SPEAKING FREELY The Sino-Japanese pipeline struggle
By Richard Giragosian
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Introduction
There are two significant energy trends underlying the competition between
China and Japan for Russia's far east oil pipeline project: the need to seek
additional energy supplies and pursue greater energy diversification. And for
both China and Japan, Russian energy both offers a significant supply source
and would
contribute to greater import diversity. But these trends in energy interests
are matched by an equally dynamic and intense geopolitical rivalry, defined by
a complex and contradictory set of converging and diverging national interests.
Within this context, the competition between China and Japan, as well as the
Russian role in exploiting this rivalry, is driven by the distinct energy
interests of each country. China's position is largely defined by the demands
inherent in its fairly recent rise to replace Japan as the world's second
largest oil importer, with internal demands driven by rising consumption and
serious inefficiency. Japan's position is also driven by the challenges imposed
from its own energy insecurity, its worsening relations with China, and its
still-weak relationship with Russia. As for Russia, in the short- to
medium-term, Russia's position is dominated by its position as the world's
second largest oil producer, and magnified by its fiscal overdependence on
energy revenue.
The pipeline courtship
The Chinese-Japanese competition for securing the role as the primary partner
for Russian energy exports from the Far East is much less a commercial
competition than a complex courtship. The usual economic considerations
inherent in a strictly commercial competition do not apply in this case.
Instead, as in the case of the earlier Baku-Ceyhan oil pipeline project,
geopolitical considerations far outweigh any and all commercial considerations.
Moreover, in the case of the Russian far east oil pipeline project, the
standard determinants of pipeline cost - length and capacity - are demoted to
secondary considerations.
The Japanese route: Angarsk-Nakhodka
The Japanese route, from Angarsk to Nakhodka, would be roughly double the price
and, at a projected 3,700 kilometers, would be significantly longer than the
Chinese alternative (see map). For Tokyo, the Angarsk-Nakhodka pipeline is
significant for two strategic reasons. First, the pipeline could result in an
estimated 10-15% reduction in Japan's reliance on Middle Eastern oil imports.
This reduction alone would offer an important new element of import
diversification and, within the new landscape of international security,
perhaps even spark a move away from imports from the volatile Middle East.
A second strategic factor for Japan stems from the fact that if Tokyo is able
to conclude a successful agreement with Russia, it would represent a strategic
reengagement with Moscow. Such a reengagement would be an important correction
to the marked decline in Japanese economic and political influence, and even
presence, in Russia through much of the late 1980s and into the early- to
mid-1990s. This decline in Japan's position with Russia has been especially
damaging over the longer term, as China was able to rapidly assert and deepen
its relationship with Russia at the expense of Japan. Therefore, such a
reengagement would help to match or even offset the recent gains in China's
geopolitical pursuit of greater proximity to Russia (and Central Asia).
The outlook for Japan
But the most fundamental obstacle to the Japanese route is one of neither
economics nor energy. As seen in the nature of the pipeline competition itself,
the main obstacle for Japan is geopolitical. Specifically, the main challenge
for Japan stems from its territorial dispute with Russia over the Kurile
Islands. For Japan, the challenges of dealing with its wartime record continue
to impede and impair its relations with its neighbors. And the territorial
dispute with Russia, despite attempts of diplomatic diversion, is a both a
problem of the past and of the present. It is a problem of the past, being
rooted in history, and it is a problem of the present, as it remains an
unresolved issue. But it is also a problem of the future, as it remains an
impediment to the course of Japanese relations with an important regional
power.
The Chinese route: Angarsk-Daqing
The Chinese route, running from Angarsk to China's energy-rich region of
Daqing, would be considerably shorter, at 2,400 kilometers, and significantly
cheaper. This route also conforms to the changing nature of the Russian far
east. Specifically, the Chinese link follows a pattern in the region of
increasing integration into what can be defined as a "greater Chinese economic
space". But this trend also fuels the Russian fear of Chinese penetration into
the area, exacerbated by Russia's demographic vulnerability and the substandard
condition of the remote region's infrastructure. This fear was also a
significant factor in Russian President Putin's determination to restore
central authority and control over the far eastern governors in an attempt to
reverse their relative autonomy garnered during the Yeltsin years.
