Nouveau riche must follow the
rules By Ehsan
Ahrari
The annual assessment of the
Director of National Intelligence almost always
captures top headlines. But the assessment of
February 6 was the first in describing a possible
collusion between Russia, China and Organization
of Petroleum Exporting Countries (OPEC)as a
"financial threat" to the US. When one gets away
from the sensational headline, the gist of the
story is that the United States is afraid that
these actors "could use their growing financial
clout to advance political goals ..."
But
one must keep in mind that OPEC, China and Russia
- since they are the owners of billions of
reserves in US dollars, which OPEC and Russia have
earned through oil and gas trade, and which China
is spending in acquiring secure energy sources -
are also worried about the continued weakening of
that currency and
are
actively and openly discussing the likelihood of
using either a basket of currencies for their
respective payments or completely switching over
to the euro.
It is also well-known that
China and Russia view their highly visible
financial status as a political tool, which they
will use to maximize their interests. All
countries do this. The United States has been a
master in this realm. If anything, China and
Russia seem to be developing their future courses
of action by keenly studying those of the United
States. But none of those actors are likely to
take any action that would damage America's global
standing. Even if their political differences with
the US were to push them in the direction of
harming its interests, the interconnectedness of
their economic interests in a highly globalized
economy would serve as the chief deterrence.
Ensuring ready access to secure sources of
energy has been one of the vital interests of the
United States. That objective also serves as one
of the constants in America's presence and
interests in the Middle East. When the US became
one of the chief targets of the Arab oil embargo
in the aftermath of the 1973 Arab-Israeli war, it
even threatened to capture oil fields in Saudi
Arabia through military action.
The United
States relied heavily on Western oil companies for
the supply of not only its own energy needs but
also those of other industrial countries. It might
not have played a direct role in the significance
of futures markets in the international energy
transactions starting in the early 1980s, but it
did not take any action to undermine their role
either. It did sanction the role of long-term
energy contracts between oil-producing countries
and Western multinational oil corporations, for
they guaranteed against haphazard price
fluctuations.
In other words, America's
energy policies have fully complemented its global
interests, as they do now. The energy policies of
China and Russia are no different in that regard.
The international dimensions of China's
energy strategy include: seeking oil and gas
reserves in Asia and the Middle East (Iran
supplies 14% of China's oil imports and Saudi
Arabia exports 17% of China's oil needs); Africa
(Sudan, Chad, Nigeria, Angola, Algeria, Gabon,
Equatorial Guinea, and the Republic of Congo),
Latin America (Venezuela, Brazil, Peru, Ecuador),
and Central Asia (Kazakhstan and Turkmenistan).
China already imports 64% of Sudanese oil
production.
Regarding Central Asia,
according to one source, "China is setting up
extensive railway linkages over two different
routes to oil-rich Central Asia. The connectivity
to Kyrgyzstan, Uzbekistan and Kazakhstan will
enhance the competitiveness of Chinese oil
companies bidding for energy assets in those
countries ..."
China is fully aware of
America's dependence in West Africa. A dispatch of
the January 28 China Post notes, "West Africa
already provides 17% of US oil imports." Since the
United States is keen to ease its reliance on
Middle Eastern energy, its dependence on West
Africa is likely to rise to 25% by 2015.
The second dimension of China's energy
strategy is the establishment of pipeline networks
involving Iran, Pakistan, Kazakhstan, Turkmenistan
and Russia. The chief driving force of China's oil
pipeline strategy is that 80% of its energy
supplies pass through the Strait of Malacca, which
can be easily blocked. Besides, America's warships
maintain a large and constant presence. Reliance
on overland pipelines reduces China's
vulnerability.
Thinking the
unthinkable Not that China expects a hot
conflict with the US. It is all part of its
contingency planning and its attempts to cover all
bases, including "thinking about the unthinkable".
In this context, one has to understand how
significant Myanmar's offshore Shwe gasfield
reserves have become for China.
Both China
and India competed for this, but Myanmar chose to
sell it to China. China intends to build pipelines
connecting Myanmar's west coast to the mainland by
2010. Even though the size of this gas reserve is
not that significant compared with China's
enormous energy needs, the proximity of that
country to China enhances its importance.
The third characteristic of China's energy
strategy is to proactively seek oil reserves in
far-off places, sign joint-venture or production
contracts with those governments and make generous
offers to construct infrastructure as "icing on
the cake". Such arrangements are especially
popular in African countries, where they are
direly needed. In the West, China's energy
proactivism is derisively referred to as "energy
mercantilism".
The final characteristic of
China's strategy is energy cooperation with Russia
in upstream as well as downstream operations. The
chief architect of Russia's energy strategy is
President Vladimir Putin. Even as a strategy, it
is only a small part of Putin's overall "vision"
for his country, which, in his view, is constantly
mistreated by the United States. He accuses
Washington of overstepping Russia's national
borders "in every way ... in the economic,
political and cultural policies it imposes on
other nations".
