The China Problem: Putin’s Desire for Superpower Status

With Putin’s star on the rise, Russia has aspired to block China’s energy ambitions in Central Asia. When China embarked on a Sino-Kazakh strategy, Boris Yeltsin was still president. Since then, Putin and his inner circle of Chekists (named after the Soviet Union’s early secret police squads) have begun tightening the noose around the former Soviet states. The mandate driving Putin’s former KGB comrades is Russia’s return to superpower status.

This became clear on October 26, 2005, when the SCO’s top officials met in Moscow for their annual conference. Because the Foreign Minister of India and the Prime Minister of Pakistan attended as SCO invited observers, Putin boasted that the populations represented by SCO member states and observer countries exceeded three billion. people. He boasted that he had gathered “half the planet” in the Kremlin. At the top of the SCO’s agenda were energy issues, such as the expansion of the oil and gas sector and the exploration of new hydrocarbon reserves. Of course, these are the issues that clearly rank high in the minds of the Chinese.

But has Putin’s mood turned more towards insolence? When Chinese Premier Wen Jiabao announced that the turnover of Sino-Russian bilateral trade could exceed $28 billion, Putin challenged: “I hope this happens.” While even Russia’s media suspected Putin of using the SCO conference as his self-centered publicity show, Russia depends on China’s economic progress to improve its own economy. Will there come a time when Russia is less afraid of China’s economic might? This might be fine in the future. Russia’s economy still needs an ally in China. Politically, Russia is politically dependent on China as a buffer to the US. The EU-China Summit in Helsinki in September should offer clues to the attempted Sino-Russian alliance. Chinese Premier Wen Jiabao will give the keynote address and possibly help forge closer alliances with Russia’s neighboring Finland. After all, Nokia is based in Finland, and China is the world’s largest consumer of mobile phones and services.

One has to wonder if Russia has been slowly closing China’s door to Central Asia in recent years. Gazprom’s press secretary, quoted in a 2004 interview in Vedomosti, announced: “…sharing mineral resources with foreign countries is against our policy…In fact, sharing oil with the Chinese would be even more inappropriate.” . Gazprom, for example, is now developing Uzbekistan’s gas fields for export to the West, not China. (See the second part of this series).

The delicate balance between Russia and China, one in which both countries hope to maneuver against further US (or, as cynics call it, imperialism) meddling in the Middle East, requires making as few concessions to the other as possible. necessary. When China moves too boldly, Russia plays into its alliance with Japan to keep China in check. Both use their UN Security Council vetoes as bargaining tools to carve out interests in oil and other commodities to preserve their energy security issues.

China serves Russia’s political aspirations by stifling US expansion in the Middle East. With decades-long ties to Iran and other Muslim states, Russia has a convenient ally in China, when it uses Iran as a thorn in Washington’s rear. And China still remembers the oil concessions it lost in Iraq after the US invasion of that country. China is likely to worry about the never-ending dispute over Iran’s uranium enrichment aspirations in light of losing those Iraqi oil concessions.

China’s pragmatist resorts to trade with

Rebel nations for energy security

At the mercy of a cutthroat global energy market, pragmatic China has turned to nations that are shunned by US interests. A productive Silk Road leading to China begins in Iran. More specifically, it starts at the Yadavaran oil fields where the Chinese oil company Sinopec plans to import some 150,000 barrels of crude per day, once it has developed these oil fields. Initially, the October 2004 deal was reported to be valued at $70 billion. However, further developments and China’s substantial purchase of Iran’s vast natural gas reserves may increase the value of this decades-old energy deal to more than $200 billion. What can go wrong? Look at the daily headlines: Iran wants to enrich its own uranium. Unless this situation is resolved, rising political tensions could affect China’s ability to import oil and gas. Obviously, China would go to great lengths to avoid an Iraqi repeat in Iran.

