U.S., China Are on Collision Course Over Oil

By Gal Luft
LA Times, February 2, 2004.

Sixty-seven years ago, oil-starved Japan embarked on an aggressive expansionary policy designed to secure its growing energy needs, which eventually led the nation into a world war. Today, another Asian power thirsts for oil: China.

While the U.S. is absorbed in fighting the war on terror, the seeds of what could be the next world war are quietly germinating. With 1.3 billion people and an economy growing at a phenomenal 8% to 10% a year, China, already a net oil importer, is growing increasingly dependent on imported oil. Last year, its auto sales grew 70% and its oil imports were up 30% from the previous year, making it the world's No. 2 petroleum user after the U.S. By 2030, China is expected to have more cars than the U.S. and import as much oil as the U.S. does today.

Dependence on oil means dependence on the Middle East, home to 70% of the world's proven reserves. With 60% of its oil imports coming from the Middle East, China can no longer afford to sit on the sidelines of the tumultuous region. Its way of forming a footprint in the Middle East has been through providing technology and components for weapons of mass destruction and their delivery systems to unsavory regimes in places such as Iran, Iraq and Syria. A report by the U.S.-China Economic and Security Review Commission, a group created by Congress to monitor U.S.-China relations, warned in 2002 that "this arms trafficking to these regimes presents an increasing threat to U.S. security interests in the Middle East." The report concludes: "A key driver in China's relations with terrorist-sponsoring governments is its dependence on foreign oil to fuel its economic development. This dependency is expected to increase over the coming decade."

Optimists claim that the world oil market will be able to accommodate China and that, instead of conflict, China's thirst could create mutual desire for stability in the Middle East and thus actually bring Beijing closer to the U.S.

History shows the opposite: Superpowers find it difficult to coexist while competing over scarce resources. The main bone of contention probably will revolve around China's relations with Saudi Arabia, home to a quarter of the world's oil. The Chinese have already supplied the Saudis with intermediate-range ballistic missiles, and they played a major role 20 years ago in a Saudi-financed Pakistani nuclear effort that may one day leave a nuclear weapon in the hands of a Taliban-type regime in Riyadh or Islamabad.

Since 9/11, a deep tension in U.S.-Saudi relations has provided the Chinese with an opportunity to win the heart of the House of Saud. The Saudis hear the voices in the U.S. denouncing Saudi Arabia as a "kernel of evil" and proposing that the U.S. seize and occupy the kingdom's oil fields. The Saudis especially fear that if their citizens again perpetrate a terror attack in the U.S., there would be no alternative for the U.S. but to terminate its long-standing commitment to the monarchy and perhaps even use military force against it.

The Saudis realize that to forestall such a scenario they can no longer rely solely on the U.S. to defend the regime and must diversify their security portfolio. In their search for a new patron, they might find China the most fitting and willing candidate.

The risk of Beijing's emerging as a competitor for influence in the Middle East and a Saudi shift of allegiance are things Washington should consider as it defines its objectives and priorities in the 21st century. Without a comprehensive strategy designed to prevent China from becoming an oil consumer on a par with the U.S., a superpower collision is in the cards. The good news is that we are still in a position to halt China's slide into total dependency.

Unlike the U.S., China's energy infrastructure is largely underdeveloped and primarily coal-based. It has not yet invested in a multibillion-dollar oil infrastructure. China is therefore in a better position than the U.S. to bypass oil in favor of next-generation fuels.

The U.S. should embark on a frank dialogue with China, conveying to the Chinese the mutual benefits of circumventing oil and offering any assistance required to curb China's growing appetite for it. A shift from oil into other sources of transportation energy such as bio-fuels or coal-based fuels, hydrogen and natural gas could prevent future conflict and foster unprecedented Sino-American cooperation with significant economic benefits for both countries.

The Chinese would probably leapfrog oil if they could. Dependency of any kind is foreign to their culture. But without substantial American technological support, China is likely to follow the path of least resistance and become a full-fledged oil economy. Failure to address the issue with the utmost care would undercut all of today's costly efforts by the U.S. to reform and stabilize the Middle East.

This explosive, complex region cannot accommodate two major powers competing not only over a barrel but also over the hearts, minds and allegiance of its people.

Gal Luft is executive director of the Institute for the Analysis of Global Security and publisher of the online publication Energy Security.

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Property of The Institute for the Analysis of Global Security 2003, 2004. All rights reserved.