TRUMP'S CORRUPTION; PANDORA PAPERS  COMPARED WITH INFLUENTIAL FILIPINOS 

A series of reports from the New York Times about how Donald Trump's son-in-law and advisor Jared Kushner, and Trump Treasury Secretary Steve Mnuchin, used their positions in the U.S. government to develop relationships with foreign governments, and then made massive private financial deals with those governments once Trump was out of office. » 

WASHINGTON, DC - JULY 24: White House Senior Advisor and President Donald Trump's son-in-law Jared Kushner reads a statment in front of West Wing of the White House after testifying behind closed doors to the Senate Intelligence Committee about Russian meddling in the 2016 presidential election at the White House July 24, 2017 in Washington, DC. In a statement released before the meeting, Kushner said he met with people who represented or may have represented the Russian government four times. (Photo by Mark Wilson/Getty Images)MARK WILSON

Back in April, The New York Times reported that Jared Kushner’s four years of Saudi ass-kissing and murder-excusing had paid off in the form of a $2 billion investment from the kingdom‘s sovereign wealth fund to his newly formed private equity firm. That struck a lot of people—ethics officials among them—as pretty shady given that far from having impressed would-be clients with his investing prowess, the panel that performs due diligence for the Saudi fund concluded that no one in their right mind would give the former first son-in-law a dime. Among other concerns, the panel noted that management was “inexperience[d],” that the kingdom would be responsible for “the bulk of the investment and risk,” that its fee seemed “excessive,” and that the firm’s operations were “unsatisfactory in all aspects.” Given those reservations, it warned that the country’s Public Investment Fund should stay far, far away from Kushner’s firm—a recommendation that was overturned by the fund’s board, which happens to be led by Crown Prince Mohammed bin Salman, i.e., the guy who approved a plan to kidnap, kill, and dismember a journalist via bone saw and benefited from Kushner’s unwavering support within the White House and reported insistence that the prince could “survive the outrage just as he [had] weathered past criticism.” (Again, just so it‘s abundantly clear, the “outrage” and “criticism” were over a Saudi dissident and U.S. resident being chopped up into pieces.)

So, it wasn’t that difficult for people to put two and two together and infer that Kushner’s firm seemingly got $2 billion to invest—and at least $25 million to pocket regardless of performance!—as a thank-you for being so good to a human rights-abusing autocrat. And a new story from the Times suggests, somehow, even further shadiness than that.

The paper’s Kate Kelly and David Kirkpatrick report that “shortly before the 2020 election,” Kushner unveiled a government-sponsored program dubbed the Abraham Fund, which the Trump administration said would raise $3 billion for projects around the Middle East, capitalizing on the Abraham Accords, the diplomatic agreements normalizing relations between Israel, the United Arab Emirates, and Bahrain. As part of that endeavor, Kushner and then Treasury secretary Steven Mnuchin “crisscrossed the Middle East in the final months of the administration on trips that included trying to raise money for the project.”

 

PROFILES: Filipino tycoons, government officials in Pandora Papers leak

OCT 4, 2021 12:00 PM PHT

RAPPLER.COMPHILIPPINE CENTER FOR INVESTIGATIVE JOURNALISM

MANILA, PHILIPPINES

(1st UPDATE) Explore the offshore financial dealings of Arthur Tugade, Dennis Uy, and other Philippine power players in the Pandora Papers

(Done in partnership with the International Consortium of Investigative Journalists)

This page, produced by Rappler and the Philippine Center for Investigative Journalism (PCIJ), features the offshore companies linked to more than 35 Filipino politicians, contractors, bankers, and business professionals.

Their profiles are based on a cache of leaked documents from offshore service providers, namely, Trident Trust, Commence Overseas Limited, Overseas Management Company Trust Limited, Asiaciti Trust, and Alcogal.

The documents were shared with Rappler and PCIJ by the non-profit International Consortium of Investigative Journalists (ICIJ), which led a global investigation with more than 600 journalists in 117 countries.

PCIJ and Rappler found more than 940 individuals and companies with Philippine addresses in the leaked files.

We sifted through hundreds of emails, documents and corporate records, and selected names that were in the public interest.

We found an extremely small number of accounts are tied to big businesses with legitimate sources, while the rest are mysterious at the very least.

PANDORA PAPERS: MYSTERY NAMES HOLD BULK OF PHILIPPINE-LINKED OFFSHORE ACCOUNTS

There are legitimate uses of offshore companies, and we do not intend to imply that all of the individuals or companies included in this page were in violation of the law.

PCIJ and Rappler sent requests for comment to all those on the list. The answers we received are included in the profiles.

Arthur Tugade

Arthur P. Tugade is the Philippines’ transport secretary under the Duterte government. Before that, he was president of the Clark Development Corp. under the Aquino administration.

IN THE DATA:

Tugade and his children appear in Trident Trust records as beneficial owners of Solart Holdings Limited, a British Virgin Islands (BVI) company which appears to have been operating at least since 2007.

The offshore company was supposedly created for the income of the Tugade family’s businesses under Perry’s Group of Companies, Trident records show. Company assets worth $1.5 million (P75 million) were mentioned, but it is unknown whether the amount was transferred to Solart.

The offshore entity is not declared in the list of businesses in his yearly Statement of Assets, Liabilities and Net Worth.

RESPONSE:

On October 5, 2021, a day after the Pandora Papers were published, Tugade issued a statement, saying that Solart Holdings was set up to hold a portion of his family’s cash assets.

“It is a legitimate attempt to grow our financial portfolio like what any astute and judicious entrepreneurs would do to diversify their investments. We decided to have a portion of our savings invested outside the Philippines, which is valid and legal,” he said.

Tugade said he consistently disclosed ownership of “offshore investments” in his SALN from 2012 to 2020. “In the said period, the account barely moved,” the transport chief said.

TRANSPORT CHIEF TUGADE KEEPS OFFSHORE FIRM OFF BUSINESS LIST

Dennis Uy

Dennis Uy is a businessman with interests in shipping and logistics, gas distribution, telecommunications and other industries. Uy donated P30 million to Rodrigo R. Duterte’s presidential campaign in 2016 and was later appointed presidential adviser for sports. He has also been serving as honorary consul to Kazakhstan since 2011.

IN THE DATA:

Uy appears in Commence Overseas Limited records as the beneficial owner of China Shipbuilding and Exports Corp., a British Virgin Islands (BVI) company registered in 2016.

He is also listed as director of Pacific Rider Limited in Overseas Management Company (OMC) Trust Limited records. Pacific Rider is another BVI company registered in January 2017. Uy’s company, Udenna Management and Resources Corp., is identified as the principal shareholder of Pacific Rider.

Uy is also a stockholder of Apex Mining Co., Inc, a Philippine corporation that ultimately holds Monte Oro Mining Co. Ltd., another BVI company managed through Commence.

In the prospectus of one of Uy’s companies, Chelsea Logistics and Holdings Corp., which was published before its initial public offering, the company declared that Chelsea purchased three tank vessels from China Shipbuilding and Exports Corp. (CSEC), one each in 2011, 2013, and 2014. The collective cost of the three vessels is $48.3 million. Chelsea disclosures did not indicate that CSEC is also owned by Uy.

RESPONSE:

PCIJ and Rappler sent a letter to Mr. Uy on September 16 via email and made several followups. We have not received a response as of press time.

