The Waking Dragon

Ian Bremmer

The conventional wisdom—put forward by China itself—is that China never entangles itself in international disputes that do not directly threaten China’s national interest. The Chinese have never sought the kind of global influence that the British, Russians, Japanese, French or Americans have. But it would be shortsighted to assume that the new China will be bound by its history, particularly now that China’s national interest demands that it scour the globe in search of new energy suppliers.

The numbers tell the story. China has 21 percent of the world’s population but only 1.8 percent of the world’s oil supply. Thirty percent of China’s domestic oil reserves are located in Xinjiang, a province in which Muslims outnumber Han Chinese and where Beijing’s long-term grip on local politics is least sure. A net importer of oil since 1993, China now buys half its daily consumption abroad. China imports twice the amount of oil it did just five years ago, and its demand for oil surged nearly 40 percent in the first half of 2004 alone. For all of 2004, China accounted for about one-third of the increase in world oil consumption. If its oil demand continues to grow at an average rate of 7 percent a year (as it has the last 15 years), China will need 21 million barrels a day by 2022—the same amount consumed today in the United States.

Chinese leaders decided years ago that future domestic political stability would be sustained by Beijing’s ability to give its citizens something the Soviet Union and the Warsaw Pact nations never provided their own people: prosperity. Prosperity depends on sustained long-term economic growth, and growth depends on energy. In a world where energy supply is tightening, demand for energy access propels China into areas of the world they have never considered even minimally important to their national interests—areas where Beijing crosses paths and purposes with the United States.

Consider Iran. In November 2004, China signed a “memorandum of understanding” with Tehran, a precursor agreement for the largest energy deal in Iran’s history. China agreed to buy 250 million tons of liquefied natural gas over thirty years. Iran will also export 150,000 barrels of crude oil per day to China, once Sinopec, a Chinese state-owned energy company, has developed Iran’s Yadavaran field. The deal is valued at $70 billion.

Shortly after, Beijing made public its opposition to any attempt by the United States to use the un Security Council to impose sanctions on Iranian energy in response to Iran’s failure to satisfy the UN’s nuclear watchdog, the IAEA, that it remains in compliance with the Nuclear Nonproliferation Treaty. Iran has now negotiated a watered-down deal on its nuclear program with three European states, a deal Washington calls inadequate. The White House may yet push the issue to the Security Council—if only to demonstrate the UN’s continuing uselessness as a forum for resolving conflict. But China’s lucrative new energy deal ensures Beijing won’t allow the Security Council to punish Iranian non-compliance. Because it needs the oil and gas, China has now replaced Russia as the major obstacle to effective multilateral pressure on Iran to renounce its nuclear-weapons ambitions and to stop funding terrorist groups in Israel and Lebanon.

China’s search for energy has also complicated Washington’s efforts to stop what the White House and the United Nations have called a state-sponsored genocide in the Darfur region of Sudan. Darfur sits atop a lot of oil, and the Chinese National Petroleum Corporation holds the largest oil concession there. China whittled down U.S.-sponsored warnings to Sudan to stop the violence in Darfur, changing Security Council threats to “take further action” against Khartoum to the promise to “consider taking additional measures.” The change made, China abstained on even this weakened resolution. China has also effectively separated un resolutions on the dispatch of peacekeepers to Darfur from those intended to impose sanctions that would cut off Chinese access to Sudanese energy.

China and the United States already compete for oil in Russia. The United States wants to reduce its energy dependence on volatile countries and regions—the Persian Gulf, Venezuela, Nigeria—by building U.S.-Russian cooperative pipeline projects to move oil across Siberia to the Pacific port of Murmansk, where it can be put on tankers bound for the U.S. west coast. But China wants that oil too and is bidding on it.

