06-10-04

Little more than a decade ago, China was able to produce enough of its own oil to satisfy domestic needs. That was before its economy started growing faster than any other in the world, forcing China to become a net importer of oil in 1993. China's economic boom is continuing, and so is its need for imported oil.

The United States and China are the number one and number two global consumers of oil. As China looks around the world for sources of oil, will its needs put it in competition over the finite resource with the United States?

Deputy Assistant Secretary of State Randall Schriver says it is too early to say whether the need for oil will lead the United States and China into potentially harmful confrontation or bring the two countries closer together.

"This could also create opportunities, and lead us to have views that are more in line with one another," he said. "If you think about it in a certain way, China will have a greater interest in free sea-lanes and protection of commerceon the high seas, something that we're very interested in. And we're working in the Asia region with our friends and like-minded countries. China is going to have a strong interest there. They are going to have an interest in stability in oil-producing regions, as we do. So, I think it is a question we can not fully answer yet."

Chinese embassy spokesman Sun Weide had a positive assessment of the impact of oil needs on US-China relations.

"Of course, as our two economies continue to grow, we both need reliable and, I think, affordable energy supplies," he said. "So, there is very good basis for cooperation between the two countries."
Mr Sun says Beijing has been actively working to diversify its sources for oil.

"The oil-producing countries in the Middle East and Russia have actually been our traditional partners and now we are actually expanding our cooperation with Kazakhstan, Turkmenistan, Sudan, Libya, Indonesia, Burma and Venezuela," he said.

The Middle East provides China with about half of its oil imports. Saudi Arabia, Iran and Oman are the top three suppliers in the region. Economist Mohammed Alkacem, of Metropolitan State College of Denver, says another Middle Eastern oil prospect for China is Iraq.

"Prior to the invasion of Iraq, they [China] did have a significant acreage in the Saddam Hussein era, contracts to prospect for oil, along with Elf of France and other companies," he said. "So, all of that is nullified by the events and the new elected government will have to decide whether they want to revisit the contract or even award it to China."

China also has sought oil closer to home, from its neighbour, Russia. But recent problems have cropped up, including an announcement by Russia's troubled oil company, Yukos, that is was suspending some shipments to China because Yukos could not pay the transport costs.
At the same time, Russia is reported to have rejected Beijing's long-standing efforts to persuade Moscow to build an oil pipeline linking China to Siberian oil fields.

Meantime, Beijing has focused on expanding cooperation with countries in Central Asia. Swedish professor Niklas Swanstrom, a visiting professor at China's Foreign Affairs University, says Central Asia is attractive to China for three reasons.

"One is oil and gas, which China needs for economic development," he said. "Another is trade, especially in Chinese western provinces, and thirdly, security."

In Latin America, China is actively pursuing oil in Venezuela, although experts say the oil reserves there are not of good quality and shipping the oil all the way to China is prohibitively expensive.

Another continent, Africa, represents only about 4 % of global oil reserves, but that has not stopped China from cultivating ties with oil-producing nations there. These countries include Angola, Sudan, and Chad, which has diplomatic ties with Taiwan an independently governed island that Beijing considers part of Chinese territory.

Chinese officials have said Beijing will pursue its oil interests in Africa without political restrictions. This philosophy may also hold for other oil-producing countries with which China is seeking to expand relations.

David Lampton, head of China Studies at Johns Hopkins University's School of Advanced International Studies, says China has been seeking oil cooperation with nations that the United States and other western countries have largely stayed away from, including Iran and Sudan.

"And these are regimes with which, often, the United States has difficulty," he said. "And, so, we are continually going to be seeing the Chinese trying to improve relations with countries we have more difficult relations with. So, I think this whole energy diplomacy area is going to be one of increasing friction."

Some experts, like Gal Luft, director of the Institute for the Analysis of Global Security, express concern over China's increased commercial presence and diplomatic engagement overseas.
"I am afraid that over the years, we will see China become more involved in Middle East politics," he said. "And they will want to have access to oil by cutting deals with corrupt dictatorships in the region, and perhaps providing components of weapons of mass destruction, ballistic missiles and other things they have been involved with and that could definitely put them on a collision course with the United States."

The US Department of Energy says China's demand for oil averaged about 5.6 mm bpd last year and is likely to keep growing. The Chinese government says the country's oil imports have jumped by 37 % in the past 12 months.

As China looks for oil around the world, the country is also trying to reduce its dependency on imported oil by looking at ways to switch to alternative sources of energy. These include gas derived from coal, renewable power generation, and stricter fuel-efficiency standards for cars and nuclear power.

Source: AP