In Putin's assertion of
Russia's position, energy has become an important
factor. Russia has the world's largest gas
reserves and the third-largest oil reserves, and
he has decided to use them to enable his country
to emerge as a superpower. For that reason, he
decided to increase state control of Gazprom -
Russia's largest energy company and the largest
extractor of natural gas - and to complete state
control of pipeline networks that deliver fuel to
the West.
Another aspect of Putin's energy
strategy is to enhance the role of Russia-backed,
rigid, bilateral, private, long-term supply
contracts. The unstated but enormous outcome of
Russia's policy is whittling away the importance
of liberal US-based oil markets that are also
dominated by the US dollar.
One must also
examine the nature of cash reserves for China,
Russia and OPEC states to understand why any
possible collusion among these actors might not
necessarily be harmful to US interests.
China's cash reserves in May 2007 were
reported by CNN as follows: "With $1.2 trillion in
reserves, most of it in dollar-backed assets,
China plans to launch the world's largest
investment fund. It could play havoc with the US
economy." It says an influx of funds in the first
three months of 2007 "boosted China's foreign
reserves to $1.2 trillion - an Everest of money
that towers over reserves held by any other
nation." These numbers have only gone up in 2008.
According to a report in the February 1
edition of the Boston Globe, "Russia accumulated
$157 billion in its oil proceeds fund, one of 40
or so sovereign wealth funds worldwide with a
total of $2.5 trillion under management."
Regarding OPEC income, the Energy
Information Administration - "the data bank of the
US Department of Energy" - estimates that members
of OPEC earned $675 billion in net oil export
revenues in 2007, a 10% increase from 2006. Saudi
Arabia earned the largest share of these earnings,
$194 billion, representing 29% of total OPEC
revenues. On a per-capita basis, OPEC net oil
export earning reached $1,147 billion, an 8%
increase from 2006. Based on projections from the
Energy Information Administration January 2008
Short Term Energy Outlook, OPEC net oil export
revenues could be $850 billion in 2008 and $783
billion in 2009.
Legitimate - not
malevolent Given the vast sums of dollar
reserves, it is perfectly legitimate for OPEC as
well as for Russia and China to seek the "best
possible means" to sustain the value of their
final accumulation. There is nothing perverse or
malevolent about such actions.
An
important characteristic of the American political
scene is that phrasemakers describing a phenomenon
or a change of a given time - especially when it
is of a major import - capture the public's
attention. Then the public perception that
revolves around that phrase accepts it as the
"real thing". US columnist Charles Krauthammer
coined the metaphor "unipolar moment" when the
Soviet Union collapsed and the United States
survived as the lone superpower.
That
phrase became the anchor for all the specialists
and analysts who saw the United States as the
unassailable superpower whose military forces
could not be challenged and whose economic prowess
would not be seriously daunted. The phrase
unipolar global order also came into vogue.
However, after the United States faced a
seemingly indefatigable insurgency in Iraq, the
phrasemakers started to gather around the metaphor
"nonpolar" world, with the United States "too
strong to stand on the sidelines, but too weak to
implement its agenda alone".
What is
closer to reality is that there never was a
unipolar moment when the US could implement its
agenda alone. Its involvement in Iraq only
underscored a reality that existed all along, but
was ignored by all those who were swept away by
the fact that the Soviet Union imploded and the
United States survived. However, that reality had
little relevance to America's supposed "absolute"
power to do anything it desired.
Since the
United States has faced challenges, such as the
high-tech bubble bursting, deficits rising, the
Iraq war going sour, the shine on the American
model has dimmed, and the unipolar American moment
is deemed over. This is in part a casualty of the
George W Bush administration's political and
economic policies, in large part the result of
global economic changes that are shifting wealth
elsewhere.
In this moment of pessimism,
one tends to misread the conventional political
activities of Russia, China and OPEC to maximize
their respective economic payoffs as potentially
damaging to US interests. Even if their
antagonisms toward the United States were to push
them in the direction of harming its interests,
the interconnectedness of their economic interests
in a highly globalized economy would serve as the
chief deterrence.
The economic realities
of a globalized world are more brutal about
harming the interests of all major actors, if one
or more of them is tempted to become too
self-centered about promoting just its own
interests. As much as the globalized world is
changing, that particular reality has remained and
will remain unaltered.
Ehsan
Ahrari is professor of Security Studies
(Counterterrorism) at the Asia-Pacific Center of
Security Studies. Views expressed in this essay
are strictly private and do not reflect those of
the APCSS, the United States Pacific Command, or
any other agency of the US
government.
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