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Introduction
The energy security dissonance
Deepa M. Ollapally
Many states appear to have strong sentiment on energy security and energy transit vulnerability. Analysts of energy security are more divided on the severity of state energy vulnerabilities and its impact. Some analysts see global trends with efficient energy markets and growing options on renewables suggesting fairly relaxed energy outlooks. Others anticipate growing competition for scarce energy resources inevitably leading to geopolitical conflicts, or conversely, geopolitical competition driving a conflict-ridden energy race. Still others worry about the emergence of a misplaced nationalistic “cult of energy insecurity” turning countries toward greater rivalry and conflict than warranted.1 How can we understand this apparent dissonance?
Our book takes up this question and focuses on Asia, the world’s most important region in terms of energy security since the global demand for electrical power is concentrated in aspiring and rising powers: China, India, Japan, and South Korea. We also include Russia given its importance in greater Asia as a growing energy supplier and geopolitical actor. The high demand for energy in Asia is occurring alongside simmering maritime disputes that have both security and energy resource undertones. Our findings shed important light on the ongoing debate in the literature regarding energy outlooks of major Asian states and whether we might expect energy policies to evolve along market-oriented cooperative lines or more competitive and even destructive nationalist mercantile lines. How these states are poised on the energy issue has clear policy implications for both the region and the United States.
Unlike most previous works in the field, we turn to the domestic environment and the domestic discourse and debates that we suggest shape policy. Our main argument is that energy policymaking cannot be understood simply as driven by the structural conditions of the global energy markets or energy demand and supply logic. Neither is it explained solely by geopolitical competition and international factors. Rather, we suggest that domestic debates structure thinking on energy security, making energy policy contingent. Specifically, we propose that on energy security, “Nationalist” sentiment can potentially play a disproportionate role at the expense of liberal market “Globalists” or more strategic international cost-benefit minded “Realists.”2 We suggest that Nationalist narratives regarding the country’s energy vulnerability, national autonomy, and geopolitical considerations make energy policy more precarious than those predicted on the efficient market assumption of the Globalists. Thus a major objective of the book is to track the domestic debates on energy security in China, Japan, India, Russia, and South Korea and assess the center of gravity between the three energy worldviews or schools of thought (to be elaborated later in this chapter).
Energy, security, and foreign policy
The common definition of energy security is “the availability of sufficient [energy] supplies at affordable prices.”3 In contrast to oil-importing countries, oil exporting countries like Russia desire security of demand. Many international relations analysts focus on the physical security and vulnerability of energy supplies for a country’s uninterrupted access to these resources.4 Yet, apart from the physical supply and demand aspects of energy, there are larger uncertainties regarding regional and international security and conflict. This leads to questions of how energy supply and transit vulnerability (or perceptions of vulnerability) affects a country’s foreign policy, what different options for dealing with these vulnerabilities are promoted in a country, and what the implications of these policy choices are for regional and global security. There is a lack of research on this critical set of questions and this book is a step toward answering these questions for the Asian region.
The countries we are looking at all have to consider energy supply reliability and transit vulnerabilities, whether in their role as energy consumer or supplier. Some may be more concerned about pipelines and others about sea lanes and maritime issues. For example, Russia would be expected to pay greatest attention to the stability and security of land-based pipelines, while Japan and South Korea would be mostly worried about sea lanes of communication and potentially disruptive maritime disputes. China and India have to think about both land and sea traversing energy supplies, and for China, maritime disputes pose a concern as well.
It is hard to miss the urgency of energy security for Asia. In 2010, China became the world’s biggest energy consumer, overtaking the United States. The International Energy Agency called China’s ascent “a new age in the history of energy.” Asia’s rapid economic growth has fueled increases in energy demand in recent times that have been remarkable, especially in light of the global recession and slowdown since 2008.5 Emerging economies accounted for 80 percent of growth in energy consumption in 2013, led by Asian countries.6 During the decade from 1995 to 2005, one third of the entire growth in global demand for oil came from China and India alone.7 In 2013, China became the world’s largest net importer of petroleum after having already overtaken the United States as the world’s largest energy consumer three years earlier.8 India is now the fourth largest oil consumer in the world behind China, the United States, and Japan.
