The Hungry Dragon

How China's Quest for Resources is Reshaping the World

Sigfrido Burgos Cáceres, Sophal Ear

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781135099978
• Edition: 1

This volume provides an up to date and accessible examination of China's global search for resources, focusing primarily on oil. This focus provides a powerful rationale to explain China's actions overseas, as it impacts on economic, energy and foreign policies.

A strong feature of the book is a comprehensive examination of geopolitical issues. Three country case studies (Angola, Brazil and Cambodia) are complemented by two chapters on opportunities and risks to China, and an examination as to how strategies are developed into tangible actions. This book also examines a number of overlapping debates regarding the varieties of capitalisms (autocratic vs. democratic), the urgent need for rebalancing as the world undergoes global crises, and the issues surrounding natural resources in the context of governance, liberal-oriented notions and poverty traps.

The book is aimed at general as well as specialized readers and examines the subject in relation to international affairs, especially how the geopolitics of scarcity is driving states to be tenser, more observant of each other, and more acute to foreign initiatives.

II

Country case studies

3 Angola

The continued growth of American and European energy demands coupled with the remarkable rise of Brazil, Russia, China, India and other emerging market economies as major economic players are rapidly moulding international energy (gas and oil) markets. Increasing instability and geopolitical threats in key oil-producing and oil-exporting regions are also contributing to these ongoing market changes.¹

Evidently, nation-states cannot only be concerned with energy markets changing at a rapid pace, but also with diverse and newer threats that need to be carefully considered alongside the rapid evolution of other components of the global architecture. Some of these components are climate change, public health, education, food security, terrorism, poverty and aid, as well as emergency responses to unexpected natural disasters (i.e. earthquakes, tsunami, volcanic eruptions, etc.) that compete for limited economic, human and physical resources.²

For its part, China seems to be concerned with very many events at once. Most, if not all, of these events carry important, long-term strategic implications for the country. In the past decade, Beijing has juggled with multiple contemporary national challenges. These challenges include, but are not limited to, rapid economic growth interrupted by a global recession, rising domestic purchasing capacity, swelling foreign demand for top-quality goods, “loss of energy self-sufficiency, substantial increases in the volume and cost of oil imports”, heightened local, regional and international scrutiny of its actions in foreign affairs, social unrest in Tibet, global notoriety owing to both its achievements and setbacks, looming environmental degradation and the associated evolution of policy frameworks that come with responsible statesmanship, among many others.³

In relation to dynamic swings in global energy sectors, such as demand-side crude oil price gyrations, China has had its fair share of influence. This can be partly explained by Beijing's purposeful intent on securing, across the globe, the natural resources and raw materials needed to sustain fast-paced economic growth in its manufacturing and industrial sectors. Among the many critical resources needed to fulfil its energy needs, oil is by far its most important, given that it fuels its economic engine. Just as the West looked abroad during its industrial and manufacturing expansion to satisfy its sprouting energy needs, so is China rightfully determined in pursuing diverse energy sources through multiple market-oriented strategies.

The extent of China's ascending oil needs has compelled the country to seek and secure new oil supplies. As part of these seek-and-find efforts, China has turned to the African continent, a vast area of land hosting large oil deposits, a place whose burdens, risks and challenges have often caused it to be shunned and overlooked by the rest of the world. Despite these obstacles, Africa has emerged as the centrepiece of China's overseas energy strategy.⁴

The magnitude of “China's trade with Africa has increased” dramatically in the last 12 years. An idea of the magnitude of annual trade growth follows: $2 billion in 1999; $4.7 in 2000; $9 billion in 2002; $18.5 billion in 2003; $29.6 billion in 2004; $39.7 billion in 2005; $73 billion in 2007; and $106.8 billion in 2008, with a large percentage of “Africa's exports to China arising from oil-rich countries”.⁵ Using the latest trade value as reference, Sino-African trade has multiplied 53.4 times since 1999, and 3.6 times since 2004.

In practice, Chinese foreign policy towards Africa is driven by the need to secure natural resources and raw materials, a natural result of commercial interests.⁶ Throughout the continent, Beijing has conveniently developed tight links and shared interests with a number of dictatorships and repressive regimes. Numerous troubling examples throughout Africa demonstrate that China's rising demand for resources trumps any concerns regarding bad governance, human rights violations and ecological disruptions.⁷

Under the conspicuous notions of sovereignty protection and non-interference that have so often filled Chinese communiqués and public discourses, Beijing and selected Chinese energy companies active in Africa have indirectly legitimized rule-of-law dismissals, undemocratic practices and many civil rights abuses. Although these actions are indeed discouraged and condemned in international arenas, China is not particularly unique in setting up deals with wretched, bellicose governments. The USA and Europe, for instance, are quite prone to negotiating generous deals with recurrent human rights offenders and environmental health violators such as Afghanistan, Cambodia, Egypt, Pakistan, Saudi Arabia and Vietnam.