China is also competing for Russian energy with Japan, a key U.S. ally and potential counterbalance to Chinese influence in East Asia. Japan imports 80 percent of its oil and has lobbied the Russian government for a 2,500-mile pipeline from Siberia to the Pacific port of Nakhodka. China, in turn, wants a 1,400-mile pipeline from Angarsk to Daqing in China’s northeast Heilongjiang province. For the moment, Japan has won the argument. But China is not giving up. It has counter-proposed a branch from the Japanese pipeline to bring Russian oil to China by 2020. The direct competition for Russian oil heightens other already-tense political disputes between Beijing and Tokyo.

China’s massive demand growth in key commodities focused on, but not limited to, oil and gas has also sharpened traditional political rivalries elsewhere in Asia. The recent conflicts with Japan in the East China Sea and with Vietnam in the South China Sea have further raised the security temperature. The southern part of the South China Sea contains considerable reserves of oil and gas. There may also be energy deposits in the disputed Spratly Islands. Conflicts among China, Japan, South Korea and Taiwan over sovereignty in these areas are not new. But they are intensifying as China’s military assertiveness grows almost as quickly as its demand for oil and gas.

China is even making its economic presence felt in the American hemisphere. Sinopec has expressed interest in investing in oil sands in western Canada. China Minmetals has bid to acquire the Toronto-based nickel-mining company Noranda. In South America, the 2004 APEC summit in Chile focused attention on the fact that more Chilean exports are now destined for China than for the United States. China has signed energy-exploration deals with Argentina, trade pacts with Brazil, and is expanding its commercial relationships throughout Latin America, considered an American sphere of influence since the Monroe Doctrine.

Under an agreement reached last month, Chinese companies will gain development rights to 15 oil fields in eastern Venezuela. Chinese energy dependence gives Venezuelan President Hugo Chavez a little more credibility when he threatens to cut oil exports to the United States. And while China does not have the necessary refinery capacity for Venezuelan heavy crude, Chavez has announced he may allow China to build refineries in Venezuela. Washington is not overly concerned that Venezuela, its fourth-largest supplier of oil, will really cut America off. But U.S. annoyance at China’s indirect involvement in disputes between Washington and Caracas adds to the rising anti-Chinese rhetoric in the U.S. Congress.

It is not simply the more intense competition in America’s backyard that concerns Washington. China now views energy resources strategically and often pays more than fair-market price to tie them up. Beijing’s willingness to pay above-market prices to secure oil access distorts the market for every nation that imports oil. And no country imports more oil than the United States.

China’s search for energy in the Western Hemisphere also draws Beijing into security conflicts with Washington. In order to build relations with Venezuela, China has provided Hugo Chavez’s government with military advisors and trainers. Chinese intelligence experts reportedly began operating a joint Sino-Cuban electronic-intelligence spy and warfare center on the Caribbean island in 1999. No states in the Americas have proven more hostile to U.S. interests in recent years than Venezuela and Cuba.

If China is not compelled by its energy demand to take actions that bring Beijing into conflict with Washington, both sides win. In practical terms, this means the United States should help China become more energy efficient. If China used its energy more efficiently, China would have less need to form relationships with governments Washington would like to contain, China would spend less for its energy, and the environment would sustain less damage as China’s explosive growth continues. For the United States to expand on the decade-old U.S.-China Renewable Energy Development and Energy Efficiency Protocol to help China develop alternative sources of energy, the Bush Administration will have to put aside concerns about China’s growing military power. It is not at all clear that can or should be done.

Washington could also help China develop an Asian strategic oil reserve. Without financing from the West, it could be years before China is able to stock even a ninety-day emergency supply of oil. But Washington is right to wonder if building China’s reserve capacity could fuel China’s ability to sustain a long-term military conflict that would destabilize East Asia.

Can the growing U.S.-China rivalry be transformed into a viable and sustainable political and economic partnership? The signs are not encouraging.

Ian Bremmer is President of Eurasia Group, Senior Fellow at the World Policy Institute, and a columnist for the Financial Times.  He is also a contributing editor for The National Interest. This is a part of a longer piece that will appear in the Summer 2005 issue of The National Interest.

Updated 6/7/05