Source: Energy Information Administration, 2012
Apart from the potential threats to the flow of oil from countries that have physical control over the chokepoints, the weak presence of the Chinese Navy over the sea routes from the Persian Gulf to Malacca and Taiwan Straits reinforces Beijing’s securitization of energy policy. China lacks control over the major oil routes and the strategic chokepoints in the South China Sea and the Indian Ocean are beyond China’s reach (Beng and Li, 2005: 23). In the Strait of Hormuz, the stand-off between Tehran and Washington has endangered the flow of trade goods and commodities. Numerous times, Iran threatened to close down the Strait if it is attacked by the US and its allies. In the Strait of Malacca, piracy is a greater concern because
“the number of pirate attacks in the [Malacca Strait] region still ranks highly when compared with the world’s other important waterways” (Komiss and Huntzinger, 2011: 12-13).
24 The String of Pearls refers to a strategy to provide China with forward presence and military bases along the SLOCs from the South China Sea to the Persian Gulf in the Middle East. A pearl normally comes with facilities like airstrips and naval bases, logistics and intelligence. China currently has a number of pearls stretching from the Gulf of Hormuz to the Malacca Strait although not all of these pearls (bases) are fully militarized in the sense of US bases.
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Obviously, Beijing feels uncomfortable with the US dominance over the sea routes and has been using its vast foreign exchange reserves to diversify its supply base (Cornelius and Story, 2005: 16). The most important indicator (and outcome) of China’s securitization of energy policy is the going-out strategy. This strategy involves: (1) Securing access to energy supply through investment in upstream projects; (2) Signing equity oil agreements with foreign NOCs to enable long-term, stable access to energy resources; (3) Taking oil off the market; (4) World-wide search for oil.25 These strategies only enable China to reduce the risks of over-reliance on the Middle East energy sup-plies because Persian Gulf’s share in China’s energy mix continues to grow due to the existing immense potential for development in China’s economy.
Certain factors facilitate Chinese NOCs’ going-global activities. Firstly,
internationalization of the energy firms increases their capability to operate in foreign
environments and compete with the long-established Western multinationals. Secondly, high oil prices accompanied with the urge to maximize profit lure NOCs to overseas ventures. Also, wage increases in China pushes companies to regions with cheaper labor and operation costs.
Thirdly, the opening up of some oil-rich countries such as Iran and Sudan and the availability of high technology equipment once monopolized by developed countries provide incentive for and enable China’s NOCs to go abroad and seek oil. Finally, world-wide internationalization of national oil companies obliges Chinese NOCs to go overseas because, if they did not, they would be outcompeted and lose revenue.
Perhaps the most effective going-abroad strategy is equity-oil agreements to help secure and diversify energy sources, increase expertise in unconventional oil exploration techniques, and capture value upstream.26 The global financial crisis and China’s vast foreign exchange reserves enable Beijing to buy equity in existing oil projects or acquire stakes in energy companies with investments in highly profitable areas. According to the EIA, since 2009,
“the NOCs have purchased assets in the Middle East, North America, Latin America, Africa, and
25 For example, crude imports from Venezuela were more than doubled between 2009 and 2011. See, “As US Leaves, Oil-Hungry China Stuck in Middle East,” Wall Street Journal, June 27, 2012.
26 International Energy Agency defines equity oil as the one “that [has been] obtained by control of rights to a given proportion of output from an oil concession in exchange for oil field exploration, development, or extraction services and investments, as opposed to trade or purchase-mediated access to oil.”
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Asia” (IEA, 2012d). In 2011 alone, Chinese NOCs invested $12 billion in gas and oil, which accounted for over 60% of the global equity oil purchases. Historically, China’s overseas equity production grew from a mere 140.000 b/d in 2000 to 1.5 million b/d in 2011. Among the big four, the CNPC is the most active NOC and holds the largest equity share. However, the landmark equity agreement was signed in 2012 by CNOOC, which bought the Canadian oil company Nexen for $15 billion, the largest Chinese acquisition of any kind.27 Since 2008, China’s bilateral oil-for-deals have amounted to $100 billion (IEA, 2012d).
