 years, the PLAN has constructed twelve nuclear submarines – two SHANG I class SSNs (Type 093), four SHANG II class SSNs (Type 093A), and six JIN class SSBNs (Type 094). Equipped with the CSS-N-14 (JL-2) submarine-launched ballistic missile (SLBM) (7,200KM), the PLAN’s six operational JIN class SSBNs represent the PRC’s first credible sea-based nuclear deterrent.

By the mid-2020s, China will likely build the SHANG class (Type 093B) guided-missile nuclear-powered attack submarine (SSGN). This new SHANG class variant will enhance the PLAN’s anti-surface warfare capability and could provide a clandestine land-attack option if equipped with land-attack cruise missiles (LACM). The PLAN is also improving its antisubmarine warfare (ASW) capabilities through the development of its surface combatants and special mission aircraft, but it continues to lack a robust deep-water ASW capability. By prioritizing the acquisition of ASW capable surface combatants, acoustic surveillance ships, and fixed and rotary wing ASW capable aircraft, the PLAN is significantly improving its ASW capabilities. However, it will still require several years of training and systems integration for the PLAN to develop a robust offensive deep water ASW capability.

Surface Combatants. The PLAN remains engaged in a robust shipbuilding program for surface combatants. At the close of 2021, the PLAN was building an aircraft carrier, a new batch of guided-missile destroyers (DDG), and a new batch of guided missile frigates (FFG). These assets will significantly upgrade the PLAN’s air defense, anti-ship, and anti-submarine capabilities, and will be critical as the PLAN expands its operations beyond the range of the PLA’s shore-based air defense systems. By the end of 2019, the PLAN had commissioned its 30th JIANGKAI II class FFG, reportedly completing the production run. However, in 2021 PRC media reported production had restarted with at least two hulls launched by the end of year and additional units are likely under construction. The PLAN augmented its littoral warfare capabilities, especially for operations in the East and South China Seas, with the high-rate production of the JIANGDAO class FFLs (Type 056 and Type 056A). The PLAN commissioned the 72nd JIANGDAO in February 2021, completing the production run. The PLAN also transferred the early flight JIANGDAO variants, likely 22 ships total, to the China Coast Guard in 2021, probably due to the models’ lack of towed-array sonar. The 056A FFLs are equipped with a towed-array sonar and are thus capable ASW ships.

The PLAN has expanded its force of large surface combatants with two programs, the LUYANG III class DDG and the RENHAI class guided-missile cruise (CG). By late 2020, the PRC had launched 25 LUYANG III class DDGs—including 12 lengthened LUYANG III MOD DDGs with 19 of the new hulls commissioning by the end of 2021. Both the standard LUYANG III and the LUYANG III MOD have a 64-cell multipurpose vertical launch system (VLS) capable of launching cruise missiles, surface to air missiles, and anti-submarine missiles. In December 2021, China commissioned its fourth cruiser with the remaining four hulls likely commissioning during 2022. The RENHAI has 112 VLS cells and can carry a large load out of weapons including ASCMs, surface-to-air missiles (SAMs), torpedoes, and anti-submarine weapons along with likely LACMs and anti-ship ballistic missiles (ASBM) when those become operational.

The PLAN continues to emphasize anti-surface warfare capabilities in its force development. The PLAN’s frigates and corvettes, as well as modernized older combatants, carry variants of the YJ-83/YJ-83J ASCM (97NM, 180KM), while newer surface combatants such as the LUYANG II class DDGs are fitted with the YJ-62 (215NM, 400KM). The LUYANG III class DDGs and the RENHAI class CGs will be fitted with a variant of China’s newest ASCM, the YJ-18A (290NM, 537KM). A few modernized destroyers have been retrofitted with the supersonic YJ-12A ASCM (250NM, 460KM). Eight of the PLAN’s 10 KILO class SSs are equipped with the Russian built SS-N-27b ASCM (120NM, 220KM). The PRC’s SONG class SS, YUAN class SSP, and SHANG class SSN field the PLAN’s newest domestic submarine-launched YJ-18 and its variants, which constitute an improvement over the SS-N-27b ASCM.

The PLAN recognizes that long-range ASCMs require a robust, over-the-horizon (OTH) targeting capability to realize their full potential. To fill this capability gap, the PLA is investing in joint reconnaissance, surveillance, command, control, and communications systems at the strategic, operational, and tactical levels to provide high-fidelity targeting information to surface and subsurface launch platforms.

