China's oil quest causes
friction By Antoaneta Bezlova
BEIJING - Amid global shortages and price
rises, what China is paying for its imported oil
could involve much more than just cash. China's
strategy of tapping new oil reserves in some
countries, blacklisted by the US as troublesome,
is meeting increasing political resistance from
Washington.
A week before Chinese
President Hu Jintao's scheduled meeting with US
President George W Bush (later canceled due to
Hurricane Katrina), on the fringes of the United
Nations summit in New York, Washington warned
Beijing that the two countries would be on a
collision course if China continues to pursue
energy deals in countries like Iran and Sudan.
Deputy Secretary of State Robert Zoellick warned
that Beijing's ties with "troublesome" states such
as Burma and Zimbabwe were ''going to have
repercussions elsewhere'' and the Chinese would
have to decide if they wanted to pay the price.
China must choose whether it wants to work
with the US to ameliorate problems posed by these
states (while still protecting
Beijing's energy interests)
or whether ''it wanted to be against us and others
in the international system as well'', Zoellick
was quoted telling reporters in Washington.
Beijing sees energy shortages as one of
the biggest potential threats to China's national
security and social stability. China became a net
importer of oil in 1993 and imports since then
have risen sharply. Last year it imported 2.46
million barrels per day (bpd), accounting for
about 40% of current demand. By 2025, according to
projections by the US Energy Information
Administration, China's oil imports will reach 9.4
million bpd of a total consumption of 12.8 million
bpd.
Most analysts agree that the surge in
Chinese demand has kept global supplies of oil
extremely tight, and was in large part responsible
for the rapid oil price rises of 2004. In this
supply-constrained environment, Chinese planners
have become fixated on their goal of diversifying
the country's sources of oil, gas, electricity and
coal.
They have sought resources in Iran,
a country the United States and Europe accuse of
pursuing nuclear weapons, as well as other states
that have been hit by political instability or are
accused of human rights abuses. Among them are a
clutch of African states that together meet 25% of
Chinese oil import needs.
Sudan, whose
regime has been accused of genocide in the Darfur
region, is currently China's largest overseas
production base. China National Petroleum
Corporation (CNPC) holds 40% stake in a consortium
that is developing large fields, and is building a
US$215 million export terminal in Sudan. China
paid for this investment, in part, by providing
arms to the Sudanese government. Other
controversial supply deals have been struck with
Chad, Gabon and Nigeria.
In Iran, where US
companies are prohibited from investing more than
$20 million annually, Chinese companies have
signed long-term contracts valued at $200 billion,
making China Iran's biggest oil and gas customer.
Zoellick said he had told Chinese officials that
from a US perspective, ''it looked like Chinese
companies had been unleashed to try to lock up
energy resources''.
Such investments carry
major political risks. Both the Sudanese and
Iranian governments are the targets of the US
administration and face political, trade or
military sanctions by Washington. Already, China
has stated it will veto a proposed resolution at
the UN Security Council to impose sanctions
against Sudan because of its human rights
violations in Darfur.
With Iran, the
situation looks even more precarious as Washington
is revving up its opposition to the regime and
soon, China may have to choose between agreeing to
sanctions, which would potentially destroy the
value of many investments it has made, or become
an outcast in the international community.
Zoellick, who spoke on key issues facing the two
powers before the meeting of their leaders next
week, said he was not sure whether Beijing's
energy quest was propelled by new Chinese oil
companies or by a government ''strategic plan''.
Last week, Beijing said energy issues
would top Hu's political and economic agenda when
he visits the US ''I think the two leaders will
talk about energy exploration and the main idea is
to strengthen cooperation,'' He Yafei, China's
Director General of North American and Oceanic
Affairs, said at a briefing on the visit. Hu was
originally due to meet Bush at the White House but
that visit was postponed due to the devastation
caused by Hurricane Katrina. The two are still
expected to meet at the UN summit, marking the
60th anniversary of the body's formation.
In Beijing, Chinese oil executives tried
to strike a conciliatory note ahead of the
meeting. Zhang Weiping, deputy chief engineer of
China National Offshore Oil Corporation (CNOOC),
said it was China's responsibility to the world to
save energy and use resources wisely. He was
speaking at an energy seminar in Beijing,
organized by China International Relations
Research Institute and the Royal Institute of
International Affairs of Britain. CNOOC, China's
largest offshore oil producer, was forced to drop
its bid for US-owned oil giant Unocal this summer
after a torrent of criticism from the US Congress.
The US is not the only country where
China's quest for energy assets has ruffled
feathers. China is increasingly facing off with
India, as both countries are competing to ensure
future supplies by either buying into new foreign
oil and gas fields or by signing supply contracts
when new reserves come on stream. The rivalry
between the world's two largest developing
countries was underscored, earlier this year, when
Indian Prime Minister Manmohan Singh said that his
country could ''no longer be complacent'' in its
competition with China to secure international
energy supplies.
Last month, CNPC won an
auction for PetroKazakhstan, a Canadian oil
company with operations in Kazakhstan, beating a
joint bid by Oil and Natural Gas Corporation
(ONGC), India's main, state-owned oil company, and
the British-Indian steel maker, Mittal Group. A
similar story unfolded in October 2004, when a bid
by ONGC to buy an interest in an offshore block in
Angola from Royal Dutch Shell was halted when
China offered the African country a $2 billion aid
package.
