Final Research Paper

Ashe’ Brooks-Cook
Jakub Smutny
Alyssa Sealock
Geopolitics of Oil
Final Group Research Paper


China’s foreign investment in oil in conjunction with its “Go Abroad Policy”

This group was tasked to discover information regarding China’s foreign investment in oil and it’s “Go Abroad Policy”. The intricacy of China’s expansion within the Global world is vast; this is because China is an emerging superpower within it. Located in Eastern Asia and bordering the East China Sea, Korea Bay, Yellow Sea, and South China Sea, between North Korea and Vietnam (CIA World Factbook), China is the world’s fourth largest country with a current population of 1,336,718,015 (CIA World Factbook). Once a country of seclusion, which used practices such as mercantilism to run its economy, China has now surfaced upon the global market, making it the largest exporter in the world as well as the second largest economy after the United States. China has a GDP of $9.872 trillion, making it third only to the European Union and the United States (CIA World Factbook). China’s vast purchasing power subsequently allows China to become a major player in the oil market. Since as early as the 1970’s which was considered the Post-Mao reform era China began to expand itself within the global market, using capitalistic methods as it had never before. During the economic reforms in 1978, China’s economy expanded at a spectacular average annual growth rate of nearly 10% (Christie). This was accelerated by reformist leader Deng Xiaoping in the 1980s and 1990s. This policy was further extended under the leadership of Communist Party member General Secretary Hu Jintao and Premier Wen Jiabao who were determined to integrate China following a post-World Trade Organization (WTO) access era (Lewis). During this time of growth and expansion up until the 1990’s China was self sufficient in oil production. China then became reliant upon the oil market in 1993, when demand for oil exceeded supply. In 1993 “Premier Li Peng designated as the primary goal of the country’s energy strategy ‘to secure the long- term and stable supply of oil to China’ (Lewis). When China initially began to import oil, it purchased the majority of its oil on the spot market. A spot transaction is an agreement to buy or sell a commodity under a price agreed-upon at the time of the arrangement. “The major sources of oil were the Middle East, the largest oil producing region world wide (42%; Oman 26%, Yemen 11%), (Southeast-) Asia (33%; Indonesia 26%) and Africa (13.6%; Angola 7.8%)” (FIW Report).
Since this time China has been on an ongoing mission to increase its oil imports and independence from the spot market particularly following a policy that allows for China to obtain long term oil deals in oil rich countries which would aid China in complete oil independence from the rest of the world, in particular from OPEC nations and the U.S. China has refused to be a member of the IEA for this very reason, mainly due to the fact that if China were to join the IEA it would be subject to its rules and regulations and to the will of the United States.
So why is it that China has become so aggressive toward the attainment of oil and it’s independence from the rest of the World? We’ll
“According to the IEA’s 2009 Reference Scenario (see IEA, 2009), China’s oil consumption would more than double in the medium-term, from 7.7 million barrels per day (mb/d) in 2008 to 16.3 mb/d in 2030. Concurrently IEA (2009) projects that China’s domestic oil production will fall from 3.8 mb/d in 2008 to 3.2 mb/d in 2030. As a result, the country’s net import needs would sky-rocket, from 3.9 mb/d in 2008 to 13.1 mb/d, making China the world’s largest net importer of crude oil by 2030, slightly ahead of the United States (13.5 mb/d in 2008, 12.7 mb/d in 2030). From the Chinese perspective this means moving from a net import dependence ratio of 51% in 2008 to 80% in 2030. As a comparison, the United States is expected to remain in a range of 73%-74% up to 2030, while OECD Europe is expected to move from a dependence ratio of 70% in 2008 to 88% by 2030, essentially due to falling North Sea production” (FIW Report).