As the PLAN continues to transition into a global multi-mission force, the addition of land-attack capabilities to its modern array of anti-surface and anti-air capabilities is a logical next step. In the coming years, the PLAN will probably field LACMs on its newer cruisers and destroyers and developmental SHANG class Type 093B SSGN. The PLAN could also retrofit its older surface combatants and submarines with land-attack capabilities as well. The addition of land-attack capabilities to the PLAN’s surface combatants and submarines would provide the PLA with flexible long-range strike options. This would allow the PRC to hold land targets at risk beyond the Indo-Pacific region.

Amphibious Warfare Ships. China’s investment in Landing Helicopter Assault ships (LHAs) signals its intent to continue to develop its expeditionary warfare capabilities. In April 2021, China commissioned the first of YUSHEN class LHA (Type 075) followed by the commissioning of the second hull in December 2021. A third YUSHEN-class LHA was launched in January 2021, marking an approximately 16-month timeframe to launch the three vessels, and will likely join the fleet in the first half of 2022. The YUSHEN class are highly capable large-deck amphibious ships that will provide the PLAN with an all-aspect expeditionary capability. The YUSHEN class can carry a large number of landing craft, forces, armored vehicles, and helicopters. In addition, the PLAN has eight large YUZHAO class amphibious transport docks (LPD) (Type 071) in service. The YUZHAO class LPDs and YUSHEN class LHAs provide the PLA with greater capacity, endurance, and more flexibility for long-range operations than the PLAN’s older landing ships, which it has reduced in number over the last decade with obsolete units being decommissioned. The YUSHEN and YUZHAO can each carry several YUYI class air-cushion medium landing craft and a variety of helicopters, as well as tanks, armored vehicles and PLAN marines for long-distance expeditionary deployments.

Aircraft Carriers. In December 2019, the PRC commissioned its first domestically built aircraft carrier, Shandong, which launched in 2017 and completed multiple sea trials during 2018-2019. Shandong was photographed at a base on Hainan Island in the Southern Theater Navy in late 2020 and should now be considered to be operational. Shandong is a modified version of the Liaoning (Soviet KUZNETSOV class) design and likewise uses a ski-jump takeoff method for its aircraft. The PRC continued work on its second domestically built aircraft carrier in 2021, which will be larger and fitted with an electromagnetic catapult launch system. This design will enable it to support additional fighter aircraft, fixed-wing early-warning aircraft, and more rapid flight operations and thus extend the reach and effectiveness of its carrier based strike aircraft. The PRC’s second domestically built carrier, the Fujian, is projected to be operational by 2024, with additional carriers to follow.

Ship Based Aircraft. The PLAN operates and is developing several aircraft to operate from its carriers and combatants. In addition to the standard J-15 fighter that currently operates from PLAN carriers, there is a catapult-capable J-15 variant in development. The aircraft is currently testing from land-based steam and electromagnetic catapults. A third J-15 variant, the J-15D, is a two-seat aircraft equipped with wingtip electronic support measures/electronic intelligence gathering pods as well as several conformal antennas. The aircraft is intended to fill a dedicated electronic attack role. China is also developing a carrier capable variant of the fifth-generation J-31 fighter. Beyond fighter aircraft, China is refining the design of a carrier-borne airborne early warning (AEW) aircraft known as the KJ-600. A mockup of the aircraft, which appears externally similar to the E-2C/D Hawkeye, has existed for many years, and a prototype of the KJ-600 is currently in flight testing. The PRC is also developing the Z-20F helicopter for the PLAN, intended for the RENHAI cruisers and LUYANG III MOD destroyers and possibly the YUSHEN LHAs. The Z-20F is similar to the U.S. Navy’s SH-60 and will provide significant improvements in ASW capabilities over the smaller Z-9 and Ka28 helicopters the PLAN currently operates. The Z-20F will also complement the larger Z18Fs that operate from the PLAN’s aircraft carriers.

Land Based Aircraft. The PLAN is in the process of replacing its older variant H-6 bombers in 2019 with the H-6J, a naval variant of the H-6K operated by the PLAAF. This new and larger advanced maritime strike bomber has six weapons pylons instead of four, advanced avionics, and upgraded engines, and the H-6J can employ the supersonic YJ-12 ASCM (250NM, 460KM). In 2020 PLAAF H-6Ks were also photographed carrying YJ-12s, significantly increasing the number of bombers available to the PLA for long-range maritime strike missions.

