Sino-U.S. Energy Triangles

Resource Diplomacy Under Hegemony

David Zweig, Yufan Hao

• Publisher: Taylor & Francis
• Year: 2015
• eBook ISBN: 9781317677864
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Global Politics
• Index: Politics & International Relations

The remarkable performance of the Chinese economy in the last three decades has placed China at the centre of the world stage. In 1993, China became a net importer of energy, although it was not until the early 2000s that the world began to pay more attention to China's energy needs and its potential impact on the world. With China's energy search occurring within a hegemonic global structure dominated by the United States, the US watches with interest as China enhances its ties with energy-rich states.

The book examines this triangular relationship and questions whether the US and China are in competition regarding access to the energy of a third state, within the context of a potential power transition. It includes case studies on China's energy relationship with countries such as Canada, Australia, Saudi Arabia, Nigeria, Brazil, Kazakhstan, Iran, Sudan and Venezuela and aims to understand the way a rising power interacts with the existing leading power and the possible outcome of this competition. The analytical framework employed helps the reader to understand not only the nature and pattern of triangles among US, China and the Resource Rich States under 'resource diplomacy', but also the salient features of US-China competition around the world.

Making an impressive contribution to the literature in fields such as US-China relations, international relations, Chinese foreign policy and global energy geopolitics, this book will appeal to students and scholars of these subjects.

1 Modelling ‘resource diplomacy’ under hegemony The triangular nature of Sino–US energy relations¹

Zweig David

DOI: 10.4324/9781315772264-1

Introduction

Today’s international power structure can be characterized as unipolar with a somewhat declining US hegemon facing a rapidly rising China. To maintain its rapid growth, China must engage in ‘resource diplomacy’ and seek resources and energy from resource rich states (RRS) around the globe. The hegemon, however, has interests in all corners of the world where China’s resource search is ongoing, turning China’s bilateral ties into triangular ones, with the US as the third partner.

This paper proposes that a triangular model composed of the US, China and the RRS reflects an excellent framework through which to analyze China’s global search for energy and the US’s response. It helps us understand the US and China’s efforts to enhance their own energy security and, the response of the RRS to that competition, and to project whether energy competition will lead to cooperation, competition or even conflict between the US and China.

Some Chinese academics and government officials argue that the US, looking to contain China and maintain its hegemony, uses China’s energy need to slow its development (Lu et al., 2011; Zhao, 2006), yet no one has analyzed this issue in depth. The goal of this paper is to lay out a framework for evaluating this hypothesis, which is then applied to the case studies in Part 2 of the book where each author assesses the extent to which efforts by China to gain oil in many RRS gains the US’s attention and whether the US tries to influence the outcome of China’s efforts.

China's and the US's search for energy security

Before discussing the triangularity of energy ties between the US, China and the RRS, we must first clarify the strategies of both China and the US to energy security. These strategies are somewhat fluid, particularly for the US, which is shifting from being an energy importer to an important energy exporter. Both countries look internally and externally in their search for enhanced energy security.

Key aspects of China’s energy strategy include energy efficiency, diversifying supplying countries, developing oil substitutes, securing oil delivery channels, building a strategic energy reserve and increasing overall supply. China’s 11th and 12th Five Year Plans call on the country to constrain the growth of energy demand and reduce energy intensity (Andrews-Speed, 2009). In November 2003, Hu Jintao called on officials to ‘give equal weight to economizing and resource exploitation…and actively developing oil substitutes’ (Wen, 2004).

The deal that the Chinese Communist Party (CCP) has struck with China’s enlarging middle class – to supply them automobiles, air conditioning and a better quality of life in return for acquiescing to one-party rule – forces the CCP to increase significantly supplies of oil and gas. Similarly, with growth and employment still dependent on exports, China needs more energy to remain the ‘factory to the world’. In 2008, 50 per cent of China’s energy imports were used to manufacture goods for the rest of the world (International Crisis Group, 2008).

This effort to access more oil internationally is coordinated between China’s foreign establishment, the central leadership and the national oil companies (NOC), particularly China National Petroleum Corporation (CNPC), Sinopec and China National Offshore Oil Corporation (CNOOC), who have been encouraged by the State Council, the China Development Bank and the Export–Import Bank to purchase equity oil abroad. In 2004, the National Development and Reform Commission (NDRC) and the Chinese State Council promulgated a list of resources and countries from which imports would be subsidized through favourable loans (Ministry of Commerce, 2004), with a follow-up list in 2007. However, some wise Chinese analysts recognize that because ‘peak oil’ makes oil competition appear as a zero-sum game, China is accused of taking other people’s oil, and so they advocate cutting China’s energy imports (Wang, 2011).

China’s NOCs have significantly expanded the range of countries, regions and territories from which they import energy resources (Table 1.1). The number of countries surpassed 35 in 2013, although within 10 years, some of these countries will stop exporting to meet their own growing domestic demands. In many cases, China’s top leaders visit RRS and they promise various development programs in return for supporting bids for oil fields by Chinese NOCs. Coordinated loan programs in the form of ‘infrastructure for oil’ (roads, rails, ports and schools), mostly by the China Development Bank, which is a practice used in Africa, have helped China’s bid to secure oil supplies (Brautigam, 2009; Downs, 2011).

Think tanks inform China’s leaders of the risks to China’s energy security posed by the global system. One meeting in March 2002, run by the Chinese Institute of International Studies, emphasized that China’s energy security faced an unfavorable shift; the West, particularly the US, could contain China’s efforts to exploit overseas oil and gas resources; and, violent fluctuations of oil prices and energy supply could affect China’s energy security. These concerns strike at the heart of the three components of energy security: supply, delivery and price (Yong, 2002: 59).