Currently China has a proven oil reserve of 20.35 billion bbl and subsequently produces 3.991 million bbl/day but consumes more than 8.2 million bbl/day and imports more than 4 million bbl/day (CIA World Factbook). China National Petroleum Corporation (CNPC), the China Petroleum and Chemical Corporation (Sinopec) and the China National Offshore Oil Corporation (CNOOC) are currently the companies which are in charge of oil supply within China.
China’s consumption of oil is mainly associated with China’s growing population. Its oil consumption is mainly attributed to transportation and overall development within China associated with construction. “In absolute terms, consumption of petroleum products for transportation increased more than threefold between 1990 and 2000 and more than two-fold again from 2000 to 2007. The major reasons behind this development are increasing urbanization, higher per capita incomes and a corresponding growth in the private vehicle fleet. Between 1990 and 2007, China’s total urban population doubled from 300 million to 600 million, per capita income (at constant prices 1995) more than quadrupled, and the number of passenger cars increased from 1.6 million to 32 million” (FIW Report).
Although China does not possess a Ministry of Energy, the main organization associated with China’s energy policies up until 2005 was the National Development and Reform Commission (NDRC). It’s power were to include issues dealing with pricing, investments, long term development planning and researching and approving foreign cooperation projects. After 2005 the National Energy Administration (NEA) was created to replace the NDRC and essentially has the same duties. This body of government is basically responsible for approving all projects abroad that China is associated with. China’s presence within the international oil market has allowed it to become a major player over the international community, thus maximizing its ability to exert influence over other regions of the world. It has worked effortlessly to increase it’s oil security which “entails guaranteeing that the country’s demand for oil (which is necessary for the sustainable development of both economy and society) is met in satisfactory terms as regards quality, quantity and price” (FIW Report). A form of Energy security is to diversify sources of imports in order to guarantee the greater stability of the market. This is a strategy that China is in the process of working toward.
China’s “Go Abroad Policy” was officially established in 2002, it gives both financial and political support toward foreign direct investment of Chinese companies and corporations abroad. “It is aimed at various targets: to make efficient use of China’s huge foreign exchange reserves, to secure resources, to acquire technology, to gain access to established distribution networks, and to reduce the risk of Chinese enterprises getting caught by non-tariff barriers to trade” (FIW Report). “Chinese companies that invest in resource extraction abroad often target other developing countries, especially in Africa and Asia” (Rossi). Now we will take a closer look to see how China deals with foreign investment in such countries.

