Managing Regional Energy Vulnerabilities in East Asia

Daojiong Zha, Daojiong Zha

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136206696
• Edition: 1
• Topic: Politica e relazioni internazionali
• Subtopic: Politica

This book examines East Asia's inter-state collaborative energy projects to address energy vulnerability. It focuses on projects that have demonstrated effectiveness in addressing vulnerabilities faced by the ten states of the Association of Southeast Asian Nations and China, Japan, and South Korea in Northeast Asia.

Including case studies on uncertainties in external sources of oil and gas supply, maritime piracy, continuation of energy poverty, and geographical barriers to cross-border electricity interconnection, expert contributors highlight how collaborative energy projects have been more successful than the traditional state rivalry in energy-related issues. The book develops the framework of energy vulnerability, avoiding usual securitization approaches, instead examining non-traditional security conceptualizations in studying energy policies to examine how issue-specific cooperation efforts between states arise and develop. Using East Asia as a starting point, contributors introduce a framework that advances the study of international energy cooperation.

Managing Regional Energy Vulnerabilities in East Asia will be of interest to students and scholars of Asian studies, sociology, development studies, and international political economy particularly the political economy of East Asia, energy and development studies, regional and global governance of energy and the environmental economics.

1 Introduction

Zha Daojiong

In East Asia, as in the rest of the world, the pursuit of adequate energy resources to meet demand for consumption at the household and aggregate national levels has been a practical concern for over a century. A general view is that the region has been remarkably successful at tackling its need for energy, the shortage of which could have placed a ceiling on the region’s development. The region’s sustained economic growth through industrialization and urbanization, starting from a low base at the end of the Second World War, stands testimony to this. Asia’s growth would not have been possible without technological advances in the cultivation, exploration, and utilization of various forms of energy; and energy trade among states within the region and beyond played no small part in meeting the region’s consumption needs.

The East Asian region has also witnessed decades of sustained inter-state peace. It is true that the region continues to be troubled by a host of territorial disputes – both maritime and land. It is also true that disagreements over the legitimate ownership of energy deposits are a powerful factor behind the inability to resolve such disputes. Nevertheless, there has been no outbreak of inter-state war over a known deposit of hydrocarbon resources since the Second World War. The term ‘energy war’ is by and large metaphorical and functions (rightfully so) as a warning against its becoming a reality.

Nonetheless, in the field of East Asian international studies, energy has become increasingly securitized. There is no dearth of literature on the issue. Predictions abound of energy being a cause of deeper diplomatic unease or outright inter-state conflict. Such a state of affairs is, in part, a result of the search by the international security studies community for conceptual frameworks. Calls to redefine security began to flourish upon the end of the Cold War. Yet, the ‘debate about prospects for inter-state war in Asia [which] has dominated the field of Asian security studies … has undergone remarkably little change since the end of the Cold War’ (Hamilton-Hart 2009: 53). Traditional concerns continue to dominate the discourse:

[The debate] remains concerned with what the distribution of power in the region is and what it means for war and peace; and with what regional institutions and diplomatic practices mitigate the role of relative power balances and alliance structures.

(Hamilton-Hart 2009: 53)

Justifications for the conceptual and analytical energy-conflict nexus proceed from considerations of the global implications of geographical concentrations of known hydrocarbon resources. The fact that supplies of oil are concentrated in relatively few countries speaks volumes. Four of the five countries that hold more than 60 per cent of the world’s proven oil reserves are in the Middle East (Saudi Arabia, Iran, Iraq, and Kuwait), with each having its own set of deep structural challenges when it comes to maintaining domestic stability and managing complex inter-state relationships. China is the only East Asian country among the top 20 countries with proven oil reserves (together these countries hold 95 per cent of the total proven oil reserves). It was a net oil exporter for two decades – until the 1990s – but is not expected to return to that status. The central question then arises: how should East Asian countries deal with the increasing competition among themselves for energy, the supply of which comes from just a few major sources, namely, the Middle East and, increasingly, Africa and Central Asia?

In the early 1990s, East Asia acquired added significance in the global energy equation; the region as a whole entered the heart of the drama of energy consumption, joining the USA and Western Europe which had up to that point been the central actors. Such a change conceptually changes the rules of the game. The USA went from leading the Western Pacificon energy – meeting the energy supply of its security allies and partners in the region and developing the energy industry of countries such as China which are outside its security alliance – to head-on competition for oil from the world’s largest source, the Middle East (Salameh 2003).