Juan Andres ‘Andy’ Bautista

Juan Andres “Andy” Bautista served the administration of President Benigno Aquino III in two capacities.

He was appointed as chairman of the Presidential Commission on Good Government in 2010 and chairman of the Commission of Elections in 2015. The House of Representatives started an impeachment proceeding against Bautista in 2017, following allegations of unexplained wealth by his estranged wife. Bautista resigned from Comelec in October 2017.

Before his stint in government, he served in various law firms, including Anglo Oriental Consulting Ltd. (Manila), White & Case (Hong Kong/New York), Troutman Sanders (Atlanta), and Castillo Laman Tan & Pantaleon (Manila). He was also a partner with international law firm Allen & Overy.

IN THE DATA:

Bautista appears in Trident Trust records as incorporator of Baumann Enterprises Limited, a company registered in the British Virgin Islands in 2010. The offshore company was reincorporated in 2017.

In the same year, Bautista was in hot water after his estranged wife, Patricia Paz Bautista, claimed he had a boxful of bank books and documents for undeclared wealth worth P1 billion. Baumann was one of the companies mentioned by Patricia to the press as a firm owned by her husband.

Before the year ended, Bautista had resigned from his post as Comelec chair, and left the Philippines. Baumann has never been declared in Bautista’s Statement of Liabilities, Assets and Net Worth (SALN) from 2010 to 2015.

RESPONSE:

In an email, Bautista said Baumann Enterprises is a shelf company his family purchased upon the advice of the Bank of Singapore (BOS), the institution in charge of the offshore income of the Bautista family through private banking.

“We were told this was normal private banking practice to facilitate our family’s desired objective of pooling our assets together,” he said.

The former Comelec chairman also noted he and his other family members had not directly dealt with Trident. He also reiterated that his personal assets in the company “were reported and duly reflected” in his SALNs.

However, Bauman has never been declared as his in his SALNs from 2010 to 2015.

Still, he contends he had not stolen any public funds from the Philippine government, “nor do I possess any ill-gotten wealth.”

Aboitiz family

The Aboitiz family owns one of the oldest conglomerates in the Philippines, the Aboitiz Group. It was founded by Filipino-Spanish businessman Jon Ramon M. Aboitiz in the 1970s. The conglomerate has interests in power generation, banking, real estate and infrastructure.

IN THE DATA:

Pandora Papers show several members of the Aboitiz family as having offshore companies, but only one has been mentioned publicly to be used for business purposes: Nice Fruit Hong Kong Ltd., a company registered in Hong Kong. Asiaciti Trust records show that 14% of the company’s shares is owned by Txanton International Limited, a British Virgin Islands (BVI) company. It is in turn, indirectly owned by Enrique Mendieta Aboitiz, current board chairman of Aboitiz Equity Ventures, as his trust in the firm is held by an individual named Leung Yi Ki. Nice Fruit, a joint venture with Del Monte Pacific Limited, and listed by the latter in its annual reports as such.

Enrique has three other BVI companies as revealed in Alcogal records: Arcata Group Limited, All Venus Limited, and Radiant Magic Limited. He also has two Seychelles companies: Permanent Victory Limited and Cloud Victory Limited.

Meanwhile, Maria Cristina Cabbarus Aboitiz, who is a current board member of the Ramon Aboitiz Foundation Inc., and wife of the late Robert Aboitiz, appears in the AsiaCiti Trust records as the beneficial owners of Woodcrest Hill Limited and Stillcho Trust.

Trident Trust records also show Melissa Marie Aboitiz Elizalde as the beneficial owner of Ozmond Holdings Limited and Santdomico Corporation. She is among the top 100 shareholders of Aboitiz Power Corp., a listed firm in the Philippines.

She also co-owns Igsoon Investment Limited with her siblings, Luis Miguel Osmena Aboitiz, the former chief strategy officer of Aboitiz Power, and Mary Anne Aboitiz Arculli.

RESPONSE:

PCIJ and Rappler sent a letter to the Aboitiz family on September 16 via email and made several followups. We have not received a response as of press time.

Gaisano family

The Gaisano family owns the publicly-listed Metro Retail Stores Group and the private mall operator Gaisano Grand Malls Group.

IN THE DATA:

Siblings Frank, Edward, Jack, and Margaret Gaisano appear in the Commence Overseas Limited list as beneficial owners of Beacon-Glory Assets Limited, Cathedral Pacific Limited, Chinaberry Asia Limited, and Pura Group Limited.

RESPONSE:

Frank Gaisano, through their lawyers, said that the BVI companies were made “for offshore business opportunities.”

The Gaisano family chose to incorporate the companies outside of the Philippines “for cost and tax efficiency.”

“There is no Philippine law that requires Filipinos (those not working in the government) to declare to Philippine authorities the offshore companies that they own or invest in,” their statement read.

Gatchalian family

The Gatchalian family rose to prominence as operators of plastic manufacturing facilities under the Wellex Group Inc. (WGI). The Gatchalian patriarch, William T. Gatchalian, founded the firm in 1969.

For the past five decades, the family has expanded its interests to include real estate, tourism, banking, and mining.

In 2001, the second generation of Gatchalians, led by now-Senator Sherwin, joined the political arena. Sherwin served as representative of Valenzuela City in Congress from 2001 to 2004, then as mayor of the city from 2004 until 2013, then back as congressman for another term, before getting elected to the Senate in 2016. His brothers have held the mayoral and congressional seats since he vacated them.

These political developments happened as members of the Gatchalian family, including Sherwin, were indicted in 2016 for the government’s alleged irregular acquisition of an insolvent bank owned by WGI.

In 2019, the Local Water Utilities Administration acquired Express Savings Bank Inc., a local thrift bank based in Laguna, a province south of Metro Manila.

IN THE DATA:

Members of the Gatchalian family – namely, William and his wife, Dee Hua; his son, Kenneth; and Dee Hua’s sister, Elvira Ting – are linked to at least nine offshore companies, as shown in Commence Overseas Limited records.

William and Dee Hua are named as direct beneficiaries of Creston Global Limited. Dee Hua is also named as sole direct beneficiary of Topwin Ventures Limited and Dedication Limited. She co-owns Silver Green Investments Limited and Polymax Worldwide Limited with Elvira Ting as well.

Meanwhile, Kenneth is found to be a direct beneficiary of Dynamo Atlantic Limited, Pentagon Development Limited and Overjoy Holdings Limited. He also co-owns Firstlink Investments Limited with Elvira Ting. There are no details of when the companies were incorporated, except for Dedication Limited, which was revealed to have been registered in the British Virgin Islands in 1992.

Polymax Worldwide Limited is the only publicly declared entity. Metro Alliance Holdings Corp., a WGI subsidiary, incorporated the company in 2003, Metro Alliance annual reports show. Polymax was used to acquire the controversial Bataan Polyethelyne Corp. from International Finance Corp. in 2005.

BPC was debt-ridden when Metro Alliance acquired it. Metro Alliance also never got to operate the facility. Instead, Polymax sold its shares to Iran-based NPC International Limited and Petrochemical Industries Investment Group, to offload its liabilities.

RESPONSE:

Nikki Jimeno, the Gatchalian family’s legal counsel, said the offshore companies were incorporated for “legitimate investment purposes” as they would like to explore “global trading”.

