Beijing’s ‘new thinking’ on energy security

China’s growing appetite for energy has caused widespread concern around the world. The Middle Kingdom is blamed for the sharp increase in global oil prices in the past few years, and the United States grows uneasy about Beijing’s evolving cozy relations with major oil producers such as Iran, Saudi Arabia, Sudan, and Venezuela – some of which are hostile toward Washington. Moreover, there is a growing call to contain China as an energy threat in a world of diminishing resources. Yet Beijing is resentful of such attitudes and has taken new measures to counter its critics.

In the past year, top Chinese policymakers have emphasized the fact that China, as a developing economy, is paying a huge price for mounting oil prices, a point not always recognized in the West. In 2004 alone, Beijing had to spend an extra US$7 billion of its foreign exchange due to climbing oil prices, with payment totaling over US$43 billion, making crude oil and product oil the country’s largest single import item. As reported by Sinopecnews, this had a negative impact on consumption, investment, export and import, and China’s GDP suffered a 0.8 per cent downturn.

The dominant Western view holds that the worldwide increase in demand, especially from China and India, and decreasing spare production capacity conspire to keep oil prices high. Beijing sees the issue far differently. The PRC suspects the real culprit is what China’s State Council Information Service calls Western government-backed, profit-seeking “international petroleum crocodiles” that manipulate oil prices. Reports in recent weeks of windfall earnings by Exxon Mobil, BP, and Royal Dutch Shell only enhance such perceptions.

In addition, take last summer’s political firestorm in the US over China National Offshore Oil Corporation’s (CNOOC) US$18.5 billion bid for Unocal. CNOOC dropped its bid last August after the US House of Representatives effectively blocked the deal on ostensible national security grounds. California-based Chevron ended up acquiring Unocal, and plenty in Beijing came away convinced the US—despite rhetoric to the contrary—does not always live up to the free-market rhetoric it broadcasts to the rest of the world.

ISN