Report

The Black Box of China’s Military

Beijing is spending hundreds of billions of dollars on defense, but no one quite knows what they're up to.

The People's Liberation Army does not have a website. There is China Military Online, which boasts that it's "approved by the Central Military Commission," (CMC) the 11-member body chaired by Chinese President Xi Jinping, which oversees the PLA, and is the military's "only news portal website." There are other Chinese news sites, like Chinamil, which hosts Liberation Daily, a newspaper put out by the PLA's general political department, the shadowy department tasked with running the army's political activities. And there's a website for China's Ministry of National Defense, an organ which is subordinate to the CMC, and which is nominally the public face of the PLA. But the world's largest standing army, and the CMC which oversees it, has decided not to bother.

On March 5, during an annual meeting of its legislature, Beijing announced that it is increasing its military budget by 12.2 percent, to a total of $131.6 billion in 2014. While still less than a third of the $496 billion that Defense Secretary Chuck Hagel proposed in February for the U.S. military in 2015, it still represents a significant expansion, even after two decades of double-digit growth in the PLA's official budget. But few doubt that the grand total allocated to China's military is yet higher, and many in the U.S. government wish they had more insight into the method to the darkness surrounding the PLA.

There is general consensus that China, like many nations, spends more on its military than it reports: In February, the U.S. Defense Intelligence Agency said that China's military budget reached $240 billion in 2013, according to Bloomberg. As the most salient data point of China's military, Beijing's official budget gets a lot of attention. And that's largely because there's little other information that comes with it. "The single number, without any accompanying detail, represents the sum total of public transparency by the world's second-largest defence spender and the fastest rising military power, pored over by intelligence agencies and military experts from around the world in an effort to glean any clues about China's future strategic intentions," reported the Financial Times.

So how opaque is the PLA, and how much insight and information does the United States possess? It's important to distinguish between what the general public and the media understands, and classified information on the PLA available to U.S. government officials. "There's a big difference between what you know and what we know," said a senior Pentagon official, who asked to speak on background because of the sensitivity of the matter. The United States has long worried about the Chinese military's lack of openness. "They mock us some times, for how much we repeat" this call for a higher level of transparency, said the senior Pentagon official. Most recently, Adm. Harry B. Harris Jr., the commander of the United States Pacific Fleet, expressed concerns about the "aggressive" growth of the Chinese military and "their lack of transparency" in a February speech.

Overall, though, the Chinese military is probably growing more transparent; or at least the United States' non-classified understanding of it is improving. On a February trip to Beijing, the Army Chief of Staff Gen. Raymond T. Odierno said the two countries' militaries were planning to start a formal dialogue and exchange program before the end of 2014. "We know a lot about China's defense budget, especially when compared to a decade ago," said a China military researcher, who asked to speak on background. Part of the reason, he said, is the proliferation of open source material. While the PLA might not have a website, it does support a media industry whose role, just like in the United States, is to explain it and critique it. There are countless newspapers, blogs, and military journals in China that regularly run articles about the Chinese military and what it should or should not be doing. "Technically our understanding of China's military has improved over the last five to ten years, and we have a decent sense" about intelligence, said a U.S. defense official, who asked to speak anonymously.

The military itself does seem to have taken steps to make itself better understood to domestic audiences and foreign governments. In November, seven units of the PLA and China's paramilitary People's Armed Police appointed spokespeople. (Prior to that, a single spokesperson for the Ministry of Defense fielded comments for the PLA.) Not much has changed: six of the spokespeople wrote New Year's greetings, which The PLA Daily newspaper dutifully published on its Sina Weibo account, and at least two of the spokespeople have, since being named, actually made public addresses. The PLA has made itself more open "in very small increments," said Avery Goldstein, director of the Center for the Study of Contemporary China at the University of Pennsylvania. They're starting to publish with more frequency "things like defense white papers" and other reports, he said.

The biggest hole in U.S. understanding of the Chinese military appears to be in how it makes decisions. "We are still pretty much in the dark" about decision-making, both in terms of personnel and other areas, said the U.S. defense official, a sentiment widely shared by others interviewed for this article. "We have pretty much zero insight into how the PLA makes decisions," said the military researcher. "Zero."

When asked about how much control Xi has over the PLA -- perhaps the most important question if a crisis were to occur -- the senior Pentagon official paused for a minute, before replying: "Nobody knows what Xi's control over the PLA is."

On one level, being able to control what information it releases benefits the PLA. "It's calculated," said Goldstein. "The Chinese don't want to reveal too much that exposes weaknesses." The PLA, he notes, realizes that it's weaker than the U.S. military. They often say, "'if you have a gun and I have a knife, transparency does not make me safer,'" said Dean Cheng, a scholar at the Heritage Foundation. Misinformation, and the selective release of information, plays a bigger role in Chinese tactics than it does in the United States. "Mao Zedong said warfare is 70 percent political," said a former U.S. defense official with extensive experience in Beijing, who asked to speak on background. He cited the concept of san zhan, or three warfares: psychological, media, and legal. "From the Chinese perspective, political warfare, including legal warfare, is seen as a form of combat," Cheng wrote in a May 2012 article.