Along with this galloping rise in energy demand is the growing external dependence for energy resources by key Asian states. India recently overtook Japan as Asia’s number two crude oil importer with nearly 85 percent of its oil requirements met through imports.9 China’s oil imports are expected to climb to as much as 60 percent of its oil use in the near term.10 India imported 62 percent of its oil from the unstable Middle East region in 2013 with the Middle East remaining the biggest supplier of crude for China as well.11
One unexpected development since the mid- to late-2000s is the so-called “shale revolution” in the United States and its resulting steep decline in energy imports and energy vulnerability.12 Indeed, the dramatic increase in U.S. energy production and probable energy independence could have wide geopolitical implications though it still remains somewhat speculative. Energy-consuming states in Asia, including China, India, and Japan, could be economic winners, though American allies in the region might face a mixed picture in terms of how U.S. security commitments could play out. The biggest winner is likely to be the United States, giving it in the words of two seasoned American diplomats, “sharper instruments of statecraft” and “new found leverage.”13
However, the shale revolution may end up sputtering. The unanticipated drop in oil prices and continued Saudi output could put a brake on investing large scale funding into fracking.14 The basic economics of fracking, or what it costs to drill versus what oil now costs, could seriously derail the shale boom that is being anticipated. Moreover, the Saudis show every intention of calibrating their oil production to keep prices low to drive out any competition from shale oil. Thus the rush to proclaim an entirely new global energy scenario seems premature at best.
Under these circumstances, the need to examine concerns raised by many analysts about the rise of “resource nationalism” and energy-related geopolitical conflict in Asia remains. While there is a growing literature on energy security in the Asian context, the different logics that can drive countries toward cooperation versus competition are seldom investigated together. The logics of global energy markets, energy geopolitics and energy nationalism generate different worldviews that we suggest need to be taken into account. Related to this is the even more pronounced lack of fine grained domestically based analysis to understand energy security thinking within states. This results from the tendency to implicitly if not explicitly accept the conventional notion of the state as a unitary actor on energy security thinking.
Our book’s premise is that states are not unitary actors even in the key energy security arena and there are competing and contrasting viewpoints in Asian states on energy security. There is a range of options available to these countries to address their energy security vulnerabilities. Their options span on the one hand from utilizing energy markets optimally, promoting strong multilateral energy regimes, creating petroleum reserves, exploring alternative energy including nuclear energy, and diversifying suppliers, to on the other hand, pursuing more neo-mercantile or resource nationalist economic policies, setting up exclusive strategic partnerships and overseas equity holdings, and military and naval buildups to protect sea lanes of communication and supply access. We posit that different groups and actors within these states often hold divergent views. We therefore challenge the dominant thinking in international energy security analyses that treat states as if they were unitary actors and argue that the structure of domestic opinion mediates the balance of state choice.15 The next section discusses the way energy security has been approached in the literature and our book’s contribution.
