Taiwan Looks to Russia to Secure Energy Imports and Independence from China

A number of nations live in a diplomatic “twilight zone,” largely bereft of global diplomatic recognition. These include the Turkish Republic of Northern Cyprus, whose unilateral declaration of independence in 1983 has only been recognized in the last 29 years and only by Turkey.

Former Yugoslavian republic of Kosovo has fared somewhat better; following its unilateral declaration of independence in 2008 after nine years of UN occupation, Kosovo has attracted diplomatic recognition from 90 countries.

But Taiwan, the self-styled “Republic of China,” is a unique case. As the “last stand” bastion of Chiang Kai-Shek’s Kuomintang, which fled there in 1949 after Mao Tse Tung’s Communist Party triumphed, during the Cold War it was regarded as the “legitimate” Chinese government, but since its loss of China’s United Nations seat in 1971, its diplomatic recognition has slowly dwindled as nations line up to court Beijing’s Red Mandarins in hopes of economic concessions. As of 2011, only 23 nations continue to maintain official diplomatic relations with Taiwan.

But Taiwan, decades before the mainland embraced capitalism, strived to position itself as one of Asia’s “little tigers” of advanced technology, and the island accordingly runs a large trade surplus, with foreign reserves that are the world's fourth largest, behind China, Japan, and Russia.

But the Achilles heel of the Taiwanese economy remains energy imports, and given its increasingly marginalized status, has sought hydrocarbons where it can, including increasingly pariah state Iran.  In 2005, Saudi Arabia became the No. 1 supplier of crude oil to China, Japan, Korea and Taiwan.

In 2010 Taiwan purchased $2.16 billion in oil products from Iran.

Now Taiwanese diplomacy is pursuing other options to safeguard its energy imports, engaging one of China’s largest energy suppliers, the Russian Federation.

On 11 March Moscow-Taipei Coordinating Commission for Economic and Cultural Cooperation Moscow head  Antonio Chen told reporters, "A delegation will be sent to Russia in the near future for negotiations for the possible purchase of crude oil, natural gas and other materials. In addition, in the trade structure, there are options for increasing supply of metals, chemical production, as well as information technologies, electronics, semiconductors, engineering products, including components for cars, and other production."

Chen added that bilateral Russian-Taiwanese trade in 2001 totaled $4 billion in 2011, noting, "If one adds trade between Russian and Taiwanese investors in continental China to this figure, Taiwan-Russia trade reached $8 billion," with bilateral Russia-Taiwan trade increasing by 120 percent annually.

The Russian Federation considers Taiwan an integral part of China, having signed on to Beijing’s “One China” policy and does not support political and diplomatic contacts with Taipei. However, economic and humanitarian ties between Russian and Taiwan exist.

The Russian Federation’s policy, as the successor state to the USSR, has a historical legacy, as the Soviet Union was the first state to recognize Mao’s Peoples Republic of China on 3 October 1949. Unofficial contacts between the USSR and Taiwan in the late 1960s after the U.S. Nixon administration’s initiatives towards a U.S.-PRC rapprochement had become evident.

So, who benefits from this?

Taiwan, locating alternative energy sources after supporting U.S. and UN initiatives on isolating Iran, safeguarding Taipei’s energy imports.

Russia?

A new market, and reminding Beijing that there are alternatives to its increasing domination of East Asia.

The immediate loser is China – in its python squeeze to isolate Taiwan, its new “best buddy” Russia is cozying up to Taiwan, a development that must be causing consternation in Beijing, as Russia is also an increasingly major energy supplier to China.

Finally, the ultimate winner is Washington, Taiwan’s most stalwart supporter, who has acquired a new ally in its covert campaign to prevent Beijing’s leadership from inhaling Taiwan.

A checkmate for the moment to Beijing – but analysts must remember that their chessboard runs on a different temporal octane. After all, when asked about the French Revolution, China’s former Premier Chou En Lai reportedly said, “It’s too soon to tell.”

By. John C.K. Daly of Oilprice.com