The PLAN operates a diverse inventory of fixed-wing special mission aircraft for maritime patrol and airborne early warning aircraft including many of the same variants operated by the PLAAF. However, the PLAN has also fielded a variant of the Y-9 for anti-submarine warfare and maritime patrol. The new aircraft is equipped with a magnetic anomaly detector boom, similar to that of the U.S. Navy’s P-3. This Y-9 ASW variant is equipped with surface-search radar mounted under the nose as well as multiple-blade antennas on the fuselage, probably for electronic surveillance. A small electro-optical (EO)/ infrared turret is located just behind the nose wheel, and this variant is equipped with an internal weapons bay in front of the main landing gear.

Auxiliary Ships. The PLAN continues to build a large number of seagoing auxiliary and support ships, including intelligence collection ships (AGI), ocean surveillance ships (AGOS), fleet replenishment oilers (AOR), hospital ships, submarine salvage and rescue ships, and various other specialized units. Additionally, China’s first domestically built polar icebreaker, XUELONG 2, became operational in 2019. The ship is operated by the Polar Research Institute of the State Oceanic Administration. In May 2021, XUELONG 2 completed the PRC’s 37th research mission to Antarctica and in the second half of 2021, the PRC’s 12th research mission to the Arctic.

PLAN Marine Corps (PLANMC). The PLANMC is still in the process of completing expansion requirements set forth by the CMC under PLA reform in 2016. Serving as the PLAN land combat arm, the PLANMC continued to evolve throughout 2021 and is receiving equipment and training necessary to become the PLA’s preeminent expeditionary force, as directed by Xi Jinping. All six PLANMC maneuver brigades have achieved initial operating capability (IOC); three of the brigades are assessed to be fully mission capable. Two other PLANMC brigades – the aviation brigade and the special operations brigade, are IOC and Full Operational Capability (FOC), respectively. The aviation brigade will likely not achieve FOC status until at least 2025 and likely beyond, based on the current pace the brigade is receiving new helicopters, fully trained flight crews, and support equipment. The FOC aviation brigade will most likely contain a mix of heavy-lift, medium-lift, attack, and multipurpose helicopters capable of operating on land and at sea to support all aspects of PLANMC operations. Such operations include, but are not limited to humanitarian aid/disaster relief, force protection, counterterrorism, amphibious assault, and combat operations ashore, either in support of large-scale PLA operations or as an expeditionary force overseas.

On December 30th, 2021, Lieutenant General Kong Jun, previously the PLANMC commander, was identified as the Eastern Theater Command Army commander. The new PLANMC commander is Major General Zhu Chuansheng. Major General Zhu also came from the PLAA and has a background in amphibious operations as the deputy commander of the 41st Group Army. It is likely that Major General Zhu will see the PLANMC through its reform and expansion, likely by 2027. The new commander will lead a PLANMC of over 30,000 marines. This number could increase to closer to 40,000 by 2027.

Reserve Force. The PLA Reserve Force is comprised of approximately 510,000 personnel subordinate to the Army Reserve, Navy Reserve, Air Force Reserve, and Rocket Force Reserve. According to official Chinese media and journal articles, a small number of active duty cadre serve as a permanent backbone for the Reserve Force to enable the influx of reserve officers and soldiers when required. The 2020 Science of Military Strategy published by the PLA’s National Defense University states the building of the reserve force is an important part of national defense construction and is the basic and strategic project to consolidate national defense. The primary mission of the reserves is to reinforce active-duty forces for national defense, with a secondary mission to aid in national disasters or maintaining social order. The Reserve Force should be prepared to effectively respond to a variety of emergencies and military threats, safeguard national sovereignty, security and development interests, and the core security of the country.

Reserve officers are selected from veteran PLA officers, local officials, PAP or militia officers, and other technical personnel. Reserve soldiers are selected from eligible PLA veterans, trained grass-roots militias, and other local or military specialty personnel. Some reserve soldiers also failed to meet active duty entry requirements and conduct remedial training in the reserves until they are able to join the active duty force.

Anecdotal evidence suggests that significant issues remain in the mobilization of reserve forces, including which equipment should be used, what level of government pays for the mobilization, and resistance from enterprises at the sudden requisition of their employees. Chinese documents state that Reserve Force equipment is predominately antiquated; one report stated that more than 70% of air defense artillery and artillery equipment is at or beyond its maximum service life. Some of the equipment is no longer manufactured and repair requires cannibalization.

