China’s insatiable thirst for energy as it continues along its course toward international hegemony is having a profound effect on the countries that surround it.
The rise of The Peoples Republic of China (PRC) on the international stage in recent years has caused increasing competition over natural resources across the globe, with energy in the Middle East being no exception.
The Middle East is an area of the globe that contains 48.4% of known oil reserves and 43% of known natural gas reserves. Since becoming a net oil importer in 1993, Beijing has considered developing diplomatic and trade relations with Middle Eastern states to be of very high priority. In 2011 China imported nearly 3 million barrels of oil from the Middle East per day, accounting for 60% of its total oil imports, and in September 2013 became the largest importer of oil in the world, surpassing the US.
It is clear then to see that with China’s ever-increasing thirst for energy to fuel its rapidly expanding economy and dreams of becoming a world superpower it is no surprise that Beijing is increasingly focusing on securing energy deals with states across this resource-rich expanse. Yet, this pursuit is far from straightforward. The current situation in Syria and the ongoing turbulence within a multitude of states across the Middle East has demonstrated to Beijing its need to secure its energy imports from this potentially volatile region.
One of the principle relationships Beijing is attempting to nourish is with the Islamic Republic of Iran. Iran possesses the largest known reserves of natural gas on the planet along with the fourth largest known reserves of oil, making it a hugely attractive trade partner for China. This relationship is already very well established, with Iran being China’s third largest supplier of oil. Contributing factors for this, beyond China’s unquenchable need for energy, are the economic sanctions placed upon Tehran by the US and other Western nations. These sanctions can be chiefly attributed to Iran’s ongoing nuclear program and have facilitated the Sino-Iranian bilateral relationship through the denial to Iran of alternative economic partners, enabling Beijing to fill the vacuum. This has resulted in bilateral trade reaching $45 billion in recent years.
In terms of energy trade, China National Petroleum Corp (CNPC), China’s largest oil company, is in the process of developing three oil fields in Iran along with the recently announced deal for Beijing to invest $20 billion in energy development programs. Complementing direct investment in energy projects, the PRC has additionally taken to investment in transport infrastructural ventures in Iran linking to existing or ongoing projects in neighboring states. Such endeavours include the approved joint construction of a high-speed railway and reports of an extension that would create a direct rail link to Xinjiang Province. Linking ground transportation systems like these to existing networks in Pakistan could provide quicker and potentially more reliable routes for transportation of goods, being less susceptible to prospective maritime interference from malcontent states.
Beijing has also placed assiduous focus upon developing relations with the House of Saud. China and Saudi Arabia have been strategic partners since 2006 and relations since that time, especially in the energy field, have burgeoned. Saudi Arabia has been China’s largest supplier of crude oil for the past decade and looks to remain a focal point for Beijing’s efforts to secure its ongoing desire for oil – not just for the fact that the Saudi Arabian geographical expanses encompass the second largest known oil reserves on the planet but the fact that Riyadh has been extremely reliable in its ongoing supply, with numerous official reassurances that this stance will continue. Bilateral agreements in the energy field include the $8.5 billion joint endeavour between Sinopec and Aramco to develop a key refinery in the Red Sea port city of Yanbu. The refinery will produce 400,000 barrels of heavy crude oil each day, scheduled to become operational in 2014.
Iraq is the third state where Beijing has heavily focused its attentions in recent years. With the world’s fifth largest known oil reserves and an industry ripe for investment following the surge in production in the years preceding the Allied invasion, Iraq represents a key market for China’s energy ambitions. Beijing has invested heavily and Baghdad has received this welcomingly. Amongst various agreements, the most prominent is the $15 billion deal inked between Iraq, CNPC and British Petroleum (BP) in 2009 to develop the gigantic Rumaila oilfield, which in 2012 accounted for one third of all Iraqi oil production and was dubbed by ministry spokesman Asim Jihad as a “milestone” in renewing Iraq’s oil industry. This 20-year contract will provide CNPC with a 37% share in oil production, helping to make the CNPC the largest foreign company in terms of production operating in post-war Iraq.
