Iceland: Land of Fire and Ice

Coming home from a tour of Iceland comes closest to the feeling of having been to another world and back.  Indeed American astronauts trained for their first landing on the moon near the center of Iceland, so my analogy is not far fetched.

In geological terms, Iceland is a truly young landmass, very much a nature’s work in progress. New land is still being created by lava flows and new islands emerge from under water volcanic eruptions, the newest being Surtsey, about 50 years old, off the southern coast of Iceland. (Surtsey is off limits to casual tourists to keep it pristine for earth scientists to study new land creation.)

Iceland is frequently called the land of fire and ice. Fire comes from the constant volcanic and geothermal activities beneath the surface and ice from the weight of massive glaciers above. The consequent landscape reflect those qualities, fields of jagged lava rocks, glacier waterfalls that cut through mountains, jagged if formed after the ice age and flat table silhouetted if the mountains were sheared by the retreating ice. The landscape was light green from the moss that grew on the lava and darker green from the grass farmers planted for the livestock. Iceland has no indigenous tall trees or large land animals.  In order to protect their domesticated livestock, local inhabitants were quick to kill rare sighting of polar bears that landed from drifting icebergs. Before the advent of man, any unfortunate bear that landed on the relatively barren Iceland most likely starved to death.

That's sand eels hanging in its mouth

Before humans discovered Iceland, it was already migratory birds’ favorite honeymoon spot. Millions and millions came to Iceland in the summer months to mate and breed. Approximately 80% of world’s puffins have their nests on Iceland. That comes to more than 20 visiting puffins for every Icelander.  Sadly because of climate change and resulting shift in the food chain, increasingly fewer puffin chicks survive the breeding season and grow strong enough to join their parents for the migration to the open ocean where they spend the rest of their time. Puffin’s average life expectancy is about 40 years, so there is still time for the species to adapt and reverse the path to extinction.  (Our tour of Iceland began in late August, which was a tad late for viewing puffins in their natural habitat, but I was fortunate to photographed one on the water.)

The official settlement of Iceland was attributed to a couple of Vikings around 870 AD. Some Irish priests may have been in Iceland a hundred years earlier but weren’t around by the time the Vikings arrived. Life on the rugged island was far from easy and most did not come willingly but usually under duress, such as having worn out their welcome in their homeland in Norway by committing some egregious indiscretion such as killing somebody important. 

The original settlers came without a written language and had to pass down their traditions and rules of conduct through oral recitations and the integrity of the oral history greatly depended on the memory of those passing them on.

By the 12^th century AD, the alphabet was introduced from the British Isles but adapted to represent the Icelandic version of the Norwegian language. The invention of paper had already arrived in the West from China but had not yet found its way to Iceland and writing was restricted to inscribing on the skin of farm animals, understandably a much more costly medium. Snorri Sturluson was one such wealthy landowner/farmer/major chieftain who transcribed much of the oral history into written sagas. He was not only a major contributor to Icelandic history and culture but also that of Norway since much of the roots of the sagas originated from Norway.

According to Icelandic sagas, Leif Erickson was the first to sail to America and even settled there for a part of his life in late 10^th and early 11^th century AD. His sister-in-law, Gudridur, who was in his party, even gave birth to a boy in 1004 on an island thought to be today’s Manhattan. Her first husband who was Leif’s brother had died and Gudridur was married to someone else when Snoori, not related to Sturluson, became the first white baby boy to arrive in the “new” world. Unlike Iceland, the new world was already inhabited and the Vikings apparently did not find a way to coexist with the American natives and eventually abandoned their settlement and went back to Iceland.

Gudridur was a remarkable woman and well travelled having gone back to Iceland from Greenland then America, and then to Europe and even to Rome to meet the Pope before returning to Iceland and to retire in a convent. Gudridur most likely talked about her days in the new land to the west because according to Icelanders, an Italian was known to have visited Iceland in 1470 and stayed for a couple years to learn all he can about the new lands. This was why 20 years later, the same Italian, Columbus was able to set forth brimming with confidence that he would find land. No doubt, the Vikings would have found his wide margin of navigational error appalling.