Outmanoeuvred by Western oil companies in obtaining many of the world’s proven oil reserves, China has cultivated Sudan as its biggest oil supplier. Sudan depends on Chinese pragmatists for its economic and military strength. China is also the main source of foreign exchange for the largest country in Africa. Shunned by the world community for the genocide it is committing in West Darfur, Sudan exports its oil to China for Chinese weapons. China finds little competition for Sudanese oil. The Chinese are the largest individual shareholders who dominate the consortium of Sudanese oil companies. It is the biggest investor in a 1,500-kilometre pipeline that delivers Sudanese oil to the Red Sea, which is then shipped by tanker truck to China.

China has not limited its purchases of African oil to just one country. Angola, another bankrupt nation, believes it could soon overtake Nigeria as Africa’s biggest oil supplier. According to the World Bank, China may have recently offered Angola some $9 billion in credits and loans. Two years ago, it was reported that China provided a $2 billion loan to Angola for 10,000 barrels of crude oil per day. Now, it seems that China is eager to help Angola build enough infrastructure in that country to develop another strong energy source.

Hoping to create a Silk Road across the Pacific from South America, China has continued its quest for energy security by developing ties with Venezuela’s Hugo Chávez. This can come to nothing. Venezuela’s highly sulfurous crude would first have to be refined in the United States. China lacks refineries to handle heavy crude. Over the past year, China’s oil imports from Venezuela amounted to orimulsion from the Orinoco Tarbelt, which is used mainly for asphalt.

However, new refineries can be built to remedy the heavy oil that Venezuela could provide. According to a recent special edition of McKinsey Quarterly, China will be forced to invest heavily in refineries for all the crude oil it has committed to: “To keep up with growing demand, the country needs to build a large, technologically world-class company. “. refinery each year for the next 15 years, at a cost of $2 billion each.” China lacks the refining capacity to meet its current needs. In the first half of 2006, imports of refined petroleum products from China they were up nearly 50 percent, compared to the same six-month period a year earlier.

Although Venezuela hopes to become one of China’s top three oil suppliers, that is likely more hyperbole than realistic before 2010. As China’s proven oil reserves continue to deplete, it is quite possible that at some point moment have to turn to Venezuela to obtain the vast wealth of this country. oil reserves. Outside of the Middle East, Venezuela may have one of the last great oil resources, reportedly over 80 billion barrels of crude. The question is not if, but how quickly can Venezuela accommodate China’s voracious appetite for its country’s oil?

Venezuela also has the largest natural gas fields in all of South America. Earlier this year, Brazil and Argentina (two of China’s favorite Latin American trading partners) discussed with Venezuela the possibility of building a gas pipeline through the Amazon. A 5,000-mile pipeline would need a destination port for LNG tankers to supply China. Instead, talk of an oil pipeline through Colombia could be replaced by a gas pipeline.

China’s approach in dealing with what the Anglo-American alliance calls “rogue nations” reflects one of non-interference in a country’s political affairs. It is a Chinese pragmatism, which many find amoral. Conversely, how is the United States being judged around the world for its military invasion of Iraq? When US President Bush recently criticized Vladimir Putin over democracy in his country, the Russian president pointed out that Russian democracy was quite different from the one the US had created in Iraq for Iraqis. One has to wonder how long China’s laissez faire doctrine will last. And whether China can continue to develop new energy silk routes at the pace its GDP growth demands.

Some believe that China does not need as much oil at the moment. In the first half of 2006, according to Xinhua news, China’s refinery output was seven percent less than the country’s domestic crude oil output. Despite producing 85 million tons of crude oil, China still imported 70 million tons of oil (in addition to 12 million tons of refined oil). Is China hoarding to avoid a future political crisis, or does it expect its energy ‘silk roads’ to be closed or blocked soon?

McKinsey Quarterly researchers also reported that if China continues at its current pace, it will need to buy about three percent of the world’s proven oil reserves. That’s more than all the reserves held by Chevron, ExxonMobil, BP, Shell and others. As energy analysts have reminded us, getting oil out of the ground costs more, the quality of the oil is falling, and there is more water in the oil. All of this has registered not only on the radar screens of Chinese energy advisers and politicians, but also at the gasoline pumps where the fill of a tank should continue to rise each year. As Deng advised on getting rich, it may be glorious, but the furious process of getting there has not only been exhausting for China, but for the rest of the world as well.

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