WCA May 2008

Statue of Liberty Image from BigStockPhoto.com Photographer: Marty

After more than a decade of estrangement between the US and Indonesia over human rights abuses laid to the Indonesian military, Mr Gates pledged more active Pentagon support to those very forces. In Australia, which has expressed interest in acquiring the high-tech F-22 fighter jet in use by the US Air Force, Mr Gates promised to look into whether a Congressional prohibition against such purchases might be lifted. Even so, the focal point of Mr Gates’s swing around Asia was clearly India, which – with its landmark nuclear energy pact with the United States stalled – required an alternate avenue of approach. Its surging economy and strong desire to upgrade its ageing weaponry make India one of the world’s most active arms markets. But it cannot have been lost on US officials that India can also serve as a counterweight to China’s regional heft. A senior defence official traveling with Mr Gates said as much, although on condition of anonymity. This source told reporters that, given China’s military strength, it was essential for the US to cement security relationships with other powers in Asia ‘not in an aggressive sense, but certainly as a hedge.’ Chinalco joins forces with Pittsburgh-based Alcoa to buy a 12% stake in mining giant Rio Tinto The 1 st February announcement, in Shanghai, of the joint purchase by Aluminum Corp of China (Chinalco) and US-based Alcoa Inc of a $14.05 billion (12%) stake in Rio Tinto was clearly intended at thwarting Anglo-Australian miner BHP Billiton Ltd’s unsolicited takeover bid for the London-based multinational mining group. If the blocking effort succeeds, state-owned Chinalco’s commitment will represent the largest-ever foreign investment by a Chinese company. That investment could perhaps go higher, in light of a memo filed by Rio Tinto with the Australian Stock Exchange on 13 th February, a copy of which was obtained by Reuters. Signed ahead of the $14.05 billion Chinalco-Alcoa offer for a 12% stake in Rio Tinto, it suggested willingness to tap a budget of up to $24 billion for a share of up to 14.9%. The unusual joint Chinese-US initiative (again, if it is successful) would close out BHP Billiton from a very substantial source of supply at a time of strenuous endeavor to secure access to natural resources. Rio Tinto is one of the world’s largest mining companies and its second-largest producer of iron ore. The company wholly-owns Hamersley Iron, in Western Australia, where its partners on some projects include several Chinese corporations; it also owns 59% of the Iron Ore Co of Canada. Rio Tinto posted a pre-tax profit in 2006 of approximately $10.2 billion on turnover of $25.4 billion. The eagerness of Chinalco – the biggest aluminium maker in China – for even a minority stake in Rio Tinto is proof, if any were needed, of the pitched battle being waged by Mining and minerals

Spotlight on: India

Aircraft sales, overseas study boost US-Indian relations Even as tensions between the US and Russia are on the rise – over America’s prompt recognition of the new Republic of Kosovo, among other issues – relations between the US and India, which once bought most of its arms from Russia, are improving steadily. India on 29 th January announced that it had placed a $2 billion order for military transport planes and helicopters with Lockheed Martin (Bethesda, Maryland). As noted by Ken Fireman of Bloomberg News (19 th February), the deal is the latest product of an Indian-US relationship that has ‘moved from chilly co-existence to the closest rapport since India achieved independence in 1947.’ Another, bigger such contract may be in the offing, as Lockheed and Boeing Co (Chicago) compete for a $10 billion order to provide India with 126 fighter jets. If it materialises, the deal would contribute heavily to annual US-Indian trade, which totalled more than $41 billion last year. The connection holds considerable potential. After China, India has the world’s fastest-growing major economy. Mr Fireman wrote: “In addition to the hard numbers of military and software sales, the warmer relationship [between India and the US] is reflected in less tangible things,” such as cultural and educational ties. He cited the New York-based non-profit Institute of International Education as reporting that more Indian college students going abroad choose the United States than any other country. In 2007, according to the New York-based promoter of educational exchanges, 83,833 Indians spent time at American colleges. Britain, once the destination of choice for Indians studying abroad, was in 11 th place, with 8,438 students from India. A grace note to the deal for transport planes and helicopters is India’s purchase, last year, of the transport vessel USS Trenton for $48.4 million. The vessel, which enhances India’s ability to project its power in the Indian Ocean, is now known as INS Jalashva . On 28 th February, in New Delhi, US Defense Secretary Robert M Gates denied that the Bush administration initiative to strengthen America’s ties to India was planned with specific reference to China. But Pentagon officials acknowledged that, in the course of Mr Gates’s two days of meetings with Indian government attachés, considerable discussion time was devoted to China. To be sure, Mr Gates also put strenuous effort into preparing the ground for future arms deals with Indonesia and Australia, as well. Both of these overtures required some finessing, and perhaps some back-pedalling. America courts India, but keeps an eye on China

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Wire & Cable ASIA – May/June 2008