When a financial crisis hits, its the peripherals that go first - advertising, additional human capital, fringe benefits and speculative investments. American’s witnessed this first hand during the last few weeks as markets plunged and art speculators shied away from Asian art auctions.

When Asian auctions opened the week beginning September 15 in New York, around the same time as Wall Street crashed,  art connoisseurs picked up well researched collectors pieces from India, China, Japan, Korea and Taiwan. Those who didn’t know their art and would have otherwise picked up paintings and sculptures purely for their decorative value, preferred to abstain from making high value payments, as a result, many collectibles were auctioned off well below their estimated price

The only difference with the summer auctions, the international herald tribune said was that silly showoff buying has stopped. The uninformed newcomers of yore unconcerned with art and on the lookout for expensive fun are gone. This was made crystal clear at Christie’s and Sotheby’s Chinese sales of Sept. 16 and 17, and was further borne out in the auction of Japanese and Korean art held at Christie’s on Sept. 18, just as the financial crisis was reaching an apex.

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With the rise of Asia and the emergence of Central Asia in global economics and politics the role of the Shanghai Cooperation Organisation is growing in importance. Founded in 2001 in Shanghai, by the leaders of China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan, the SCO was originally formed due to growing security concerns in the region, but its role has been extended to encompass economic benefits to member countries as well. India, Iran, Mongolia and Pakistan remain observers to the SCO. The United States applied for observer status but was denied in 2005.

SCO countries (full members and observers) comprise a hefty 25 percent of Earth’s land area. Although the declaration on the establishment of the Shanghai Cooperation Organisation contained a statement that it “is not an alliance directed against other states and regions and it adheres to the principle of openness”, many observers believe that one of the original purposes of the SCO was to serve as a counterbalance to NATO and the United States and in particular to avoid conflicts that would allow the United States to intervene in areas near both Russia and China

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South Korea’s growing economy is hungry for oil and is actively competing with China for oil and natural gas from Russia, its closest oil rich nation. South Korea is interested in getting a spur of the Asian pipeline being built by Russian pipeline monopoly Transneft, the company’s vice president, Mikhail Barkov, told Reuters.

A source close to the South Korean embassy in Moscow confirmed to Reuters on Wednesday that South Korea is interested in the pipeline project and in importing Russian oil, which would allow the country to diversify imports away from the Middle East.

In the past South Korea has evinced interest in importing oil through the Eastern Siberia-Pacific Ocean oil pipeline (ESPO). Korean National Oil Company (KNOC) representatives are also believed to be in talks with the Russian oil company Transneft over the construction of a branch of the ESPO pipeline that would stretch through North Korea to South Korea. The oil pipeline is projected to run alongside a gas pipeline.

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Hong Kong tycoon Li Ka-shing, the Warren buffet of Asia, has bought heavily into bank of East Asia after stocks of the Asian bank plummeted more than 11 percent.

Warren E. Buffett, the America’s most famous investor and one of the world’s richest men, announced on Tuesday that he would invest $5 billion in Goldman Sachs, the embattled Wall Street titan, in a move that could bolster confidence in the financial markets.

Following his lead, Li Ka-shing, who has built a massive empire ranging from shipping to education in Asia and beyond, on Thursday reportedly swooped in to buy Bank of East Asia’s shares, bolstering confidence and Asia and helping Hong Kong’s fifth-ranked lender stay afloat.

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Two days before Taro Aso an outspoken conservative who has advocated a return to old-style government spending to stimulate Japan’s economy, was nominated to power, Nomura Holdings, Japan’s largest brokerage, reached a deal to buy the Asian operations of Lehman Brothers.

The Japanese bank announced it would pay US$225 million for Lehman’s equities and investment banking operations across Asia, which includes Japan and Australia. In bailing Lehman’s out, Nomura told the AFP it would offer employment to all 3,000 Lehman Brothers’ workers in Asia.

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China and India are aggressively and strategically competing over gaining control of international waters south of Hambantota, Sri Lanka. Over the years, the two countries have been fortifying their forces around the vital water way in a bid to gain influence in the region.

The vital water way lies south of Sri Lanka and north of Antarctica in the Indian Ocean and is one of the world’s great trade arteries, the shipping lanes where thousands of vessels carry oil from the Middle East and raw materials to Asia, return with toys, clothes, television sets and sneakers for European consumers.

According to the International Herald Tribune these tankers provide 80 percent of China’s oil and 65 percent of India’s fuel desperately needed for the two countries’ rapidly growing economies. Japan, too, is almost totally dependent on energy supplies shipped through the Indian Ocean. Any disruption — from terrorism, piracy, natural disaster or war — could have devastating effects on these countries and, in an increasingly interdependent world, send ripples across the globe.

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There is a brilliant white light at the end of the tunnel of U.S. financial woes - lucrative jobs in emerging Asia. As investment banks fold in the U.S. and hundreds lose their livelihoods, banks in India and China are lapping up wall street bankers by the dozens. Asian economies which are growing at an average of seven percent annually, can easily absorb these globally experienced whiz kids.

New York’s governor reckons 40,000 Wall Street jobs could go in a worst-case scenario, with talk swirling of more bank deals and mergers.

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The fallout from the collapse of Lehman Brothers caused panicked selling of banking shares on Tuesday throughout Asia, where many of the failed American company’s biggest creditors are based. Even as analysts and bankers said the effects of Lehman’s failure on Asian financial markets would be limited, the 158 year old investment bank closed operations in three of their Asian subsidiaries - Lehman Brothers Asia, Lehman Brothers Securities Asia and Lehman Brothers Futures Asia, the International herald tribune reported.

The New York based investment bank also ceased trade on the Hong Kong Securities Exchange and Hong Kong Futures Exchange, but Lehman Brothers Asset Management, its asset management company, is expected to continue operations as usual.

Lehman Brothers biggest exposure in Asia was undoubtedly in Japan where it holds outstanding loans worth US$1.6 billion from seven Japanese banks, including Aozora Bank in Tokyo, to which it owes US$463 million. Lehman further told IHT that it owed Mizuho Corporate US$289 million and US$231 million to Shinsei. It also identified six other Asian banks, including the Bank of China and a unit of Citigroup based in Hong Kong. (more…)

Our sister website, China Briefing, has been running an excellent series over the past few months on China’s relations with its neighbors. While many concentrate on action within Asian nations themselves, there is little commentary about who is influencing who, and where border trade is developing.

The past week has seen two threads go up on that site concerning India and Pakistan which should be of great interest to 2point6billion readers. Links to them and to the complete series are listed below. Enjoy.

Rivals and Partners: India and China Look Forward

China and Pakistan’s Enduring Alliance

Complete Series

Asia’s growth tigers are mellowing down according to the revised statistics on the regions growing economies released by the Asian Development Bank. According to the bank, The slowdown in the U.S. economy is now gradually impacting Asia’s developing nations which are expected to grow at 7.5 percent this year, the slowest growth in the region since 2003. The ADB also slashed the 2009 growth forecast to 7.2 percent from the previous 7.8 percent as it said the global slowdown, high inflation and tight monetary policy would cut back on expansion.

Reuters quoted the report - “If the sub-prime crisis worsens significantly, Asia is bound to suffer much more serious financial effects, including an abrupt reversal of the capital inflows that have held up well so far.” Experts also believe that the decline of the U.S. economy, could change global war politics and influence trade thereby slowing the rapid pace of globalisation we have witnessed in the least few years.

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