Jimeno also noted stockholders of its companies were notified of the activity. Among the offshore companies found in the Pandora Papers, only Polymax Worldwide Limited were disclosed in the annual reports of Metro Alliance Holdings & Equities Corp.

Olivares and Santos families

The Olivares and Santos families own Our Lady of Fatima University, which has six campuses across the Philippines. The institution started from the establishment of Our Lady of Fatima Hospital in Valenzuela in 1967. By the next decade, they expanded and opened the Our Lady of Fatima College of Nursing. Since then the institution has opened campuses in different parts of Luzon.

IN THE DATA:

August Olivares Santos, executive vice president and chief financial officer of Our Lady of Fatima University, appears in Commence records as the beneficial owner of 7-21st Street Investments Inc., a company registered in the British Virgin Islands in 2008. A 2012 document shows that at least six relatives are also directors of the company. They are Enrico John Olivares Santos, Mylene Olivares Santos, Robert Jerome Bjorn Olivares Santos, Vicente Olivares Santos Jr., and Yvonne Olivares Santos. All of them are either current members or once served on the board of Our Lady of Fatima University.

August Olivares Santos also appears in Trident Trust and Commence Overseas records as director of two other offshore firms: Fairbrook Overseas Limited and Waterberry Management Limited, companies registered in the British Virgin Islands.

RESPONSE:

PCIJ and Rappler sent a letter to the Olivares and Santos families on September 16 via email, and made several followups. We have not received a response as of press time.

The Sy family

The Sy siblings – Henry, Hans, Harley, Elizabeth, Herbert, and Teresita – own the SM Group. Forbes ranked them as the richest Filipinos, collectively worth $16.6 billion.

IN THE DATA:

The names of Henry, Hans, Harley, Elizabeth, Herbert, and Teresita appear in the Commence Overseas Limited records as owners of Quicksilver Global Limited and Valueplus Resources Limited.

The list also states that Teresita and Harley are the beneficial owners of Deercreek Worldwide Limited.

Harley is also said to be the beneficial owner of Crownhill Overseas Limited, Equimax Worldwide Limited, Simplex Group Limited, Broadbase Global Limited, and Pioneer Zone Investments Limited.

Teresita is listed as the owner of Antares Resources Limited and Accura International Limited.

Harley and Teresita were also mentioned as owners of Jetstream Capital Limited.

RESPONSE:

PCIJ and Rappler sent a letter to the SM Group on September 20 via email, and made several followups. We have not received a response as of press time.

Tantoco family

The Tantoco family founded luxury retail chain Rustans and own the SSI Group, the Philippines’ largest specialty retailer.

IN THE DATA:

The names of SSI president and director Anthony Tantoco Huang and its CEO Zenaida Tantoco appear in the Commence Overseas Limited list as beneficial owners of Transwell Worldwide Limited and Eaglepass International Limited.

RESPONSE:

PCIJ and Rappler sent a letter to SSI on September 20 via email. We have not received a response as of press time.

Joselito ‘Butch’ Campos Jr.

Campos is the founder of food and condiments firm NutriAsia Inc. In 2006, the firm bought a majority stake in Singapore-based Del Monte Pacific Limited.

Campos also has interests in real estate and pharmaceuticals through his father’s businesses, Greenfield Development Corp. and Unilab Laboratories Inc. The food tycoon is known among the local art circle to be a collector. Campos chairs the Metropolitan Museum of Manila and the Bonifacio Arts Foundation Inc.

IN THE DATA:

Pandora Papers do not show Campos as a beneficial owner of any offshore firm, but he is revealed to have done business with one. In 2011 and 2015, Campos bought art pieces through Montefalco Limited, a Hong Kong-based offshore firm.

Asiaciti records reveal Montefalco facilitated Campos’ art purchases abroad. The two transactions, which at one point involved a purchase of a Fernando Amorsolo oil painting, were worth $150,000 and £160,000, respectively.

RESPONSE:

In an email, Antonio Ungson, internal legal counsel of Del Monte Pacific Limited, said Campos is “a private citizen and has purchased artworks only in his personal capacity.”

Ungson reiterated that Campos does not have beneficial interest in Montefalco Limited.

Helen Dee

Helen Dee is the chair of Rizal Commercial Banking Corporation (RCBC).

The bank was used by cyber criminals to steal $81 million from the Bangladesh Bank in February 2016.

IN THE DATA:

Helen Dee appears in Trident Trust records as the beneficial owner of Jason Holding Ltd. and Neenah Ltd., two companies registered in the British Virgin Islands in 1988 and 1994, respectively.

In April 2016, amid the Bangladesh Bank heist investigations, records show that Dee changed the agent in charge of these two companies, from Trident Trust to MMG Trust. There are no details on what the companies are being used for.

RESPONSE:

PCIJ and Rappler sent a letter to Ms. Dee on September 16, via email, and made several followups. We have not received a response as of press time.

Rolando Gapud

Rolando Gapud is the executive chairman of the board of Del Monte Pacific Limited.

He served as “financial adviser” to the Marcos family. He would later on help identify the family’s assets for government retrieval.

IN THE DATA:

Gapud appears in Asiaciti Trust records as the beneficial owner of Retiro II Trust (Cook Islands) and Northwick Holdings Limited (British Virgin Islands). His wife and six children were also identified as direct beneficiaries.

As of 2014, Northwick Holdings Limited owns 40% of a company called Great Arian Property Holdings Co. Inc. in the Philippines. Gapud had also disclosed in Asiaciti Trust records that Retiro II Trust would comprise of “properties held in the Philippines by BVI companies which he owns and administers personally.” The communication was made in 2014. In the same year, Gapud was named as chairman of Del Monte Foods Inc.

RESPONSE:

In an email, he said “the trust and Northwick Holdings were formed upon the advice of our lawyers for estate planning purposes.”

Gapud noted the trust and Northwick were never activated and have remained dormant.

“No assets were ever added to the trust or Northwick,” he added.

Oscar Hilado

Oscar Hilado is director of several companies with interests in telecommunications, tourism and mining. He is chair of publicly listed firm Phinma Corp. since 2003. In 2015, he became an independent director of Rockwell Land Corp.

IN THE DATA:

Hilado appears in Commence records as the beneficial owner of Merrylink International Limited, a company registered in the British Virgin Islands.

RESPONSE:

Hilado said the company was established as part of an investment portfolio plan “that was ultimately not pursued.” He said the company is now closed.

Enrique Razon Jr.

Enrique Razon Jr., chairman of International Container Terminal Services, the country's leading terminal operator, has been on in Forbes’ list of 10 richest Filipinos since 2011.

In the past decade, Razon has expanded to hospitality and infrastructure business, through Bloomberry Resorts and Prime Infrastructure Holdings, respectively. He also has business interests in water distribution, retail, and mining.

Razon has bagged key infrastructure projects in the past five years. Razon’s infrastructure firm, Prime Infra, got a water dam project and the rights to distribute electricity in a provincial island town in the Philippines.

Recently, Razon was allowed to build a mega vaccination site on reclaimed land in Metro Manila.

IN THE DATA:

Razon appears in 2016 Commence Overseas Limited records as the beneficial owner Monte Oro Mining Co Ltd. (MOMCL), a company registered in the British Virgin Islands.

Apex Mining Co Inc., a mining company registered in the Philippines, indicated in its annual reports that MOMCL is a subsidiary of Monte Oro Resources & Energy, Inc. (MORE).