China and the Middle East

In terms of satisfying China’s ever-growing energy requirements, the Middle East has become an increasingly important partner. For oil alone, the petroleum-producing countries of the MENA have taken on a vital role in providing China with its most precious natural resource. The domestic scarcity of oil coupled with an unprecedented and steadfast economic growth has turned China from a relatively self-sufficient nation into a one increasingly dependent on foreign oil imports. This trend is likely to continue in the upcoming years, partly because of China’s positive credit situation as one of the few places seemingly unaffected by the global recession. The continuous efforts of the Chinese leadership in striking deals with oil-producing countries, the majority of which being located in the MENA, will be integral for this long-term process. For, even if oil makes up only a marginal portion of China’s domestic energy consumption, the utmost importance of the black gold as a commodity enabling all different sectors of the economy to operate smoothly and without technical restraints has been acknowledged.
According to the U.S. Energy Information Association (EIA), in 2009 the Middle East was the largest source of oil imports for China. Of the 4bn barrels/day imported by China in this year, approximately 2bn came from the area around the Persian Gulf. Among the bulk of countries contributing to this trade, Saudi Arabia has stood at the forefront, exporting roughly 839,000 bbl/day - one third of China’s total crude oil imports. This was only paralleled by a similarly sized exports from Angola (644,000 bbl/day in 2009) whose potential for China is likely to increase given the relative stability of the region. In fact, the latest estimates attest to those long-term predictions as Angola has ostensibly surpassed Saudi Arabia in terms of daily imports of crude oil to China. Depending on China’s economic performance in the coming years and the situation on the world oil markets, the Asian giant will likely tilt more towards the MENA region as a guarantor of stable oil supply. This will run corollary to the pressures on the domestic oil demand market which has kept on jumping unrelentingly over the past couple of years. In the first half of 2010, the year-to-year increase was 30%.
The future outlooks make a compelling case for China to lean closer towards the Middle East for sustaining its long-term crude oil demand. Most importantly, if China is to continue its growth and simultaneously place emphasis on domestic development initiatives, there is every reason to believe that its demand curve will go on rising. In this regard, the long-term peak for Chinese oil demand seems difficult to estimate. More so when China’s population pressures are set to pose challenging constraints upon the economy. In comparison to the U.S., in 2009 the Chinese domestic oil consumption was only at 2.4 barrels/day per capita, almost ten times less than the same figures for the U.S for the same period. Given China’s massive economic growth, sustaining it will entail a steady upsurge in domestic energy requirements, the government is inevitably going to rely more on crude oil imports from the Middle East.
This tendency will perhaps be augmented because of another fact. According to Oil & Gas Journal, of the world’s total proven oil reserves, 56% is located in the Middle East. When bearing in mind China’s growing need to look for oil sources abroad, this reality might help determine the preferences for the Chinese leadership as to where long-term contractual arrangements might best serve China’s interests. Nonetheless, China’s “Go Abroad Policy” has manifested a marked diversity translating into Chinese investments in different parts of the world.
In fact, China’s recent policy of diversification of foreign oil imports has seen other petroleum-producing regions grabbing some percentages of the market share from the Middle East. This has been a result of China’s effective modernization of its refining facilities which has allowed for a procession of so-called “sour crude oils” that usually come from places outside the Middle East. The increasing numbers of these facilities have gone hand-in-hand with the foreign oil diversification policy.
However, at the same time, Chinese imports from Saudi Arabia alone have been on the rise as well. According to Khalid al-Falih, the chief of Saudi Aramco, a state-owned national oil company of Saudi Arabia, the Persian kingdom’s realignment with China and India has been a “long-term transition”. An important factor for Saudi Arabia to sell less crude oil to its traditional customers, such as the U.S., have been the repercussions of the 2009 global recession which saw U.S. imports of Saudi oil plummeting by 10% from its 2005-7 peak values.
A host of new projects encompassing both downstream and upstream industry have further served as proof of China’s mindfulness of the Middle Eastern oil market. The project China-Myanmar pipeline is seen by many as an attempt of the Chinese government to seek alternative routes for its crude oil imports from the Middle East. China’s pragmatic approach toward working with governments otherwise labeled “undemocratic” has widened its strategic possibilities in the area of long-term energy policies. The Myanmar-China pipeline offers a unique chance for China oil companies to by-pass the Straits of Malacca, a narrow, 805-km water passage-way bordering Singapore. As traditionally the fastest, but still relatively lengthy, way for merchant ships coming to China through the Indian Ocean, the Straits of Malacca have taken on a high security significance. The projected pipeline bears the potential of markedly easing the security concerns associated with importing oil via this narrow stretch of water. Instead, either by using Myanmar’s seaports or further extending the pipeline towards Iran and Central Asia, China might be able to further secure its future energy supply chains.
But reaching out to Iran might play out as a tricky endeavor for China. For one, Iran’s hostile diplomatic relations with the United States, the main provider of security in the Persian Gulf and hence China’s core ally in securing seawater security in the region, have pitted China against the U.S.-led “Western World.” In 2009, Iran supplied China with 463,000 bbl/day and hence contributed significantly to China’s economic growth. Around the same time, Iran’s alleged build-up of nuclear facilities and their potential for being misused for terrorist attacks against the U.S. led the Obama administration to impose targeted sanctions against Tehran. This introduced a whole new security matrix whereby Chinese reliance on the U.S. in protecting the crude oil imports heading eastwards has become complemented by China’s disapproval of the U.S. sanctions vis-à-vis Ahmadinejad’s regime. As Beijing’s international leverage continues to grow, one may expect more outspoken remarks towards U.S. foreign policy initiatives in the Middle East and particularly Iran, which for the Chinese has come to represent a vital economic interest. Other than oil, scholars have pointed out several other incentives for China to nurture goodwill with Tehran, including China’s avowed problems with radical Islam in its Western provinces, a lurking Iranian market for Chinese-made military hardware or the long-term strategy replace the U.S. as the chief oil imports security provider. All these aspects are somewhat controversial and would certainly merit deeper investigation.
Lastly, it is perhaps worth exploring whether Chinese increasing involvement in the Middle East can somehow threaten the U.S. interests there. Basically, there are two contending views regarding this matter. A somewhat mainstream, “U.S.-conservative” perspective posits that, due to Chinese thrust to come up with its own security capabilities, most importantly a strong navy capable of safeguarding Chinese oil imports from the MENA, the traditional U.S. hegemony in the Pacific and beyond has been challenged. These scholars ascribe China’s alleged desire to become a true superpower to a widespread sense of nationalism existing within the leadership circles as well as a general tendency to attain “greatness.” Others rejoin by describing China’s engagement on the global oil market as “peaceful diplomacy” marked by striking strategic partnerships and “confidence-building measures.” According to them, China is well aware of its military inferiority vis-à-vis the U.S., as well as its dependence on the latter to help with securitizing oil sea-lanes from the Middle East. In any case, it will be interesting to see how future developments on the global energy markets will shape U.S.-China relations over the Middle East, a region that is poised to attract an increasing amount of investors in the decades ahead.