While securing long-term energy deals with various states across the Middle East has been of vital importance to China to assist in sustaining its current high growth levels, the safe transportation of these resources is just as crucial. For if the situation were to arise of a prolonged US blockade in the Strait of Hormuz in a dispute with Tehran, this could have potentially devastating effects on China’s ability to transport its energy imports from Iraq and the Arabian Peninsula. There is also the ongoing issue of pirates operating off the coast of Somalia along with the future potential scenario of a reduced US presence in the Middle East. A recent BP report reveals its projections of the US becoming “entirely self sufficient in energy by 2030.” With this consideration, Beijing has taken numerous steps to ensure the safe transit of its essential energy imports and to diversify its transportation options. As mentioned above, the PRC has begun to put measures in place to increase overland transportation from Iran, through Pakistan and on to Xinjiang Province. However, such measures are so far limited and face many issues themselves due to expense, time and ongoing relations between the different states within the Middle East. Thus, maritime transportation will remain the most employed vehicle for transportation in the short to medium term.
In light of these projections, Beijing has been developing what commentators have termed, its “String of Pearls” strategy. This includes engagement with Pakistan, Myanmar, Bangladesh, Sri Lanka, Maldives, Seychelles and Mauritius. Engagement with all these states has crucially included agreements within the naval realm, including investment in strategically located ports such as Gwadar, Hambantota and Sittwe, securing refueling facilities in the Bangladeshi ports of Chittagong and Cox’s Bazaar, and monitoring stations on the Coco Islands of Myanmar, There are reports that China has made agreements with both Maldives and Seychelles to establish naval bases and refueling stations for Chinese ships.
The port of Gwadar in Pakistan represents the most significant pearl for China in terms of its energy transportation interests from the Middle East. Strategically located 400 kilometers from the Strait of Hormuz, a Sea Lane Of Communication (SLOC) transits over one third of China’s oil imports. Beijing has provided over $1.2 billion in investment alongside further investment in the port at Karachi and the construction of a new highway to connect the two (1). The location will allow China to keep a close eye on the nearby SLOC, orchestrate the safe transit of energy imports and react to any interference. The PRC has also courted the idea of constructing gas and oil pipelines running from Gwadar to Xinjiang, serving as an alternative route to maritime transit across the Indian Ocean and through the Malacca Strait and reducing China’s “Malacca Dilemma” (2). In tandem with Beijing’s increased naval presence in the Indian Ocean Region, the Peoples Liberation Army Navy (PLAN) has increasingly been carrying out anti-piracy operations and a number of multilateral naval exercises in the littoral seas around the Middle East. Such endeavours are helping to advance the PLAN’s goal of becoming a “blue water navy” and its ability to ensure the safe transit of imports across the oceans.
As China continues to rise on the world stage toward its seemingly inevitable hegemonic standing it will continue to have an insatiable thirst for energy, a thirst that looks likely to be quenched significantly through rising imports from the Middle East. The International Energy Agency reported a projected increase of China’s oil imports from the Middle East from 2.9 million barrels a day in 2011 to 6.9 million in 2035. With this unavoidable reality staring the leaders in Beijing starkly in the face, it seems only logical for China to significantly step up its engagement and influence in the region in line with its energy interests. However, this will not be a straightforward task, as increased engagement will bring difficulties of its own: ongoing turmoil across the region, the clash of interests with other powers including the US and India, in addition to the stumbling blocks likely to be encountered from simultaneous engagement with states holding high levels of animosity toward one another. To lower the vulnerability associated with China’s reliance on imported energy, Beijing has begun to increasingly diversify its imports from other areas of the globe, including Africa and Central Asia. Yet, as projections indicate the Middle East continuing to supply the PRC with the majority of its energy imports, Beijing will continue to focus upon the region like a hawk, as the outcome of its endeavours here could have a profound effect on China’s economic growth and hegemonic dreams.
(1) J. Blazevic, “Defensive Realism in the Indian Ocean: Oil, Sea Lanes and the Security Dilemma,” China Security, Vol. 5 No. 3 (2009), pp. 59-70.
(2) R. D. Kaplan, “China’s Port in Pakistan?”, and J. R. Holmes & T. Yoshihara, “China’s Naval Ambitions in the Indian Ocean.” Pg. 378. The Malacca Dilemma refers to the over-reliance on the Strait of Malacca for its energy imports.