MOMCL was incorporated in 2016, and lists the Filipino billionaire as a direct beneficiary.

Razon owns 40% of the shares of Apex Mining Co Inc. Apex annual reports also show that MOMCL owns a gold mining project in the Republic of Sierra Leone in West Africa.

Aside from MOMCL, Razon also appears in Commence records as a direct beneficiary of Saxony Asia Limited, a company registered in 2016.

RESPONSE:

PCIJ and Rappler sent a letter to Mr. Razon on September 16 via email. We have not received a response as of press time.

Peter Rodriguez

Peter Rodriguez is the founder of Asian Aerospace Corp., an air charter operator. The company is considered a pioneer in the local industry.

In 2001, Asian Aerospace Corp. partnered with U.S.-based arms and defense firm Lockheed Martin Corp. for a P2.1-billion deal with the Armed Forces of the Philippines.

PCIJ reported Lockheed was looking to sell military planes to the then Arroyo-led Philippine government, and delivered the units even before a final contract was signed.

IN THE DATA:

Rodriguez appears in Commence Overseas Limited records as the beneficial owner of Skyjet International Group Limited. The company was incorporated in 2017 in the British Virgin Islands.

Skyjet looks to be used for the trade of aircrafts, as a press release from 2011 shows it sold a $18.5-million plane to Glory Key Investments Limited.

RESPONSE:

Rodriguez said the company was established for “business purposes.” As to whether the transactions he made through these companies were reported to concerned agencies is unknown.

Elmer Serrano

Elmer B. Serrano is a lawyer of the Sy family, owners of SM Prime Inc. and SM Investments Inc. The family operates the largest mall chain in the Philippines, and the country’s biggest bank in terms of assets.

Serrano sits as secretary of several Sy-owned firms, including 2GO, SM Prime Holdings, Premium Leisure Corp., and Banco dDe Oro Savings Bank.

IN THE DATA:

Serrano appears in Asiaciti Trust records as director of Myddleton Holdings Ltd., a company registered in the British Virgin Islands. He was appointed in 2018. Information on the beneficial owners or the purpose of the company are not available.

RESPONSE:

PCIJ and Rappler sent a letter to Mr. Serrano on September 16 via email. We have not received a response as of press time.

Wenceslao family

Delfin Wenceslao Jr. is president and director of real estate firm DM Wenceslao & Associates Inc. In 2003, the firm expanded to construction with the incorporation of Aseana Holdings Inc. The company has since been specializing in developing reclaimed land, with the 204-hectare Aseana City in Pasay as its flagship project.

Wenceslao Jr. passed away last September 22 at the age of 77.

IN THE DATA:

Wenceslao has appeared in Commence records as director of a British Virgin Islands company, Crown Star Ventures Limited, as early as 2001. By 2014, he included his children – Carlos Delfin, Delfin Angelo, and Edwin Michael – as co-directors of the company.

In a report by Esquire Philippines, Delfin Angelo said it was the same year the company created a “family constitution,” which detailed “​the goals, concerns, rules and even dispute resolution mechanics of the family with regards to the business.” All of his sons serve on the board of DM Wenceslao & Associates Inc., with Delfin Angelo now sitting as CEO.

A 2017 document also shows Wenceslao’s wife, Sylvia Chua Wenceslao, as beneficial owner of Crown Star Ventures Limited.

RESPONSE:

PCIJ and Rappler sent a letter to DM Wenceslao & Associates Inc. on September 16 via email, but learned that he passed away on September 22.

We made follow-ups with DM Wenceslao since. We have not received a response as of press time.

Monte Oro Resources and Energy

Monte Oro Resources & Energy Inc. (MORE) is a corporation wholly owned by Apex Mining Co. Inc. Among Apex Mining’s stockholders are: Ramon Y. Sy, Walter W. Brown, Graciano P. Yumul Jr., Modesto B. Bermudez, and Dennis A. Uy.

A. Brown Company Inc. and Prime Metroline Holdings Inc. are also among Apex’s top stockholders. A. Brown is owned by Walter W. Brown. Prime Metroline is owned by Enrique K. Razon Jr.

IN THE DATA:

Monte Oro Resources & Energy Inc. (MORE) appears in Commence records as the major shareholder of Monte Oro Mining Co. Ltd., a company registered in the British Virgin Islands.

Monte Oro Mining Co. Ltd. (MOMCL) is 90% owned by Monte Oro Resources & Energy Inc. (MORE) while the remaining 10% is owned by Walter W. Brown, according to a 2017 email.

In a 2016 Commence record, Razon was indicated as the beneficial owner of MOMCL.

RESPONSE:

Billy Torres, vice president for finance and compliance officer of APEX Mining Co. Inc. confirmed that Monte Oro Mining Co. Ltd. is owned 90% by Monte Oro Resources & Energy Inc. In turn, Monte Oro Resources and Energy Inc. is owned 100% by Apex Mining Co. Ltd. (APX).

Torres said Monte Oro Mining Co. Ltd. has an exploration project in Sierra Leone, and noted “it is normal to establish offshore companies to hold offshore projects.”

Jose Carlo Antonio

Jose Carlo Antonio is managing director of listed property giant Century Properties. Prior to joining the company in 2007, he worked in the investment banking groups of Citigroup and Goldman Sachs.

IN THE DATA:

Antonio’s name appears in the list by Commence Overseas Limited as beneficial owner of Bantam Enterprises Limited, a company incorporated in British Virgin Islands in 2013.

RESPONSE:

In an email, Century Properties said that they have endorsed the queries of PCIJ and Rappler to BVI Finance. We will update this story once the company has responded to our request. – Rappler.com/PCIJ

CONTRIBUTORS TO THE ‘PANDORA PAPERS’ PROJECT: Carmela Fonbuena, Miriam Grace A. Go, Karol Ilagan, Elyssa Lopez, Pauline Macaraeg, Ralf Rivas, Felipe Salvosa

ILLUSTRATED PROFILES: Guia Abogado

Other stories in the Pandora Papers Philippines series:

Offshore havens, hidden riches exposed in Pandora Papers leak

Pandora Papers: Mystery names hold bulk of Philippine-linked offshore accounts

Transport chief Tugade keeps offshore firm off business list

Tugade says offshore investments has ‘barely moved’ while he’s in government

THEN DESTROY CHINESE MILITARY ASSETS with Offensive Anti-Surface Weapon

 

Secretary of State Antony Blinken warned China to restrain its military operations around Taiwan in order to avoid the “unintended consequences” of a crisis following House Speaker Nancy Pelosi’s visit this week.


 Blinken warns China not to risk 'unintended consequences' of military crisis over Taiwan

“I hope very much that Beijing will not manufacture a crisis or seek a pretext to increase its aggressive military activity,” Blinken said Thursday while traveling in Cambodia for a summit of the Association of Southeast Asian Nations (ASEAN). “We, and countries around the world, believe that escalation serves no one and could have unintended consequences that serve no one’s interests, including ASEAN members and including China.”