Apparently, of the three options available to provide energy security (diplomacy, trade and force), China have chosen diplomacy whereas the US strategy has for long included military force, as well.28 What factors lead China to choose securitization over diplomacy? A concise answer to this question would be two pronged: First, China lacks indigenous oil supply to meet the domestic demand. Second, Bejing’s energy diplomacy is largely driven by its view of energy security and its reliance on foreign sources of energy. PRC considers (and rightly so)
international energy market as unfair: The most developed energy spots and futures markets are located in the West; the quality areas of oil in the Middle East and elsewhere are under the control of Western multinationals; and energy markets could be manipulated by the West. Also, as the amount of tradeable oil is limited in the markets (because of the control of the oil cartel OPEC’s on the daily crude output), China’s needs cannot be met adequately. China faces the risks of carrying the bulk of its oil through naval chokepoints. Also China’s strategic petroleum reserves (SPRs) are still inadequate.
Beijing sees that US actions in the Middle East is partly to serve its energy interests although it feels also threatened by the US’ firm grip on these markets and maritime routes to and from those markets. Consequently, for the PRC, energy business can hardly be divorced from high politics. China sees that it is dangerous to merely rely on the markets for energy
27 The CNOOC-Nexen deal was approved by the US government on February 12, 2013, overcoming the final hurdle.
Previously, the deal also received approval from Canadian and British governments. Visit, http://online.wsj.com/article/SB10001424127887324196204578299862176958542.html
28 Shaofeng Chen (2008) defines oil diplomacy “as the foreign activities with explicit involvement of the central government aiming to secure foreign oil and gas resources or promote interstate oil and gas business cooperation.
It differs from oil and gas trade in terms of the major actors involved, the principal objectives, and the specific transaction methods.”
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acquisition. Other factors for the securitization of energy are “the possibility of temporary oil shortage and/or oil price volatility in the international market, natural disaster,
uncompetitiveness of Chinese oil firms, and absence of a crisis management system for oil security” (Sahofeng, 2008: 83-88). For this reason, energy policy remains a mixture of hard (military) and soft (macroeconomics) power supported by domestic measures such as energy preservation and diversification (Jian, 2011: 2).
All in all, China securitizes energy mainly because of the twin issues of availability (the growing negative ratio between production and consumption) and accessibility (risk such as outside intervention in the oil producing countries or the security of strategic maritime routes).
What reinforces China’s concern for energy security is the country’s limited power projection capability. As a result, Chinese energy sector remains state-led and securitized. China’s response to energy insecurity includes naval modernization for the protection of sea routes, state-to-state equity oil agreements, oil for loan deals and other forms of concessions, and an overall defiance of the US security regime in the Middle East and North Africa as it is seen to endanger China’s energy security prospects. In this respect, a study of the Chinese policy in the Middle East will shed further light on the China-US strategic competition. Therefore, the following chapters aim to provide a comprehensive investigation as to how securitization impacts on the dynamics of China-US relations in the Middle East.
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Chapter 3: China in the Middle East
China’s Political Presence in the Middle East
China’s relations with the Middle East began around 300BC through a network of traders from both ends of the Asian continent. The famous historic trade route, known as the Silk Road, extended from the city of Xian in China to Constantinople of then-Roman Empire.
Throughout this route the famous Chinese commodity, silk, was transported to Central Asia, Middle East and Europe. Other civilization-nations also contributed to the trade; India with its spices, Persia with its precious rugs and Arabia with its horses and camels. Other than for trade, China utilized the Silk Road for its westward expansion which laid the ground for its further encounter with the Arab world.
The end of the Mongol rule and rise of the Ming Dynasty in China coincided with the continued fall of the Arab/Islamic civilization and ascend of the Europeans. However, despite its great power status and unquestioned seafaring capability and naval dominance, China reverted into isolationism from the 15th century until the British encroachment in the mid-19th century that forced China open. According to historians, by locking itself into the Asian landmass at the apex of its might, China lost (what some call) a historic opportunity to be a global-imperial power with territorial possessions in the Americas, Africa, and the Middle East, and avoid altogether the century of humiliation (1848-1950) under Western colonialism.
