Big Shift in China's Oil Policy  

Posted by Big Gav

The Washington post has a good article on China's sisyphean quest for energy security.

Until recently, China's view of the global energy map focused narrowly on the Middle East, which holds roughly two-thirds of the world's oil. Special attention was directed toward one well-supplied country: Iraq.

Through cultivation of Saddam Hussein's government, China sought to develop some of Iraq's more promising reserves. Beijing advocated lifting the United Nations sanctions that prevented investment in Iraq's oil patch and limited sales of its production.

Then the United States went to war in Iraq in 2003, wiping out China's stakes. The war and its aftermath have reshaped China's basic conception of the geopolitics of oil and added urgency to its mission to lessen dependence on Middle East supplies. It has reinforced China's fears that it is locked in a zero-sum contest for energy with the world's lone superpower, prompting Beijing to intensify its search for new sources, international relations and energy experts say.

"Iraq changed the government's thinking," said Pan Rui, an international relations expert at Fudan University in Shanghai. "The Middle East is China's largest source of oil. America is now pursuing a grand strategy, the pursuit of American hegemony in the Middle East. Saudi Arabia is the number one oil producer, and Iraq is number two [in terms of reserves]. Now, the United States has direct influence in both countries."

Many other factors help explain China's motives in dispatching its energy companies abroad for new stocks. Oil demand is exploding in China as people embrace automobiles and as factories, apartment towers and office buildings proliferate. For the third summer in a row, China is rationing energy, limiting production in industrial areas.

Under the rule of Mao Zedong, China -- under the banner of fending for itself -- focused on oil production in its northeast, near the city of Daqing. The government's current push to secure foreign oil fields is driven by worries that there may one day be too little oil to meet worldwide demand and that foreign powers -- in particular the United States -- will choke China.

The Rodent is heading off to London to watch the Ashes match at Lords, but it won't be all fun, games and Pimms for him as he has the tricky task of trying to avoid offending either or both of our imperial masters in Washington and our best customers in China before he makes it to the UK.
Before the Prime Minister concludes his official visit to the United States and Britain by watching the Ashes at Lord's, he faces a potentially sticky wicket in Washington. John Howard leaves tomorrow for the US for talks with President George Bush and top officials on issues including counter-terrorism measures in the wake of the London bombings and Australia's deployment of troops to Afghanistan.

A third theme officials expect to be raised at the the White House talks, however, has the potential to cast a shadow over Mr Howard's visit. Australia's warming relations with China, buoyed by recent multibillion-dollar gas and coal deals, are said to be spurring US concerns about the potential for China's influence to compromise the Australia-US alliance.

Hugh White, professor of strategic studies at the Australian National University and a former strategic adviser to Labor and Coalition governments, says Canberra's alliance with Washington is facing a big test. Australia's role in Iraq "now attracts less attention in Washington than our growing political alignment with China", he wrote recently in the Herald.

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