China’s increasing demand for energy is leading to a push to further exploit its own energy resources deposits, a leveraging of its growth market for favorable energy pricing, and conflicts with neighboring countries. Energy experts discussed China’s efforts to bolster its energy resources, during a 17 September forum on energy and security issues in China and the Asia Pacific at the Woodrow Wilson International Center for Scholars in Washington, D. C.
These experts also examined whether regional tensions around oil and gas are primarily about geopolitics or energy. China’s standoff earlier this year with Vietnam over the placement of the China National Offshore Oil Corporation’s Haiyang Shiyou 981 oil platform in disputed waters in the South China Sea is just one of the latest examples of tensions related to energy in the region.
Amy Myers Jaffe, executive director of energy and sustainability at the University of California, Davis, said that China is making a big push to develop its shale resources while simultaneously instituting energy conservation measures. She suggested that the shale revolution in the United States is “a shocking development” for China.
“Where previously they were worried about the United States controlling the sea lanes for energy trade,” Jaffe explained, “now they have to worry about that on top of the fact that the United States is going to have its own energy and is not going to have that same disadvantage of relying heavily on imports from the Middle East or Russia or other places in the same way.” Jaffe said that she doesn’t doubt that China eventually will be successful in developing its shale resources, though the country will need to determine the best technologies and techniques that work there.
Leveraging for the Best Terms
In addition to developing its own energy resources, Jaffe said that China also is working to benefit from its position as the biggest energy purchaser in the market and as a country to which many other nations are in debt. “Their big thing is how do they leverage their powerful position as what is being perceived as the only growth market out there,” she said. “With everyone in the world going to court the Chinese to buy their oil and gas, if you are the Chinese, that gives you leverage in trying to make demands about pricing terms.”
The terms of a 30-year deal for China to buy Russian natural gas, announced last May, are one example of this leveraging, she said, stating that China squeezed out the most attractive terms possible. She also linked that energy deal to the situation between Russia, Ukraine, and other European nations, with Russia seen by some countries as using energy as a political tool.
The Russians “have had to capitulate on almost everything they’ve always said they wouldn’t do”—for this deal with China—“to get the Chinese to give the geopolitical appearance that they are siding with Russia,” she said. “Believe me, no matter what [the Chinese] stand up and say for geopolitical reasons in dealing with the U.S.-Asian ‘pivot’ or help on other issues where they have a strategic interest, don’t kid yourselves about thinking that the Chinese are not deeply concerned about whether Russia could not be a reliable energy supplier.”
Jan Kalicki, public policy scholar with the Kennan Institute’s Global Sustainability and Resilience Program at the Wilson Center, said that the Russians needed the appearance of an alternative to providing Europe with energy because many Europeans are concerned about the potential unreliability of Russia’s energy supply.
“China really is much more in the driver’s seat here,” said Kalicki, an expert on regional and global energy issues. “For example, the fact that the pricing has not been divulged” in the Russian-Chinese energy deal “can only mean that it is not a very agreeable set of prices from the Russian point of view.”
Energy and Geopolitics
Mikkal Herberg, research director of the Energy Security Program of the National Bureau of Asian Research and senior lecturer at the University of California, San Diego, focused on whether the disputes between China and some neighboring countries is more about energy or geopolitics.
Herberg said that the maritime territorial squabbling in the South China Sea region “is 95% geopolitical” rather than primarily driven by energy concerns. “It’s about territory, it’s about sovereignty, it’s about historical claims, it’s about the rise of China, and all the regional readjusting and pushing and shoving is about trying to adjust to a much more powerful China. This is simply part of the symptom of that.”
He did add, though, that energy concerns have an impact on tensions. “To the extent you believe there is a large [energy] resource, I think this does have a multiplier effect on the territorial disputes,” he noted. “Energy has become a tool in marking your strategic claims.”
—Randy Showstack, Staff Writer