China conducts military exercises off Taiwan after warning Pelosi to scrap visit



PLA carries out ‘live-fire exercises’ after US House Speaker Nancy Pelosi told not to visit the island democracy

President Xi Jinping warned his US counterpart, Joe Biden, in a phone call on Thursday against ‘external interference’ in Beijing’s dealings with the island. Photograph: Reuters


Associated Press in BeijingSat 30 Jul 2022 12.38 EDT

China said it was conducting military exercises off its coast opposite Taiwan after warning Nancy Pelosi, the Speaker of the US House of Representatives, to scrap possible plans to visit the island democracy.

The ruling Communist party’s military wing, the People’s Liberation Army (PLA), was conducting “live-fire exercises” near the Pingtan islands off Fujian province from 8am to 9pm on Saturday, the official Xinhua news agency said. The Maritime Safety Administration warned ships to avoid the area.


Such exercises usually involve artillery. The one-sentence announcement gave no indication whether the exercises also may include missiles, fighter planes or other weapons.


China has fully militarized three islands in South China Sea, US admiral says

Read more

Pelosi, who would be the highest-ranking American elected official to visit Taiwan since 1997, has yet to confirm whether she will go.

President Xi Jinping warned his US counterpart, Joe Biden, in a phone call on Thursday against “external interference” in Beijing’s dealings with the island.

China says Taiwan has no right to conduct foreign relations. It sees visits by American officials as encouragement for the island to make its decades-old de facto independence official.

The First Island Chain is defined as the chain of islands that begins at the Kuril Islands, runs through the Japanese Archipelago, the Ryukyu Islands and the island of Taiwan, the northwestern portion of the Philippines (particularly Luzon, Mindoro and Palawan) and finishes towards Borneo, and used to extend to the Spratly Island and the southern Vietnamese coast prior to the Vietnam War. The chain also serves as the maritime boundaries between the East China Sea and the Philippine Sea, and the South China Sea and the Sulu Sea.

The First Island Chain was conceptualized during the Cold War as the first line of defense to contain the spread of influence of the Soviet Union and its allied socialist countries in East and Southeast Asia. The midpoint and key part of the first chain was — and still is — Taiwan. Because the island chain is composed of a series of landmasses, it is also called the "unsinkable aircraft carrier", especially in reference to Taiwan.

THEN DESTROY CHINESE MILITARY ASSETS with Offensive Anti-Surface Weapon

The Navy has finally pushed into production a next generation surface-to-surface missile under its “Offensive Anti-Surface Weapon” program—by adapting a weapon already in use with the Air Force. The AGM-158 Joint Air-to-Surface Standoff Missile is a stealthy and highly precise surface-skimming cruise missile with a range of 230 miles, or 620 for the Extended Range AGM-158B. The shorter-range AGM-158A model saw its combat debut on April 4, 2018, when two B-1B bombers launched nineteen of the stealth missiles at a Syrian research center in Barzeh.

The SPY-6 radars family advances the technical curve in a number of tactically significant respects, in part because it can combine ballistic missile defense and air and missile defense into a single integrated system. This synergy gives the system an ability to track and help destroy enemy drones, aircraft, cruise missiles and long-range incoming ballistic missiles.

Japanese, Spanish and Canadian warships are evolving their maritime missile defense posture to expand the envelope at which it can detect and destroy incoming missiles, hypersonic weapons and even intercontinental ballistic missiles (ICBMs). To accomplish this, their warships are integrating a new high-powered, more sensitive ship-based radar system engineered to achieve longer ranges and greater precision. The concept is, among other things, to empower Navy ships with an ability to track and destroy enemy ICBMs from the ocean. 

US TAKE POSSESSION OF SCARBOROUGH SHOAL LOCATED AT THE GATES OF MANILA, 120 MILES WEST OF SUBIC BAY, 

I believe China will expand its influence over Taiwan to breakout of the first Island Chain as it is necessary for China to move toward the Second Island Chain. ie Guam, Hawaii and the West Coast.

The Western block would consist of the US, NATO, Japan, South Korea, Australia, Israel, and Saudi Arabia. The Eastern block would consist of Russia, China, North Korea, Iran, basically all of the Middle East, Serbia, and Belarus. There will unlikely be any large scale fighting near American soil in a strictly conventional war situation. Firstly, let us start with Asia. The United States, Japan, and South Korea. would send their navy to counter North Korea,  and China. South Korea would strictly focus on North Korea and would win with relative ease. The United States would focus on China, and Japan would focus on North Korea and China. The United States, India and Japan would form a blockade around China. This would lead to the US and Japan destroying their nuclear launch sites and all aircraft that can carry nuclear weapons. The US air-force, assisted by Japan, would control the skies over China. They would launch devastating airstrikes and would pierce their land defenses. This would all lead to the withdrawal of China,  as they would probably not want to surrender. This would be a major victory for the US and Japan in Asia.  Overall, it would be a costly US led coalition victory. China,  would be recovering from the massive Japanese/American bombardment. North Korea would be under South Korean rule and they would begin to slowly recover and become prosperous. Japan would be trying to recover from the Chinese. They would still remain prosperous. The United States and Canada would remain relatively safe. America, being a war based economy, would profit greatly. Australia would be safe and would not really change at all.  

The underlying factors are the growth of Chinese power, Chinese dissatisfaction with the US-led regional security system, and US alliance commitments to a variety of regional states. As long as these factors hold, the possibility for war will endure.

Whatever the trigger, the war does not begin with a US pre-emptive attack against Chinese fleet, air, and land-based installations. Although the US military would prefer to engage and destroy Chinese anti-access assets before they can target US planes, bases, and ships, it is extremely difficult to envisage a scenario in which the United States decides to pay the political costs associated with climbing the ladder of escalation.

Instead, the United States needs to prepare to absorb the first blow. This doesn’t necessarily mean that the U.S. Navy (USN) and U.S. Air Force (USAF) have to wait for Chinese missiles to rain down upon them, but the United States will almost certainly require some clear, public signal of Chinese intent to escalate to high-intensity, conventional military combat before it can begin engaging Chinese forces.

If the history of World War I gives any indication, the PLA will not allow the United States to fully mobilize in order to either launch a first strike, or properly prepare to receive a first blow. At the same time, a “bolt from the blue” strike is unlikely. Instead, a brewing crisis will steadily escalate over a few incidents, finally triggering a set of steps on the part of the US military that indicate to Beijing that Washington is genuinely prepared for war. These steps will include surging carrier groups, shifting deployment to Asia from Europe and the Middle East, and moving fighter squadrons towards the Pacific. At this moment, China will need to decide whether to push forward or back down.

On the economic side, Beijing and Washington will both press for sanctions (the US effort will likely involve a multilateral effort), and will freeze each others assets, as well as those of any co-belligerents. This will begin the economic pain for capital and consumers across the Pacific Rim, and the rest of the world. The threat of high intensity combat will also disrupt global shipping patterns, causing potentially severe bottlenecks in industrial production.

Whether US allies support American efforts against China depends on how the war begins. If war breaks out over a collapse of the DPRK, the United States can likely count on the support of South Korea and Japan. Any war stemming from disputes in the East China Sea will necessarily involve Japan. If events in the South China Sea lead to war, the US can probably rely on some of the ASEAN states, as well as possibly Japan. Australia may also support the US over a wide range of potential circumstances.

China faces a less complicated situation with respect to allies. Beijing could probably expect benevolent neutrality, including shipments of arms and spares, from Russia, but little more. The primary challenge for Chinese diplomats would be establishing and maintaining the neutrality of potential US allies. This would involve an exceedingly complex dance, including reassurances about Chinese long-term intentions, as well as displays of confidence about the prospects of Chinese victory (which would carry the implicit threat of retribution for support of the United States).