The outlook for China
For China, one of the more basic challenges is Russian reluctance, hesitation
and delay. In part, this stems from the limited nature of the Chinese option;
as with the case of Russia's "Blue Stream" natural gas project with Turkey,
there is a significant Russian reluctance to engage in projects with only one
end-user. But in the reality of the global energy market, this fear may be
essentially more political than practical. It is also apparent that the Russian
strategy is one of delay, and as this pipeline courtship continues to drag on,
Moscow can be expected to hold out for as long as possible before selecting a
final partner. The danger for Russia is that it may delay for too long and
overplay its hand by overestimating its position, mirroring an overall pattern
of Russian immaturity.
But the most interesting factor in assessing the outlook for the Chinese
pipeline route is the shifting dynamics of geopolitics. The fact that the
United States can now be defined as a Central Asian power may serve as an
overriding strategic consideration for both Russia and China. In some ways, it
is this Central Asian consideration that is also helping to drive Russia and
China into a closer working relationship. This tactical realignment is further
driven by a shared perception of an assertive US agenda seeking to diminish or
challenge Russian and Chinese interests in the region.
But for China, there is a danger that this convergence of strategic interests
may induce Russia to seize an opportunity for greater leverage, perhaps
gambling that China's overriding interest in securing Russian assistance in
countering the US presence in Central Asia may include a Chinese willingness to
sacrifice the Far East energy deal. In this light, Russia could see a chance to
maximize its position by leveraging its energy position from a zero-sum game
into a win-win gain.
The strategic imperatives of the pipeline courtship
As argued earlier, the core determinant of the Chinese-Japanese pipeline
courtship of the Russian Far East is only one element in a deeper geopolitical
contest driven by the differing strategic imperatives of each country.
Therefore, in order to present a more complete assessment, it is necessary to
examine the essential nature of Chinese, Japanese and Russian interests.
China's energy imperative
Most traditional assessments of China's energy strategy miss a fundamental
point and start from a mistaken premise. Specifically, unlike far too many
analyses warning of the rise of China, China's energy policies are actually
rooted in weakness and worry. The weakness is demonstrated by a serious
imbalance between the location of its energy resources and its main centers of
energy demand, and reflected in the overwhelming vulnerability of China's
access to external energy supplies. This inherent weakness defines the Chinese
energy strategy and, most importantly, results in two distinct needs: for
greater energy imports and for a modern infrastructure able to span great
distances. China is also beset by worry over the challenge of managing its
mounting energy demand. It is readily accepted that the sharp rise in Chinese
demand for energy is a priority for Beijing. And with a rate of increase
surpassing the global average rate by some four to five times, China's
ever-increasing demand for energy is an obvious concern.
Furthermore, as important as adequate energy supplies are for the Chinese
economy, there is a corollary political aspect which is often underappreciated:
the current Chinese government is dependent on economic growth for political
stability and regime legitimacy. In this way, any threat to the delicate
relationship between secure energy supplies and sustained economic growth is a
threat to the legitimacy and security of the Chinese state. Thus, China's
energy policy is one of political legitimacy as much as economic growth. And it
is through this prism that one can best understand the Chinese view of energy
as a strategic imperative.
The outlook for Chinese energy policy follows a trajectory marked by two
significant external factors. First, Chinese energy strategy is no longer a
regional approach. Its parameters have expanded into an international context,
with China's pursuit of energy resources surpassing geographic boundaries and
ideological barriers. This expanded scale and scope of Chinese energy strategy
is expressed on three levels. One level comprises regions and areas of US
"benign neglect," such as Canada and South America. These areas can be seen as
new considerations for Chinese energy planners, as there is a perceived vacuum
in the wake of American neglect.
Another level of new Chinese energy engagement is comprised of the energy-rich
"pariah states," or member states of the so-called "axis of evil". These
"pariah states" include countries such as Iran, Sudan, and Angola, which remain
closed to investment or exploration by Western energy firms. For these states,
China's engagement is virtually unopposed. The third and final level of
engagement is a combination of the first two, and is demonstrated by the case
of Venezuela, where China is warmly welcomed.