Securing Oil Resources: China’s Evolving Presence in Africa

Due to the fierce competition of resources and political upset in the Middle East, China is seeking new suppliers to satisfy its oil hungry appetite. By maintaining its ‘no-strings attached’ money supply to invest with, China has become a key player in the emerging African oil industry across the continent and has expanded its relations there since the 1950’s as part of its broader “Go Abroad Policy”. The Chinese government, especially after the country’s economy started booming, has been liberal in offering credit and aid on generous terms to oil producing African nations. By some counts, China now sources 25-30% of its oil imports from the African continent, and in 2009 alone, China took 30% of Angola’s total oil exports and 60% of Sudan’s output.
Africa is seen as an answer to East Asia’s oil dependency dilemma. Companies can seemingly acquire equity stakes in African oil assets and become deeply and personally involved in African oil extraction in a way impossible in the Middle East. China has been and continues to court the African oil nations heavily giving over $20 billion dollars of aid and concessionary financing to many African governments, and generating profile visits, delegations, and summits in Beijing.
China is determined to expand its presence throughout Africa. China’s oil refining industry is mostly geared to handle sweet crude (with a low sulfur content), which favors African oil over Saudi Arabian (a mix of sweet and sour crude). However, (with Saudi Arabian help and finance in some cases) China built refineries capable of dealing with Saudi sour crude. Nevertheless, Africa remains important but also contentious for China.
Since China has seriously started to seek oil supply deals in Africa, Beijing has taken what some see as a highly pragmatic approach, stressing business and development and keen to emphasize that it was not a former colonial power but a friend of the region. It is a strategy that has largely worked, despite criticism that China has unfairly used diplomatic leverage, ignored corruption and conflicts, done nothing to encourage transparency in the industry and little to create jobs in the countries in which it invests. Beijing counters that Americans and Europeans take more oil from Africa than China does, and have done so for decades through imperialism and business, and have hardly left a shining legacy on the continent.
China-Africa trade is predicted to continue to rise and China’s investment strategy in Africa is a simple one: China will build infrastructure in exchange for oil. In 1995 China’s trade with Africa totaled $3 Billion dollars, in 2006 its trade totaled $55 billion dollars and by 2008 China’s trade with Africa totaled $107 billion dollars . The Bloomberg website has indicated that China’s investment into Africa may rise to 70% by 2015, which would mean an increase in investment of $50 billion from 2009. Furthermore it is projected by 2015 that as the Asian nation seeks to acquire resources, bilateral trade between China and Africa will reach $300 billion, doubling the level of trade from 2010. Not only is China the biggest builder of infrastructure within Africa, it is also the biggest lender; subsequently China-Africa trade has just pushed past $100 billion annually. In 2006, China had been in third place, behind the US and France, among Africa’s trade partners, while by 2008 China had leapfrogged over France, but still trailed behind the U.S. by $140 billion. China asserts that its trade is responsible for 20% of Africa’s economic growth.
China’s demand for African oil and other raw materials has inevitably helped to perpetuate Africa’s reliance on oil exports and, in so doing, further prevents the growth of more labor-intensive industries, such as agro-business and manufacturing. Ten percent of Sub-Saharan African exports went to China in 2005, by 2007, the figure was 13.4 %. Five oil and mineral exporting countries accounted for 85 % of The Peoples Republic of China (PRC) imports from Africa. In 2004, oil and gas were 62% of Africa’s exports to China. In 2009, oil, gas and minerals accounted for 86% of such exports. Oil accounted for 80 % of 2005 U.S. imports from Sub-Saharan Africa. Petroleum products accounted for 92 % of the value of goods imported under the U.S.’s preferential African Growth & Opportunity Act (AGOA) in 2008, when 88 % of overall U.S. -Africa trade (AGOA and non-AGOA) was in petroleum products.
