Mon, Nov 26, 2018 - Page 7 News List

Bribery scandal sounds alarm to nations along new Silk Road

A trial in New York City, the arrest of CEFC chairman Ye Jianming and the collapse of many of the firm’s deals have raised questions about the growing control of Chinese state-run enterprises in the Belt and Road Initiative

By Blake Schmidt  /  Bloomberg

Illustration: Yusha

A chain of events that followed the arrest of former Hong Kong secretary for home affairs Patrick Ho (何志平) a year ago in the US has collapsed more than US$10 billion of deals across central and eastern Europe, an embarrassment for China that could spur a change in the development of Chinese President Xi Jinping’s (習近平) grand plan for a New Silk Road.

Ho, whose trial is set to begin on Monday in a US federal court in Manhattan, was charged under the Foreign Corrupt Practices Act with corruption and money laundering.

Prosecutors say he wired US$900,000 to African officials via New York City as part of a bribery scheme to win advantages for Chinese oil company CEFC China Energy Co.

Ho pleaded not guilty and has been denied bail five times.

Following his arrest, Chinese media reported that CEFC chairman Ye Jianming (葉建明) was under investigation by authorities in China.

Last month, state television said a former Chinese Communist Party chief in Gansu Province had been accused of taking bribes from Ye.

Ye had turned CEFC from an obscure oil-trading startup in eastern China into an international energy giant, with a string of deals in Asia, Europe and the Middle East that had been some of the highest profile contributions by a private company to Xi’s New Silk Road, now part of the Belt and Road Initiative (BRI).

Ye had appeared in Xi’s entourage during a state visit to the Czech Republic, where he became a special adviser to Czech President Milos Zeman, and had had a deal in Kazakhstan publicly endorsed by Chinese Premier Li Keqiang (李克強).

“It’s bad for BRI because it ties it to corruption and financial and political risks,” said Andrew Chubb, a postdoctoral fellow in the Columbia University-Harvard University China and the World Program. “They want to increase outbound investment in a range of infrastructure projects by pushing the BRI idea, yet they want to control outbound investment by private companies.”

Many of CEFC’s overseas ventures collapsed after Ye’s detention, including a bid to buy 14 percent of Russian oil giant Rosneft, fueling concern among nations who have received Chinese investment pledges that even projects supported by China’s leaders could fall foul of China’s anti-corruption drive.

“Central and eastern European states are asking where the investments are” that Chinese companies have promised, said Francois Godement, a French historian and director of the Asia and China program of the European Council on Foreign Relations. “Which projects are actually going ahead?”

For many states in the region, China offered a new alternative as an economic ally, without the Soviet-era baggage of Russia, or the long, protracted admission process of the EU.

Nowhere did this new order, and the sea change in the fortune of CEFC, have a greater relative impact than in the tiny nation of Georgia.

With a population fewer than 4 million, Georgia has been little more than a footnote in global politics since a war with Russia a decade ago, but it occupies a unique geographical position on Xi’s New Silk Road.

Halfway between the borders of China and western Europe, its sliver of coastline on the Black Sea is the only route across Asia into Europe that does not run through either Russia or Iran and Iraq.

That made it a target for Chinese companies looking to make investments that would mesh with China’s Belt and Road strategy.

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