In preparing to settle in Iceland, Vikings had to bring everything they needed to survive such as horses, sheep and cattle and even lumber for the construction of their dwellings. After the trickle of migrating Vikings halted, the populations remaining on the island were left to develop in relative isolation. As the main beast of burden, the horses evolved into a hardy breed that can survive the winters in the open. The Icelandic sheep’s wool is particularly soft and the lamb meat particularly tasty. Retrospective study through genetic testing showed (according to the National Museum) that about 80% of the men are descended from the Vikings but 62% of the women trace their origin from mothers from the British Isles, especially from Ireland. No doubt the Vikings supplemented their breeding stock of women en route from Norway to Iceland.

The living conditions on Iceland were harsh, barely allowing the settlers to scrape by, relying on farming and fishing, and did not leave much time for cultural pursuits. The population never exploded nor developed the wealth needed to grow into a great civilization. They also had the good fortune of living on a barren land unmarked by gold ore that would have been the magnet for avaricious European adventurers. Even today, the total population of Iceland is around 320,000, more than 2/3 living in the greater Reykjavik engaged in usual urban occupations and not with farming and fishing. With a landmass of 42,000 square miles, it is slightly larger than the state of Tennessee but at a population density of 3 per square km, Iceland with roughly one thousandth of the U.S. population is only denser than Montana, Wyoming and Alaska among the U.S. states.

While inhabitation of Iceland occurred in relatively recent human history and from a rather humble beginning, the country in recent years has flourished and has become a modern nation with enviable metrics of success. Not least is its relatively low unemployment and possession of world leading technology in the utilization of geothermal energy for electricity generation and hot water for heating. About 95% of the population are regular users of the Internet, a significantly higher acceptance than the rest of Europe. Free access to the Internet was everywhere, including not just the hotels but nearly every café and restaurant provide access for the asking without any complicated log in process. Visitors to the Blue Lagoon would be impressed with the use of the smart chip to monitor entry and exit, personal use of lockers as well as keeping track of purchases of food and beverage while bathing in the lagoon.

Since 2010, tourism in Iceland has been increasing at double-digit rate. For the current year, Iceland expects to welcome more than one million visitors for the first time.  Our tour operator, Overseas Adventure Travel specializes in small group travel limited to not more than 16 per group. OAT 11-day group tours arrived nearly one per day during the summer months and they contracted 25 professional trip leaders in order to take care of them all. On our OAT tour, we saw waterfalls of varying sizes, glaciers in the distant and up close, a landscape of strange lava rock formations dotted by occasional little churches and farm houses, birds and whales offshore and Icelandic horses and sheep on land.

Three representative photos to show the diversity of Icelandic landscape

The Icelanders we met were uniformly warm and friendly, educated and easy to talk to in English. Our affable trip director, Oddur, kept teaching us about all aspects of Iceland with grace and ease. Vignir, our driver, is writing a book based on the oral history of selected Icelanders. Instead of eating in their restaurant in Heimaey, the owners hosted dinner at their home and entertained us with the story of the 1973 eruption that buried part of Heimaey on Westmen Islands but increased the landmass by 20%. They also sang for us and Oddur was invited to join in for a number Kingston Trio made famous. The husband of the couple that home hosted our dinner in Akureyri was a trained journalist, now chief editor of a weekly paper, and an author of several books. His wife is resuming her education pursuing a PhD in museology. Oddur at various stops on the tour would play the church organ or piano for us. I am left with the impression that many Icelanders face years of long dark winter days by developing other skills and interests making them interesting people to interact with.

Statue of Leif Erickson, a gift of the US government
(so the story about him must be true)

RMB developing quickly as major world currency

Just earlier this month, I posted a progress report on the rate of globalization of the Renminbi. In today's China Daily is an update that suggests a rate of development faster than expectation. (The headline of the CD article is the same as the title of my post.)

Last year 4.63 trillion yuan ($746 billion) were used in cross border trade settlement, up 57.5% from 2012. According to the article, the RMB is already the fifth most used international currency after the dollar, the Euro, the British pound and the Japanese yen, accounting for 2.5% of cross border trade settlement.

By the end of 2013, the amount of international bonds and bank notes denominated in RMB increased by nearly 25% YOY to a total worth $71.9 billion.

By year end 2013, China has entered currency swap agreements with 23 countries and regions.

China is Practicing Paycheck Diplomacy

On the front page of recent issue of Wall Street Journal was an article titled, “An Arc of Instability Unseen Since the ‘70s.” The piece pointed out that In the past month alone, the U.S. has faced twin civil wars in Iraq and Syria, renewed fighting between Israel and the Palestinians, an electoral crisis in Afghanistan and ethnic strife on the edge of Russia, in Ukraine. The horror of shooting down a civilian 777 in Ukraine airspace followed shortly after the publication of the aforementioned article.