About 47 % of the oil China consumed in 2006 and 50 % in 2008 was imported. PRC imports in 2006 were 6.8 % of the world oil trade and supplied 12% of all energy China consumed, coal, hydropower and nuclear power being major sources of Chinese energy consumption. China’s 2005 oil imports from Africa provided 4% of China’s energy needs. Of the 31% of PRC oil imports from Africa, Angola’s share was 14%, Sudan’s 5%, Congo (B)’s 4%, and Equatorial Guinea’s 3%. African oil supplied 14.5% in 2006 and 16% in 2008 of all the oil China consumed, not much different from U.S. imports from Africa of 13.2% of all oil it consumed in 2006, imports that provided 5.2% of U.S. energy needs. China receives 8.7% of Africa’s oil exports, while the European Union and the U.S. each take 33%, and China’s investment in Africa’s energy industries amounted to one-sixteenth of the total global investment in these industries, showing that China hardly dominates Africa’s oil markets.
China is often accused of participating in exploitative business practices in Africa. Historically, the price of oil and other globally traded primary products, relative to that of industrial commodities, have been significantly determined by asymmetries in political power. Apart from “unequal and disparate exchange” that affects oil and primary products generally, oil is capital intensive, creates few jobs, is environmentally damaging and corrupts producing states. People in oil-rich regions, such as southern Sudan and Nigeria’s Niger Delta, receive so few benefits from their patrimony that violent conflict has ensued. China is in Africa for oil because 80 % of the World’s proven conventional (non-tar sands, non-shale) oil reserves are state-owned and account for two-thirds of oil production.
China's growing energy partnership with Sudan represents one of a number of areas where Sino-U.S. energy interests diverge in Africa. China National Petroleum Corporation established oil exploration rights in Sudan in 1995. Two years later when Washington cut ties with Sudan China filled the vacuum, making Sudan China's largest overseas production base. More than half of Sudan's oil exports go to China, accounting for 5% of China's total oil imports. C.N.P.C. owns a 40% stake in the Greater Nile Petroleum Operating Company and pumps over 300,000 barrels per day in Sudan. Another Chinese firm, Sinopec, is constructing a 1500 kilometer pipeline to Port Sudan on the Red Sea, where China's Petroleum Engineering Construction Group is building a tanker terminal. In recent years China's political, economic and military relations with Africa have been subordinated to its quest to secure energy resources in the African continent as energy resources are being secured in exchange for aid, arms or infrastructure investment. China's relations with Africa have shifted from holding a strong ideological bias in support of communist regimes and Marxist insurgencies to being led by market and resource considerations. African states are drawn to China by its non-ideological, non-interventionist approach, which contrasts with the Western approach that places an emphasis on democracy, governance, human rights and humanitarian intervention.
With Sudan and Iran together supplying China with 20% of its oil imports, U.S. attempts to contain these regimes bring it into direct confrontation with China's energy security policies. While there have been gestures of rapprochement in Sino-U.S. relations such as the recently initiated Sino-U.S. Strategic Dialogue and both states along with India, Australia, Japan and South Korea establishing an energy partnership known as the Asia Pacific Partnership on Clean Development, the competition to secure energy resources on the world stage could fuel their already shaky relationship. The recent failed bid by Chinese energy company China National Offshore Oil Corporation to acquire U.S. energy company Unocal is evidence of this. Facing a plethora of internal crises ranging from poverty to poor governance and civil war, Africa is likely to emerge as a volatile stage of Sino-U.S. energy competition. African states have been drawn to China by its non-interventionist, non-ideological approach in conducting relations, although China's attempts to secure energy resources in conflict-ridden states by offering aid or arms-for-oil could heighten instability in the region.
In Conclusion, the importance of this topic and of China relations within the World is vast. Now as a leading importer of oil within the world economy the power structure of China has and will continue to shift. As the U.S. looses more and more control over the Global market it will be interesting to see in the coming years how much influence China will truly have on the rest of the world, as it attempts to gain oil independence and secure its place within it.
Hopefully our group has provided a comprehensive explanation of China’s involvement in foreign investment of procuring oil and its “Go Abroad Policy” particularly within the Middle East and Africa and imparted a glimpse into China’s future regarding such policy as well as revealed the importance of learning about this subject matter.