But the opacity also raises concerns about the intentions of the Chinese military. "They flat out refuse to put limits on what they may do!" said the senior Pentagon official. "There are interminable meetings, where we say, 'How many submarines? Are you going to build a lot of anti-satellite weapons? 100? Five?' Anything that would possibly jeopardize U.S. forces, we'd like to know about. But they flat refuse to say anything at all about the limit or future size of the force they might build. 'Go straight to hell' is their attitude." That has consequences both in the Pentagon, and repercussions back in Beijing. "Do you think when the Chinese speak this way to an [American] admiral or general, the admiral just takes a sip of tea? No! It makes them paranoid," he said. "The secrecy turns into inadvertent provocation for U.S. defense hawks to spend more on the rebalance" -- the U.S. policy of moving forces toward the Asia-Pacific region. "I hate to say it, but [the PLA] have brought this onto themselves."

It's not only foreigners who are kept in the dark. "One of the biggest discoveries of the last 10 years is that the PLA doesn't share with the civilian leadership," said the senior Pentagon official. Indeed, an editorial announcing the institution of PLA spokespeople in the Global Times, a Communist Party newspaper, politely offered suggestions for making the PLA more open: "They could also create an 'Open Barracks' day for some troops garrisoned in cities, allowing the public to observe the troops going about their daily tasks. This is done by not a few foreign armies, and the positive effects are clear."

Whether the PLA will choose to adopt such nominal efforts at openness is still an unanswered question. What's not is that China's military is still a black box. "Is there a Chinese doctrine on military space? How does the military command? If there is a crisis, who do we call. We just don't know," Cheng said. The key questions are the unknown unknowns in a time of potential crisis. If there is a major, unannounced build-up of China's military, said the senior Pentagon official, "then not knowing is a disaster."

Yiqin Fu contributed research.

Feng Li/Getty Images

Report

Help Is Not on the Way

Sorry, Congress, America can't save Ukraine by selling it natural gas.

The Russian invasion of the Crimean peninsula and the haunting fear that Moscow will use its energy exports to bludgeon Ukraine and the European Union into compliance have unleashed a cavalcade of calls for the United States to use its own energy bounty to rescue Europe. Gazprom's threat on Friday to shut off gas supplies to Ukraine, which owes the company almost $2 billion and is late with the payments, has added fuel to the fire.

There's just one problem: While there is one abundant U.S. energy source that could help Europe in the short term, it isn't natural gas. The United States won't be able to export significant amounts of liquefied natural gas (LNG) for years, much of that gas has already been snapped up by customers with long-term contracts, and Europe must compete with Asia, which is willing to pay far more money for the little that is left.

That may come as news to Congress, where top lawmakers are arguing that stepping up gas exports to Ukraine would be an easy way to boost the country's new, fragile, and pro-Western government. House Speaker John Boehner (R-Ohio) took to the opinion pages of the Wall Street Journal to call on the United States to "liberate" its "natural energy" as a weapon against Russian strongman Vladimir Putin by accelerating a sclerotic permitting process for natural gas export terminals. Numerous members of Congress are rushing to introduce, or reintroduce, legislation meant to fast-track exports of U.S. gas. Rep. Michael Turner (R-Ohio), for instance, introduced a bill on Thursday, March 6, that would expand U.S. gas exports to all World Trade Organization countries.

Late Thursday, the ambassadors to the United States from Hungary, Poland, the Czech Republic, and Slovakia sent letters to Boehner and Senate Majority Leader Harry Reid (D-Nev.) urging Congress to unshackle U.S. gas exports and help allies in Europe.

Jason Bordoff, a former energy advisor to President Barack Obama, argued on ForeignPolicy.com that the United States can turn gas to its advantage against Russia. The Heritage Foundation wants U.S. gas to bolster allies in the Baltics. The New York Times and the Wall Street Journal have reported on the frenzy in Washington to turn energy abundance into geopolitical leverage, including the State Department's push to use natural gas as a diplomatic tool. The basic thrust: Awash in natural gas, the United States needs to release the hounds, as it were, on Russia.

Those calls miss a fundamental point: Simply making it easier for the United States to export gas won't automatically translate into help for beleaguered friends, especially because customers in Asia are willing and able to pay higher prices for gas than anyone else.

"You can issue all the permits you want. Gas companies still won't lose money on purpose to help the United States achieve geopolitical gains," Michael Levi, an energy expert at the Council on Foreign Relations, told Foreign Policy. He wrote about the limits of U.S. gas diplomacy earlier this week.

