Energy diplomacy helps China secure oil supply

Jun 15, 2006, 4:32 GMT

Beijing - As China imports an increasing volume of oil to fuel its booming economy, volatile global markets have forced it to protect its long-term energy security with contracts in nations that some Western governments label rogue states.

Critics accuse China of taking a softer line on Sudan and Iran, for example, to protect its oil interests by opposing sanctions and ultimatums by the UN Security Council. Chinese leader dismiss the charges.

The London-based human rights group Amnesty International in May charged that China, along with Russia, had kept the UN from intervening in Sudan's Darfur region in order to 'protect their oil interests and arms trade with Khartoum.'

Although China's rise as a global economic power 'places upon it greater responsibility in international relations,' Beijing in 2005 'continued to show little concern for human rights at home or abroad, entering into economic partnerships with some of the most repressive regimes around the world,' Amnesty International observed.

Chinese leaders are not impressed with such arguments. Instead, they say they are guaranteeing the economic rights of the country's 1.3 billion people.

'In these areas [Iran and Sudan], we have our own interests, therefore we will think about our interests when considering the solution of these problems,' Xia Yishan of the state-run China Institute of International Studies told Deutsche Presse-Agentur dpa.

Chinese officials also enjoy pointing out inconsistencies in the West's own economically-motivated foreign policy.

'As for the western countries thinking we are not tough [on such issues as Sudan and Iran], we have our policies and they will not be totally the same as the West's policies,' Xia said.

China has also signed major energy contracts with Nigeria, Myanmar and Kazakhstan in recent months.

President Hu Jintao's visit to Saudi Arabia in April was rewarded with an outline agreement for Saudi Aramco to supply 1 million barrels of crude oil per day to China by 2010.

The ruling Communist Party long ago abandoned its focus on cooperation with ideological allies, freeing the government to pursue national interests first. Lke Western powers, China claims that investments in oil-producing nations will help other countries lift their economic conditions.

'In Kazakhstan, for example, through our oil and gas exploration, the local government's revenue increased, and we allocate some money to improve the local education, health care, employment and environment,' Xia explained.

Oil from Kazakhstan began flowing into China on May 25 through a pipeline that eventually is to carry 20 million tons of oil per year.

Such big oil deals grab headlines, but Xia emphasized that cooperation with other major oil importers, such as the United States, Europe, India and Japan, was also important - despite the rebuff of its offer to buy the US energy concern Unocal.

China and India agreed earlier this year to share information on bids for foreign oil and gas contracts to avoid stiff competition that could drive up prices.

China's 50-billion-dollars worth of crude oil imports last year reached 127 million tons, about 40 per cent of its total consumption. Half were from the Middle East, and escalating costs added 7 billion dollars over the 2004 price tag.

Imports could rise to 150 million tons this year and 165 million tons in 2010, when total consumption may reach 330 million to 350 million tons of oil, analysts say.

The government has twice raised retail prices of oil-based fuel this year, in response to rising global crude oil prices and economists' warnings that fuel subsidies are encouraging waste.

China is also pursuing more sustainable, energy-efficient growth, with a view to cooling off to 7.5 per cent annual growth by 2010 - down from the 9.9 per cent increase in 2005, when gross domestic product was 8.23 trillion yuan (2.26 trillion dollars.)

But no matter what the figures, Chinese leaders revel in the irony that China, with 22 per cent of the world's population, only consumes 6 per cent of the daily oil supplies, the third largest amount after Japan.

The United States, with only 5 per cent of Earth's people, remains in first place, consuming a whopping 25 per cent of the world's oil.

Jiang Wenran, director of the China Institute at Canada's University of Alberta, said there was lingering bitterness over last year's rebuff by the US.

'After the uproar over the Unocal bid, the Chinese have looked elsewhere, making a series of high-risk energy investments in Africa, the Middle East and Latin America,' Jiang said.

'Thus when the Chinese read Western media accounts of Beijing dealing with dictators or 'rogue states' as defined by the US, they feel especially bitter.'

The risks became apparent in April when, just weeks after Beijing finalized a 2.3-billion-dollar deal to exploit offshore oilfields in the Niger Delta, local Nigerian militants bombed a refinery and issued a 'final warning' that Chinese oil workers would be 'treated as thieves'.

Yet such setbacks are unlikely to deter China's overall policy of securing oil wherever they can find it, aided by what Xia calls a new 'energy diplomacy'.