Jodi Liss: China, Rio Tinto, and The Future of Diplomacy

By Jodi Liss

Help is the sunny side of control.”—Saying among social workers

Consider the following bit of news: two weeks ago, Chinalco, a Chinese state-owned aluminum mining company, invested more than $19 billion in faltering international mining giant, Rio Tinto.

They paid $124 million above market value for what they got.

While everyone knows oil has cratered to less than $40/bbl, mining of all sorts is equally calamitous. Copper, for example, has plunged 60 percent. Mining giants like southern Africa’s Anglo American, Freeport McMoRan and BHP Billiton, the world’s largest mining company, have laid off tens of thousands of workers and closed mines everywhere. Rio Tinto, Fortescue, and others are desperately seeking investors to stay afloat. The investor they see on the horizon is China.

And that is just the private sector. In the past week, China offered cash-strapped Russian oil company Rosneft and Russian pipeline giant Transneft $25 billion in exchange for 15 million tons of oil a year for twenty years. China has lent Brazil’s state-owned oil company Petrobras $10 billion in exchange for a long-term oil relationship. Venezuela has borrowed another $6 billion from them.

Most people interested in geopolitics prefer to spend countless hours analyzing the power politics and security aspects of it all. But since the end of the Cold War, geopolitics has changed radically because the relationship in the developing world between money and power has profoundly changed. No longer can developing countries line up for cash behind a chosen sponsor, the United States or Russia. In many places, the economy is heavily dependent on commodities. He who owns the commodity (the money) has the political power; the commodity is the source of the power. The two are inextricably intertwined.We can see three things from this current spending spree. One, which is easy, is that China is not expecting to head for green energy any time soon (although it may be trying to get away from coal). The second, which is obvious, is that China has cash, which makes it practically alone in its capacity to do important things for its economy right now. Yet it could do these things without spending as much as it does.

The third thing is what should be of concern to United States policymakers. It is the way the Chinese are handling these opportunities.

Yes, they do need the commodities and will need them even more when the global economy recovers. But more importantly, they are changing the balance of power in the international community in a way that should give U.S. diplomats pause in how this country conducts its foreign policy.

The Chinese are conducting checkbook diplomacy, true, but in a very specific way that, in the long run, will help them enormously geopolitically. They are handing out money quietly, with few strings attached, for stuff that much of the cash-strapped world is desperate to sell.

Chinese actions and policies ingratiate them to many foreign leaders, and not just leaders of resource-rich countries. The Chinese are not altruists; they just have a different approach to getting what they want. This is not the realpolitik of the past—it is quieter and softer. They offer money without the demands for political change, without hectoring on human rights, without the humiliation or tap-dance requirements to get money out of the West. China may be keeping questionable leaders in place, but those leaders are still the heads of their countries and still have power over those commodities, still vote at the UN, and are still part of the global community we like to assume we, the United States, lead.

Thanks to the policies of the bombastic and arrogant previous eight years, the United States is now drastically weakened both financially and morally; it has less power and commands less respect and attention. Especially in countries that can’t live up to our high standards, China is making friends, increasing its geopolitical power and standing. It has not made enemies doing so—if the people overthrew the bad leaders of these countries tomorrow it is unlikely those people would go after the Chinese. As much as China is building up their commodities portfolio, it is building its power exponentially.

I believe in human rights and I believe the United States is a beacon for them. But I am no longer sure that the specific moralistic agendas and demands of the NGOs, so influential in the West, are working well enough to justify their cost. Years of United States divestment in Sudan and has the government there ended its campaign against its people? No. It doesn’t have to listen to us; it does, however, listen to China. What would happen if the United States just let go of moralistic diplomacy?

The recent trip to Asia by Secretary of State Hillary Clinton—largely to shore up the crucial financial relationship with our leading creditors, China and Japan—shows the Obama administration is aware that we can no longer constantly put all our weight behind the cry of human rights. Both parties are guilty of these sorts of demands: Republicans want capitalism, Democrats human rights (women’s rights, anti-torture, etc.). Both sides are anti-corruption, free press, rule of law, and electoral democracy. These are great and noble goals. But, perhaps due to the pressure NGOs exert, our foreign policy, aimed at both national and civil society, at times seems like missionary work. And as with most rich people, we have been lecturing the less wealthy on their moral deficiencies. Whether our points are true or not, this approach of moral carrots and sticks needs change.

I DO NOT mean that we should stop believing in or campaigning for human rights or for good governance.  But I think the bullying, scolding, threatening form of our advocacy is not working and will only get weaker in the future. We need to find a way to lead without haranguing. We, including Western NGOs, need a softer sell, a different approach, and better, more creative incentives. Otherwise, regardless of what you think of the developing world’s less-than-perfect leaders, they will be able to afford to tune us out. And that will be the greatest loss of power and influence.

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Jodi Liss is a former consultant for the United Nations, the United Nations Development Programme, and UNICEF. She has worked on the “Lessons From Rwanda” outreach project and the Post-Conflict Economic Recovery report. Her article, “Making Monetary Mischief: Using Currency as a Weapon,” appeared in the winter 2007/8 issue of World Policy Journal.

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