Rising energy prices and mounting concerns
about environmental depletion have animated fears
that the world may be headed for a spate of
"resource wars" - hot conflicts triggered by a
struggle to grab valuable resources. Such fears
come in many stripes, but the threat industry has
sounded the alarm bells especially loudly in three
areas.
First is the rise of China, which
is poorly endowed with many of
the
resources it needs - such as oil, gas, timber and
most minerals - and has already "gone out" to the
world with the goal of securing what it wants.
Violent conflicts may follow as the country shunts
others aside. A second potential path down the
road to resource wars starts with all the money
now flowing into poorly governed but resource-rich
countries. Money can fund civil wars and other
hostilities, even leaking into the hands of
terrorists. And third is global climate change,
which could multiply stresses on natural resources
and trigger water wars, catalyze the spread of
disease or bring about mass migrations.
Most of this is bunk, and nearly all of it
has focused on the wrong lessons for policy.
Classic resource wars are good material for
Hollywood screenwriters. They rarely occur in the
real world. To be sure, resource money can magnify
and prolong some conflicts, but the root causes of
those hostilities usually lie elsewhere. Fixing
them requires focusing on the underlying
institutions that govern how resources are used
and largely determine whether stress explodes into
violence. When conflicts do arise, the weak link
isn't a dearth in resources but a dearth in
governance.
Feeding the
dragon Resource wars are largely back in
vogue within the US threat industry because of
China's spectacular rise. Brazil, India, Malaysia
and many others that used to sit on the periphery
of the world economy are also arcing upward. This
growth is fueling a surge in world demand for raw
materials. Inevitably, these countries have looked
overseas for what they need, which has animated
fears of a coming clash with China and other
growing powers over access to natural resources.
Within the next three years, China will be
the world's largest consumer of energy. Yet, it's
not just oil wells that are working harder to fuel
China, so too are chainsaws. Chinese net imports
of timber nearly doubled from 2000 to 2005. The
country also uses about one-third of the world's
steel (around 360 million tons), or three times
its 2000 consumption.
Even in coal
resources, in which China is famously
well-endowed, China became a net importer in 2007.
Across the board, the combination of low
efficiency, rapid growth and an emphasis on heavy
industry - typical in the early stages of
industrial growth - have combined to make the
country a voracious consumer and polluter of
natural resources. America, England and nearly
every other industrialized country went through a
similar pattern, though with a human population
that was much smaller than today's resource-hungry
developing world.
Among the needed
resources, oil has been most visible. Indeed,
Chinese state-owned oil companies are dotting
Africa, Central Asia and the Persian Gulf with
projects aimed to export oil back home. The
overseas arm of India's state oil company has
followed a similar strategy - unable to compete
head-to-head with the major Western companies, it
focuses instead on areas where human-rights abuses
and bad governance keep the major oil companies at
bay and where India's foreign policy can open
doors. To a lesser extent, Malaysia engages in the
same behavior. The American threat industry rarely
sounds the alarm over Indian and Malaysian
efforts, though, in part because those firms have
less capital to splash around and mainly because
their stories just don't compare with fear of the
rising dragon.
These efforts to lock up
resources by going out fit well with the standard
narrative for resource wars - a zero-sum struggle
for vital supplies. But will a struggle over
resources actually lead to war and conflict?
To be sure, the struggle over resources
has yielded a wide array of commercial conflicts
as companies duel for contracts and ownership.
State-owned China National Offshore Oil
Corporation's (CNOOC) failed bid to acquire
US-based Unocal - and with it Unocal's valuable
oil and gas supplies in Asia - is a recent
example. But that is hardly unique to resources -
similar conflicts with tinges of national security
arise in the control over ports, aircraft engines,
databases laden with private information and a
growing array of advanced technologies for which
civilian and military functions are hard to
distinguish. These disputes win and lose some
friendships and contracts, but they do not unleash
violence.
Most importantly, China's
going-out strategy is unlikely to spur resource
wars because it simply does not work, a lesson the
Chinese are learning. Oil is a fungible commodity,
and when it is sourced far from China it is better
to sell (and buy) the oil on the world market. The
best estimates suggest that only about one-tenth
of the oil produced overseas by Chinese
investments (so-called "equity oil") actually
makes it back to the country. So, thus far, the
largest beneficiaries of China's strategy are the
rest of the world's oil consumers - first and
foremost the United States - who gain because
China subsidizes production.
Until
recently, the strategy of going out for oil looked
like a good bet for China's interests. But,
despite threat-industry fear-mongering, we need
not worry that it will continue over the long term
because Chinese enterprises are already poised to
follow a new strategy that is less likely to
engender conflict. The past strategy rested on a
trifecta of passing fads. One fad was the special
access that Chinese state enterprises had to cheap
capital from the government and by retaining their
earnings.
The ability to direct that
spigot to political projects is diminishing as
China engages in reforms that expose state
enterprises to the real cost of capital and as the
Chinese state and its enterprises look for better
commercial returns on the money they invest.
Second, nearly all the equity-oil investments
overseas have occurred since the late 1990s, as
prices have been rising. Each has looked much
smarter than the last because of the surging value
of oil in the ground. But that trend is slowing in
many places because the cost of discovering and
developing oil resources is rising.
And
the third passing fad in China's going-out
strategy is the fiction that China can cut special
deals - such as by channeling development
assistance to pliable host governments - to confer
a durable advantage for Chinese companies. While
there is no question that the special deals are
rampant - by some measures, most of China's
foreign assistance is actually tied to
natural-resources projects - the Chinese
government and its overseas enterprises are
learning that it is best to avoid these places for
the long haul. Among the special havens where
Chinese companies toil are Sudan, Nigeria, Chad,
Iran and Zimbabwe - all countries where even
Chinese firms find it hard to assure adequate
stability to reliably extract natural resources.
As China grapples with these hard truths
about going out, the strategy will come unstuck.
It won't happen overnight, but evidence in this
direction is encouraging. China already pursues
the opposite strategy - seeking reliable hosts,
multiple commercial partners and market-oriented
contracts - when it secures natural resources that
require technical sophistication. China's first
supplies of imported natural gas, which started
last year at a liquefied natural gas terminal in
Shenzhen, came from blue-chip investments in
Australia, governed by contracts and investments
with major Western companies.
With time,
China will shift to such arrangements and away
from the armpits of governance. At best, badly
governed countries are mediocre hosts for projects
that export bulk commodities, such as iron ore and
raw crude oil. These projects, however, are least
likely to engender zero-sum conflicts over
resources because it is particularly difficult to
corner the market for widely traded commodities,
as China has learned with its equity-oil projects.
Resources that require technical sophistication to
develop tend to favor integration and stability,
rather than a zero-sum struggle.
Pernicious tents The second
surge in thinking about resource wars comes from
all the money that is pulsing into resource-rich
countries. There is no question that the revenues
are huge. OPEC cashed US$650 billion for 11.7
billion barrels of the oil it sold in 2006,
compared with $110 billion in 1998, when it sold a
similar quantity of oil at much lower prices.
Russia's Central Bank reports that the country
earned more than $300 billion selling oil and gas
in 2006, about
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