Works Cited


CIA World Factbook: https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html

FIW Research Reports 2009/10. Edward Hunter Christie (Ed.), Joseph Francois, Waltraut Urban, Franz Wirl. ” China’s foreign oil policy: genesis, deployment and selected effects”. January 2010.

Lewis, Dr. Stevens W. Energy Security: Implications For U.S.-China-Middle East Relations

Rosen. Daniel H. and Thilo Hanemann. “China’s Changing Outbound Foreign Direct Investment Profile: Drivers and Policy Implications”.

Rossi, Vanessa. and Nora Burghart . “As China's economy matures, its companies are looking for opportunities to expand around the world”. The China business Review

China's Interest in Africa

Some interesting points taken from a recent article regarding China's interest in Gaddafi, by Pepe Escobar of Aljazeera.

It is important to remember that Africa is absolutely crucial for China's energy strategy, as their top oil suppliers are Saudi Arabia, Iran, Angola, Russia, Oman and Sudan. Saudi Arabia is China's top oil supplier (1.1 million barrels a day; the Middle East as a whole exports a total of 2.9 million); that limits Beijing's leverage to really influence the Arab world.

~China has 50 large-scale projects in Libya, but still invests less than in Angola and Zambia. From a Libyan point of view, China is a major Gaddafi financial partner – the third-largest buyer of Libyan oil behind Italy and France, with the added bonus of following its world-famous "non-interventionism" policy.

~China's top African oil suppliers are Angola, Sudan and Nigeria – all ahead of Libya, and 80 per cent of Libya's oil reserves, of roughly 44 billion barrels, are in the Sirte basin – spread out between Tripolitania and Cyrenaica, a great deal of it under on and off rebel control.

~Some 70 per cent of Libya's GDP is connected to oil. Beijing would hate to contemplate a balkanisation of Libya along Korea's lines – an impoverished, oil-less, Gaddafi-ruled west/North Korea opposed to an affluent, oil-rich, Western-aligned Cyrenaica/South Korea.

Now with a Libyan stalemate as the most possible scenario, Beijing is factoring its influence in the price of oil. Oil consumption in China is about 4 per cent of GDP. Each $10 increase in the price of a barrel dangerously increases that proportion by 0.4 per cent.China has to worry about Iran, its number two supplier (of oil and also natural gas), under severe sanctions that have shrunk its energy production.

Whichever the latitude, Beijing finds the Pentagon's mighty machine interfering with most of its key sources of energy; half of China's oil imports in 2011 came from MENA. The threat is graphic, as Beijing sees it.Africa, in the periphery of Eurasia, is a key battlefield of the New Great Game – as the global geo-economy is rearranged, and the competition between the US and China for energy resources is emphasized.

