TomDispatch has a new column from Pepe Escobar (the fourth in an ongoing series) on the evolving great game over Central Asian natural gas - China’s Pipelineistan “War”.
Future historians may well agree that the twenty-first century Silk Road first opened for business on December 14, 2009. That was the day a crucial stretch of pipeline officially went into operation linking the fabulously energy-rich state of Turkmenistan (via Kazakhstan and Uzbekistan) to Xinjiang Province in China’s far west. Hyperbole did not deter the spectacularly named Gurbanguly Berdymukhamedov, Turkmenistan’s president, from bragging, “This project has not only commercial or economic value. It is also political. China, through its wise and farsighted policy, has become one of the key guarantors of global security.”
The bottom line is that, by 2013, Shanghai, Guangzhou, and Hong Kong will be cruising to ever more dizzying economic heights courtesy of natural gas supplied by the 1,833-kilometer-long Central Asia Pipeline, then projected to be operating at full capacity. And to think that, in a few more years, China’s big cities will undoubtedly also be getting a taste of Iraq’s fabulous, barely tapped oil reserves, conservatively estimated at 115 billion barrels, but possibly closer to 143 billion barrels, which would put it ahead of Iran. When the Bush administration’s armchair generals launched their Global War on Terror, this was not exactly what they had in mind.
China’s economy is thirsty, and so it’s drinking deeper and planning deeper yet. It craves Iraq’s oil and Turkmenistan’s natural gas, as well as oil from Kazakhstan. Yet instead of spending more than a trillion dollars on an illegal war in Iraq or setting up military bases all over the Greater Middle East and Central Asia, China used its state oil companies to get some of the energy it needed simply by bidding for it in a perfectly legal Iraqi oil auction.
Meanwhile, in the New Great Game in Eurasia, China had the good sense not to send a soldier anywhere or get bogged down in an infinite quagmire in Afghanistan. Instead, the Chinese simply made a direct commercial deal with Turkmenistan and, profiting from that country’s disagreements with Moscow, built itself a pipeline which will provide much of the natural gas it needs.
No wonder the Obama administration’s Eurasian energy czar Richard Morningstar was forced to admit at a congressional hearing that the U.S. simply cannot compete with China when it comes to Central Asia’s energy wealth. If only he had delivered the same message to the Pentagon.
That Iranian Equation
In Beijing, they take the matter of diversifying oil supplies very, very seriously. When oil reached $150 a barrel in 2008 -- before the U.S.-unleashed global financial meltdown hit -- Chinese state media had taken to calling foreign Big Oil “international petroleum crocodiles,” with the implication that the West’s hidden agenda was ultimately to stop China’s relentless development dead in its tracks.
Twenty-eight percent of what’s left of the world’s proven oil reserves are in the Arab world. China could easily gobble it all up. Few may know that China itself is actually the world’s fifth largest oil producer, at 3.7 million barrels per day (bpd), just below Iran and slightly above Mexico. In 1980, China consumed only 3% of the world’s oil. Now, its take is around 10%, making it the planet’s second largest consumer. It has already surpassed Japan in that category, even if it’s still way behind the U.S., which eats up 27% of global oil each year. According to the International Energy Agency (IEA), China will account for over 40% of the increase in global oil demand until 2030. And that’s assuming China will grow at “only” a 6% annual rate which, based on present growth, seems unlikely.
Saudi Arabia controls 13% of world oil production. At the moment, it is the only swing producer -- one, that is, that can move the amount of oil being pumped up or down at will -- capable of substantially increasing output. It’s no accident, then, that, pumping 500,000 bpd, it has become one of Beijing’s major oil suppliers. The top three, according to China’s Ministry of Commerce, are Saudi Arabia, Iran, and Angola. By 2013-2014, if all goes well, the Chinese expect to add Iraq to that list in a big way, but first that troubled country’s oil production needs to start cranking up. In the meantime, it’s the Iranian part of the Eurasian energy equation that’s really nerve-racking for China’s leaders.
Chinese companies have invested a staggering $120 billion in Iran's energy sector over the past five years. Already Iran is China’s number two oil supplier, accounting for up to 14% of its imports; and the Chinese energy giant Sinopec has committed an additional $6.5 billion to building oil refineries there. Due to harsh U.N.-imposed and American sanctions and years of economic mismanagement, however, the country lacks the high-tech know-how to provide for itself, and its industrial structure is in a shambles. The head of the National Iranian Oil Company, Ahmad Ghalebani, has publicly admitted that machinery and parts used in Iran’s oil production still have to be imported from China. ...
Much more is to come, and Chinese leaders expect energy-rich Russia to play a significant part in China’s escape-hatch planning as well. Strategically, this represents a crucial step in regional energy integration, tightening the Russia/China partnership inside the SCO as well as at the U.N. Security Council.
When it comes to oil, the name of the game is the immense Eastern Siberia-Pacific Ocean (ESPO) pipeline. Last August, a 4,000-kilometer-long Russian section from Taishet in eastern Siberia to Nakhodka, still inside Russian territory, was begun. Russian Premier Vladimir Putin hailed ESPO as “a really comprehensive project that has strengthened our energy cooperation.” And in late September, the Russians and the Chinese inaugurated a 999-kilometer-long pipeline from Skovorodino in Russia’s Amur region to the petrochemical hub Daqing in northeast China.
Russia is currently delivering up to 130 million tons of Russian oil a year to Europe. Soon, no less than 50 million tons may be heading to China and the Pacific region as well.
There are, however, hidden tensions between the Russians and the Chinese when it comes to energy matters. The Russian leadership is understandably wary of China’s startling strides in Central Asia, the former Soviet Union’s former “near abroad.” After all, as the Chinese have been doing in Africa in their search for energy, in Central Asia, too, the Chinese are building railways and introducing high-tech trains, among other modern wonders, in exchange for oil and gas concessions.
Despite the simmering tensions between China, Russia, and the U.S., it’s too early to be sure just who is likely to emerge as the victor in the new Great Game in Central Asia, but one thing is clear enough. The Central Asian “stans” are becoming ever more powerful poker players in their own right as Russia tries not to lose its hegemony there, Washington places all its chips on pipelines meant to bypass Russia (including the Baku-Tbilisi-Ceyhan (BTC) pipeline that pumps oil from Azerbaijan to Turkey via Georgia) and China antes up big time for its Central Asian future. Whoever loses, this is a game that the “stans” cannot but profit from.