Why Washington needs to be concerned about Beijing's need for fuel.China is currently spending four times as much as the United States to develop unconventional gas sites.Earlier this year, China gained leverage and influence over Myanmar when it began importing gas from offshore gas fields through a 500-mile-long pipeline, a project that cost $2.5 billion.
While the United States and European Union strongly oppose
Russia over its expansionist agenda in Ukraine, China has cautiously avoided
having to take a side as the rhetoric became more and more heated. Russia’s
increasingly fraught relationship with the West has strengthened China’s hand,
allowing them to import cheaper gas from Russia, as evidenced by the deal
struck on the sidelines of the recent APEC Summit. As the world’s
second-largest economy and number one energy consumer, China is pursuing all possible
avenues to ensure its energy security. As the international community isolated
Moscow for its actions in Ukraine and its sheltering of Syrian dictator Bashar
al-Assad, the Chinese in May 2014 seized
the opportunity to strike the $400 billion gas deal they had been
negotiating for over a decade. This attitude is indicative of Beijing’s recent approaches
to some of the world’s energy producing regions to secure energy supplies,
sometimes in competition with American and Western interests.
But to better understand China’s foreign policy globally and
in its near-abroad more specifically, one must take a closer look at its energy
needs.
As the world’s second-largest consumer of oil behind the
United States, China is projected to become the largest net importer of oil by
the end of 2014. Beijing’s imports from the Middle East will soon surpass those
of the United States. With over half of its oil imports coming from the Middle
East, most notably Saudi Arabia, Iran, Oman, and Iraq, one cannot underestimate
the geopolitical implications of these relationships. With the backdrop of
America’s uncertain strategy in the Middle East, Beijing is maneuvering to
secure its energy needs by building a strong interdependent relationship with
countries in the region. Furthermore, the decline in oil prices orchestrated by
Saudi Arabia has been very beneficial for China. Domestically, China is
investing heavily in its internal oil pipeline network to improve
infrastructure and increase capacity. This will increase oil imports via
pipeline links with Kazakhstan and Russia — cutting down transit times and
further strengthening ties by signing long-term bilateral energy agreements.
Growth in natural gas demand has also been robust in recent
years. China is now the third-largest liquid
natural gas (LNG) importer, and is looking beyond its traditional partners in
the Asia Pacific to places like Qatar.
With LNG entering China through nine terminals, Beijing is making headway in
satisfying increased demand with another five terminals under construction and
more currently in varying stages of construction and planning.
China’s dramatic increase in gas demand is also causing a
spike in domestic gas exploration, mostly around alternative gas sources.
China is currently spending four
times as much as the United States to develop unconventional gas
sites.Beijing, it seems, looks to imitate the shale gas revolution that has
brought the United States much closer to achieving energy independence. But
with oil prices continuing to fall at their current rates, China’s gas
production may not be cost effective in the near to short-term future.
For this, China has linked its foreign and energy policies
to establish a working relationship with the United States to develop its shale
reserves. A 2010 memorandum on
shale gas between the U.S. State Department and China’s National Energy
Administration outlines both countries’ commitment to exploit unconventional
and cleaner energy sources. Through this agreement, the United States will help
China develop its shale gas resources — estimated
at 25.1 trillion cubic meters, the world’s largest — by lending its
experience and expertise, which also would help China reduce its carbon
emissions.
The reduction of greenhouse gases and the fight against
climate change remain a major source of tension between Beijing and the
international community. The landmark deal the United States and China reached
in mid-November to
reduce emissions is a rare point of agreement and has far-reaching
implications, illustrating the influence these two powers have in directing the
global climate change debate. China, however, remains the world’s number one
coal producer, consumer, and importer, accounting for nearly half of global
consumption, mainly for use in coal-fired power plants. Even though
Beijing plans
to cap coal use in comparison with other fuels by 2017, the U.S.
Energy Information Agency, a government statistics agency,expects that
China’s coal consumption will continue to rise over the next few decades.
China’s new energy demands have equally impacted its
approach to working with international energy producers as well. In the last
several years, overseas Chinese energy companies have actively acquired assets
in various countries. A flurry of diplomatic activity and official visits to
and from Beijing usually precede such moves. This further demonstrates
Beijing’s use of its foreign policy as a tool to secure its energy demand,
while further gaining global influence by building interdependent relationships
with energy exporting countries. This trend is set to continue as China’s
national energy companies continue purchasing assets in the Middle East, the
Americas, Africa, and Asia. According to a report by the CNPC Economic
Technology Research Institute, a subsidiary of the oil behemoth China National
Petroleum Corporation, Chinese energy companies invested anestimated $34 billion in
overseas assets in 2012.
Beijing is skillfully and pragmatically trying to assert its
global influence and assemble allies in order to build strategic geopolitical
alliances and partnerships to secure a steady supply of energy from proven and
potential offshore sources, as well as to control maritime activity in its
immediate region. However, this competition for resources is raising alarm
among neighboring countries.
China’s designation of disputed waters in the South China
Sea as its main offshore site for natural gas exploration has also heightened
tensions with the Philippines and Vietnam, both U.S. allies. China’s dispute
with Japan in the East China Sea over the sovereignty of the Senkaku or Diaoyu
islands remains unresolved despite the agreement reached in
November to de-escalate the situation; the desire to exploit nearby offshore
energy reserves remains a key driver of this row. The United States has played
a delicate balancing game in both disputes, careful to publicly diffuse
tensions and not upset Beijing while simultaneously reiterating support for our
key allies in the region like Japan and the Philippines.
Earlier this year, China gained leverage and influence over
Myanmar when it began importing gas from offshore gas fields through a
500-mile-long pipeline, a project that cost $2.5
billion. The deal attracted criticism because Myanmar will be
exporting gas to its giant neighbor while it faces major electricity shortages at
home. The project raised further
concerns after the military suppressed local
farmers protesting about compensation for lost land — worryingly, at a time
when the West is heralding an opening up of the country.
Beijing is also actively engaging with the latest member of
the autocracy club in Southeast Asia, the Thai military junta. In October the
new leaders — who staged a coup to oust the democratically elected government
in May – announced their
intention to offer new concessions onshore for the exploration of oil and gas.
Understanding the lifespan of the military junta is short-lived, Beijing kept
its options open by inviting former prime ministers Thaksin and Yingluck
Shinawatra in November. Photos of the two cuddling a panda went viral. With the
United States absent from the scene, China is well positioned to fill the
political void while further enhancing its energy portfolio.
Despite the “pivot” to Asia, Washington has not adequately
increased its influence in the region — especially where energy is concerned.
And China’s energy security should be a concern for the United States.
Washington and Beijing must find ways to better cooperate, based on a clear
understanding of each other’s needs and priorities. A better understanding of
China’s foreign policy through the prism of its energy needs would enhance
Washington’s diplomatic efforts with Beijing on issues and geographies that
concern it most. Focusing on the areas where cooperation can lead to fruitful
outcomes for both parties — such as the energy technology transfers required to
wean Beijing off its destructive reliance on coal, and exploiting where our
geopolitical interests align — can only have a positive political and economic
impact for both partners.
**AFP / Stringer