The second defining factor in the new trajectory of Chinese energy policy is
one of potential conflict with the United States. This potential conflict
between China and the US for position in global energy will not be a direct
confrontation, however, but one marked by a competition for secondary markets
and suppliers. Such an indirect confrontation will most likely center on areas
of US absence or neglect, fostering a new arena for Sino-US rivalry and
jockeying. Central Asia can also be viewed as one of the more prominent of
these new arenas.
But this new Chinese trajectory is also moderated by two important internal
factors. First, Chinese energy strategy is still mainly defensive, rooted in
the Chinese strategic fear that the US will seek to block or contain its
pursuit of energy resources in an attempt to weaken or destabilize the Chinese
state. Second, the course toward energy-driven confrontation with the United
States is offset by a convergence of interests. These shared interests are
intricate and intertwined, including certain regional security issues, such as
the North Korean case, and even energy interests, as with the common need to
maintain the security of sea lanes. For China, the shared interest in maritime
security is a priority and is only compounded by the Chinese vulnerability
regarding the Strait of Malacca, through which passes four-fifths of Chinese
oil imports. Thus, although China's energy strategy is increasingly active and
assertive, it remains offset by an inherently defensive approach that will
avoid direct confrontation with the United States at all costs. Hopefully, the
convergence of Chinese and American security interests in the Asia-Pacific
region will soothe the signs of indirect competition in the emerging arenas of
Latin America, Africa, and Central Asia.
Japan's transformation
As with China, there is a deeper set of driving forces determining Japanese
energy strategy. After a series of prolonged economic difficulties and
political paralysis, Japan is now undergoing a profound transformation. In some
ways, the impetus for Japan's transformation has been a result of accumulating
tension, insecurity and a mounting pressure for change. This has fostered a
degree of readjustment, mainly through a traditionally Japanese approach of
gradual, evolutionary change designed to limit any unsettling or destabilizing
effects on the Japanese society and system.
These changes have followed a gradual course of reevaluation, but have included
a serious reexamination and questioning of Japan's very identity and future.
Within this course of reevaluation, there have been three specific changes that
comprise Japan's overall transformation and that exert influence over both the
Japanese approach to its competition with China and its developing relationship
with Russia. The first change has been a reexamination of Japan's international
position and influence. This has been demonstrated by the Japanese deployment
of peacekeeping troops to Iraq and its bid for a seat on the United Nations
Security Council.
The second element of this Japanese transformation was its expanding regional
role as a US proxy force and more active ally in the Asia-Pacific region. This
expanded role can be seen in Japan's participation in the US plan for theater
missile defense and is also evident in the steady modernization of the Japanese
Self-Defense Forces. Further, the expanded area of operations and extended
deployment of Japanese forces in support of the US-led "war on terror"
represents another important aspect of this enhanced regional role.
And finally, the Japanese recognition of its regional power and influence as
both a necessary and positive objective marks the third element in the
country's transformation. Such recognition has been bolstered by Japan's threat
environment, with greater concern over the buildup of the Chinese military and
from the perception of threat posed by North Korea. But Japan's emphasis on its
military has been without any stress on militarism. Thus, each of these aspects
of Japan's transformation has contributed to its competition with China for
Russian energy as part of a broader dynamic. And although the emergence of a
vibrant and heated Chinese nationalism has exhibited strident anti-Japanese
feeling, it has been the continued dispute over natural gas reserves in the
East China Sea that has most recently fueled this Japanese-Chinese rivalry.
Russia's energy strategy
The Russian role as an arena for competition between China and Japan stems as
much from Russian energy strategy as from the Chinese-Japanese geopolitical
rivalry. Under Russian President Vladimir Putin, energy has emerged as a tool
for strategic leverage, in effect replacing the traditional Russian reliance on
the "hard power" of its military with a new exercise of Russia's "soft power".