North Korea presents an even more difficult problem. Any intervention on the part of the DPRK runs the risk of triggering Japanese and South Korean counter-intervention, and that math doesn’t work out for China. Unless Beijing is certain that Seoul and Tokyo will both throw in for the United States (a doubtful prospect given their hostility to one another), it may spend more time restraining Pyongyang than pushing it into the conflict.

The US will pursue the following war aims:

1. Defeat the affirmative expeditionary purpose of the People’s Liberation Army Navy (PLAN).

2. Destroy the offensive capability of the PLAN and People’s Liberation Army Air Force (PLAAF).

3. Potentially destabilize the control of the CCP government over mainland China.
4. Liberate Tibet from Chinese rule by the action of India.t

Except in the case of a war that breaks out on the Korean Peninsula, the first task involves either defeating a Chinese attempt to land forces, or preventing the reinforcement and resupply of those troops before forcing their surrender. The second task will require a wide range of attacks against deployed Chinese air and naval units, as well as ships and aircraft held in reserve. We can expect, for example, that the USN and USAF will target Chinese airbases, naval bases, and potentially missile bases in an effort to maximize damage to the PLAN and PLAAF. The third task probably depends on the successful execution of the first two. The defeat of Chinese expeditionary forces, and the destruction of a large percentage of the PLAN and the PLAAF, may cause domestic turmoil in the medium to long term. US military planners would be well-advised to concentrate the strategic campaign on the first two objectives and hope that success has a political effect, rather than roll the dice on a broader “strategic” campaign against CCP political targets. The latter would waste resources, run the risk of escalation, and have unpredictable effects on the Chinese political system.

Japan is very much the flavor of the current Indian season. Especially when juxtaposed against China, Japan is acknowledged by New Delhi as being one of the most significant maritime players in the Indo-Pacific. Indeed, Japan’s steadily deteriorating and increasingly fractious relationship with China is a prominent marker of the general fragility of the geopolitical situation prevailing almost throughout the Indo-Pacific. Within this fragile environment, New Delhi is seeking to maintain its own geopolitical pre-eminence in the IOR and relevance in the Indo-Pacific as a whole by adroitly managing China’s growing assertiveness. In this process, Japan and the USA (along with Australia, Vietnam, South Korea, and Indonesia) collectively offer India a viable alternative to Sino-centric hegemony within the region. However, before it places too many of its security eggs in a Japanese basket, it is important for India to examine at least the more prominent historical and contemporary contours of the Sino-Japanese relationship. As India expands her footprint across the Indo-Pacific and examines the overtures of Japan and the USA to seek closer geopolitical coordination with both, it is vital to ensure that our country and our navy are not dragged by ignorance, misinformation or disinformation, into the law of unintended consequences.Map of Sea of Japan.  This could be the scenario in the conflict between India, Japan and USA against China and Russia. Although the videos are cartoon like, they are mostly accurate to some degree. With Japan, Ausrtalia, UK and Vietnam alliance China will be overwhelmed.

The influence of China, with its ancient and extraordinarily well-developed civilization, upon the much younger civilization of Japan has been enormous. Even the sobriquet for Japan — the Land of the Rising Sun — is derived from a Chinese perspective, since when the Chinese looked east to Japan they looked in the direction of the dawn. As Japan began to consolidate itself as a nation, between the 1st and the 6th Century CE, it increasingly copied the Chinese model of national development, administration, societal structure and culture. And yet, for all that, there is also a history of deep animosity between the two countries, which manifested itself across of whole range of actions and reactions. At one end was China’s disapproval of Japan attempting to equate itself with the Middle Kingdom (as when Japan Prince Shotoku, in 607 CE, sent a letter to the Sui emperor, Yangdi, “from the Son of Heaven in the land where the sun rises to the Son of Heaven in the land where the sun sets.”) At the other, lay armed conflict. Over the course of the past two millennia, Japan and China have gone to war five times. The common thread in each has been a power struggle on the Korean Peninsula. Even their more contemporary animosity dates back to at least 1894 — during the Meiji Restoration in Japan. It is true that, much like India and Pakistan, relations between China and Japan have witnessed periods of great optimism. For instance, Sino–Japanese relations in the 1970s and early 1980s were undeniably positive and ‘historical animosity’ was not a factor strong enough to foster tensions between the two nations at the time. However, it is also true, once again like India and Pakistan, that these periods of hope have been punctuated by a mutuality of visceral hatred. In the Sino-Japanese War of 1894-95, China, which was mired in political conflict and civil war, suffered eight months of comprehensive defeats leading, amongst other indignities, to the occupation of Taiwan by Japan. The historical echoes of this horrific conflict and its humiliating aftermath for China resonate to this day.

The South China Sea has never occupied the top rung on Beijing’s foreign policy agenda, except perhaps during the Philippines’ initiation of arbitration against China’s claims of historic rights in 2013 and the Hague tribunal’s decision in 2016. Given economic reforms, protests in Hong Kong, President Tsai Ing-wen’s renewed mandate in Taiwan, censure of its security policies in Xinjiang, trade talks and great power rivalry with the United States, and the ongoing public health crisis of the novel coronavirus, Beijing will have its hands full. It may have little left in its tank for the South China Sea. In contrast, the six-way territorial and maritime row represents the most pressing security and foreign policy priority for other claimants. This sharp asymmetry may stimulate a willingness on the part of the biggest claimant to concede and negotiate with other disputants. That would jive well with China’s stated intention to project good neighborliness and settle the issue among the claimants without intervention by other powers. However, this readiness for dialogue may not necessarily extend to other maritime powers, especially as the South China Sea gradually emerges as a theater for great power competition.

China is apparently taking a more active role in conveying its narrative and engaging international think-tanks and publics. In April 2019, the South China Sea Strategic Situation Probing Initiative was launched by the Peking University Institute of Ocean Research. Earlier this year, the initiative has already held exchanges with regional counterparts in Singapore, Malaysia, and the Philippines. This is on top of the Hainan-based National Institute for South China Sea Studies setup in 2004 which has also been holding exchanges with foreign counterparts. Whether these attempts at public diplomacy allay concerns among Southeast Asian claimants remains to be seen.

Meanwhile, the high priority given to the dispute by other claimants means that they will exhaust the broad gamut of defense, diplomatic, and legal redress to safeguard their interests. Vietnam, for instance, concluded the 11th iteration of its Diplomatic Academy’s annual South China Sea conference in November 2019, drawing local and international experts. But pushback against Chinese incursions tends to wax and wane, and approaches vary among claimants. The nature of the threat posed by Chinese actions and the degree of economic ties with China are important variables to consider here.

Having lost the Paracels in 1974 and Johnson Reef in 1988, not to mention fighting China in a bitter land border war in 1979, Vietnam traditionally pushes back the hardest. Possible resort to legal means and international forums, especially as the country chairs ASEAN this year and assumes a nonpermanent seat on the UN Security Council (2020-2021), will diversify Hanoi’s toolkit and raise the stakes for future Chinese interference in Vietnam’s marine economic activities. The Philippines took a tougher stance after losing Mischief Reef in 1995 and control over Scarborough Shoal in 2012. The first incident pushed the country to modernize its armed forces (1995) and eventually sign a Visiting Forces Agreement (1999) with its longtime treaty ally, the United States. The second incident compelled the country to launch a legal challenge to China’s excessive maritime claims (2013) and allow U.S. troops a rotational presence in mutually agreed locations throughout the country via the Enhanced Defense Cooperation Agreement (2014). Last year, Manila also sought and obtained greater clarity on the scope of its Mutual Defense Treaty with the United States. However, Manila’s recent move to abrogate the Visiting Forces Agreement may undercut the value of the alliance at a time of growing Chinese presence in the disputed sea.

