Chinese Company Runs Guns – and Who Knows What Else – to Cuba
Casey Institute of the Center for Security Policy
Wednesday, June 13, 2001
WASHINGTON – A front-page article in Tuesday's Washington Times identified
China Ocean Shipping Co. (COSCO) as a key player in the ongoing, surreptitious
delivery of weapons from China to Cuba. Ironically, this report comes shortly
after COSCO's CEO paid a visit to the Times for the purpose of disavowing
widely reported connections between his company and the Chinese military.
According to the Times, Beijing's arms deliveries to Cuba have taken place on
at least three separate occasions within the past several months. This pattern
of reported transfers belie the claim that COSCO's activities are solely driven
by the pursuit of profit, independent of the Chinese government's foreign-policy
agenda. Instead, it seems far more likely that COSCO - a 100 percent Chinese state-owned
enterprise (SOE) - is doing precisely what its owners instruct it to do, i.e.,
supporting the PRC's goal of increasing military and economic collaboration between
Havana and Beijing.
In a move that has, regrettably, become standard operating procedure for making
certain Chinese SOEs more palatable to U.S. and overseas investors, COSCO created
a wholly owned subsidiary, COSCO Pacific, to establish a funding vehicle
on the Hong Kong stock exchange. This and other so-called "Red Chips," however,
generally remain largely under the influence of the parent company. The contention
by some market observers that there is a genuine "firewall" between COSCO and
COSCO Pacific is made still less plausible by the Times' identification of yet
another COSCO subsidiary (COSCO Tianjin) as the transporter of sophisticated
weaponry components to Pakistan in 1998.
American shareholders of COSCO Pacific now seemingly find themselves in the unsavory
position of holding the stock of a subsidiary of a Chinese state-owned company allegedly
implicated in untoward international arms smuggling and possibly weapons-proliferating
schemes. According to Thomson Financial Research Services, these investors include:
the State Teachers' Retirement System of Ohio (which holds some 6 million shares),
the Teachers' Retirement System of Texas, Nomura Asset Management, Morgan Stanley
Emerging Market Fund, Putnam Investment Management, Goldman Sachs Core International
Equity Fund, Credit Suisse Asset Management and American Express Asset Management.
Should Bill Gertz's reports of alleged violations of U.S. law prove correct,
Congress and/or the Bush administration may feel compelled to deny access to
the U.S. capital markets to COSCO and its publically traded subsidiaries as a
highly leveraged and singularly effective penalty for activities that facilitate
the military armament of terrorist-sponsoring states like Cuba in violation of
U.S. law.
The center's publications are intended to invigorate and enrich the debate
on foreign policy and defense issues. The views expressed do not necessarily
reflect those of all members of the center's board of advisers.
The above publication of the Center for Security Policy can be found, fully formatted
and hyperlinked to related documents, on the World Wide Web at the following
address: http://www.security-policy.org/papers/2001/01-F43.html
Read more on this subject in related Hot Topics:
Castro/Cuba
China/Taiwan
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