{"id":41892,"date":"2018-09-07T06:00:03","date_gmt":"2018-09-06T20:00:03","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=41892"},"modified":"2018-09-06T17:54:19","modified_gmt":"2018-09-06T07:54:19","slug":"government-must-reject-chinese-bid-for-vital-gas-business","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/government-must-reject-chinese-bid-for-vital-gas-business\/","title":{"rendered":"Government must reject Chinese bid for vital gas business"},"content":{"rendered":"
<\/figure>\n

With Huawei\u2019s aspirations to provide infrastructure for Australia\u2019s 5G network dashed, attention must now shift to another major foreign investment proposal: the planned acquisition of APA Group, an Australian-owned and -controlled company, by Hong Kong\u2019s CK Infrastructure Holdings (CKI). APA Group is a vital part of Australia\u2019s national energy infrastructure. It owns more than 15,000 kilometres of gas pipelines, including the crucial South West Queensland Pipeline that acts as a conduit for north\u2013south gas transmission on Australia\u2019s eastern seaboard.<\/p>\n

With the principal exception<\/a> of ASPI\u2019s Executive Director Peter Jennings, most of the commentary surrounding the proposed acquisition has focused<\/a> on its economic dimensions. The terms of CKI\u2019s offer provide a very favourable deal for APA\u2019s shareholders. The $13-billion all-cash bid, unanimously endorsed by APA\u2019s board, represents a 30% premium<\/a> over the company\u2019s recent trading value.<\/p>\n

Though attitudes towards foreign investment in Australia\u2019s critical infrastructure are changing, it\u2019s still the case that investment proposals are too often examined<\/a> through the narrow lens of economic costs and benefits. In that view, the criteria for considering foreign investment proposals are economic, principally whether the terms offered are acceptable to shareholders. Any factors outside the economic merits of a proposal tend to receive scant attention.<\/p>\n

The increasingly obvious problem with this economistic view of foreign investment is that it\u2019s unable to perceive larger, more important dynamics beyond the narrow calculus of economic costs and benefits. It doesn\u2019t appreciate the surrounding geopolitical context through which foreign investment proposals acquire significance. In recent years, this perspective has proven a liability for Australia\u2019s security interests.<\/p>\n

The context that should influence Australia\u2019s response to CKI\u2019s bid for APA Group is China\u2019s aspirations for regional hegemony. As Jennifer Lind describes<\/a> in a recent issue of Foreign Affairs<\/em>, China is pursuing the strategies of previous regional hegemons: working to establish itself as the region\u2019s dominant military power, interfering in the domestic politics of other nations (including Australia), and engaging in a \u2018soft power\u2019 offensive to shape popular opinion.<\/p>\n

Of prime importance, however, is that aspiring hegemons seek to establish their economic centrality to the neighbours they strive to control. As Lind describes it, \u2018economic dominance lets regional hegemons use economic coercion to advance their agendas\u2019 of political domination.<\/p>\n

Though the idea isn\u2019t explicated by Lind, historical experience shows that hegemonic powers seek control over natural monopolies like transportation, communications and energy. Because of their unique qualities, often related to very high infrastructure costs or other barriers to entry, natural monopolies have no ready substitutes. They are therefore powerful pressure points that hegemons can manipulate to coerce subordinate states. The hegemon can use its control of an asset to deny or disrupt client states\u2019 access when they\u2019re not sufficiently compliant. In many cases, the mere threat of being able to do so is enough to deter a subordinate state from \u2018misbehaving\u2019.<\/p>\n

The increasing importance of economic instruments in the relations between states has been analysed by Robert Blackwill and Jennifer Harris in their 2016 book War by other means<\/a><\/em>. They detail the growing centrality of economic measures, pertaining to such areas as trade, investment and exchange rates, to 21st-century statecraft\u2014a phenomenon they label \u2018geoeconomics\u2019.<\/p>\n

Blackwill and Harris identify energy as a particularly vital geoeconomic asset that states \u2018enlist\u2019 to advance their geopolitical interests. As an illustration, they detail Russia\u2019s acquisition of energy infrastructure in nations of its \u2018near abroad\u2019, such as Gazprom\u2019s purchase of Kyrgyzstan\u2019s gas network in 2013. That investment, according to the authors, wasn\u2019t made in accordance with economic criteria, but strategic calculations relating to Russia\u2019s regional preeminence.<\/p>\n

Blackwill and Harris decribe China as the \u2018world\u2019s leading practitioner of geoeconomics\u2019. The Chinese state directly controls tremendous economic resources, and can also influence private actors through the coercive power wielded by the Chinese Communist Party. China has a unique capacity to advance unified policies by bringing together private and state organisations. As a consequence, it has the ability, and willingness, to direct and oversee international economic transactions of strategic significance.<\/p>\n

That applies no less to private organisations based in Hong Kong, such as CKI. CKI\u2019s considerable operations on the Chinese mainland mean that it must maintain a cooperative relationship with the CCP. CKI\u2019s capacity to refuse the directions of the CCP cannot be guaranteed, and Australia would be mistaken to presume the CCP\u2019s benevolence.<\/p>\n

Australian policymakers cannot afford to neglect these factors when considering Chinese proposals to acquire natural monopoly assets. APA Group is a textbook natural monopoly. Its assets provide the primary means of moving gas along the eastern seaboard.<\/p>\n

Permitting CKI to acquire APA would mean giving a Chinese organisation control over a key component of Australia\u2019s energy infrastructure. It would provide the Chinese state with a pressure point that could be exploited in a future crisis, giving leverage to compel Australian acquiescence.<\/p>\n

That could take the form of cyberattacks that manipulate the software that regulates the pipeline system, interfering with the operation of control valves, pressure monitors or other vital components. Such an attack could cause explosions, spills or other physical damage, and could disrupt gas distribution along the entire eastern seaboard. These are not abstract concerns\u2014in April a cyberattack on a shared data network in Texas demonstrated<\/a> the vulnerability of gas pipelines, though no physical damage resulted.<\/p>\n

If Australia is to resist China\u2019s hegemonic aims, we can no longer afford to let the economic merits of foreign investment proposals obscure their national-security implications. There are encouraging recent signs of our ability to resist China\u2019s advances\u2014namely, the establishment of the Critical Infrastructure Centre, the updating of laws covering espionage and foreign interference, the introduction of the foreign influence transparency scheme and, most recently, the 5G decision. Just as importantly, an ideational shift is underway that is changing Australian attitudes towards deepening engagement with China.<\/p>\n

Rejecting CKI\u2019s bid to acquire APA Group is a vital next step for the government to affirm its willingness to resist China\u2019s hegemonic aims.<\/p>\n","protected":false},"excerpt":{"rendered":"

With Huawei\u2019s aspirations to provide infrastructure for Australia\u2019s 5G network dashed, attention must now shift to another major foreign investment proposal: the planned acquisition of APA Group, an Australian-owned and -controlled company, by Hong Kong\u2019s …<\/p>\n","protected":false},"author":853,"featured_media":41894,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[2212,52,2110,1153,74],"class_list":["post-41892","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-australia-china-relations","tag-china","tag-economic-policy","tag-gas","tag-resources"],"acf":[],"yoast_head":"\nGovernment must reject Chinese bid for vital gas business | The Strategist<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link 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