The need for a domestic discourse lens
Despite the increase in scholarship and policy analysis on energy security since the early-2000s, the resulting work mostly falls along predictable lines: optimistic accounts from those taking a market approach against varying degrees of alarm and pessimism from those who are more geopolitically minded.16 Indeed, their conclusions seem to flow from their own implicit assumptions or bias. The pessimistic line of thinking is most often based on the perceived high vulnerability of energy supply from unstable regions and transit risk which is seen as likely to drive governments in rapidly growing Asian economies to adopt non-market, even mercantilist, measures to safeguard access and assured supplies.17 Purveyors of this view argue Asia’s unresolved territorial and maritime disputes, and strong lingering distrust between China and the two major Asian democracies, Japan and India, make energy security a high priority in geopolitical terms, leaving the region open to eventual conflict. For William Tow, the regional conflict structure itself is what is driving energy nationalism: “Controlling ‘energy nationalism’ will have much to do with how much strategic stability the Asia-Pacific region experiences over the next two to three decades.”18
Conversely, market proponents argue that the market is an efficient tool for achieving security of energy supply.19 In particular, they point out because oil is traded globally, a supply disruption anywhere will affect prices everywhere and thinking nationalistically is useless. For example, buying stakes in far flung foreign oil fields will not make a country more energy secure. In the case of a crisis with tankers being attacked on the high seas, Chinese or Indian oil stakes in Africa will make no difference.20 Others who believe in market efficacy argue that when it comes to energy security, “… price, not power, will determine the allocation of the world’s oil.”21 There are also some free market economists who simply do not see any resource scarcity at all on the horizon.22 The implication from liberal economic analysis is that no country can hope to gain energy independence, and a country is better off relying on global energy markets, understanding economic interdependence, and cooperating multilaterally.23
Indeed, if we go by the shifts in energy policy by Asia’s two biggest energy consumers – China and India – we see a clear trend toward accepting liberal economics logics, going from substantial energy price subsidies historically to a more market-oriented approach with prices increasingly set by supply and demand.24 Nevertheless, a compilation of a so-called Energy Insecurity Index found that Asia has higher energy insecurity than Europe or the United States with especially high degrees of insecurity for Japan, South Korea, Taiwan, India, and China.25 This presents a somewhat anomalous picture which calls for more fine-tuned analysis.
In explaining this seeming anomaly, work by Danielle Cohen and Jonathan Kirshner is useful. They identify the emergence of what they term “the cult of energy insecurity” in key Asian capitals.26 According to them, the cult of energy insecurity comes from two tendencies: (1) overstating the extent to which the supply of oil can actually be threatened; and (2) greatly overestimating the extent to which states can redress problems of energy security through foreign policy measures. Accompanying this is the serious underestimation of the power of efficient energy markets.27 Similarly, others like Llewellyn Hughes have discussed the “myth” of resource nationalism and the ability to secure energy independence.28 In this line of argument, foreign policy measures such as the race for equity oil, exclusive partnerships with oil producers and national naval build-ups to protect energy sea lines of communication (SLOCs) are not only ineffective and counterproductive, but invariably lead to strained international relations or worse. How then do states get drawn into resource nationalism or a cult of energy insecurity? It would seem important to understand how states move from an outlook that values and relies on the market and international cooperation to more nationalistic viewpoints, which we argue calls for a domestic turn.
Some existing analysis on energy security touches on the domestic sphere, or at least leaves the door open to it. Andrew Phillips describes the state as a player whose energy security policies are comprised of multiple considerations, including strategic stability and benignity. To him, this in turn is “significant in that it provides an insight into the ease with which governments can come to regard energy as a national security challenge, rather than an exclusively or even primarily economic issue.”29 For others, the question is whether states that have trusted the market mechanism and believed that costs of war to control energy resources outweigh the benefits will continue to accept this as making strategic sense in the future.30 Others like Bo Kong and Jae H. Ku find that energy security cooperation in Northeast Asia is stymied partly because of the lack of powerful domestic champions.31 This still leaves open the question of how a state comes to regard energy as a national security rather than economic issue, gives up its trust in the market, or disregards incentives toward regional and international energy cooperation. Opening up the state to consider the interplay of various strands of opinion on energy security as our book does should offer more insight into this process.32 As a result of this approach, our findings will contribute to the ongoing scholarly debate on the validity of geopolitical, resource nationalist, and cult of energy insecurity frameworks versus market approaches as well as to policy discussions over the prospects for energy cooperation or conflict in Asia.
Apart from the scant attention paid to domestic thinking and debates in the literature, there is also little systematic comparative foreign policy work on energy security or the possible interactive dynamics o...