The PLA Reserve Force also provides significant support to local areas after natural disasters. The PLA Reserve Force does not include militias, the Civil Air Defense, or myriad other groups (e.g. the People’s Armed Police or the Xinjiang Production and Construction Corps (XPCC)).

People’s Armed Police (PAP). The PAP is a component of the PRC’s armed forces and an armed wing of the CCP with an estimated 660,000 personnel. In the 2020 National Defense University publication Science of Military Strategy, the primary responsibilities of the PAP include maintaining political, institutional and regime security, handling emergency rescue, counter-terrorism, air support, maritime rights protection, administrative law enforcement, and defense operations. The PAP is organized into three main parts: the Internal Security Corps, the Mobile Corps, and the China Coast Guard (CCG). The Internal Security Corps covers each of the PRC’s provinces, provincial-level cities, and autonomous regions. There is not yet a reported permanent presence of the PAP in the Special Administrative Regions (SARs) of Hong Kong or Macao, but since 2019, the PAP maintains a rotational deployment in Hong Kong. The Mobile Corps is comprised of myriad PAP units placed to reinforce the Internal Security Corps and provide flexibility in responding to internal security issues. Mobile Corps units are concentrated in the west and south (Xinjiang, Tibet, Sichuan, Yunnan, and Qinghai) as well as the major cities of Beijing and Shanghai. Xinjiang is a particular focus of the PAP due to PRC perceived separatist activity, as well as its proximity to areas of unrest in Central Asia. The China Coast Guard is covered in depth in the next section of this report.

Xi Jinping and the CCP leadership tasked the PAP with integrating themselves into the PLA’s joint operation system. The PAP’s main mission is internal security, but is increasingly focused on joint operations with the PLA and is developing capabilities for rapid response, mobility, and counterterrorism operations. The PAP also conducts training with foreign partners, including at least Uzbekistan, Kyrgyzstan, and Russia. Since at least 2016, PAP forces have likely operated in Tajikistan, patrolling the tri-border region connecting Tajikistan, Afghanistan, and the PRC. In 2021, the PAP reportedly executed numerous emergency rescue and disaster response operations in response to heavy flooding and typhoons, as well as conducting counter-terrorism and opposing force training and exercises.

China Coast Guard (CCG). The CCG is subordinate to the PAP and is responsible for a wide range of maritime security missions, including defending the PRC’s sovereignty claims; fisheries enforcement; combating smuggling, terrorism, and environmental crimes; as well as supporting international cooperation. In 2021, the Standing Committee of China’s National People’s Congress passed the Coast Guard Law which took effect on 1 February 2021. The legislation regulates the duties of the CCG, to include the use of force, and applies those duties to seas under the jurisdiction of the PRC. The law was met with concern by other regional countries that may perceive the law as an implicit threat to use force, especially as territorial disputes in the region continue.

The CCG’s rapid expansion and modernization has made it the largest maritime law enforcement fleet in the world. Its newer vessels are larger and more capable than older vessels, allowing them to operate further off shore and remain on station longer. A 2019 academic study published by the U.S. Naval War College estimates the CCG has over 140 regional and oceangoing patrol vessels (of more than 1,000 tons displacement). Some of the vessels are former PLAN vessels, such as corvettes, transferred to the CCG and modified for CCG operations. The newer, larger vessels are equipped with helicopter facilities, high-capacity water cannons, interceptor boats, and guns ranging from 20 to 76 millimeters. In addition, the same academic study indicates the CCG operates more than 120 regional patrol combatants (500 to 999 tons), which can be used for limited offshore operations, and an additional 450 coastal patrol craft (100 to 499 tons).

China’s Maritime Militia
Background & Missions. The People’s Armed Forces Maritime Militia (PAFMM) is a subset of China’s national militia, an armed reserve force of civilians available for mobilization that is ultimately subordinate to the Central Military Commission through the National Defense Mobilization Department. Throughout China, militia units organize around towns, villages, urban sub-districts, and enterprises, and vary widely in composition and mission.

PAFMM vessels train with and assist the People’s Liberation Army Navy (PLAN) and the China Coast Guard (CCG) in tasks such as safeguarding maritime claims, surveillance and reconnaissance, fisheries protection, logistics support, and search and rescue. China employs the PAFMM in gray zone operations, or “low-intensity maritime rights protection struggles,” at a level designed to frustrate effective response by the other parties involved. China employs PAFMM vessels to advance its disputed sovereignty claims, often amassing them in disputed areas throughout the South and East China Seas. In this manner, the PAFMM plays a major role in coercive activities to achieve China’s political goals without fighting, and these operations are part of broader Chinese military theory that sees confrontational operations short of war as an effective means of accomplishing strategic objectives.