This use of energy as leverage consists of three components. First, it has
supplemented, and in some cases even projected, an effective reassertion of
Russian power and influence within the so-called "near abroad" of former Soviet
states. Most notably, this can be seen in the Russian dominance over the energy
sectors of much of the South Caucasus and Central Asia. Second, it has also
featured the use of energy as a tool for strengthening state power, empowering
Russia's status as a regional and, in this case, as an Asian power. And
thirdly, it has offered Moscow an attractive way to restore its international
position and regain its geopolitical relevance.
But in the case of the Chinese-Japanese competition for the Russian Far East,
it has also revealed Russia's fundamental weakness. Despite the tactical gains
from the use of energy as leverage, Russia's energy sector remains beset by
four serious shortcomings: it has no unutilized capacity (meaning Russia lacks
the ability to expand production as a "carrot" to states it might wish to
influence); its oil is relatively expensive to produce; it has limited pipeline
capacity; and it still is not a global energy player. Therefore, Russian energy
strategy is predominantly driven by weakness and need.
There is a broader strategic dimension to Russian energy strategy, however. The
Russian strategic perspective views energy as an integral part of an overall
projection of Russia power and position. It is energy that most clearly marks a
Russian shift toward Asia and away from Europe. And as an aspiring Asian power,
Russia sees no real threat or challenge from Japan (other than the unresolved
territorial dispute over the Kuriles). But it views China more as a rival
power, and despite its rather reluctant partnership with Beijing, Moscow is
consumed by a fear of Chinese expansion and penetration into the vulnerable Far
East.
Conclusion
Given the long duration and delay of the Far Eastern oil pipeline project,
there can be no real conclusion at this time, as the competition remains
dynamic and unresolved. Instead, there are five key assessments that can be
derived. First, energy competition has emerged as only one aspect of a broader
geopolitical contest heightened by a potential clash or conflict of competing
interests. Second, the looming energy competition between China and the United
States actually serves to define a broader framework for this pipeline
courtship, most likely to emerge in new arenas, such as the regions and areas
of US neglect or absence, mainly in South America and Africa, and over "pariah"
states, like Iran and even Venezuela. This competition will feature a new
intensity but will most likely be contained to a series of indirect clashes, as
China will undoubtedly avoid any frontal or direct confrontation with the
United States.
Third, Chinese-Russian relations, including energy ties, are on a path of
converging interests, partnering in response to the US military presence along
their borders and reacting to recent US policies emphasizing democracy
promotion and regime change. In fact, this is the underlying motivation for the
close Chinese and Russian approach to the Shanghai Cooperation Organization
(SCO), spurring and solidifying bilateral military ties, and for a greater
coordinated response to the "revolutions of fruits and flowers" in Central Asia
and other former Soviet states. Beijing and Moscow's interpretation of the
recent "revolutions" in Georgia, Ukraine and Kyrgyzstan is starkly different
from Washington's. Moscow sees them not as democratic victories of people
power, but as externally-financed assaults on its traditional spheres of
influence. And Beijing sees these developments as part of a broader American
strategy of encirclement, aimed at curtailing China's expanding economic,
political and energy ties.
Unlike the first three assessments, however, the case of competition for the
Russian Far East also reveals some positive and encouraging trends. The fourth
assessment demonstrates that despite the elements of competition and contest,
energy is also an important area of potential stability and security. This is
most evident in two cases: the still developing US-Russian strategic
partnership, with the promise of Russia as America's "energy ally," and by the
shared interests of energy security common to both China and the United States.
Finally, the last assessment is based on a contention that the converging
energy interests of these powers can be greatly enhanced and bolstered by the
precedent of region-based cooperation. The recent example of the six-party
talks as a region-based, coordinated effort to address the North Korea issue
offers an important confirmation of the need for multilateral security in the
Asia-Pacific region. And with such a demonstrated foundation of shared
interests, the security outlook for the Asia-Pacific reflects more promise than
peril. But the outstanding questions are whether this region-based approach
will last, or if the Asia-Pacific will revert to the division and competition
of these powers' unilateral impulses and energy imperatives.
Richard Giragosian is a Washington-based analyst specializing in
international relations and military security in the former Soviet Union, the
Middle East and the Asia-Pacific region.
Speaking Freely is an Asia Times Online feature that allows guest writers to have
their say.
Please click hereif you are interested
in contributing.
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