China's Energy Smash-n-Grab

China energy geopolitics in high gear Beijing is also moving to ‘secure energy at the sources.’ China's booming economy, with 9% growth, requires massive natural resources to sustain its growth. China became a net importer of oil in 1993. By 2045, China will depend on imported oil for 45% of its energy needs.

On May 26, Kazakhstan crude oil began to flow into China from a newly-completed oil pipeline from Atasu in Kazakhstan to the Alataw Pass in far western China Xinjiang province, a 1,000 kilometer route announced only last year. It marked the first time oil is being pumped directly into China. Kazkhstan is also a member of the SCO, but had been regarded by Washington since the collapse of the Soviet Union, as its sphere of influence, with ChevronTexaco, Condi Rice’s old oil company, the major oil developer.

By 2011 the pipeline with extend some 3,000 kilometers to Dushanzi where the Chinese are building its largest oil refinery due to complete by 2008. China financed the entire $700 million pipeline and will buy the oil. In 2005 China’s CNPC state oil company bought PetroKazkhstan for $4.2 billion ands will use it to develop oilfields in Kazakhstan.

China is also in negotiations with Russia for a pipeline to deliver Siberian oil to Northeast China a project that could be completed by 2008, and a natural gas pipeline from Russia to Heilongjiang in China’s Northeast. China just passed Japan to rank as world’s second largest oil importer behind the United States.

Beijing and Moscow are also integrating their electricity economies. In late May the China State Grid Corp announced it plans to increase imports of Russian electricity fivefold by 2010.

China everywhere in African oil states

In its relentless quest to secure future oil supplies ‘at the source,’ China has also moved into traditional US, British and French oil domains in Africa. In addition to being the major developer of Sudan’s oil pipeline which ships some 7% of total China oil imports, Beijing has been more than active in West Africa in the states bordering the oil-rich Gulf of Guinea, source of vast fields of highly-prized low-sulphur oil.

Since the creation of the China-Africa Forum in 2000, China has scrapped tariffs on 190 imported goods from 28 of the least developed African countries, and cancelled $1.2 billion in debt.

Indicative of the way China is doing an end-run around the customary IMF-led Western control of African states, China’s export-import bank recently gave a $2 billion soft loan to Angola. In return, the Luanda government gave China a stake in oil exploration in shallow waters off the coast. The loan is to be used for infrastructure projects. In contrast, US interest in war-torn Angola has rarely gone beyond the well-fortified oil enclave of Cabinda, where ExxonMobil along with Shell Oil have dominated until recently. That is apparently about to change with the growing Chinese interest.

Chinese infrastructure projects underway in Angola include railways, roads, a fibre-optic network, schools, hospitals, offices and 5,000 units of housing developments. A new airport with direct flights from Luanda to Beijing is also planned.

Indirectly, through its support of the Sudan government, China is also a contender in a high-stakes game of potential regime change in neighboring, oil-rich Chad. Earlier this year, World Bank ‘tough guy,’ Paul Wofowitz, was forced to back down from plans to cut off World Bank aid, after threat of an oil export cut-off by tiny Chad. ExxonMobil is currently the major oil company active in Chad. But Sudan backs Chad rebels, who were only prevented from toppling the notoriously corrupt and unpopular regime of President Idriss Deby by 1,500 French soldiers propping up the Deby regime. Washington has joined with Paris in backing Deby.

Sudan has involved China, rather than Western corporations, in exploiting its oil fields, largely as a result of misconceived US sanctions imposed in 1997, which blocked American oil companies from doing business in Sudan. A new Sudan-backed regime in Chad would jeopardise the Chad-Cameroon pipeline and Western oil firms. One can imagine China just might be willing to step into such a vacuum and help Chad develop its oil, especially if the lion’s share went to China.

And immediately after his unpleasant diplomatic visit to Washington in April, where the Chinese President was greeted by a White House diplomacy of deliberate insults reminiscent of a University of Texas frat house prank, Hu Jintao went on to Nigeria, long regarded by Washington as its ‘oil sphere of interest.’

In Nigeria, Africa’s largest oil producer, Hu signed a deal with the Nigerian government where Nigeria will give China four oil drilling licenses in exchange for a commitment to invest $ 4 billion in infrastructure. China will buy a controlling stake in Nigeria's 110,000-barrel per day Kaduna oil refinery and build railway and power stations, as well as take a 45% stake in developing Nigeria’s OML-130 offshore oil and gas field, referred to by China CNOOF oil company chairman as, ‘an oil and gas field of huge interest…located in one of the world’s largest oil and gas basins.’

Almost all of Nigeria's current oil production is controlled by Western multinationals. But the situation there will also soon change in China’s favor.

Similar soft infrastructure loans or energy investment offers are being made by China to Gabon, Ivory Coast, Liberia and Equatorial Guinea.

The curious charge against China of ‘not playing by the rules,’ and ‘trying to secure energy at the source,’ begins to assume real dimension when these and Russian recent energy moves are taken as a totality.