Much of the energy security studies literature begins with conventional concerns over the geopolitical dynamics that cross-border movements of energy may trigger. The underlying logic is rather straightforward. Sufficient energy to power a country’s economic growth, which in turn is required for sustaining military might and expansion, gives a potential geopolitical adversary a greater opportunity to be a formidable challenger. At some riskof simplification, the mainstream international security studies community makes a differentiation between the types of nation-states that access the same physical supply of oil and other forms of energy. Those states that are conceptualized as status quo ones within the current regional security structure are seen as benign. By contrast, those states viewed as potential challengers are subject to scrutiny over the geopolitical motivations behind their efforts to secure external energy supplies.

A case in point is the treatment of China in mainstream studies on the energy-security nexus on the regional and international scene. As the Cold War political structure was taking shape, China became an explicit object of the US-led hub-and-spoke security order in the Western Pacific. Industry-level contacts between China and its neighbours were lost.

As the geostrategic competition between the USA and China began to subside, there arose growing research interest in making access to China’s newly discovered oil and other forms of hydrocarbon resources possible (Ma 1980). In 1973, thefirst shipload of crude oil from China arrived on Japanese shores. China also sold crude oil and oil products, at ‘friendship prices’,to Thailand and the Philippines, both members of the US-led regional security structure. There was even a short-lived expectation for China to become the Saudi Arabia of the Western Pacific (Barnett 1981).

Against the background of continuing uncertainties in the world’s oil markets after the Arab oil embargo of 1973, such developments should have been welcomed as contributions to development and peace in the region. However, the authors in the US-based journal Foreign Policy opined that ‘We should welcome China’s oil but recognize that, for us, enormous quantities of it may be a mixed blessing’ (Park and Cohen 1975: 49). Also, with world crude oil prices dropping in the latter half of the 1990s to a level low enough to affect investment in the oil industry and thus the sustainability of production levels, the growing Chinese demand for oil ought to have been viewed with relief by the global oil industry. However, within a geopolitics-driven mode of understanding, the China factor is not seen as a positive for energy security. According to that perspective, it is not consumption per se, but what type of country’s consumption, that truly matters.

A significant limitation of geopolitics-driven studies of energy dynamics in East Asia is that it fails to take into consideration one important dimension of the global oil and energy market. Oil crosses nation-state boundaries in two forms: physical barrels of crude and refined products; and those unseen barrels embedded in manufactured goods. In a sense, non-oil commodity trade involves the trade of oil as well, except that the directions of flows are more difficult to track and scholars often have to rely on mathematical models. One such model puts forward this estimate:

In 2000, global trade in manufacturing goods accounted for 2.9 million barrels of oil per day, compared to 33.2 million barrels of oil per day traded directly. This calculation of oil used in industry includes oil used as a direct input in manufacturing processes. It does not account for indirect oil used, for example, by labour.

(Wagner 2010: 7711)

The extent of energy embedded in products traded between nation-states is beyond the scope of consideration here. For international security studies, suffice it to point out that an awareness that energy is used in non-energy products alerts us that we need to take into consideration other reference points such as the degree to which states can affect each other’s policies and practices in the area of energy utilization. One such observation is that, due to international trade, a country’s energy consumption takes place beyond its own boundaries as well. In a similar fashion, trade in non-energy products amounts to a spreading of the various costs of securing energy supply (which could include technological and monetary inputs).

Still another key point to note is that states do have the option of ameliorating increasing energy demand through promoting efficiency in energy use among all trading partners. The logic is simple. The expansion of demand in one country is what drives competition, real or perceived, for access to the same available sources of supply in the first place. As a matter of fact, patterns of intra-industry trade are well established in East Asia and gaining importance across the region (Sawyer et al. 2010; Fukao et al. 2003). These trends are indicative of increasing levels of cross-national harmonization of manufacturing standards, which is in turn conducive to the adoption of equipment and industrial processes and practices compatible with the goal of reducing the intensity of energy consumption. Multinational manufacturing corporations are important and necessary agents in moving those products between nation-states, often through vertical integration strategies that keep companies rather than governments in the driver’s seat. Although international studies scholarship tends to take the nation-state as the unit of analysis, what is important to note is that an exclusive focus on state–state competition for access to oil in particular, and energy in general, can easily result in fallacious assessments about a country’s or region’s level of (in)security.

In short, the movement of energy across nation-state boundaries is a multifaceted web of phenomena, defying neat simplification. When assessing a nation-state’s (in)security – whether in terms of questions of access to the hydrocarbon resources available or in broader terms that taken into account calculations of the overall economic power of countries active in the world energy equation – international security studies that adopt energy as a referent point need to adequately reflect the complexities rather than rely on simplistic assessments.

