In Latest Blow To US, Malaysia Will Buy Navy Vessels From China

Having largely lost long-time ally Philippines as an anchor to US foreign policy in the Pacific rim, a loss which comes at a critical time for the US just as China is aggressively expanding its territorial ambitions in the South China Sea, Washington is set to lose another key ally, and a critical one at that: as Reuters reports, in a "blow to the US", Malaysia's corrupt Prime Minister Najib Razak, whose involvement in the 1MBD scandal has been extensively reported by the WSJ for over a year now, will sign a contract to purchase Littoral Mission Ships from China when he visits Beijing next week, according to a Facebook posting by the country's Ministry of Defense.

The text of a speech to be delivered by Malaysian defense minister Hishammuddin Hussein appears to have been accidentally posted on Facebook on Tuesday, but was later removed after Reuters asked a defence ministry spokesman for comment.

The purchase of the patrol vessels, if it proceeds, would be Malaysia's first significant defence deal with China and comes amid rising tensions in the South China Sea and as the United States and China compete for influence in the region. It would also be the latest, if far more nuanced, pivot away from a US sphere of inluence in the region since Philippines' Duterte said he was severing ties with the US last week.

China's foreign ministry spokesman Lu Kang said on Friday he was "unclear on the specifics of the situation". But responding to a Reuters question at the daily ministry briefing he noted China and Malaysia "continue to cooperate and communicate regularly across all spheres".

Why the diplomatic fallout between the US and Malaysia?

One reason, as we noted last weekend, is that thanks to the Podesta leaks, we got a glimpse into the real reason for the TPP, which was to appease countries such as Malaysia and prevent them from shifting to a pro-Chinese trade sphere. As a Soros memo revealed, "Malaysia received more TPP carve-outs than any other TPP member country." However, now that the TPP appears to be in jeopardy, any leverage the US may have had with Razak has been put on hiatus and gives Kuala Lumpur a green light to pursue Beijing and see just what they have to counteroffer.

A more acute reason is that Malaysia's ties with the US were substantially strained after the Department of Justice filed lawsuits linked to a money-laundering investigation at state fund 1Malaysia Development Berhad (1MDB), which Najib founded and had overseen as chairman of its advisory council.

So, feeling betrayed by his former close golfing buddy, Barack Obama, Najib is traveling to China on Sunday for a week-long visit to see just what Beijing's proposal is.

"On November 5, 2016, the Defence Ministry will sign a contract for the procurement of Littoral Mission Ships (LMS) with SASTIND (the State Administration for Science, Technology and Industry for National Defense), which is an important part of the schedule during the Prime Minister's official visit to China," the Facebook post quotes Hishammuddin saying.

As Reuters adds, a defence ministry spokesman declined to comment and the prime minister's office did not immediately respond to requests for comment.

What Malaysia will allegely purchase from China are Littoral Mission Ships, fast patrol vessels that can be equipped with a helicopter flight deck and carry missiles. They are primarily used for coastal security, maritime patrol and surveillance, but can also be deployed for disaster relief and search and rescue operations.

Malaysia could buy up to 10 of the littoral mission ships at a cost of approximately 300 million ringgit ($71.43 million) each, said Lam Choong Wah, senior fellow at REFSA, a Malaysia research institute. He is also the author of a book on Malaysian military capability. It is very possible that China will provide the loans for the purchase, serving as a regional Ex-Im bank.

China claims most of the South China Sea as its territory. But Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have rival claims to parts of the waterway, which commands strategic sea lanes which carry some $5 trillion worth of trade a year. Of course, providing both Philippines and Malaysia with military equipment will assure their continued compliance with any territorial expansions by China, despite Washington's loud protests.

Meanwhile, as relations between the US and Malaysia have deteriorated, ties between Malaysia and China reached a new peak in December when China came to Najib's rescue with a $2.3 billion deal to buy assets of scandal-hit state fund 1MDB, helping ease Najib's concern over the firm's mounting debt. Najib is traveling with dozens of government leaders and business people to China. In a statement on Wednesday, he said Malaysia was committed to strengthening friendship with China and pushing ties to "new highs".

Najib's visit follows that of the Philippines president Rodrigo Duterte, who announced the country's "separation" from the United States and signed a raft of memoranda of understanding for Chinese investment in the country.

And as Malaysia joins the new Asian axis, which involves China and the Philippines, and perhaps Russia, the US is finding itself with increasingly fewer allies: "the push to strengthen China ties come after July lawsuits filed by the U.S. Justice Department implicating Najib in a money-laundering scandal", Reuters notes. The lawsuits allege over $3.5 billion was misappropriated from 1MDB, some of which ended up with a 'Malaysian Official 1,' identified later by U.S. and Malaysian authorities as Najib.

Confirming the strategic rationale behind the move, Lam Choong Wah added that "the truth is we could have bought these from a number of countries. But China is the only country that has provided political support for Malaysia during the 1MDB scandal. This is payback for that political support."

It appears that Joe Biden, Clinton's Secretary of State will be very busy undoing what is rapidly becoming the worst Asian "balance of power" strategic mess in decades, assuming of course that Hillary gets elected.