US and China looking to Mideast for more oil

China may need to step in to help keep region secure; US reduces its dependence on Saudi oil as Chinese demand soars.

By DAVID ROSENBERG / THE MEDIA LINE
September 9, 2011 10:11
4 minute read.
Chinese markets, China shares

Chinese markets, China shares_311. (photo credit: Reuters)

The US and China are likely to find themselves competing for access to Middle East oil as China’s booming economy demands increasing amounts of energy and the US becomes increasingly reliant on the region for its petroleum, experts said.

The two economies are the world’s two biggest consumers of oil - and both need ever growing amounts of imported petroleum to meet their energy needs - while the Middle East is home to more than half the world’s proven reserves. India, a third emerging global economy, is also on its way to becoming a major energy consumer.

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That means the Middle East will become an even bigger factor than it is today in their strategic calculations in the coming years.

The region accounts for about an eighth of US oil imports, but the share had begun growing as its traditional suppliers in North and South America see their reserves dwindle, Yitzhak Shichor, a political scientists and expert on China at Israel’s Haifa University, told The Media Line.

“I think that sooner or later the US will come back to the Middle East,” he said on the sidelines of a conference near Tel Aviv on Thursday. “Oil from Canada and Mexico will diminish … which means China, the US and India will have to coordinate purchases.”

Keeping a reliable supply of oil to power the world’s economies is a top strategic priority of the US, but to date China has left Washington the task of ensuring security in the Middle East, particularly the Gulf.



But as China’s interest in the region grows it may step up its military and diplomatic presence in there. Beijing announced earlier this year that military spending would rise to 601.1 billion yuan ($91.7 billion) in 2011 and also said it was developing its first stealth fighter jet.

In a sign of Beijing's growing naval power, China carried out sea trials of its first aircraft last month. China has developed a series of ports and intelligence stations, the so-called string of pearls, along the coasts of Myanmar, Sri Lanka and Pakistan, areas the sit astride the oil route from the Middle East. That has prompted concerns from India, which is also stepping up its naval presence.

Shichor said he hoped the three powers would find a way to compromise on their needs.

“The alternative is competition or confrontation,” he said.

The International Energy Agency forecasts that China’s consumption of oil will grow to 13 million barrels a day by 2030, compared with just 3.5 million in 2006 as Chinese abandon bicycles and buses for private cars and its factories turn out goods for global markets.

About half its imports come from the Middle East. Unless major reserves are uncovered elsewhere in the world, the growing needs of China – and new sources for the US – will have to come from the Middle East, analysts said.

“Oil imports will increase, even though China doesn’t want this to happen. This is an unalterable truth,” said Li Guofu, director of the South Asian Middle Eastern and African Studies Department of the China Institute for International Studies.

Anticipating the growing competition between East and West, Syrian Finance Minster Mohammad Al-Jleilati said on Wednesday that he hoped China and/or Russia buy its petroleum after the European Union put sanctions into effect.

”We will refine it … or sell it directly to Russia, China or any other country that accepts buying extra oil,” he said.

Oil traded told the Reuters news agency that Syria is unlikely to win the sales, only because the country’s daily production of about 150,000 barrels a day is too small to invest in the logistics of transporting it.

In Saudi Arabia, China has stepped in as the US has reduced its reliance on Saudi oil over the years and now the two sides have created a mutual dependency that may be hard for America to break, some analysts signaled. Saudi Arabia holds close to 20% of the world’s proven reserves.

“The reason we have such deep cooperation with Saudi Arabia is because America has reduced its imports,” Li told The Media Line on the conference sidelines. “They have a need for a stable market… and we need a major source of oil.”

Vis a vis Iran, Chinese analysts said they believe China would prefer to deal with the US and Europe, except that United Nations-imposed sanctions have prevented this. China, contrary to the popular impression, has also pared back its commercial ties with Iran, including energy imports.

Schichor estimated China had cut back its imports of Iranian petroleum to about 8.7% of the total from 15% over the past two years.

But Beijing is loathe to break with Iran, not only because it needs oil and gas but because China is concerned about its restive Muslim minority in the Xinjiang region. The Uighurs, who say they have been marginalized by an influx of China's majority Han to their homeland, launched their own protests two years ago that left at least 197 people dead.

“China needs Iran’s oil and gas – and its international support,” Fan Hongda, an associate professor at Xiamen university in Xiamen, China, told The Media Line. “In China’s northwest there are many Muslims, so security is a major factor.”


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