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China's move toward oil diplomacy
Paul Lin

The continued rapid development of China's economy over the past few years has led to an astonishing consumption of raw materials and energy sources.

In a report detailing the raw-materials production market in 2003 and forecast for last year, China's Ministry of Commerce pointed out that the country relied on imports for 35 percent of its crude oil, 36.2 percent of its iron ore, 47.55 percent of its aluminum oxide and 68.24 percent of its natural rubber. At the annual National People's Congress and Chinese People's Political Consultative Conference last March, an economist pointed out that energy consumption needed in China to create US$1 was 4.3 times that of the US, 7.7 times that of Germany and 11.5 times that of Japan. China has now become the world's biggest consumer of crude oil after the US, importing more than 100 million tonnes last year. One of the reasons oil prices soared last year was China's great increase in oil imports.

China's urgent desire to import oil is indeed startling. Apart from the needs resulting from economic development, there is also a feeling of crisis, as if someone were trying to cut their oil supplies. After Hu Jintao took over as president, China's diplomacy has been transformed from a great-nation diplomacy to an "oil-nation diplomacy," and China's oil grab is now reaching across the globe.

At the end of January last year, Hu visited four nations, three of which, Egypt, Gabon and Algeria, are all oil exporters. The purpose of his visit was to sign energy agreements. Last November, he signed a US$19.7 billion investment agreement with Argentina, US$5 billion of which is to be used for oil exploration.

Last month, Venezuela's President Hugo Chavez visited Beijing, where he signed an agreement allowing China to drill for oil, set up oil refineries and produce natural gas. To be able to import oil from Sudan, China sold a vast amount of arms to the Sudan government to support it in the country's 20-year civil war. China also opposed submitting the issue of Iran's nuclear program to the UN Security Council for discussion in order to be allowed to drill for oil in Iran.

A conflict has, however, arisen between China and Vietnam over drilling in the oil fields in the South China Sea. In the Americas, because Canada is the biggest provider of oil to the US, China's oil company sent representatives in December 2003 to Calgary, the energy capital of Canada, to discuss a joint investment plan aimed at undermining the US' oil position. China's oil company is even going to buy the Asian assets of the Californian oil company Unocal Corp.

The most important target of China's oil-nation diplomacy is of course Russia. China recognizes Russia's occupation of Chinese territory and has bought large amounts of Russian arms, and the two nations also share the goal of counterbalancing the US. The two nations enjoy a very good relationship, and in 1994 an agreement was reached to build an oil pipeline between Angarsk in Siberia and Daqing in China. Hu visited Russia in May 2003 to sign an agreement, but the following September Russia changed its attitude. Leaders from the two countries then exchanged several visits without being able to sign an agreement, and Russia instead turned to cooperation with Japan to build a pipeline between Taishet and Nakhodka, and finalized an agreement to do so on Dec. 31 last year.

Because of this, Russia may add a branch to the pipeline to placate China, but it worries that oil supplies will be insufficient. Another way to placate China would be to allow China's oil company to obtain shares in a Russian oil company. To make up for this loss of Russian supplies, China is also building a pipeline from Kazakstan.

In addition, Chinese specialists have outlined several crude oil import programs.

First, digging a canal across the Isthmus of Kra in the south of Thailand to bypass the Strait of Malacca, which could come under US control. Doing so would ensure oil shipments from the Middle East, and it would also shorten the transportation route.

Second, emulating the Burma-Yunnan railway -- built during World War II to transport US materials -- by building an oil pipeline from Kunming to a port in Myanmar. This would guarantee crude oil shipments to the provinces in southwest China. If a pipeline isn't built, a pan-Asian railway reaching the Indian Ocean should still be built, starting in Ruili, in the west of Yunnan and connecting to Lashio, the traffic hub in northeastern Myanmar, and finally reaching Yangon, to form a railroad connection from China to the Indian Ocean.

Third, building a pipeline from Russia through Xinjiang and Tibet on to India as a way of gaining India's support when dealing with the US. The question is whether New Dehli would feel at ease with China, because that would amount to Beijing controlling India's oil supplies.

No country today feels that it has the ability to invade China. China does not set out to save energy, but instead stirs up a feeling of crisis in various places in order to whip up nationalist sentiment. The oil crisis is one example. The goal is to use oil diplomacy to cover up its ambitions for strategic expansion. This is the crisis toward which the whole world should turn its attention.

Paul Lin is a commentator based in New York.

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