While Obama was busy fighting diplomatic fires around the world, China's president Xi Jinping was conducting his version of a globe trotting charm offensive. His first stop was Seoul, reciprocating an earlier visit to Beijing by South Korea president Park Geun-hye. The two leaders have met previously and have developed a warm personal friendship. Even more significantly, Xi's not stopping in Pyongyang to or from Seoul, is widely regarded as a deliberate downgrade of China's relations with North Korea.

The next step is up to Washington. If Obama is willing to seize this development as an opportunity to strike a deal with China and settle the Korean peninsula conundrum, he should begin a China-U.S. dialogue. The basics of the deal as I have suggested is peaceful reign of an unified Korea under the leadership of Seoul in exchange for American guarantee to vacate their military presence on the peninsula. (See this link.)

For the deal to reach a desired conclusion, a lot of conversation, negotiation and trust building would have to take place between the two superpowers. The plum prize is for Obama to go down in history as the first president to truly reap a peace dividend. Instead of instability, he would have brought stability in northeast Asia and no longer having to deal with one of Bush's axis of evil.

From Korea, Xi returned to Beijing long enough to welcome Germany Chancellor Angela Merkel to China before embarking on a week long jaunt to Latin America. First order of business was to attend a leaders' summit among the BRICS nations (Brazil, Russia, India, China and South Africa.)

Even before the formal summit conference, Xi renewed his acquaintance India's newly elected Prime Minister Narendra Modi. At this side meeting, the two leaders promise to strengthen the bilateral relations with frequent exchange of visits and explore Chinese participation in India's much needed infrastructure investments. No doubt, based on impressions from Modi's previous visits to China, he had to come away impressed by the scale of China's infrastructure investments.

A direct outcome of the BRICS summit was an agreement to establish the New Development Bank (NDB) for the expressed purpose of "mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies." The initial subscribed capital of $50 billion was to be shared equally by the five founding nations. 

The BRICS members account for nearly 30% of world's territory, more than 42% of world's population and 21% of world's GDP and their economy has been growing twice as fast as the developed countries. The formation of NDB will provide alternate view to the U.S. dominated World Bank and IMF in setting priorities for assisting emerging economies.

This was the sixth summit for BRICS. Outside observers were caught by surprise. They expected a lot of haggling and bargaining among the members before they could agree to the formation of NDB. Instead it was a done deal after two days of wide ranging discussion.

Outside of the summit venue, Xi was also busy networking with other leaders from Latin America. In one of the bi-lateral meetings, Xi raised the idea to Peru's President Ollanta Humala of building a transcontinental railroad from Peru to Brazil, linking the Pacific to the Atlantic with a vital trade corridor. Both leaders of Peru and Brazil were intrigued by Xi's idea and held high regard for China's expertise on building railroads in challenging environments.

Indeed after the conclusion of the BRICS summit, Xi stayed in Brazil for an official state visit. One of the items in the resulting memorandum of understanding between Xi and Brazil's President Dilma Rousseff was for China to assist Brazil in railway construction and make significant improvement in Brazil's infrastructure.

Another fallout of Xi's visit was the official establishment of the China-CELAC Forum. CELAC stands for Community of Latin American and Caribbean States. Canada and the U.S. are not members. In welcoming this new forum, Xi proposed a $20 billion fund to finance infrastructure projects and $10 billion credit line to the community of nations. 

China is already the largest trading partner to Brazil, Peru and Chile. Xi's goal is to help all the countries in the western hemisphere increase their ability to participate in international trade because of infrastructure improvements.

Xi has won high praise for his vision of how China can help developing countries help themselves. China is proposing closer cooperation via assistance in infrastructure development. Improvements in infrastructure leads to economic expansion. Expansion creates jobs. Xi's message translates into paycheck diplomacy.

Developments on the Renminbi Becoming a Reserve Currency

Sometime ago I began to track bilateral currency swap agreements between China and its trading partners. (See this blog and others that precede it.) The idea was that this trend could be the beginning of the Chinese yuan becoming a global currency and qualify as a reserve currency. Some recent developments provide some indicators of the progress the Renminbi has made towards this end.

