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
Monday, May 16, 2011
Wednesday, May 4, 2011
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.
Tuesday, May 3, 2011
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.
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.
Wednesday, April 27, 2011
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.
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.
Tuesday, April 26, 2011
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.
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.
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.
Friday, April 22, 2011
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
http://www.youtube.com/watch?v=cNnsyuLQ08g&feature=related
Wednesday, April 20, 2011
Summary of Feeding the dragon: the relentless drive by Chinese energy companies to buy ovrseas oil and gas assets is likely to be constrained by forei
http://find.galegroup.com/gtx/infomark.do?&contentSet=IAC-Documents&type=retrieve&tabID=T003&prodId=ITOF&docId=A140095722&source=gale&srcprod=ITOF&userGroupName=nysl_me_newsch&version=1.0
Feeding the dragon: the relentless drive by Chinese energy companies to buy ovrseas oil and gas assets is likely to be constrained by foreign politics.(China).
Petroleum Economist 72.12 (Dec 2005): p10(2). (1302 words)
In lou of China's go-abroad policy, the country has began to lax many of it's policies such as "loosening its control over the mergers and acquisitions (M&A)" which will help China to procure oil more easily abroad. According to the article the rush overseas "is part of a wider, explicit government strategy". Deals were signed in Australia, Myanmar and Indonesia; and Sinochem by China's National Offshore Oil Corporation (CNOOC). According to the article "the crowning glory was CNPC's successful $4.4bn acquisition of PetroKazakhstan, which gives the Chinese firm proved and probable reserves of 0.55bn barrels of oil equivalent at roughly $7.60 a barrel and, importantly, the chance to pump oil from fields direct to China through an under-construction 1,000 km pipeline." In 2004 the company "singed 48 contracts with 20 countries" and "over the next 15 years plans to spend a total of $18bn on oversees acquisitions and stakes. One key advantage to China's go-abroad policy is the fact that China does not adhere to restrictions set by other countries namely the United States and what countries it can do business with. As a result China has a history of making deals with corrupt regimes such as Uzbekistan, Myanmar and Sudan. For China the bottom line is business.Su
Feeding the dragon: the relentless drive by Chinese energy companies to buy ovrseas oil and gas assets is likely to be constrained by foreign politics.(China).
Petroleum Economist 72.12 (Dec 2005): p10(2). (1302 words)
In lou of China's go-abroad policy, the country has began to lax many of it's policies such as "loosening its control over the mergers and acquisitions (M&A)" which will help China to procure oil more easily abroad. According to the article the rush overseas "is part of a wider, explicit government strategy". Deals were signed in Australia, Myanmar and Indonesia; and Sinochem by China's National Offshore Oil Corporation (CNOOC). According to the article "the crowning glory was CNPC's successful $4.4bn acquisition of PetroKazakhstan, which gives the Chinese firm proved and probable reserves of 0.55bn barrels of oil equivalent at roughly $7.60 a barrel and, importantly, the chance to pump oil from fields direct to China through an under-construction 1,000 km pipeline." In 2004 the company "singed 48 contracts with 20 countries" and "over the next 15 years plans to spend a total of $18bn on oversees acquisitions and stakes. One key advantage to China's go-abroad policy is the fact that China does not adhere to restrictions set by other countries namely the United States and what countries it can do business with. As a result China has a history of making deals with corrupt regimes such as Uzbekistan, Myanmar and Sudan. For China the bottom line is business.Su
China's "Peaceful Oil Diplomacy"
Article: Hongyi Harry Lai, "China's Oil Diplomacy: Is It a Global Security Threat?" Third World Quarterly 28.3 (2007)
This article examines China's expansion into the Middle East in terms of increasing oil imports, and whether or not this represents a threat the U.S. national security by virtue of tapping into the U.S.'s source of energy resources.
The author argues that these fears have been largely exaggerated. He supports this by mentioning China's support for the U.S. actions vis-a-vis Iraq (voted in favor of UN SC Res. 1441/2002) or the still limited capacity of China's maritime forces whose main preoccupation remains covering of the Taiwan Strait in South China Sea. The Chinese ability to control the oil sea lanes to/from the Persian Gulf is thus very limited. With this in mind, China depends on help from other countries, including the U.S.
