In today’s Wall Street Journal (by subscription) Chinese Oil Drill: Beijing’s blundering quest for energy.
Inexperienced in global commodities markets and suspicious of the United States, China’s policy makers are vainly seeking to insulate themselves from the global energy market by locking up energy supplies. To do this, Beijing has supported regimes that promote geopolitical instability, overpaid for energy assets and invested in expensive infrastructure projects as alternatives to transporting oil by sea. China is also developing the capability to project its military power into sea lanes used by oil tankers. It has every right to waste resources in this way, but its clumsy approach harms others by raising international tensions and oil prices.
The article goes on to explain how China’s investments increase geopolitical instability, for instance how
Beijing’s opposition to sanctions [against a nuclear Iran] actually increases the likelyhood of a conflict – a judgement reflected in rising crude oil prices.
The article concludes by stating,
While investing in new iol sources can have positive effects for the world as a whole, that is overweighed by the rist of increased geopolitical instability as a result of China’s blundering quest for energy.
Toasted Bread links to a WaPo article from last year, Big Shift in China’s Oil Policy: With Iraq Deal Dissolved by War, Beijing Looks Elsewhere
With so much competition for assets, China has pursued deals with international pariah states that are off-limits to Western oil companies because of sanctions, security concerns or the threat of bad publicity. China National Petroleum is the largest shareholder in a consortium running much of the oil patch in Sudan, a country accused by the United States of genocide in its western region of Darfur. Last year, China signed a $70 billion oil and gas purchase agreement with Iran, undercutting efforts by the United States and Europe to isolate Teheran and force it to give up plans for nuclear weapons. If Cnooc acquires Unocal, it would have gas fields and a pipeline in Burma, whose operation by the U.S. company has been criticized by human-rights groups.
The WaPo article states that President Hu Jintao said Chinese companies would invest $5 billion in oil projects in Argentina.
Neither article mentions China’s upcoming deal with Cuba for oil drilling in the Caribbean, and the volatile Iran/Cuba/Venezuela mix.
China continues to play an increasingly more visible part in Venezuela, including the upcoming 5th China-Venezuela High Level Convention in July, while at the same time Venezuela tries to bankroll projects such as the creation of a South American natural gas cartel and intervention in Latin American politics (Argentina included).
On the latter, I was told by an expert in Latin America that the plan is IF (big IF) Sandinista Daniel Ortega wins the election Nicaragua, China would build a pipeline from the Caribbean — where Venezuelan oil tankers would dock, to the Pacific — from where the Chinese tankers would take oil to China. The person stating this is not indulging in wild speculation, as China has been playing an increasingly larger role in the Caribbean after Jimmy Carter so kindly let go of the Panama Canal in 1977.
Interestingly, oil might prove to be Hugo’s undoing, whether it drops in price, or if Belize, Colombia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Nicaragua and Panama realize their dreams of producing oil for $8 less a barrel than the going world market rate, a dream for which the huge Chinese market is an incentive.
