China and the Middle East (page 3 of 3)

An important feature of China's current energy strategy is a desire to increase the country's direct ownership stake in oil fields around the world.

This is being done through state-owned oil companies such as Sinopec, Sinochem and China National Offshore Oil Corporation, which own shares in oil fields in countries as varied as Venezuela, Myanmar, Sudan, Libya, Kazakhstan, Turkmenistan and Indonesia. Taken together, output from these fields accounts for one-fifth of the country's total oil import needs.

To some extent, the Beijing authorities are latecomers to a series of supply relationships built up over decades by the European powers and the United States. China only established diplomatic relations with Saudi Arabia in 1990, and it now imports around 15 million tons of Saudi crude every year.

In February, Sinopec signed a 25-year contract with the Saudi authorities to develop a 40,000 square meter field in the east of the country. The authorities in Beijing are deeply aware of their vulnerability on the energy front, and this explains another aspect of their policy: to diversify sources of supply as much as possible.

According to Yang Yufeng, who helped write the energy policy paper for China's Development and Reform Commission, "Our strategy should be to diversify our energy diplomacy, so as not to be controlled by one country, and at the same time not lightly give up cooperation with anyone."

On land, China is developing an oil pipeline to bring in 10 million tons of crude per annum to Xinjiang from Kazakhstan's Caspian Sea fields, starting in 2005. It is also lobbying fiercely, against competition from Japan, to get a pipeline to bring in oil from Russia's Siberian fields to Daqing. Japan wants the pipeline to go instead to the Russian port of Nakhodka, from where it could be shipped to Japanese buyers.

However much diversification is achieved, the fact remains that China will be dependent on Middle Eastern sources of supply for at least half its oil import needs for the foreseeable future. That fact alone suggests that the country is going to have to develop a more proactive diplomatic and strategic approach to the region. Some signs that this is happening are already evident.

On Iraq, for example, the US invasion meant that China lost supplies from a 26-year oil production field contract it had signed with the Baghdad government in 1997. At the same time it remains uncomfortably dependent on US naval power to ensure the safety of its tankers. But it is marking out a diplomatic line different to Washington's.

At the end of May, Beijing issued a statement within the UN Security Council fixing its position on the future of Iraq. It said that the mandate of the US-led military presence in Iraq should end in January 2005, with the election of a transitional government, and should only be renewed with the agreement of both the Security Council and the Iraqi government.

Suggestively, the Financial Times ran the story under the title "China Gently Flexes its Security Council Muscles." As one diplomat commented, "China has taken the initiative this time. In the past it often hung back or abstained from voting because it did not want to annoy the US."

In the long term, will the arrival of Chinese strategic influence in the Middle East be more beneficial for the region than the present status quo under the "American decade"? That's a big question, and there appear to be no quick or easy answers.

But there is at least one clear preliminary conclusion: China is important for the Middle East, and it is going to get more important as time goes on.