After the establishment of the PRC in 1949, China-Middle East relations took an
increasingly ideological tone. China explicitly supported Arab nationalist movements and their right to freedom from colonial domination and to self-determination. Initially, it attempted to co-ordinate its Middle East policy with the Soviets but after the Sino-Soviet split in the 1960s, Chinese incursion into the region became more complicated. Nevertheless, Beijing managed to gain considerable foothold in terms of diplomatic recognition and trade relations. The PRC sided with Nasser in Egypt and offered cooperation with other nations that held similar anti-imperialist agenda such as Syria, Iraq, Yemen and Algeria. On the Arab-Israeli conflict in
Palestine, China consistently advocated negotiated solution to the crisis while at the same time
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it continued to work closely with Yasser Arafat, the founder and leader of the Marxist popular liberation organization, the PLO until the 1990s (Olimat, 2013: 6-34).
The turning point in China-Middle East relations came when Mao Tse-tung passed away in 1976. Succeeding him, Deng Xiaoping gave priority to the economic modernization of China and the process of opening-up gradually began to prioritize China’s foreign policy. In the 80s, China began to draw a line between its state ideology and foreign policy, reserving the former for its domestic affairs and moving from idealpolitik to realpolitik in its foreign relations. This enabled a number of reactionary Gulf countries to establish diplomatic ties with China. As the 1990s progressed, China had almost completely abandoned the idea of supporting
revolutionary regimes such as in Libya, South Yemen, the Palestinian Authority, recognized Israel and Qatar and built economic and political relations with the UAE and Saudi Arabia. In short, the primacy of economic interest over revolutionary ideology led to the de-ideologization of the Chinese foreign policy in the Middle East and the primacy of China’s economic interests took the center stage (Yao, 2007: 1-4).
The political economy of China’s contemporary relations with the Middle East improved when China took off economically throughout the 1990s and 2000s. Yet, Middle East as a region also went through certain structural alterations under external and internal forces which, in return, had deep implications for China. The two decades starting from the early 1990s signaled the period of successive wars: the United States had the Persian Gulf War in 1991 and then in 2001. It waged another war in Afghanistan in 2003. These wars and interventions caused an anti-US sentiment to rise throughout the Middle East. China, on the other hand, maintained a strict non-interventionist policy, distancing itself from the US as a responsible developing state.
This benign approach has won China a favorable public in the Middle East. China also took advantage of the existing structure to promote its interests and improve relations.
Hence, China’s foreign policy offered countries across the Middle East a viable
alternative to the hard-handed policies of the US China’s adept policy of respect for sovereignty and non-interventionism suited well with (most of the) the war-torn region estranged from the US Unlike the Western nations, China had no history of colonialism in the Middle East and thus possessed a cleaner slate to offer. Beijing’s adept policy enabled it to have good relations even
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with the close allies of the US such as the Saudi Arabia, UAE, Qatar, Kuwait and Bahrain just as China had mostly good relations with Iran.
China’s political relations with countries in the ME (especially those with which the US maintains contentious relationship) provides Beijing with a geostrategic leverage against the US The balancing of the US power, however, is often carried out in a behind-the-scene fashion as China does not wish to confront Washington openly. Hence, Beijing moves carefully not to be seen by the nations taken the brunt of the US as a savior; rather, as a trusted partner. However, more implicitly, it attempts to check the US power by offering the most required political and economic bloodline to countries such as Iran and Sudan. Energy security occupies a large space in China’s geopolitical calculations. Obviously, “the GME [Greater Middle East] is certainly one of the most important areas where the future structure of the globe will be decided” (Radtke, 2007: 415).
Thus, since the 1990s policy makers in China have attempted to cultivate good relations with the Middle East based on a foundation that has now evolved into a radically different form from what it was in the Cold War era (Calabrase, 1998: 353). Even in the areas that are
politically most-sensitive and potentially contentious, China has maintained a firm but non-contentious political posture and a strategic balance that, first, aimed to promote good
relations with the region; second, avoid unilateral involvement in regional disputes that would put it squarely up against the United States (Zhang, 1999: 152-153). As a result, China’s, cautious but firm approach bore concrete results. This way, Beijing has managed to remain focused on improving economic and strategic relations while observing a low-key posture in the region’s numerous political and social problems (Tang: 2006: 20).