Irrespective of details, it is clear that China's position of openly acknowledging, without recrimination, all of the violations of standard democratic norms by some African leaders goes against international consensus favouring of fair and responsible statesmanship. In general, China does not seem to regard the political instability, ethnic schisms, or social discords in some African countries as an obstacle to its far-reaching ambitions. Far from it, China and Chinese companies are rapidly seizing burgeoning opportunities and potential deals as they arise, especially as countries start to open their economies to foreign investments and privatization of public services and industries.⁸

This selective opportunism has been highlighted by staffers at the Council on Foreign Relations (CFR) in New York, who ascertain that China is following a pre-established path traditionally followed by the USA, Europe, Australia and Japan of offering developing countries comprehensive technical assistance and aid agreements combined with exploitative trade deals.⁹ This comes as no surprise since China, as well as other nations, acts diligently to uphold best the interests of its constituencies.

To put in perspective China's resource hunger around the globe in the context of regional energy dynamics, we must first talk about the progression of demand and supply over time. For instance, Asia's growth in general—and China specifically—is visibly reflected in rising energy and oil demand, whereas gas and oil production in the Asian region has not kept up, supplying less than one-third of Asian regional consumption by 2008. It is estimated that within two decades (i.e. by 2030), the Asia-Pacific oil deficit will be around 70% of consumption, compared to 10% in the Atlantic regions. At that future time, too, it is believed that West Africa could feasibly cover 25% of Asia's entire regional oil needs.

In view of growing demand surpluses and supply deficits in the Asian region, high-level policymakers in Beijing are carefully weighing their options in rapidly changing contexts regarding energy availability in order to uphold national energy security in the medium and long terms. Clearly, Chinese sensitivities to and situational awareness of facts and rumours in relation to regional and global energy determinants are not entirely synchronized with on-the-ground realities. It is for this reason that informed decision making is performed carefully under a case-by-case basis, with implementation of energy and foreign policies proceeding under a revisionist stance that reassesses information as it is gathered, crosschecked and filtered by embassies, representatives, government officials and state-controlled companies in the locations in question.

In practice, and in consideration of the rapidly rising needs aforementioned, oil imports to China, Indonesia and India are mainly conducted by state-owned or state-controlled companies, which actually adjust to the needs of the state much more so than to the whims of corporate executives and foreign shareholders, seeking to maximize quarterly profits.

Big oil suppliers negotiate strategically with big oil importers: some countries peg commodity exports to other reciprocal benefits such as low-interest loans, migrant hosting, aid assistance and commercial leniency. Middle Eastern exporters, for instance, go to great lengths to ensure that contract resell prohibition clauses are strictly enforced so that no unnecessary friction arises. These clauses are necessary to avoid having rogue officials in top government positions conducting “buy low, sell high” transactions with other countries that do not enjoy “special” treatments, as China, India and others do. Furthermore, this hawkish oversight by Middle Eastern oil companies results from the sheer size of their export—that is, the supply of 70% of their oil outputs to the Asia-Pacific region in 2008.

The classical balance of power in oil rested largely on Middle Eastern countries, but recently a new and evolving oil axis has emerged. The term “oil axis” has been used to describe a number of oil-dependent relationships, strategic partnerships or possible coordination between countries in their quest to secure external energy resources or to contest hegemonic positions. The new oil axis we refer to includes dominant players such as China, Russia, Iran, India and Venezuela. For example, the most strategically significant manifestation of this oil axis is Russia's willingness to use its leveraged resource position to counteract what Moscow considers an unacceptable level of American infringement on its territorial interests and spheres of dominance. Venezuela, too, tries to undermine US influence in Latin America.¹⁰

In view of the aforementioned evolving oil axis, selective investments in oilcontaining zones have a commercial strategic value and national security interests. Here, dominant countries and giant oil companies compete ferociously for the most valuable and reliable options, while seeking continued support from local governments interested in securing oil export revenues to finance military spending, domestic growth, or development.¹¹ In Africa, China chose resource-rich Angola.

Brief outl...