by Behzad Shahandeh
08-11-05
The rapid, almost unfathomable growth in
the Middle Kingdom’s energy demand is creating dynamics in global energy markets
with broader security implications. Although China has its own fields, its
production nowhere near meets its demand of 6.5 mm bpd in late 2005.
China is already the world’s second largest oil consumer after the United States
replacing Japan in the number two position. A net importer since 1993, China now
purchases close to 3 mm bpd from abroad.
In the last two years, 35 % of the increase in world petroleum consumption of
has been China’s. Its automobile population is expected to be the world’s
largest market within a decade. China’s very survival depends on procuring oil
and gas to fuel its development. Beijing has no alternative, any slow-down even
temporarily will deal a heavy blow to the legitimacy of the state, and usher in
the dreaded Tianamen syndrome.
The rising expectations created in China by colossal growth over a period of
more than two decades will be severely jeopardized if the industry stalls even
for short time from lack of energy.
To meet this demand, China has embarked on developing and expanding ties with
Persian Gulf giants -- Iran and Saudi Arabia. Beijing is seeking to secure
access to the Persian Gulf oil and gas by concluding exclusive supply and equity
deals and by expanding its political influence in the region.
Because the Persian Gulf holds 65 % of the world’s reserves, and China has been
encountering United States obstruction of Beijing’s equitable operation of the
global energy markets (as demonstrated by the recently failed bid by China’s
CNOOC to acquire UNOCAL), the Middle Kingdom has become an aggressive player on
the Persian Gulf scene. And as a region that will remain as the primary source
of energy, with reserves dwindling rapidly in other regions, the Persian Gulf
will be the most vital region in the global economy, and for its most important
beneficiary the United States.
Abundance in oil explains US involvement in the region’s security during the
past half a century. But Washington, which regards its presence in the Persian
Gulf as its national interest, is being challenged by China’s thirst for oil,
especially to sustain its booming manufacturing and transport sectors.
The eruption of China as a key energy player is already affecting security in
the Persian Gulf. In the backdrop of the crisis over Iran’s nuclear program, and
despite US concerns, China is developing stronger ties with Tehran, which has
problematic relations with Washington. China’s second largest oil company,
Sinopec, has recently signed a deal worth $ 100 bn with Iran to develop the
giant Yadavaran gas field.
On a somewhat different tone, China is cultivating relations with Saudi
Arabia, which has the biggest oil reserves in the world at 263 bn barrels (Iran
comes second with 137 bn barrels, also being number two in gas reserves after
Russia). Saudi Arabia has become China’s main supplier of energy.
Riyadh is expanding relations with Beijing to include exports of Liquefied
Natural Gas (LNG). China has recently signed an agreement with Saudi Arabia to
build a refinery for natural gas in China’s province of Fujian. Sinopec also won
the right to explore for natural gas in Saudi Arabia’s Rub al-Khali Basin. In
return Chinese firms will also explore for bauxite and phosphate deposits in the
Saudi Kingdom.
These deals will open the way for a productive relationship with Saudi
Arabia, and even more so with Iran. With the former depicted as the Kernel of
Evil (Washington has since the September 11 tragedy, floated regime change
scenarios under the banner of democratisation in the Middle East…. 15 of the 19
hijackers on the 9/11 tragedy were of Saudi origin), and the latter as part of
the Axis of Evil (together with North Korea and the then Saddam Hussein regime
in Iraq) by the United States, the two Persian Gulf giants are making best of
the alternative that China is offering them, an alternative which challenges US
hegemony in the region.
Saudi Arabia for its part is cultivating China as the consumer of its oil and
gas to hedge against further deterioration in US Saudi relations. While Iran is
seeking to lessen the US pressure of sanctions by moving closer to China, which
is a more than willing partner due to her need for energy supplies.
There is a certain logic for both states to say we need a good relationship
with a country that is a permanent member of the United Nations Security
Council, and is a strong growing market for our main product, oil. Is a nuclear
power that can ease the ever-mounting US pressure on us a good and sound
investment?
And China’s escalating energy needs and sense of its own rising economic power
is making it harder for Washington to influence Beijing’s Middle East (Persian
Gulf) policy, and is in itself creating a breathing space for both Iran and
Saudi Arabia.
In conclusion we must assert that China is a huge contributor to the oil
exporters collective surpluses that in 2005 are amountingto $ 400 bn. In 2004,
when the oil price averaged $ 40 per barrel, oil exporters ran a collective
saving surplus of $ 270 bn, almost three times as much as 2001, and that gives
the major producers Saudi Arabia and Iran tremendous opportunity to strengthen
their political clout.
Both countries now have Oil Stabilization Funds into which the windfalls from
increase in oil prices flows and China is more responsible for the colossal
earning than any other country.
The writer is an Iranian visiting professor at the Graduate School of
International Area Studies, Hankuk University of Foreign Studies in Seoul.
Source: The Korea Times