However, this is not to say that China’s Middle East strategy is one-dimensional; rather, other geopolitical concerns (encompassing economics, defense, diplomacy, soft power, and hegemonic competition) also remain relevant in China’s policy formulations in the Greater Middle East. One such consideration is the geographic and cultural proximity of China’s own ethnic minorities in the Northwest regions with Central and West Asia. Political and sectarian turbulences in the Middle East may have negative impact on the internal security of China itself – as it has already been proven in the June 2013 terrorist attacks in China’s far-western
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region of Xinjiang.29 Therefore, the threat of ethnic and sectarian separatism and terrorism extends Beijing’s attention from Central Asia to the Middle East. Another concern is the long-established strategic dominance of the US in the region. China is suspicious of the US
intentions, at the very least, and the US Navy’s ability to control and dominate the trade lanes is interpreted as a potential threat that may lead to the obstruction of those routes if China-US great power competition takes on a more contentious nature (Calabrase, 1998: 353-354).
As China moved from being a second-tier power focused on the protection of national unity and territories to a global power with greater capacity to extend force beyond its traditional boundaries, its focus also extended into Latin America, Africa, Central Asia and the Middle East (Jaffe and Lewis, 2002: 115). Whereas ideological alliance-making guided Beijing’s expansion in the pre-Gulf War era, search for oil and, less visibly, strategic balancing of the US, aided its geopolitical and economic expansion in the post-ideology era. As China went beyond its immediate periphery in the quest for energy, the likelihood of a clash with the US on a variety of security-related issues has increased. Especially China’s securitized approach to energy has created frequent frictions between the two countries (Blumenthal, 2005). Since Beijing’s energy policy in the Middle East inadvertently overlaps with other fields such as nuclear proliferation, sanctions on the unruly states and export of arms, Beijing-Washington relationship is expected to become more contentious as the Middle East today goes through one of its deepest political and social crises, widely known as the Arab Spring, since the wave of independence in the 50s and 60s that had installed strong, secular and nationalist
governments, among others, in Iraq, Syria, Libya and Egypt. Hence, as Shambaugh puts it rather alarmingly, “what the world has seen from China since 2009 is an increasingly realist… nation, seeking to maximize its own comprehensive power…” (Shambaugh, 2011: 24).
The underlying feature of China’s political influence in the Middle East is the fact that it is overwhelmingly considered as a benign great power. Beijing’s articulated policy of peaceful coexistence and designation of itself as the largest developing country takes away the negative connotations that are associated with the industrialized West (Chen, 2011: 1-4). However, this
29 Some of the perpetrators that took part in the bloody attack received training in Syria. See, “China state media blames Syria rebels for Xinjiang violence,” Reuters, July 1, 2013, http://www.reuters.com/article/2013/07/01/us-china-xinjiang-idUSBRE96005I20130701
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is not to say that political ties between China and the Middle East involve no resentment or mistrust (although they are mostly of economic nature except the more ideological and sectarian issue of Xinjiang separatism and its connections with governments and
non-governmental organizations groups in the Middle East). The nature of the Chinese trade in the region, for example, is a source of concern. Indeed, Middle East mostly serves as an export source of natural resources and an importer of Chinese goods (although this has started to change with the growth and internationalization of China’s medium and high-end
manufacturing). Also, Chinese firms which bring in their own workforce to large infrastructure projects create resentment among local populations due to reduced impact on the people’s prosperity. Finally, China’s policy in its restive Xinjiang region impairs its relations with some countries in the region. All in all, however, China enjoys a considerably favorable posture in the Middle East in both public and political domains.30
China’s Economic Presence in the Middle East
Modern China’s economic relations in the Middle East have improved over time just as its political relations did. Most notably, as China’s foreign policy transitioned from ideology to realpolitik, its economic relations, which were initially based on arms trade (although not large in scale because of China’s weaker standing in the region as compared to the US, some
Modern China’s economic relations in the Middle East have improved over time just as its political relations did. Most notably, as China’s foreign policy transitioned from ideology to realpolitik, its economic relations, which were initially based on arms trade (although not large in scale because of China’s weaker standing in the region as compared to the US, some