Recent WSJ article reported on the increase use of Renminbi (RMB) instead of dollars to settle their cross border transactions. The US has surpassed Taiwan to become the fourth largest trading hub for the yuan, after Hong Kong, Singapore and U.K. To put this into perspective, Hong Kong accounts for 71% of all the world wide payments in yuan, Singapore 6.8% and London 5.9% while the U.S. only 2.6%.

The next day, China Daily followed with a related story on use of RMB. According to HSBC, about 17% of the U.S. companies settled their trade in RMB this year, nearly double the previous year. though it is below the global average of 22%. Poll of German companies revealed that 23% of the companies settled their accounts in RMB, a jump from mere 9% in 2013.

Reasons for for using the yuan include lower cost of doing business and better pricing. Not long ago, the Chinese seller would rather get paid in dollars but apparently no longer. It's a reflection of the confidence in the stability of the RMB that they now prefer to get paid in their own currency and not to have to worry about exchange rate fluctuations.

So is the RMB ready to take over as a preferred reserved currency? A paragraph from the WSJ article says not yet: Usage of the yuan has taken off globally. More than 18% of China's total trade is paid for in the currency, up from less than 1% give years ago, according to Bank of China Ltd. The Bank for International Settlements reported last year that the yuan is now the ninth most actively traded currency in the world.

Cyber Indictment reflects badly on the Obama Administration

This piece has been posted on New America Media and subsequently published in May 29, 2014 issue of China Daily, USA edition.
--------------------------------------------------------------------------

Last week the Department of Justice announced an indictment of cyber theft against five members of China’s PLA. Since there is no possibility of these charges ever coming to trial, one has to wonder as to the purpose of making these allegations.

Since the revelations by Edward Snowden, everybody in the world knows that no entity in the world is busier at cyber hacking than the NSA of the U.S. government.

Thus it was important for Attorney General Holder to draw the line and define certain kinds of cyber intrusion as acceptable—at least by American standards—and others not. No surprise that the NSA type of cyber activity is not nefarious but justifiable in the name of national interest.

According to Holder, the Chinese cyber activity is criminal because he alleges that the cyber theft of intelligence goes to help specific Chinese companies gain a commercial advantage, obviously a crass activity entirely beneath the hackers at NSA.

By its very clandestine and esoteric nature, an understanding of the intricacies of cyber hacking eludes most of us. Fortunately we do not simply have to take the DOJ’s version of the story; we have the analysis of Jeffrey Carr, an independent cyber security expert, to provide another point of view.

Carr examined the DOJ charges and came up with some illuminating conclusions.

The Chinese hackers were accused of stealing the secrets of SolarWorld, a maker of solar panels, but Carr pointed out the panel maker was using obsolete technology, losing money for three straight years and in the process of plunging into bankruptcy all by itself. Chinese panel makers were using more economically competitive, thin film technology and adopting SolarWorld’s technology would have been going backwards.

The Chinese were also accused of stealing designs of nuclear power plant from Westinghouse, but apparently Holder did not realize that technology transfer was part of the deal to sell power plants to China. By agreement, Westinghouse had willingly handed plant designs over to China, which meant there was no need for cyber thievery.

Carr went on to show that the other alleged victims/plaintiffs in Holder’s indictment, US Steel, Alcoa and Allegheny Technologies, had no technology of value to China and weren’t damaged by any of the alleged cyber activity.

To paraphrase Carr’s words, if those cases were the best the DOJ could do to level cyber theft charges against China, the U.S. government is in a lot more trouble than he thought.

So other than just another case of the U.S. proclaiming, “don’t do what we do but do what we say we do,” how can we explain the action to indict?

The timing seemed particularly bizarre coming on the heels of full honor arrival ceremony welcoming PLA general Fang Fenghui to the Pentagon. General Fang is chief of general staff of PLA and the visit was billed as another step to building a trusting relationship between the two governments.

But then of late, the Obama Administration seemed to be particularly adept at wrong footing.

After Secretary of Defense Hagel and Secretary of State Kerry visited China in their respective efforts to strengthen a working relationship, President Obama then took a swing through Asia and undid their efforts.

Despite his disavowing any intention to antagonize China, his words in Japan and Philippines clearly showed his sympathies in their disputes with China. In exchange, he was looking for reinforcement by way of concessions for his pivot to Asia but came home empty handed.