Operations. PAFMM units have been active for decades in maritime incidents and combat operations throughout China’s near seas and in these incidents PAFMM vessels are often used to supplement CCG cutters at the forefront of the incident, giving the Chinese the capacity to outweigh and outlast rival claimants. In March of 2021, hundreds of Chinese militia vessels moored in Whitsun Reef, raising concerns the Chinese planned to seize another disputed feature in the Spratly Islands. Other notable incidents include standoffs with the Malaysian drill ship West Capella (2020), defense of China’s HYSY-981 oil rig in waters disputed with Vietnam (2014), occupation of Scarborough Shoal (2012), and harassment of USNS Impeccable and Howard O. Lorenzen (2009 and 2014). Historically the maritime militia also participated in China’s offshore island campaigns in the 1950s, the 1974 seizure of the Paracel Islands from South Vietnam, and the occupation of Mischief Reef in the Spratly Islands in 1994.

The PAFMM also protects and facilitates PRC fishing vessels operating in disputed waters. For example, from late December 2019 to mid-January 2020, a large fleet of over 50 PRC fishing vessels operated under the escort of multiple China Coast Guard patrol ships in Indonesian claimed waters northeast of the Natuna Islands. At least a portion of the PRC ships in this fishing fleet were affiliated with known traditional maritime militia units, including a maritime militia unit based out of Beihai City in Guangxi province. While most traditional maritime militia units operating in the South China Sea continue to originate from townships and ports on Hainan Island, Beihai is one of a number of increasingly prominent maritime militia units based out of provinces in the PRC. These mainland based maritime militia units routinely operate in the Spratly Islands and in the southern South China Sea, and their operations in these areas are enabled by increased funding from the PRC government to improve their maritime capabilities and grow their ranks of personnel.

Capabilities. Through the National Defense Mobilization Department, Beijing subsidizes various local and provincial commercial organizations to operate PAFMM vessels to perform “official” missions on an ad hoc basis outside of their regular civilian commercial activities. PAFMM units employ marine industry workers, usually fishermen, as a supplement to the PLAN and the CCG. While retaining their day jobs, these mariners are organized and trained, often by the PLAN and the CCG, and can be activated on demand. Additionally, starting in 2015, the Sansha City Maritime Militia in the Paracel Islands has developed into a salaried full-time maritime militia force equipped with at least 84 purpose-built vessels armed with mast-mounted water cannons for spraying and reinforced steel hulls for ramming along with their own command center in the Paracel Islands. Lacking their normal fishing responsibilities, Sansha City Maritime Militia personnel, many of whom are former PLAN and CCG sailors, train for peacetime and wartime contingencies, often with light arms, and patrol regularly around disputed South China Sea features even during fishing moratoriums. Additionally, since 2014, China has built a new Spratly backbone fleet comprising at least 235 large fishing vessels, many longer than 50 meters and displacing more than 500 tons. These vessels were built under central direction from the Chinese government to operate in disputed areas south of twelve degrees latitude that China typically refers to as the “Spratly Waters,” including the Spratly Islands and southern SCS. Spratly backbone vessels were built for prominent PAFMM units in Guangdong, Guangxi, and Hainan Provinces. For vessel owners not already affiliated with PAFMM units, joining the militia was a precondition for receiving government funding to build new Spratly backbone boats. As with the CCG and PLAN, new facilities in the Paracel and Spratly Islands enhance the PAFMM’s ability to sustain operations in the South China Sea.

JOINT CAPABILITIES IN DEVELOPMENT
Key Takeaways

•The PLA is aggressively developing capabilities to provide options for the PRC to dissuade, deter, or, if ordered, defeat third-party intervention in the Asia-Pacific region.

•The PLA is also developing the capabilities to conduct military operations deeper into the Indo-Pacific region, and in some cases, globally.

•Although the PLA has undertaken important structural reforms to promote joint operations, the capability of the PLA to carry out joint operations in support of counter-intervention or joint campaigns outside the First Island Chain remains in its infancy.

