China

We Just Don’t Know

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Back in September I wrote a post that bitched because a certain law had a loophole that was being exploited.

I now have an update of sorts.

I will limit this discussion to residential A/C equipment to keep the discussion simple.

To review, the original intent of the law that was enacted as of January 1 of this year was to eliminate the manufacture of any residential A/C that contained the refrigerant R-22. Unfortunately the law was written poorly, and quickly the Chinese manufacturers flooded the market with air conditioners that were shipped dry, meant to be charged with R-22 in the field. R-22 is still available at relatively low prices.

Last week in Chicago I attended a lecture by the head of a large HVAC trade group. Apparently the DOE (Department of Energy) is frowning upon this loophole and may be doing something to not allow the dry units to be sold.

Meanwhile, several of the major manufacturers are (as of this writing) gearing up production for dry R-22 units.

So what to do. Jump in and risk the units being outlawed at a later date (as is what most think will happen) or sit here and let my competitors get a leg up on the thing?

This isn’t the only pending issue in my industry – there are a lot of credits available now for replacing your old heating and cooling system with one of a much higher efficiency – those credits are due to expire at the end of the year unless re-upped. This was expected to be done but Congress left town to campaign and it is tabled. They may or may not get on it with the lame duck session (like so many other items).

This is a very nervous and interesting time for my industry. I am sure there are many, many others who are also watching Congress like never before in this uncertain last few months of the year.

How you move stuff around is an interesting topic, isn’t it?

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China has shown interest in the construction of two railway lines—-one in Pakistan via the Gilgit-Baltistan region and the other in Afghanistan. While the railway line through Gilgit-Baltistan, ultimately extending up to Gwadar on the Mekran coast, will meet the external trade requirements of Chinese-controlled Xinjiang and other regions of Western China, the proposed line in Afghanistan will meet the requirements of a copper mine which China is developing in the Aynak area in Afghanistan.

– Raman’s Strategic Analysis

8. However, because of the alternate routes through the CARs being developed by them and their ability for air-lift from Bahrain, they are able to manage despite the increasing attacks on the convoys in Pakistani territory. When the US and other NATO forces start thinning down their presence in Afghanistan, the Afghan National Army (ANA) would not enjoy these benefits. The Pakistan Army and the Taliban acting in tandem would be able to choke the ANA by interfering with its logistic supplies. Even if the US plays a diminishing role in ground operations after July 2011, it cannot reduce its logistics role in support of the ANA. Otherwise, the ANA could collapse.

– Raman’s Strategic Analysis

Although the Chahbahar port has been an Indian project for some time, the Iranian side has been notoriously lax in keeping to its end of the bargain.

The port is strategically important — serving as the entry point for India’s outreach into Afghanistan and Central Asia, bypassing Pakistan. For this purpose, India also spent a lot of money and human lives to build the Zaranj-Delaram road in Afghanistan’s Nimroz province, which was intended to link up with the Chahbahar port. But establishing those linkages turned out to be more difficult than India imagined. The political situation in Iran over the past year has scarcely helped.

– Times of India

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After Iran Gets The Bomb

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The decision by President George W. Bush in 2006 to forgo hitting Iran’s nuclear facilities has made Iran acquiring the atomic bomb, and worldwide catalytic nuclear proliferation, inevitable. This will have horrid consequences for the world and for American liberty at home. It will leave the world we live in an unrecognizable dystopia.

To use the May 16, 2006 words of former Secretary of State Henry Kissinger:

“… The world is faced with the nightmarish prospect that nuclear weapons will become a standard part of national armament and wind up in terrorist hands. The negotiations on Korean and Iranian nuclear proliferation mark a watershed. A failed diplomacy would leave us with a choice between the use of force or a world where restraint has been eroded by the inability or unwillingness of countries that have the most to lose to restrain defiant fanatics. One need only imagine what would have happened had any of the terrorist attacks on New York, Washington, London, Madrid, Istanbul or Bali involved even the crudest nuclear weapon.
 
…An indefinite continuation of the stalemate would amount to a de facto acquiescence by the international community in letting new entrants into the nuclear club. In Asia, it would spell the near-certain addition of South Korea and Japan; in the Middle East, countries such as Turkey, Egypt and even Saudi Arabia could enter the field. In such a world, all significant industrial countries would consider nuclear weapons an indispensable status symbol. Radical elements throughout the Islamic world and elsewhere would gain strength from the successful defiance of the major nuclear powers.
 
…The management of a nuclear-armed world would be infinitely more complex than maintaining the deterrent balance of two Cold War superpowers. The various nuclear countries would not only have to maintain deterrent balances with their own adversaries, a process that would not necessarily follow the principles and practices evolved over decades among the existing nuclear states. They would also have the ability and incentives to declare themselves as interested parties in general confrontations. Especially Iran, and eventually other countries of similar orientation, would be able to use nuclear arsenals to protect their revolutionary activities around the world.

That was said in 2006. It is now 2010. Kissinger’s world is now upon us.

Aircraft can fly between North Korea and Iran via China and Pakistan. If they don’t land in Pakistan at bases where we can inspect them, America will have little and unverifiable information about their contents, such as weapons-grade fissionables and nuclear weapons components. So Iran can assemble its nukes in North Korea, using North Korean fissionables, fly them to Iran via China and Pakistan, and test them in Iran.

The real question here is not whether Iran has working nuclear weapons – they certainly have that capability given that North Korea produced more than 60kg of weapons-grade plutonium – but the status of their warhead fabrication capability, i.e., can they put working nuclear warheads on ballistic missiles?

I think the answer is “Yes” and I gave my reasons why in a post titled Count Down to Iran’s Nuclear Test Revisited on the Winds of Change blog in April 2006.

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Rare Earths

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The rare earths are a collection of 17 elements in the periodic table: lanthanum, cerium, and erbium, to name a few. These materials play an important and increasing role in electrical and electronic devices, including batteries and magnets (which are used in electric motors and geherators.) Considerable concern has been raised lately about the concentration of rare-earths production in Chinese hands: see for example today’s Business Insider post, which deals with the Chinese government’s push for consolidation of that country’s rare-earths industry into a smaller number of companies. See also this post regarding dependency of key U.S. military systems on rare earths.

I’m interested in discussing rare earths from two standpoints: overall U.S. economic and security policy, and investment opportunities/risks.

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