Also, in light of the fact that the U.S. oil imports from Arab OPEC nations only accounted for 14.8% in 2005 (I will have to check the latest data on this), the proposed challenge to the U.S. national security does not seem like an urgent matter.
Lastly, China's "peaceful oil diplomacy" has been underlined by the fact that, in 2004, China's domestic energy consumption was still largely based on coal (67.7%); oil accounted for 22.7%. As the study argues, thus, "imported oil plays only a minor role in China's energy consumption". With regards to oil imports from Iran, to mention some of the growing worries amongst the Americans who perceive China's friendly ties with Iran as a reason for caution, the Middle Eastern country supplied only 1% of China's total energy consumption in 2003. On top of all that, it is argued that China has been aware of the growing concerns pertaining to its rapid global expansion and growing energy needs and, thus, so far restrained from any actions that might threaten mutual relations with the U.S.
With this in mind, my personal comment would be that China's speedy development and a heightened thirst for oil are likely going to be based increasingly on oil as a vehicle for growth and urbanization. Hence, with oil expected to be gradually replacing coal in its importance as a core resource, one might expect that China could place more emphasis on securing oil imports from the Middle East in the future. This, in turn, could potentially re-shape the hitherto maintained balance of power and regional/global security framework.
This article examines China's expansion into the Middle East in terms of increasing oil imports, and whether or not this represents a threat the U.S. national security by virtue of tapping into the U.S.'s source of energy resources.
The author argues that these fears have been largely exaggerated. He supports this by mentioning China's support for the U.S. actions vis-a-vis Iraq (voted in favor of UN SC Res. 1441/2002) or the still limited capacity of China's maritime forces whose main preoccupation remains covering of the Taiwan Strait in South China Sea. The Chinese ability to control the oil sea lanes to/from the Persian Gulf is thus very limited. With this in mind, China depends on help from other countries, including the U.S.
Also, in light of the fact that the U.S. oil imports from Arab OPEC nations only accounted for 14.8% in 2005 (I will have to check the latest data on this), the proposed challenge to the U.S. national security does not seem like an urgent matter.
Lastly, China's "peaceful oil diplomacy" has been underlined by the fact that, in 2004, China's domestic energy consumption was still largely based on coal (67.7%); oil accounted for 22.7%. As the study argues, thus, "imported oil plays only a minor role in China's energy consumption". With regards to oil imports from Iran, to mention some of the growing worries amongst the Americans who perceive China's friendly ties with Iran as a reason for caution, the Middle Eastern country supplied only 1% of China's total energy consumption in 2003. On top of all that, it is argued that China has been aware of the growing concerns pertaining to its rapid global expansion and growing energy needs and, thus, so far restrained from any actions that might threaten mutual relations with the U.S.
With this in mind, my personal comment would be that China's speedy development and a heightened thirst for oil are likely going to be based increasingly on oil as a vehicle for growth and urbanization. Hence, with oil expected to be gradually replacing coal in its importance as a core resource, one might expect that China could place more emphasis on securing oil imports from the Middle East in the future. This, in turn, could potentially re-shape the hitherto maintained balance of power and regional/global security framework.
Monday, April 18, 2011
Concrete Project Outline?
I think we really need to come up with some tangible plan or ideas of how to proceed with this project.
(1) What will be the topic of the project? It does not suffice to limit our analysis to where China gets its oil from or what its future energy requirements will be.
- we should choose a specific aspect of this very broad topic so that we can better focus our research. Personally, I think there are two good ways we can approach it:
(a) Focus on China's oil policies towards a specific region (Africa, Middle East) and how this changes hitherto maintained balance of power there. Alternatively, what are the positive (greater development aid for the region..etc.) and negative (environmental degradation, propping up undemocratic governments..etc.) implications of China's growing involvement in that particular region.