That isn't to say that energy exports wouldn't serve U.S. interests over the longer term, as Bordoff noted. The hydraulic fracturing revolution over the last five years has unleashed a gusher of natural gas supplies that have already reshaped the U.S. electricity sector and reinvigorated certain manufacturing sectors and that hold promise as an alternative fuel for transportation.

Shipping some of that gas, and eventually oil unleashed by the same process, overseas would certainly help the U.S. trade balance and add liquidity to global markets. More supplies of oil and gas sloshing around the globe would reduce the likelihood of supply shocks and buffer economies against price spikes. Greater global supplies also make certain foreign-policy objectives, such as slapping sanctions on Iran's oil exports, easier to do with less pain.

But that doesn't mean that the United States is in a position to use its gas supplies to ride to Ukraine's or Europe's rescue right now, when Moscow is jacking up prices of the gas it ships west and hinting at a supply stoppage to Kiev.

First and foremost, it takes years and billions of dollars to construct the specialized terminals needed to convert natural gas into a liquid and then cram it into specially built tankers. The Energy Department has approved six of the 30-odd applications it has for LNG export terminals to sell gas to countries with which the United States does not have a free trade agreement. But only one project, Cheniere Energy's export terminal in Sabine Pass, La., has passed all the regulatory hurdles and secured final authorization. It hopes to begin exports late next year; few if any of the remaining terminals waiting in line will be operational before 2018.

"We only have one approved license actually, and the molecules still aren't going to flow for a while," Energy Secretary Ernest Moniz said at a conference this week in Houston, Bloomberg reported.

On paper, there is enough potential gas included in the pending export applications to meet two-thirds of Europe's annual gas consumption. Even if only a handful of terminals are finally built, the potential gas volumes available for export could still theoretically meet a significant part of Europe's needs, which are estimated at about 18 trillion cubic feet of gas per year.

In reality, exporters need to secure long-term supply contracts with dedicated customers before they can secure the billions of dollars they need to build the advanced LNG terminals. Terminals that have already won conditional approval have supply contracts with power companies in Japan, South Korea, and India. Japanese firms, for example, have secured supply deals with four of the six terminals that have won Energy Department approval so far. Only a handful of European firms have signed long-term contracts with U.S. LNG exporters.

And only a small portion of the contracts are for so-called portfolio gas sales, where the buyer can ship gas wherever it's needed -- which is what Europe would need as a safety valve to replace Russian supplies. In other words, even when the U.S. export terminals are up and running at full speed in four years or so, most of their gas will be earmarked for Asia.

Another complication is the price of exported gas. Until recently, natural gas was cheap inside the United States because of a sheer glut of supply, not the fracking revolution. For the last couple of years, natural gas cost between $2 and $4 per million British thermal units (Btu) at Henry Hub, the main U.S. pricing point. But a vicious winter has sent gas use and gas prices soaring; in the first week of March, Henry Hub prices topped $7.

That matters for exports, because gas has to be liquefied and transported thousands of miles, which adds to the market price of the gas. Shipments from the United States to Europe are expected to add about $4 to the price of gas, while the longer route to Asia will likely add about $6 to the price. As natural gas becomes pricier at home, it becomes harder for U.S. gas to undercut gas overseas. Much of Europe pays around $10 to $11 per million Btu for Russian gas, for example -- which would already make it tough for U.S. gas to compete.

In Asia, LNG fetches higher prices than in other parts of the world -- about $15 per million Btu. That does provide a market for U.S. exports, especially since Japan needs gas to replace its shuttered nuclear fleet, and China hopes to boost the use of gas to clean up its power sector. But it also means that gas exporters will look first to customers in Asia that are willing to pay a premium rather than to the ones in Europe that aren't.

The United States does have one energy arrow in its quiver that could meet some of Europe's needs, but it isn't one the Obama administration is racing to embrace, or one that thrills European greens: cheap, abundant, U.S. coal.

In recent years, the gas boom has knocked King Coal off its perch in the U.S. market; overseas markets became a natural replacement. The United States set a record for coal exports in 2012, and despite an apparent drop-off in 2013, it still had one of its biggest export years ever. Despite all the talk of China's insatiable thirst for coal, Europe was -- and remains -- the biggest export market for U.S. coal.

Unlike with natural gas, coal-export facilities are already up and running. Unlike the convoluted regulations governing natural gas exports, coal can be traded freely. And there's no need for European countries to build expensive new terminals to handle coal imports.

There is one problem, of course: Coal is a lot dirtier than gas, with about twice the emissions of greenhouse gases when burned for power. For years, Europe has tried to curb its emissions and make its energy sector cleaner, even though expensive local gas and cheap U.S. coal have made that tough the last couple of years.

But as Europe grapples with long-term questions of energy security, climate change goals, and fears about economic competitiveness, coupled with short-term fears about a sudden end to energy supplies from Moscow, coal might just be the one U.S. energy export that makes a difference.

Photo: Andrew Burton - Getty