China turns to the gulf (page 1 of 2)

On September 23rd, two Chinese Navy ships, the guided missile destroyer Qingdao and a support vessel were greeted by a cheering crowd when they docked at the eastern port of Qingdao after completing a four-month, round-the-world voyage.

It was the first such cruise undertaken by the Chinese military. The small flotilla visited eight countries on five continents. The route of its 132-day voyage included the Arabian Sea, where during the Ming Dynasty in the first half of the 16th century, a mighty 62-ship imperial fleet under Admiral Cheng Ho wielded China's maritime power over seven great expeditions into the Indian Ocean.

Centuries later, Beijing is seeking to rebuild its naval power, in part to return to the Arabian Sea and the shipping lanes that link it to China, the better to protect the oil it gets from the Gulf, upon which it depends for its economic expansion.

On November 14th, China's first Middle East peace envoy, Wang Shijie, wrapped up a groundbreaking swing through Israel, Syria, Egypt, Jordan, Lebanon and Palestine, underlining a shift toward a more robust, hands-on policy in a region that has become of vital economic and political importance to Beijing.

The tour also indicated that China, a permanent member of the United Nations Security Council, is eager to assert itself as a major power with global influence. Indeed, many believe it will eventually replace the United States as the dominant power in Asia.

These two events illustrate key strands of China's emerging strategic plans: challenging US and European oil giants around the world to secure energy supplies for its burgeoning economy and industrialization, and a longer military reach, designed in part to eventually protect its energy supply routes from the Middle East in the event of future disruptions.

In the Middle East, the driving force behind the change in Beijing's policy has been China's transformation from self-sufficiency in oil to net oil importer in 1993, exposing it for the first time to the vagaries of the world oil market. Although it has the world's largest coal reserves, it is now importing 30 percent of its current consumption, two-thirds from the Middle East.

One of the ways China has sought to minimize its concerns about energy security was to internationalize its oil industry. Since 1996, it has been investing in oilfields as far apart as Sudan, Venezuela, Kazakhstan, Nigeria, Canada and Indonesia. Regionally, the state-run China National Petroleum Corp. (CNPC) and the Northern Industries Corp., the state-owned weapons and industrial conglomerate, have an agreement with Baghdad to develop the al-Ahdab oilfield in central Iraq once UN sanctions have been removed and have been negotiating for a similar deal on the Halfayah field.

On August 22nd, CNPC announced it had won a $230 million contract to build twin 520-kilometer oil and gas pipelines in Libya to link southern fields with refineries near Tripoli. It is also expected to secure a major oilfield-refinery contract in Algeria in the next few months.

Beijing has been mulling oil investment deals with Iran and has an agreement with Saudi Arabia under which Saudi companies can invest in Chinese refinery projects while Chinese firms can pursue oilfield activities in the kingdom. Although the prospects for Chinese investment in this sector remains limited, these could expand as the Saudis open their doors to foreign investment in natural gas fields and move forward on long-delayed privatization plans.

Saudi Arabia opened diplomatic relations with China in 1990, but the relationship was only cemented in 1999, when then President Jiang Zemin visited the kingdom.