(b) China's "oil expansion" into the Middle East and its potential consequences in terms of contending security concerns of other major powers there (the U.S. in particular). Can China's growing share on the Middle Eastern oil markets precipitate conflict? Is China speeding up the expansion of its maritime forces in order to better safeguard its oil imports (and, thereby, challenging the post-WWII U.S. hegemony in this area)?
- Let's talk about this. If anyone has a different view on how we should proceed, we can debate it.
(2) What is the outline and who's going to work on which part?
- obviously, without resolving the first point, there is no way of coming up with an outline. However, based on the blog posts made so far and our general interests, I propose the following:
TOPIC: CHINA OIL AFFAIRS: THE SHIFTING BALANCE OF POWER IN THE MIDDLE EAST AND NORTH AFRICA
I. Introduction
II. China's Booming Economy: Past Precedents and Future Needs
(a) The Flawed Policy of Self-Reliance
(b) China's Economy Today: Growing Oil Demands, World Markets and Increased Foreign Involvement
III. The Security Framework in the Middle East
(a) The U.S. as a Traditional Provider of Security in the Middle East
(b) China's Increasing Share on the Persian Gulf Oil Market - A Threat to the U.S. Interests and Regional Security?
IV. The Security Framework in North Africa
(a) The Oil Markets in Sudan, Libya and Other Oil-Exporting Countries in the Region
(b) The Role of China: Oil Interests and the Changing Security Situation
V. Is China's Involvement in the Middle East and North Africa a Reason for Concern?
(a) How Is China's Economic Outreach Tied to a Greater Militarization of the Region? Or, Is It?
(b) U.S. Take on China's Increasingly Felt Presence in the Region
- in this paragraph, we could analyze countries like S. Arabia, Kuwait or Bahrain and whether their reliance on the U.S. as a long-lasting security provider comes at odds with China's increasing role as a top client.
V. Conclusion
Please, let me know what do you think. Over the next few days, I am going to read couple of articles on this topic.
Jakub
(1) What will be the topic of the project? It does not suffice to limit our analysis to where China gets its oil from or what its future energy requirements will be.
- we should choose a specific aspect of this very broad topic so that we can better focus our research. Personally, I think there are two good ways we can approach it:
(a) Focus on China's oil policies towards a specific region (Africa, Middle East) and how this changes hitherto maintained balance of power there. Alternatively, what are the positive (greater development aid for the region..etc.) and negative (environmental degradation, propping up undemocratic governments..etc.) implications of China's growing involvement in that particular region.
(b) China's "oil expansion" into the Middle East and its potential consequences in terms of contending security concerns of other major powers there (the U.S. in particular). Can China's growing share on the Middle Eastern oil markets precipitate conflict? Is China speeding up the expansion of its maritime forces in order to better safeguard its oil imports (and, thereby, challenging the post-WWII U.S. hegemony in this area)?
- Let's talk about this. If anyone has a different view on how we should proceed, we can debate it.
(2) What is the outline and who's going to work on which part?
- obviously, without resolving the first point, there is no way of coming up with an outline. However, based on the blog posts made so far and our general interests, I propose the following:
TOPIC: CHINA OIL AFFAIRS: THE SHIFTING BALANCE OF POWER IN THE MIDDLE EAST AND NORTH AFRICA
I. Introduction
II. China's Booming Economy: Past Precedents and Future Needs
(a) The Flawed Policy of Self-Reliance
(b) China's Economy Today: Growing Oil Demands, World Markets and Increased Foreign Involvement
III. The Security Framework in the Middle East
(a) The U.S. as a Traditional Provider of Security in the Middle East
(b) China's Increasing Share on the Persian Gulf Oil Market - A Threat to the U.S. Interests and Regional Security?
IV. The Security Framework in North Africa
(a) The Oil Markets in Sudan, Libya and Other Oil-Exporting Countries in the Region
(b) The Role of China: Oil Interests and the Changing Security Situation
V. Is China's Involvement in the Middle East and North Africa a Reason for Concern?
(a) How Is China's Economic Outreach Tied to a Greater Militarization of the Region? Or, Is It?