Further from China’s reach, Malaysia and Brunei have long pursued quiet diplomacy. But with Chinese outposts now  enabling distant fishing fleets and patrols to scour the sea’s southern reaches, they, as well as Indonesia, may eventually recalibrate their strategy. Indonesia’s tough response to foreign illegal fishing in its waters and its strong posturing in the Natunas creates disquiet in its relations with China as well as with ASEAN neighbors like Vietnam. Thus, China’s assertiveness and the smaller claimants’ heightened sense of insecurity generates the potential for conflict, drawing other major powers in—to Beijing’s displeasure.

In addition, in the interest of gaining legitimacy, smaller claimants have been aligning their maritime claims with international law, notably the UN Convention on the Law of the Sea. Malaysia’s submission of its second extended continental shelf (ECS) claim in the South China Sea last December is instructive. Prior to that, Vietnam and Malaysia jointly submitted an ECS claim in 2009, a move which compelled Beijing to officially articulate its nine-dash line claim. The Philippines, meanwhile, ratified its first ever maritime boundary delimitation agreement with Indonesia last year. These legal foundations may serve to pressure Beijing to bring its claims into conformity with international law. This is especially so after the landmark 2016 arbitral award invalidated China’s claimed “historic rights” and ruled that none of the features in the contested Spratly Islands are capable of generating exclusive economic zones (EEZs). Other claimants will likely continue to pursue their own ECS submissions and EEZ delimitations in the South China Sea.

Southeast Asian claimants will also push back against Chinese overtures to upend security engagement and offshore energy undertakings with other countries in the South China Sea. The deep and complex web of alliances and partnerships, to which security and economic engagement with China forms just one part, is integral to ASEAN’s centrality and autonomy, an aspiration threatened by growing major power rivalry. The 2019 defense white papers of Malaysia and Vietnam both recognized this context of great power competition. Hanoi, for one, added a new caveat in its defense policy, expressing readiness to develop military relations with other countries while still upholding its four nos policy: no military alliances, no siding with one country against another, no foreign military bases, and no use of force or threat to use force in its international relations. This is a significant departure in Vietnam’s strategic thinking and goes to show the extent to which Chinese actions are driving such shifts.

In relation to hydrocarbons in the South China Sea, Southeast Asian claimants resist Chinese demands to terminate upstream contracts with foreign companies from non-claimant states because doing so would adversely affect investor confidence even outside the energy sector. For example, despite being compelled to suspend Spanish firm Repsol’s offshore work in 2017 and 2018, Vietnam continued to encourage Russian, Japanese, Indian, and U.S. energy companies to operate in its EEZ in the South China Sea. The Philippines likewise suggested it would welcome involvement from Russian energy company Rosneft in the country’s oil and gas projects. This said, the continued retreat of Western investors from offshore projects around the South China Sea may facilitate Beijing’s proposed joint development model by leaving its neighbors with few options. For instance, the exit of U.S.-based Chevron from Malampaya, the Philippines’ largest natural gas field located in the South China Sea, and the purchase of its equity by Udenna Group may pave the way for China National Offshore Oil Corporation to acquire a stake in the aging gas field that supplies up to 40 percent of the electricity for Luzon, the country’s main island. Last year, Phoenix Petroleum, one of Udenna’s companies, signed a deal with the Chinese state-owned company to develop a liquified natural gas terminal. ExxonMobil was also rumored to be exiting from the Blue Whale project off Vietnam as part of the company’s divestment efforts.

In sum, notwithstanding bilateral and regional efforts at dispute management and confidence building, the level of importance that claimants will assign to the South China Sea disputes and the extent to which they will push back against coercion will foretell how tempestuous the South China Sea will get in 2020.

Strategy to Defeat China in The SCS

The air campaign in Desert Storm was a watershed for air power. It demonstrated the effectiveness of precision munitions, marked a high water point for electronic warfare and introduced radar stealth in a decisive manner. It also established a template for the application of air power that has taken root in Air Force culture and remains firmly established a quarter century later.

During this COVID-19 global crisis, when

Before the shooting war begins, and after a hostile action made by China, activate naval and air forces in blocading Chinese economic access to the western Pacific and the sources of oil in the Sumatran Straights. In effect all US forces are in their full readiness without the time element of transporting from the distant mainland of the US.  At the outset of the shooting war, sink all  surface Chinese ships and submarine, after radar and SAM coastal batteries have been neutralized using our airforce stealth bombers and jet fighters.

Continue to limit the access of the Chinese Surface ships to the Western Pacific  islands  by mining the ports and islands. Limit the energy resource and commercial maritime intercourse which China is so dependent upon. The primary objective here is to effectively neutralize certain elements of PRC military power by starving it of energy. In contrast with maritime interdiction, strategic interdiction is not an airtight blockade but a targeted effort to interdict primarily the production and transport of energy resources all the way back to the source. A campaign would have four elements:

A “counterforce” effort designed to stop the adversary air forces (particularly bombers), naval forces (gray hulls) and naval auxiliaries (replenishment) to the point where they can neither project military power nor defend against U.S. power projection, at least far beyond the PRC continental shelf.


Chinese military force design has been built specifically to counter the U.S. Air Force’s reliance on stealth and forward basing, and to reduce the threat of carrier aviation by developing weapons designed to keep the carriers far away from the action. Our response has been to plan to fight symmetrically, matching our technological widgets against theirs in a battle in the PRC’s front yardTerritorial Disputes in the South China Se

The most prominent Sino-Japanese contributor to contemporary geopolitical fragility is the Senkaku/ Diaoyu Islands dispute. This is an extremely high-risk dispute that could very easily lead to armed conflict, especially in the wake of Japan’s nationalization of three of the islands in September 2013. Reacting strongly to this unilateral action by Japan, China established an Air Defense Identification Zone (ADIZ) on 23 November, 2013, encompassing (inter alia) these very islands. This, in turn, was immediately challenged by the USA, Japan, and South Korea. Within days of the Chinese declaration, military aircraft from all three countries flew through China’s ADIZ without complying with the promulgated ADIZ regulations. Perhaps because of the robustness of this response, China has not been enforcing this ADIZ with any great vigour, but has not withdrawn it either. It is appreciated that this is a long-term play, because China would acquire strategic advantage by asserting a maximalist position, then seeming to back down, while preserving some incremental gain — akin to a ‘ratchet’ effect. This is an example of ‘salami slicing’ — of which much has been made in a variety of Indian and Western media.

China’s increased military activities in this maritime area have certainly caused a fivefold rise in the frequency with which Japanese fighter jets have been forced to scramble in preparedness against Chinese aircraft intrusions into Japanese airspace over the East China Sea (ECS). Japanese aircraft have moved up from 150 scrambles in 2011 to a staggering 1,168 scrambles in FY 2016-17. (The Japanese FY, like that of India, runs from 01 April to 31 March.) Given that fighter pilots are young, aggressive, and trained to use lethal force almost intuitively, this dramatic increase in frequency of scrambles causes a corresponding increase in the chance of a miscalculation on the part of one or both parties that could result in a sudden escalation into active hostilities. 