Rejoinder to Ross' Piece

In response to Robert Ross' article I published earlier, two scholars, M.A.Glosny and P.C.Saunders provide a rejoinder:

This came out in International Security journal, Fall 2010 ("Debating China's Naval Nationalism")

Overall, though still seeing the world through the all-encompassing lens of China's thrust to address its national-security concerns (which is probably a very fair and true depiction given that the world of IR is still driven by the imperatives of sovereign interests), the article explains China's inclination to develop greater sea power from a different angle.

First, it dismisses Ross' geopolitical analysis and rather claims that, for China, the "security environment" has changed. Today, the Chinese are concerned about developing "confidence-building measures", "strategic partnerships" and "regional organizations". As it stand now, China is very far from attempting to challenge the U.S. in its maritime power dominance.

The Chinese are aware of the fact that they cannot complete with the U.S. militarily. And, indeed, they do not even want to. They priorities are tangled to preserving its own global interests which, as the two authors argue, have been taken by the Chinese leadership as a need to focus its activities on projecting a "limited naval power" whereby interests of other states would not be compromised.

In other words, there has been a shift from focusing on national security to "regime security" which has worked as a reflection of the intertwined nature of global economy and multilateral politics.

The authors also criticize Ross' over-emphasis on "Chinese nationalism" as a driving force behind the country's ostensible thrust toward projecting massive naval power for the purpose of boosting military capabilities. The two authors argue that the extent to which Chinese nationalism influences decision-making is difficult to tell, partly because there is a considerable lack of transparency when it comes to China's domestic affairs. In addition, since past waves of nationalism inside China did not translate into adoption of aggressive policies, there is little evidence to suggest that the current plans to build new sea carriers have roots in an increased public demand to increase the country's prestige abroad.

I personally think it is important here to notice how things that appear daunting on the surface (China building a new aircraft carriers in order to boost international prestige and assume desirable naval strength) should be viewed through a more nuanced lens (China building these carriers for other than military purposes, such as international peacekeeping, humanitarian missions..etc.).

China might be aware of the potential for its regime to fall as a result of the continuous opening of its economy. That's why, it may be plausible to argue that greater efforts aimed at ameliorating the regime's image on the international scene through showing a good-will have been pursued by the Chinese leadership.

I think it can ben only through Chinese people's increasing exposure to the outside world that the regime inside the country can gradually turn more democratic. On the other hand, I think one has to contend that while Chinese government retains its capability to raise living standards through formidable economic performance, the arguments for a complete democratization (in whatever such a vague term may mean) should be carefully analyzed and thought through.

Diversification of the Oil Markets and China's Oil Sescurity targets

http://www.fiw.ac.at/fileadmin/Documents/Publikationen/Studien_II/SI03.Studie.China__s_oil.pdf

FIW Research Reports 2009/10 N° 03
January 2010

China’s foreign oil policy: genesis,
deployment and selected effects
Edward Hunter Christie (Ed.), Joseph Francois, Waltraut Urban, Franz Wirl

This is a long article, but I chose to comment on the piece on Diversification, risks and threats and China’s oil security targets

According to Winston Churchill ‘the key to oil supply security is with diversity and diversity alone.’According to the article their are three types of diversity that are relevant for energy security: diversity of suppliers, diversity of routes, and diversity of fuels. In regards to diversity of suppliers and fuels the article actually talks about how it is better to have one reliable supply rather than several shaky supplies which would reduce overall risk. In regards to diversity of routes, it is important to do a risk analysis factoring in cost and benefits to creating new routes in relation to the risk associated with existing routes.


China has undergone a major campaign towards securitization of its oil resources. China can securitize it's oil in two ways, either confrontationally or non. Since much of China's oil is exported by sea mainly through the Straits of Malacca, one way that it can securitize it's shipments non-confrontationally is by finding alternative ways to import its oil such as pipelines or third parties. Potential threats to China's shipping of oil by sea include largescale terrorist attacks, piracy, naval blockades, major shipping accidents and/or extreme weather events. The Straits of Malacca is such an important location for China because it would be a pivotal blocking point of oil exports if say they were to get into conflict with the United States. If the United States wanted to cut off China's oil the Straits is where it would most likely occur. Since the Iraq war China has decided to focus more on issues of oil security. "ong Lixia, an energy expert at the Chinese Academy of International Trade and Economic Cooperation stated: ‘The turning point in China's energy strategy was the Iraq war. After 2003, both the companies and the government realized China could not rely on one or two oil production areas. It's too risky."