(b) U.S. Take on China's Increasingly Felt Presence in the Region
- in this paragraph, we could analyze countries like S. Arabia, Kuwait or Bahrain and whether their reliance on the U.S. as a long-lasting security provider comes at odds with China's increasing role as a top client.
V. Conclusion
Please, let me know what do you think. Over the next few days, I am going to read couple of articles on this topic.
Jakub
Sunday, April 17, 2011
China's Quest for The Next Empire
An article by Howard French in the Atlantic magazine (http://www.theatlantic.com/magazine/archive/2010/05/the-next-empire/8018/) discusses how Chinese companies are signing deals that involve oil production in Africa. Since the turn of the millennium, Chinese companies have muscled in on lucrative oil markets in places like Angola, Nigeria, Algeria, and Sudan.
French claims that to fully grasp China’s economic approach in Africa, one must study European imperial history—as Beijing itself has been doing. "If you look at Chinese policy documents, it is very obvious that they are focused on opening up the heart of the continent. There is clearly a long-term strategy for doing this, and it seeks to break up the north-south flow of minerals, to build east-west lines that will allow them to bypass South Africa.”
French claims that to fully grasp China’s economic approach in Africa, one must study European imperial history—as Beijing itself has been doing. "If you look at Chinese policy documents, it is very obvious that they are focused on opening up the heart of the continent. There is clearly a long-term strategy for doing this, and it seeks to break up the north-south flow of minerals, to build east-west lines that will allow them to bypass South Africa.”
Wednesday, April 13, 2011
China's Angst over Iran Sanctions
Article:To Appear in Middle East Economic Survey (MEES)- Op-Ed http://www.mees.com/cms/
China's Angst over Iran Sanctions
Beijing’s go-it-alone oil security could fail during any U.S.-Iran conflict
Thomas W O'Donnell, PhD
China isn't happy with the fact that the U.S. has "targeted" sanctions on Iran's nuclear program, which have the potential to interrupt oil supplies to China. This poses a problem because 50% of China's oil comes from the Persian Gulf. If China decides to side with the U.S. and sanction Iran it could cut china's supply which amounts to about 500,000 barrels per day.
China is in the process of building two storage facilities that will hold 100 million barrels of oil in anticipation of possible supply loss. The problem with the reserves is that they amount to only about a month's worth of China's imports.
As a fall back China needs to decide if it wants to join the IEA reserve system. This has the potential to undermine China's "Go Abroad" strategy, the idea of this strategy is for China to be completely independent of all other countries, including OPEC and the OECD which would make China subject to the U.s.
China's Angst over Iran Sanctions
Beijing’s go-it-alone oil security could fail during any U.S.-Iran conflict
Thomas W O'Donnell, PhD
China isn't happy with the fact that the U.S. has "targeted" sanctions on Iran's nuclear program, which have the potential to interrupt oil supplies to China. This poses a problem because 50% of China's oil comes from the Persian Gulf. If China decides to side with the U.S. and sanction Iran it could cut china's supply which amounts to about 500,000 barrels per day.
China is in the process of building two storage facilities that will hold 100 million barrels of oil in anticipation of possible supply loss. The problem with the reserves is that they amount to only about a month's worth of China's imports.
As a fall back China needs to decide if it wants to join the IEA reserve system. This has the potential to undermine China's "Go Abroad" strategy, the idea of this strategy is for China to be completely independent of all other countries, including OPEC and the OECD which would make China subject to the U.s.
Tuesday, April 12, 2011
China's Need for Naval Army
Article: Lee Jae-Hyung, "China's Expanding Maritime Ambitions in the Western Pacific and the Indian Ocean", Contemporary Southeast Asia, Vol.24, no.3, Dec 2002.
Though this article is somewhat outdated, it nevertheless sheds light on the basic imperatives for China to strengthen its military base in order to complement economic growth with adequate security.
(1) The article stresses the fact that "Beijing has recognized the importance of sea-lines of communication from the Persian Gulf to China, as it became a net oil importer in 1993"
- hence, there has been an almost existential incentive for China to expand its military capabilities, especially the naval force. With China's exponential economic performance, there is every reason to believe that the simultaneous militarization of international waters will continue.