Even more worrying is the prospect that once China completes her building of airfields on a sufficient number of reefs in the Spratly Island Group, she would promulgate an ADIZ in the South China Sea. Should she do so, the inevitable challenges to such an ADIZ would probably bring inter-state geopolitical tensions to breaking point.

All in all, the increased militarization and current involvement of the armed forces of both countries in the Senkaku/ Diaoyu islands have grave implications for geopolitical stability. To cite a well-used colloquialism, “once you open a can of worms, the only way you can put them back is to use a bigger can.” In the case of the Senkaku/ Diaoyu Islands, both Japan and the PRC have certainly opened ‘a can of worms’ and now both are looking for a bigger can. Thus, both countries are jockeying for geopolitical options with both the USA as well as with other geopolitical powers that can be brought around to roughly align with their respective point of view. Japan’s alliance with the USA and its active wooing of India and Australia with constructs such as Asia’s Democratic Security Diamond is one such ‘larger can.’ 

Yet, Japan’s geopolitical insecurities in its segment of the Indo-Pacific are not solely about the Senkaku/ Diaoyu islands. Japan’s apprehension in 2004-05 that China’s exploitation of the Chunxiao gas field (located almost on the EEZ boundary line — as Japan perceives it) was pulling natural gas away from the subterranean extension of the field into the Japanese side of the EEZ boundary brought the two countries to the brink of a military clash. While the situation has been contained for the time being, it remains a potential flashpoint. Across the Sea of Japan /East Sea lie other historical and contemporary challenges in the form of the two Koreas, a Russia that appears to be in a protracted state of geopolitical flux, and of course, the omnipresent elephant in the room, namely, the People’s Republic of China.

Closer home, Japan’s Maritime Self Defense Force (JMSDF) is present and surprisingly active in the Indian Ocean Region (IOR) as well. Its interest in maintaining freedom of navigation within the International Shipping Lanes to and from West Asia in general, and the Persian Gulf and the Gulf of Aden in particular, are well known features of Tokyo’s ‘energy security’ and ‘security-of-energy’ policies. Off the Horn of Africa at the southern tip of the Gulf of Aden, the ‘war-lord-ism’ that substitutes for governance in Somalia is a source of strategic concern at a number of levels.

Chinese soldiers sit atop tanks as they drive in a parade to celebrate the 70th Anniversary of the founding of the People's Republic of China in Beijing on Oct. 1. KEVIN FRAYER/GETTY IMAGES

Many observers believe China is building up its military, especially its navy, to break through the first and second island chains and push the United States out of the Asia-Pacific. China’s military expansion in the region is thus seen as a major threat against U.S. interests and security.

But there’s a big problem with the language involved. Phrases like “pushing the United States out of the Asia-Pacific,” “China’s military expansion in Asia,” or “breaking the two island chains” create the image of a physical process, of the Chinese military pressuring U.S. troops and bases in the Asia-Pacific until they can no longer resist and are forced to leave. In reality, both the goal and the process are different—and unless U.S. strategists rectify the way they think about this, they could come to dangerous conclusions.

This isn’t about a physical outcome, but a political one. It doesn’t refer just to U.S. bases in Japan or South Korea. The United States has no permanent bases in the Philippines, but, because of the two countries’ mutual defense treaty, U.S. troops would defend the Philippines in case of attack. China’s goal isn’t just to remove U.S. personnel or equipment from the region, or even to prevent rotational deployments or joint exercises in the Asia-Pacific; it’s to limit or eliminate Washington’s influence over countries in the region, including, ideally, through the termination of their defense treaties and the Taiwan Relations Act, which commits the United States to support Taiwan’s defense.

This doesn’t mean that China is looking to completely extricate the United States from Asian and Pacific countries: It’s OK if they continue trading, or if U.S. companies invest there. But China’s goal is to constrain Washington’s influence to the point that it would no longer try, or would be unable, to convince regional governments to take measures against China such as banning Huawei fifth-generation technology.As long as Washington remains their chief partner, the U.S. government would still be able to convince Tokyo and Seoul to take anti-China measures.

It will help Beijing little if U.S. troops leave Japan and South Korea, but their mutual defense treaties remain in force. As long as Washington remains their chief partner, the U.S. government would still be able to convince Tokyo and Seoul to take anti-China measures, such as restricting Chinese tech companies it considers national-security threats—even if the assurance of U.S. troops as a tripwire against aggression were removed.

Yet in both Beijing and Washington, there’s a belief that, if China establishes regional military superiority over the United States, it will be able to push the United States out of the Asia-Pacific region. But transforming that military superiority into political influence is far trickier than it seems.

Imagine that it’s 2025, and China’s military has become stronger and more active, while the United States failed to keep up in the Asia-Pacific. Think tanks and experts warn that the military balance has shifted in China’s favor and, in case of war, it’s likely that it would prevail. Would U.S. allies, from Seoul to Canberra, decide to ditch the United States and align themselves with the rising hegemon, fulfilling demands such as Chinese sovereignty over the archipelago in the South China Sea known as the Senkaku or Diaoyu Islands, or censorship of local anti-China voices? Or would they stick to the United States, building up their military capabilities and strengthening other military alliances?

Both U.S. allies and neutral countries in the Asia-Pacific already fear China’s growing power and its geopolitical demands. This is happening while the military balance is still in Washington’s favor. If China becomes more powerful, it will also become more threatening. With the exception of India, all other regional countries are dwarfed by China. If left alone, they would have to acquiesce to any and all demands coming from Beijing, as they would stand zero chance of prevailing in a bilateral military conflict.

The United States, even if weaker than China, would be their only hope in such an adverse geopolitical environment. A more menacing China would also galvanize the U.S.government and public to confront it. Military expansion can’t achieve China’s goals by itself.Unless the United States willingly abandons its competition with China, Beijing will never create the military gap necessary to scare the entire region into submission.

Chinese military power could force the United States out of the region in two scenarios: a China so dwarfing the U.S, presence in the region that its might is unassailable, or a decisive military victory. The first scenario needs the United States to weaken so much that regional military planners would no longer believe that it can impose enough costs on China, thus voiding alliances of any deterrent effect. Combined with Chinese economic sanctions or military skirmishes, Asian and Pacific countries might be forced to cut ties with the United States, if it’s clear that they serve no defense purpose. But the odds of a U.S. government ever allowing so vast a gap to emerge are very low.The other scenario, a war, would necessitate a crystal-clear military victory over the United States, maybe including the invasion and occupation of an ally. A simple tactical win wouldn’t suffice. If China defeats the Japan-U.S. alliance by sinking a few ships and bombing some bases, leading to a diplomatic agreement that gave Beijing control of the Senkaku/Diaoyu Islands, would the Japanese government later surrender its defense treaty with the United States and remain at Beijing’s mercy? This would make no strategic sense. More likely, it would strengthen military ties with the United States and maybe develop a nuclear capability to deter any further Chinese threats. Only a devastating defeat in a full-blown conflict that risks nuclear war could achieve such a goal—something China desires as little as anyone else.