Ironically, while the stumbling diplomacy damaged the bilateral relations with China, Russia’s Vladimir Putin may have been the unintended beneficiary.

Putin was in China for a two-day state visit. He needed to conclude a long-term gas supply deal to burnish his global image, especially after being pilloried by the West for his maneuvers involving Crimea.

The long-term supply contract had been in negotiations over a ten-year span. Now he needed to close the deal and show that there were other customers and partners for Russia’s energy than Western Europe.

He was privately rueful and observed that the Chinese were tough negotiators and wondered whether the deal was going to get done before the end of his visit.

Then came the announcement of the U.S. indictment, and China’s president Xi Jinping may well have decided to leave some money on the negotiating table and finish the gas supply agreement.

It became more important for the world to see a newly strengthened alliance between China and Russia and for the two countries to jointly thumb their noses at Washington.

It’s sadder still if the Obama Administration is showing that when it comes to foreign policy, members of his team are clueless as to what others on the team are doing.

How about a NATO in the Pacific?

I recently was an invited guest on a radio program on the somewhat rhetorical question: Namely, is it time to consider forming a NATO like alliance in Asia?

Some of the questions and issues raised in the program include:

1. Not clear as to who the members of the alliance should be and who the alliance is intended to oppose.
2. NATO like alliance is a western idea and not one consistent with Asian cultures.
3. There is no analogy between the confrontation between former USSR and the eastern block and western Europe then to the situation in the Pacific now.
4. The oldest democracy and the largest democracy in Asia have been examples of how not to govern.
5. Uncle Sam is still not financially healthy. Anyone in a hospital gown should think carefully before pivoting too quickly lest his whole backside becomes exposed.

Go the this link to listen to the entire show.

Obama on Wrong Side of History and Gary Locke's Redemption

An edited and revised version was published in New America Media.

On his recent tour of Asia, President Obama's first stop was Japan where he blundered and tarnished the prestige of the Presidency. At about the same time, as if to atone for his former boss's misstep, Gary Locke, the first Chinese American to be a state governor, a cabinet secretary and as ambassador to China, paid a personal visit to the Nanjing Massacre Museum. 

In his typically understated style, Locke did not announce his intention to visit in advance and thus went to the museum without fanfare. When the media caught up to him, he made it clear that his was a personal visit and had no bearing on the official position of the U.S. government.

This was his first visit to the museum. Keeping his visit a routine matter reflected a sincere interest to see first hand various acts of Japan's WWII atrocities, free of grandstanding and limelight that politicians crave. He effectively reminded the government of Japan that all Chinese and most of Asians are still waiting for Japan to finally admit their heinous acts of inhumanity and stop pretending to be the victims rather than perpetrators of the War.

In contrast, Obama's visit in Tokyo was bathed in bright lights and he said just about everything Japan's prime minister Abe wanted to hear, including the willingness of the U.S. to help Japan in the event of military conflict over the disputed Diaoyu/Senkaku islands.

Until Obama's statement, the U.S. official position was that when the administrative control of the islands was turned over to Japan in 1972, the U.S. government took no position on the rightful ownership of those islands.

China had been demanding that Japan abide by terms of unconditional surrender as described in the Potsdam Declaration. The terms specified that Japan renounced all claims to offshore islands other than the four main islands of Japan.

Not only did Obama showed ignorance of history but he got nothing in return. Abe was all smiles but gave no concessions that Obama sought. Obama gave up the good vibes from the Sunnyland summit with China's Xi Jinping for no good reason.

In August 2001, not long after he was elected to Congress, Mike Honda visited China and he made sure the Nanjing Massacre Museum was on his itinerary. Despite his being ethnic Japanese, Honda understood the right and wrong of history. He has been among the most vociferous members of Congress in demanding redress from Japan for their crimes against humanity.

Later Honda even guided then freshman Congresswoman Judy Chu to the Nanjing Museum so that she can become acquainted with this dark chapter of WWII history. Chu born in America was not familiar with the war atrocities committed by Japan's Imperial troops.

At the massacre museum in Nanjing, leis of paper folded cranes made by school children from Japan can be seen as offerings of regret and apology. Schools from Japan organized periodic tours to Nanjing so that their students do not forget.

The right wing government does not represent the majority of Japanese people. Even if Americans do not pay attention to history, the people of Asia will not let Abe and his ilk forget.