China's energy needs and Central Asia.

• Author: Shuja, Sharif
• Position: 143722963
• Pages: 56(10)

China is a fast emerging global power and has registered rapid economic growth. It remains the sole long-term challenger to U.S. hegemony. It has now displaced the United States as the dominant market for many commodities; its steel production outstrips that of the United States and Japan combined; it now accounts for 35 per cent of global coal production; and China's investment share of G.D.P., now close to 45 per cent, is the highest in the world. These figures come from a recent paper by Chicago-based U.S. economist, David Hale, an authority on China's economy.

He argues that China's consumption of raw materials is "poised for explosive growth". Steel production is running at 220 million tonnes annually and it plans to add another 200 million tonnes of capacity in the next few years. As China's steel production and economy rapidly expand, so does its thirst for oil, gas, coal and electricity. Today, China accounts for 12 per cent of the world's energy consumption--second only to the U.S. at 24 per cent, and up from 9 per cent a decade ago.

China's whole modernisation strategy requires access to abundant supplies of energy, and its weakness continues to be its energy supply. Once largely oil-self sufficient, China has over the last decade become increasingly reliant on imports, which now account for 60 per cent of its oil consumption, compared with only 6 per cent in 1993. Within the next few years, China's oil imports are expected to continue rising and to account for 77 per cent of the country's estimated demand by 2020. (1)

According to U.S. Energy Department forecasts: by 2020 China's demand for oil will nearly double, to 11 million barrels a day; natural gas consumption will more than triple, to 3.6 trillion cubic feet annually, and coal use will grow by 76 per cent, to 2.4 billion tons a year. (2)

Chinese petro-diplomacy already extends worldwide as far as Africa. It is establishing surveillance stations, naval facilities and airstrips to safeguard the oil route from the Gulf to the South China Sea. But its main goal in escaping dependence on maritime oil supplies is access to Iranian and Central Asian as well as Russian oil. Iran and Central Asian states are China's neighbours, and Beijing is keenly interested in accessing the energy resources lying there. Central Asian states such as Azerbaijan, Kazakhstan, Turkmenistan, Kyrgyzstan and Uzbekistan have huge natural resources, both oil and gas reserves. According to estimates, 200 billion barrels of crude oil, that is, a quarter of the world's total, are present in countries lying on the coasts of the Caspian Sea. Similarly, abundant quantities of natural gas are also present in these countries. There are also huge oil and gas reserves in Iran. Contracts worth billions of dollars have been signed with these newly-independent Central Asian states and joint development ventures initiated; but the region still does not have a reliable export route to the open seas and hence to the world market.

Azerbaijan holds approximately 18.5 per cent of these estimated reserves and was the first state to export petroleum free from Soviet control. It is presently the largest oil producer in the Caspian region. It has previously signed contracts agreeing to develop two pipelines to Georgia and Turkey, accessing both the Black Sea and the Mediterranean respectively. This has eventuated, despite objections from Russian interests.

Russia, the Soviet Union's successor, is the region's most important player. A Russian presence is felt throughout the whole region as common ethnicity and languages associated with Russia--as well as the Russian Orthodox faith--run through Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan. Moscow aims to obtain as many pipelines as possible to cross over into its own territories so as to position itself to play a more influential role in "The Great Game".

The United States has also become an external influence on the region, as it desires increased diversification in the world's oil markets due to its dependence on Persian Gulf reserves. The United States now has troops and military bases here and the Bush Administration has signaled that it wishes to remain a military presence in Central Asia. Washington aims to develop as many routes as possible in the region to decrease the chance of any one country establishing a stranglehold of flows to world markets. Strategically, the United States would like to block China's entry into the region. Washington is putting intense pressure on the Ukraine to forestall any Chinese encroachment on this oil-strategic area. (3)

China is also marching on this region. It has signed a deal with Kazakhstan. Under this deal, China will acquire the right to develop two oilfields (Aktuibinsk and Uzan) in Kazakhstan in exchange for its commitment to build a 3,000-kilometre pipeline from the oilfields to China's Xinjiang province and a 250-kilometre pipeline to the border of Iran (via Turkmenistan). The construction of this pipeline is already under way and, when completed, is expected to transport a huge quantity of oil from Kazakhstan to China. It would leave China in the least vulnerable position with respect to oil transportation risks.

China has also consolidated its relations with Mongolia. Although...