Complications

The facts have ominous overtones. As of the end of 2020 proven crude oil reserves in the U.S. amounted to 38.2 billion barrels, or about 4.89 times annual consumption. Thus, excluding unproven reserves and imports, the U.S. has about 5 years left of domestic oil at current consumption levels. In addition, by some estimates, the world’s proven oil reserves will last approximately 45 to 50 years Currently the world’s top five oil consuming nations are the United States, China, India, Japan, and Russia. Of these, only the latter has domestic reserves to meet its fuel needs. To answer the question that Rep. Tlaib did not ask at the hearing, the largest proven oil reserves are in Venezuela, the Persian Gulf and Canada. Thus, as long as the world remains addicted to oil, competition among the top oil consuming nations for a guaranteed right of priority to these dwindling reserves will only get more intense.

Posted in Oil

The Ukrainian Crisis II

January 9, 2022

Background

  • On December 7, 2021 (Pearl Harbor Day) the White House released a readout of the video call between Presidents Biden and Putin.
  • On December 15, 2021 Presidents Putin and Xi reportedly cemented ties between Russia and China. According to the Kremlin, the latter backed Russia’s push for security guarantees in the Ukraine.
  • On December 30, 2021, in a 50-minute phone call, Presidents Biden and Putin reportedly exchanged warnings over the crisis in the Ukraine.

As can be expected, no unredacted transcripts of these conversations were made public, therefore it is useless to speculate as to what was omitted from the official disclosures. However, the sequence of conversations is reminiscent of, and as ominous as, the feverish negotiations that took place in July 1914 as the Great Powers attempted, without success, to halt the automatic series of events that unleashed a devastating pivotal war between two sets of alliances that, among other things, broke up the Austro-Hungarian, Russian and Turkish Empires, set the stage for the rise of Hitler, led to the subsequent demise of the British and French Empires, the temporary partition of Germany, the demise of the Soviet Union, and an American economic and military hegemony now being challenged by a rising China. On that occasion, it should be remembered, the Kaiser gave Austria-Hungary what became known as a “blank check” to, essentially, wage war on Serbia as retribution for the assassination of the Archduke Franz Ferdinand.

Although the public does not know exactly what Presidents Putin and Xi said to each other, the sequence of the three phone calls is not exactly a harbinger of optimism for a quick, peaceable settlement of the Ukrainian crisis. Of particular interest is the fact that it was President Putin who requested the second call with President Biden, and it took place two weeks after the former’s conversation with President Xi.

On January 10, 2022, long-awaited talks in Geneva between the U.S. and Russia over the Ukrainian crisis are scheduled to begin. At issue is a Russian demand/ultimatum for a guarantee that the Ukraine will never joint NATO and, essentially, to roll back the military balance in Eastern Europe to what it was just after the dissolution of the Soviet Union. More specifically, that NATO in general, and the United States in particular, make good on a verbal promise made to Gorbachev’s regime that NATO would not expand into the former Warsaw Pact countries. In addition, President Putin has publicly demanded quick compliance with the ultimatum. NATO and the U.S. have publicly rejected both demands. They justify their position by saying that NATO is defensive in nature and that the Ukraine cannot be forced to make decisions “with a gun pointed to its head,” presumably a reference to the tens of thousands of Russian troops presently deployed along their common border. Inversely, Russia views the alliance, which was set up to counter communism and the now defunct Soviet Union, as a hostile entity, and that Ukrainian membership in NATO would by default point a gun to Russia’s head –Moscow.

Point and Counterpoint

The United States has ruled out putting American combat troops in the Ukraine to counter a possible Russian invasion. However, buoyed by British and German backing, it has promised unprecedented retribution on Russia should the latter decide to attack the Ukraine. For its part, Russia says there will be no concessions on its demands. Presumably this implies that the pain of any retributions the U.S. and NATO can bring to bear on Russia will be less than tolerating Ukrainian membership in NATO. And so, confident of prevailing, neither side is expected to back down. Whether their respective postures will unleash catastrophic events exceeding World Wars I and II combined in this day and age of weapons of mass destruction, COVID and climate change, time will tell. The spectacle is reminiscent of two silverbacks fighting for dominance. The question is, can we do any better?