(2) The South China Sea sea lanes are vital for the Chinese as exercising control over this area speaks directly to safeguarding imports of oil from the Persian gulf.
- it seems imperative for the Chinese to first ensure that the waters closest to the China mainland will be controlled by the Chinese navy. In addition, a heightened presence of China in the South China Sea could enable Beijing to get more leverage over Taiwain, which remains protected by the U.S.
(3) By going further west, China embarked on securing support of major regional players, such as Myanmar and Pakistan, partly to maintain balance of power vis-a-vis India. The two countries share favorable relations with Beijing, the latter acting as a welcome alternative to the perceived regional hegemony of the U.S.
- in this respect, is this a worrying sign for the international community given China's poor democratic and human rights record? Or, is it that neither the U.S. nor China have done anything meaningful to support democracy in the region and, hence, the fact that China is increasingly asserting itself should not be too alarming?
(4) The author also touches upon China's currying favor with Iran. As he asserts, "Iran seeks to enhance its political and military influence over the Middle East and to reduce interference form foreign powers, especially the United States, in the Persian Gulf region."
Furthermore, he stresses that "China anticipates that its close ties with Iran would guarantee its growing requirement for oil from the Middle East, and help to restrain radical Islam in China’s western provinces. Iran is viewed as a potential counterbalance to U.S. influence in the Persian Gulf; and China also views Iran as a market for its military hardware."
- Iran's present-day hostility toward the West in general, and the U.S. in particular, points to a likely continuation of this policy from the Chinese side. But to what extent can the U.S. pressure Beijing to give up on its growing engagement in the region, considering the fact that the U.S. is still straight-jacketed by the lingering economic recession and, on the contrary, China is enjoying a positive balance of trade and a steady growth?
- Overall, the intent of Beijing to gradually build its military base can undoubtedly be detected. By conceiving of itself as a superpower equal to the U.S., this military build-up should also be viewed as an attempt to challenge the U.S. military (and esp. naval) supremacy.
- As a next step, it could be perhaps useful to take a look at China's military involvement in the Middle East and what reactions has it elicited from the side of the U.S.
A Possible Roadmap
Hi,
these are just some of the brief thoughts of mine regarding how we might go ahead with this project.
(1) Based on last week's comments and suggestions by Tom, I think it might be helpful to look more closely at China's policy of 'self-reliance' during Mao (and perhaps even some years later). I believe this could give us a basis for better a understanding of China's current oil policy. By looking at this China's past experience, we could perhaps better evaluate how important it is for the Chinese to establish various new networks on the global oil market. For, on one hand, while it is obvious that China needs an increasing amount of oil to sustain its rapid economic growth, this sole premise itself may not be enough to examine the true importance China places on reaching out to far-flung oil markets. It is possible that by shedding more light on this particular element, we will be better equipped to properly assess China's simultaneous developments in the field of security, and potential challenges to the present U.S. military hegemony, especially in the Middle East.
(2) This brings me to my second major point - how does China's increasing presence in oil-exporting regions translate into the changing balance of powers there. Is there any threat for the U.S. if China keeps on importing steadily increasing amounts of petroleum from hitherto U.S.-dominated markets? And, if yes, what could a likely U.S. response be?
I believe it is certainly not in the U.S. interests to pass on its military control over the most significant oil regions to China. The U.S. is still going through an economic recession, while the Chinese have been enjoying an unprecedented economic growth for the past couple of years. This, however, has been yet to translate into a military leverage, which remains firmly under the grips of the U.S. army.
For me, the major question could be as follows: would the shifting geopolitical balance of powers worldwide, and especially in the Middle East and other oil-rich regions, lead to a conflict between the U.S. and China? If not, what are the indicators supporting it; if yes, can we already see signs of heightened tensions between the two superpowers?
Sunday, April 10, 2011
Sino-African vs. Sino-U.S. Energy Relations
An article accessed at: http://www.globalpolicy.org/component/content/article/198-natural-resources/40248.html states:
China currently derives 25% of its oil imports from Africa, with interests in Algeria, Angola, Chad and Sudan and increasing stakes in Equatorial Guinea, Gabon, and Nigeria.