Based on such observations, the current study introduces the notion of energy vulnerability as an organizing theme for viewing East Asia’s energy dynamics. Before we move on to highlight the areas of those vulnerabilities, a general view of regional energy cooperation is in order.

Region-wide energy cooperation in East Asia

A commonsensical observation to make is that the energy issues facing countries in East Asia are not parochial. Countries in this region are directly affected by many of the same issues facing the rest of the world. Meanwhile, countries in the region differ wildly in terms of energy endowments and levels of industrialization. Regardless of aparticular country’s stage of development, it is a government policy imperative to continuously search for energy supply both from within and without a country. So it is necessary to expand the scope of business opportunities and the potential for energy and energy-related development. Last but not least, it should be noted that in East Asia there is no regional policy structure for handling world energy trade dynamics.

For East Asia, the three decades following the Second World War saw state-to-state economic (and, of course, energy) cooperation following the divisive lines of West-versus-East trade, defence ties, and political ideologies. The establishment of the Association of Southeast Asian Nations (ASEAN) in 1967 did usher in government-led cooperation in economic affairs in the Southeast Asian region. However, ASEAN, either collectively or through its individual member states, was not in a position to influence the slow course of regional energy cooperation for the entire East Asian region. China did reach out to Japan and a number of Southeast Asian markets through trade in coal and oil, but the scale was limited. China’sefforts to explore oil and gas in the continental shelf areas were accompanied by disputes over territorial rights (Woodard 1980). It was only with post-war Japan’s return to energy development and with the other broader economic trends emerging in Southeast Asia that the conditions emerged for the weaving of trade ties between ASEAN member states and Japan, and among the North-east Asian economies (Zha and Hu 2006).

A meaningful attempt at creating a regional platform for fostering economic cooperation is the Pacific Basin Economic Council, launched in 1967. The grouping was merged into the Pacific Economic Cooperation Council (PECC) in 1980. A key rationale in establishing the PECC – a network of countrycommittees (asopposedto sovereign representation) and institutions – was to bring to the same forum the interests of the USA, China, Hong Kong and Taiwan. With the signing of a friendship treaty between Beijing and Tokyo in 1979, Japan worked hard to make the creation of the PECC possible (Okita 1979).

The PECC launched a Minerals and Energy Forum in 1986. This was arguably the earliest multilateral forum to specifically address energy issues in East Asia. In the same year, China joined the grouping, as did the Soviet Union (as an observer). PECC discussions were structured to be unofficial and non-binding. Still, with China and the Soviet Union, the two countries in the region with the geological endowments to supply oil and coal to the rest of the region, both on board, one might expect that coordinated official initiatives on energy policy might emerge. However, from the start, the PECC process was too unofficial and exploratory to have much influence over government policies. According to one anecdote, in the process of negotiating China’s participation, a Chinese diplomat suggested that the PECC adopt the practice of the World Energy Conference in recognizing ‘Taiwan’ as the official name for that territory’s representation. In other words, there seemed to be some space among PECC participants from China to see energy as less sovereignty-sensitive (Woods 1990: 215), which seems to underline the unofficial tone of the country’s representation. With the PECC proving to be ineffective, geostrategic opportunities in the region opened up for the creation of the Asia-Pacific Economic Cooperation (APEC) forum in 1989.

At this juncture, it would be relevant to mention that, in the mid-1980s, the USA – an economy unrivalled in energy endowment, cross-Pacific energy trade, and equipment and business models for energy industry development in the East Asian countries – had its own package of East Asian energy policies. The USA supplied Japan with oil and coal, worked with China to increase oil output from the latter, and helped American energy companies explore Southeast Asian energy markets (Mares 1986). The US government provided funding to support the East-West Center in Honolulu, Hawaii, to systematically track energy market developments in the entire Pacific region. For many years, the East-West Center functioned as the knowledge powerhouse for the region’s energy scene. While the solid chronicling of the PECC is difficult to undertake, the preceding observations on the stand-alone US energy policy of the time ought to in some way validate general observations about national preferences taking precedence in institutions designed to foster trans-governmental policy coordination.

APEC was the first government-level institution devoted to promoting cooperation in the Asia-Pacific region. It was an improvement on the PECC concept in that it envisioned participating governments translating consensus into action. Nevertheless, it was still based on an incremental and non-binding approach. In the initial Canberra Declaration in 1989, a number of small-scale and specific projects were listed as agenda items. All were issues that member governments would have had difficulty choosing not to address: investment, technology transfer, human resource development, collaborative research, energy, resources,fisheries, the environment, and tourism. The rationa...