The 2022 Ukraine Crisis

January 1, 2022

Background

In just a few days representatives of the United States and the Russian Federation will meet to discuss the latter’s demand (bordering on an ultimatum) for a guarantee that the Ukraine will not ever be admitted to NATO. To be sure, there are other elements to the demand, but from Russia’s point of view this is undoubtedly the most pressing. And for good reason. Should the Ukraine joint NATO, nothing would prevent the United States from deploying nuclear-tipped hypersonic missiles on the Ukrainian-Russian border, within 5 minutes flight time to Moscow. These are first-strike weapons with the potential ability to decapitate the Russian government and dismember the Russian Federation. For that reason, from Russia’s point of view at least, this threat forfeits the Ukraine’s sovereign right to join NATO. Furthermore, having repeatedly and publicly declared this, President Putin has all but put himself into a position from which he cannot unilaterally back down. If he does, the political price he might have to pay might well bring about that which he is trying to prevent. Similarly, a divided Senate and the upcoming mid-term elections mean that President Biden cannot afford to be perceived as (or accused of being) a weak leader that caves in to President Putin’s will. Absent a fortuitous face-saving as well as substantive compromise, the danger of an unyielding, non-negotiable “no” from the U.S. and NATO means that the risk of all-out war with Russia is quite high. No need to describe or analyze the consequences of such an event.

By all accounts, in 1962 President Kennedy was ready to wage nuclear war with the Soviet Union because the latter had deployed nuclear-tipped medium-range missiles in Cuba, which unbeknownst to him, were already fully armed and operational. To put this in perspective, the distance from Havana, Cuba to Washington, D.C. is 1,134 miles (approximately 1,825 kilometers), over three times farther than between Shostka and Moscow. Khrushchev, who as a Political Commissar had in 1942 witnessed firsthand the unspeakable horrors of the Battle of Stalingrad, agreed to remove the missiles subject to a (then) secret clause: in exchange for doing so, and over Castro’s vociferous objection, the U.S. would remove its missiles from Turkey. It is no exaggeration to say that we’re all alive today because of that agreement.

Seeking a Compromise

As today’s crisis is nothing less than a planetary existential threat, anyone is entitled to offer a (hopefully) constructive opinion on what might be done to defuse it. So here’s one:

NATO to agree to a “cooling off” specific period (perhaps 50 years) during which the Ukraine would not be admitted into the alliance.

Russia would respect the current Ukrainian borders and commit to not invading it during the cooling off period.

The Crimea would remain Russian territory; the Ukraine would agree to it.

A binding referendum sponsored by mutually acceptable neutral observers would be held in the eastern portion of the Ukraine currently under Russian rebels’ control. Persons unwilling to live under Ukrainian rule would relocate to Russia proper and renounce all ownership claims to any Ukrainian land.

Both Russia and the Ukraine would agree to not mass combat troops within a mutually acceptable distance of their common border. If necessary, United Nations peacekeepers would be deployed to verify compliance.

Recognizing that climate change is going to force humanity to drastically reduce using fossil fuels, and that its heavy reliance on revenue from the sale of such fuels will be severely curtailed, Russia might consider taking advantage of the cooling off period to use fast-warming Siberia to offset this new reality. For example, like Brazil, which moved its capital from Rio de Janeiro inland to Brasilia, Russia could relocate its capital from Moscow to some city east of the Urals. Not only would this effectively improve the government’s security, it would attract domestic and foreign immigration, particularly if concurrent complementary measures are offered. These might include temporarily subsidized housing, free compulsory education including instruction in the Russian language, subsidized healthcare, and temporary cash payments to persons acceptable to Russia, willing to work in Siberia, and subject to available employment for a contractual period of time.

A program of this magnitude and scope would likely benefit the United States to the extent that at least one of three brewing crises –Russia, China and Iran- has been defused. For that reason, the U.S. might consider supporting a deal along these lines by lifting all current sanctions on Russia.

Accelerating Melting of Himalayan Glaciers

A study published in the journal Scientific Reports, a peer-reviewed publication, revealed that ice in the Himalayan glaciers is melting at a rate 10 times higher than the average rate over past centuries, far more rapidly than glaciers in the rest of the world. All told, Himalayan glaciers have now lost about 40% of their area in the past several hundred years, and the increasing rate at which they are shrinking is directly attributable to climate change.

These glaciers are a critical source of water for approximately 1.9 billion people in the mountains and the river valleys below, including the Ganges, Indus, and Brahmaputra.

Worth noting is that the pertinent authorities have not announced –much less deployed- a mechanism to replace the rapidly shrinking source of water. On the contrary, more coal than ever –the dirtiest of all fossil fuels- is being burned to generate electricity.

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