Purchasing oil and gas abroad forms only one component of energy security; one must also guarantee the safe delivery of energy to China. When General Xiong Guangkai was Deputy Chief of Staff he opined that the ‘contest for energy sources and secure supply channels among major powers and powerful nations has become fiercer’, so the nation’s energy problem ‘needs to be seriously taken into account and dealt with strategically’ (Xiong, 2004: 5). In 2003, President Hu Jintao, referring to a ‘Malacca dilemma’, commented that ‘certain powers have all along encroached on and tried to control the navigation through the Straits’ (Wen, 2004). In summer 2006, Zhang Wenmu from the University of Aeronautics and Astronautics described China’s energy vulnerability as

Table 1.1 Sino–US oil imports by category of US ties, 2007–2012

	By China (%)			By US (%)
	2007	2010	2012	2007	2010	2012
Pariah
Iran	12.9	8.9	8.1	–	–	–
Sudan	6.5	5.3	0.9^1	–	–	–
Venezuela	2.6	3.2	5.6	11.5	9.9	10.7
Subtotal	22.0	17.3	14.7	11.5	9.9	10.7
Neutral
Angola	15.8	16.5	14.8	5.0	4.2	2.6
Brazil	1.5	3.4	2.2	1.7	2.8	2.2
Congo	3.0	2.1	2.0	0.6	0.8	0.3
Equatorial Guinea	2.1	0.3	0.7	0.6	0.5	0.5
Kazakhstan	3.8	4.2	3.9	0.1	0.2	–
Libya	1.8	3.1	2.7	0.8	0.5	0.7
Nigeria	1.0	0.5	0.3	10.8	10.7	4.8
Russia	9.2	6.4	9.0	1.1	2.9	1.2
Vietnam	0.3	0.3	0.3	0.3	0.1	0.1
Subtotal	38.4	36.8	36.0	21.0	22.6	12.4
US ally
Australia	0.0	1.2	1.4	0.0	0.1	0.1
Canada	0.0	0.1	0.2	18.6	21.4	28.4
Indonesia	1.4	0.6	0.2	0.2	0.4	0.1
Iraq	0.9	4.7	5.8	4.8	4.5	5.6
Kuwait	2.3	4.1	3.9	1.8	2.1	3.6
Mexico	–	0.5	0.4	14.1	12.5	11.4
Norway	–	–	0.0	0.6	0.3	0.3
Oman	8.6	6.6	7.2	0.3	0.1	0.1
Saudi Arabia	16.6	18.7	19.9	14.5	11.7	16.0
UAE	2.3	2.2	3.2	0.1	0.0	n.a.
Yemen	2.0	1.7	1.3	0.1	n.a.	n.a.
Sub-total	35.9	41.0	44.2	55.5	53.6	66.0
Total	96.3	95.0	94.9	88.0	86.1	89.1

Source: EIA (various years), China Customs Statistics. 1Due to conflict between Sudan and South Sudan over the transfer fee of oil through Sudan's pipelines, South Sudan closed down all oil shipments in 2012.

rapidly changing from a relationship of relative dependence to one of absolute dependence…China is almost helpless to protect its overseas oil import routes…The most crucial conduit connecting China with the region and the rest of the world is the sea lanes, and therefore China must have a powerful navy.

(Zhang, 2006: 19–20)

A US military report in November 2008 quotes a Chinese naval strategist saying that ‘The straits of Malacca are akin to breathing itself…to life itself’ (American Foreign Policy Council, 2009). In 2008, China, therefore, announced that it was building an aircraft carrier, which is now completed with a second one on the way.

Finally, China has established a network of oil and gas pipelines that circumvent the high seas. In 2006, China’s first oil pipeline from Central Asia was opened for business and in 2013 a new oil pipeline from Russia was linked to Daqing, a major refinery centre in northeast China. Gas pipelines have also been completed from central Asia and from Myanmar, limiting China’s dependence on the Malacca Straits.

The US's search for energy security and its response to China

The US has both domestic and global strategies to enhance energy security. Domestic goals include increasing output of oil and gas within the US, cutting demand, particularly in the transport sector (Herberg, Chapter 3, this volume), enhancing energy efficiency and dealing with environmental issues, such as pollution and climate change. External efforts occur in the near and far. The US supports policies to expand and accelerate cross-border energy investme...

Table of contents

• Cover Page
• Half Title Page
• Series Page
• Title Page
• Copyright Page
• Contents
• List of illustrations
• Contributors
• Acknowledgements
• Abbreviation
• Introduction Sino–US energy competition in resource rich states
• I Conceptual frameworks
• 1 Modelling ‘resource diplomacy’ under hegemony The triangular nature of Sino–US energy relations1
• 2 China's energy needs and energy security
• 3 US energy security strategy and China's energy diplomacy1
• II US and its allies
• 4 Sweet and sour Sino–Saudi crude collaboration and US-crippled hegemony
• 6 The true north – strong and full of energy China's resource diplomacy and Canada–US relations
• III America's neutrals
• 7 Angolan agency and Chinese and US oil politics, 1975–20141
• 8 Triangular or parallel? China's relations with Nigeria in the context of the US's ties with Abuja
• 9 Perspectives and limits on Sino–US competition The Kazakhstan case study
• 10 The impact of Brazil's expanding hydrocarbon reserves on its relations with the US and the PRC
• IV America's ‘pariahs’ and China's energy supply
• 11 The US factor in Sino–Iranian energy relations
• 12 The case of Darfur Diplomacy under influence of Sino–US resource rivalry
• 13 Resource diplomacy under hegemony The peculiar case of Venezuela under the Bolivarian Revolution
• 14 Conclusion China's ‘energy anxiety’
• Index