Issues such as diversification and Securitization of oil are pressing and will dictate the future of China and its growth.

A little bit of realpolitik

Article: Robert S. Ross, "China's Naval Nationalism: Sources, Prospects, and the U.S. Response", International Security, Fall 2009.

This is a classic mainstream text holding the worldview of a global race for geopolitical supremacy between the U.S. and China. It reminded me a lot of the vast majority of articles contained in the FP magazine that we can pick up every week at GPIA office :)

The author proposes a thesis whereby the chief point of concern is China's alleged spiking military build-up, especially in the area of naval security. He identifies that as a growing concern for the U.S. national security and its position as a power hegemon in Pacific blue-waters.

Ross claims that in light of China's alleged desire to attain a great power status similar to the U.S., its leadership has decided to invest heavily into the nation's naval forces. This, in turn, might pose some threat to the established security interests of the U.S. (which are portrayed as vital not only in terms of the U.S. national security, but also from the viewpoint of providing security to U.S. main partners in the region, such as Japan or Singapore). In this regard, China is depicted as an unwelcome challenge.

According to Ross, this thrust for the attainment of greatness is further complemented by China's "pseudo-national interest strategy". Indeed, this is the main thread throughout the whole article as the Chinese leadership, however rational and relatively non-aggresive in terms of geopolitical agenda, has been ostensibly captured by China's nationalists who seek increased militarization to fulfill aspirations of the Chinese people.

In Ross' view, this kind of nationalism is wholly irrational and undermines China's long-lasting strategy of power projection via peaceful diplomatic means. This approach has, for decades, helped China attain its current economic growth and, at the same time, left unchallenged the U.S. naval supremacy in the Pacific. Since the author clearly associates himself with the view that, in order for world's peace and stability, we need the U.S. to singularly take on the protection of blue-seas and maintain its status as a chief guarantor of international security, he obviously dismisses this avowed Chinese nationalism. But by supposedly acknowledging its dominant position within the society (a point I found lacking credible evidence), Ross makes several alarming points with possible consequences for the U.S. should this whole nationalistic wave let loose.

However, he concludes by appeasing everybody that China is still lagging far behind the U.S.'s naval capabilities. According to him, some of the most crucial short-term implications are possible distortions in the U.S.-China diplomatic relations which, as he stresses, should desirably be kept friendly. Chinese nationalists should regain their sanity, strip their overly ambitious plans and stop investing heavily into navy.

By and large, this is an interesting piece. Not for the originality of argument, but rather for the chance to see the lines along which U.S. mainstream analysts write. There is a critical rejoinder to this published in the same magazine few months later. I will read it soon and then provide a summary. In this way, we can set ourselves a stage for a sound analytical framework.

'No-Strings' Attached

In a piece by Paul French and Sam Chambers, entitled "Oil on Water", the two authors reveal interesting info about China's oil hungry no strings investment in the emerging African oil industry.

As we know, the Chinese government has been very liberal in offering credit and aid on generous terms to oil-producing African nations. China now sources 25-30 percent of its oil imports from Africa, and in 2009, China took 30 % of Angola's total oil exports and 60% of Sudan's output.

China has courted over US$20 billion of aid to African oil nations, and Angola briefly overtook Saudi Arabia as China's major oil supplier. China's oil refining industry is mostly geared to handle sweet crude, which favors African oil over Saudi Arabian's mixture of sweet and crude.

Critics claim that China has unfairly used diplomatic leverage, ignored corruption and conflicts, and done nothing to encourage transparency in the industry, and done little to create jobs in the countries with which it invests. Beijing counters that Americans take more oil from Africa than China does, and through imperialism and business.

Oil Wars: China's Influence on the U.S. Economy pt. 1 of 5

Check out this youtube video on China, it's great

http://www.youtube.com/watch?v=cNnsyuLQ08g&feature=related