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 five percent of China's total oil imports. C.N.P.C. owns a 40 percent 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 (932 miles) 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 percent of its oil imports, U.S. attempts to contain these regimes bring it into direct confrontation with China's energy security policies.
The United States and China are not the only states vying for energy resources in Africa. Recently, Korea National Oil Corporation obtained 65 percent oil and gas production rights in two Nigerian offshore blocks, while India's Oil and Natural Gas Corporation Videsh obtained a 25 percent stake. South Korea and India are the world's fourth and sixth largest energy consumers respectively. India and China both hold stakes in the Greater Nile Oil Project in Sudan with India having invested US$700 million in Sudan's oil sector. China and India have also been engaged in direct competition for African energy resources, as seen in October 2004 when China outbid India to buy an interest in an offshore block in Angola. [See: "Economic Brief: China's Energy Acquisitions"]
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.
China currently derives 25% of its oil imports from Africa, with interests in Algeria, Angola, Chad and Sudan and increasing stakes in Equatorial Guinea, Gabon, and Nigeria.
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 five percent of China's total oil imports. C.N.P.C. owns a 40 percent 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 (932 miles) 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 percent of its oil imports, U.S. attempts to contain these regimes bring it into direct confrontation with China's energy security policies.
The United States and China are not the only states vying for energy resources in Africa. Recently, Korea National Oil Corporation obtained 65 percent oil and gas production rights in two Nigerian offshore blocks, while India's Oil and Natural Gas Corporation Videsh obtained a 25 percent stake. South Korea and India are the world's fourth and sixth largest energy consumers respectively. India and China both hold stakes in the Greater Nile Oil Project in Sudan with India having invested US$700 million in Sudan's oil sector. China and India have also been engaged in direct competition for African energy resources, as seen in October 2004 when China outbid India to buy an interest in an offshore block in Angola. [See: "Economic Brief: China's Energy Acquisitions"]
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.
Tuesday, April 5, 2011
Brief summary of current post
Current post are our groups attempt to highlight sources of China’s oil, and the amount of consumption within china. This is a good start into looking into researching China’s policies and why it is so intent on expansion.
Here are a few facts from last week’s articles that we learned:
Currently Angola exports more oil than Saudi Arabia into China
Due to the United States ambition to curtail imports of oil from Saudi Arabia, China has begun to pick up the slack- The Saudis now sell over a million barrels a day to China. This represents about a quarter of China's total imports. China is becoming a competitor on the oil market, particularly towards the United States, which could affect the relationship between China and the United States.
China is rapidly expanding and investing worldwide, including countries in Russia, Brazil, Venezuela, Kazakhstan, Ecuador and Turkmenistan.
Other countries Such as Venezuela and Russia recognize the potential market and China and are also looking to capitalize. Although for these particular countries it seems that dealing with foreign trade is turning out to be more difficult than expected.
Here are a few facts from last week’s articles that we learned:
Currently Angola exports more oil than Saudi Arabia into China
Due to the United States ambition to curtail imports of oil from Saudi Arabia, China has begun to pick up the slack- The Saudis now sell over a million barrels a day to China. This represents about a quarter of China's total imports. China is becoming a competitor on the oil market, particularly towards the United States, which could affect the relationship between China and the United States.
China is rapidly expanding and investing worldwide, including countries in Russia, Brazil, Venezuela, Kazakhstan, Ecuador and Turkmenistan.
Other countries Such as Venezuela and Russia recognize the potential market and China and are also looking to capitalize. Although for these particular countries it seems that dealing with foreign trade is turning out to be more difficult than expected.
The Growing Role of Angolan Oil
From the Finance China article: "Angola Becomes Largest Oil Import Source." Accessed 5 April, 2011 http://news.fnchn.com/Angola_becomes_largest_oil_80450.aspx According to this article from last year, Angola topped Saudi Arabi in crude oil exports to China. - The imports for the first half of 2010 were at 21.7m metric tons, up 75.86% from the same period in 2009 - Saudi Arabia exported 20.26m metric tons of crude tons for the same period (up 12.49 from 2009)
- This contradicts the chart we posted earlier. It would be great to find some reliable source of data that might serve as a point of departure, at least in terms of statistics.
- In any case, this introduces a whole new debate - China's involvement in Africa
China & Saudi Arabia Oil Dynamics
From NY Times' article: "China's Growth Shifts the Geopolitics of Oil." Accessed 5 April, 2011 http://www.nytimes.com/2010/03/20/business/energy-environment/20saudi.html?_r=1&pagewanted=2 Few Highlights pointed out in this article: (1) The 2009 global economic recession, which resulted in a notable decrease of the U.S. consumption of Saudi oil (10% less than the 2005-7 peak), simultaneously brought about a change in the Saudis' global oil market policies. The kingdom's exports now tend to go more to China and India. A chief CEO of Saudi Aramco said he believes "this is a long-term transition" - among other things, this might represent a blow to the U.S. oil imports as the ever-growing market in China already made the Saudis scrap its hitherto applied discount for exports to the U.S. The Saudis now have a choice whom to export their oil to, and hence do not need to maintain certain special privileges vis-a-vis the U.S. - on the other hand, as the article also mentions, the diminishing share of Saudi Arabia's U.S. exports might tap into the country's regional security, historically guaranteed by the U.S. However, I do not think this should bother the Saudis too much as the exports to the U.S. are still relatively substantial and very core for the U.S. from long-term perspective. (2) The Saudi-China cooperation at the oil-and-gas market has several dimensions and is by no means short-term. - The Saudis now sell over a million barels a day to China. This represents about a quarter of China's total imports - Several projects run by Saudi Aramco and other companies are already underway in China. They concern primarily a construction of new refineries and other oil-related facilities. (3) The enormous potential of China's future oil demand. - Today, the U.S. is still the top consumer with 18.5 million barrels a day in 2009 - In per-capita terms, this amounts to 22 barels a day per one American. - In comparison, the current per-capita oil consumption in China is only 2.4 barrels a head. - This points to the formidable heights the Chinese demand for oil might turn to in the future years.
Wednesday, March 30, 2011
The U.S. Energy Information Administration or eia provides a basic overview, data and analysis of various countries.
http://www.eia.doe.gov/countries/country-energy-data.cfm?fips=CH
The U.S. Energy Information Administration or eia provides a basic overview, data and analysis of various countries.
As many of already know and according to the eia, China is the world’s second-largest consumer of oil behind the United States, and for the first time the second-largest net importer of oil in 2009. In addition China is the largest producer and consumer of coal in the world, making China the second largest energy consumer behind the United States. This is due to the fact that China has the world’s highest population and is steadily growing at an enormous rate.
Upon further investigation of the site I learned that “China consumed an estimated 8.3 million barrels per day (bbl/d) of oil in 2009, up nearly 500 million bbl/d from year earlier levels. During that same year, China
The U.S. Energy Information Administration or eia provides a basic overview, data and analysis of various countries.
As many of already know and according to the eia, China is the world’s second-largest consumer of oil behind the United States, and for the first time the second-largest net importer of oil in 2009. In addition China is the largest producer and consumer of coal in the world, making China the second largest energy consumer behind the United States. This is due to the fact that China has the world’s highest population and is steadily growing at an enormous rate.
Upon further investigation of the site I learned that “China consumed an estimated 8.3 million barrels per day (bbl/d) of oil in 2009, up nearly 500 million bbl/d from year earlier levels. During that same year, China
Monday, March 28, 2011
Where is China Getting its Oil?
Recent Headlines:
Chavez Wants to Send 1 billion barrels/day to China
http://online.wsj.com/article/SB10001424052748703921204576217073681492388.html
China Wants Russia's Arctic Oil:
http://www.reuters.com/article/2011/03/29/russia-transneft-pipeline-idUSLDE72S01V20110329
http://www.oilandgaseurasia.com/news/p/0/news/10944
Subscribe to:
Posts (Atom)