Energetic security in China and vertuous climatic diplomacy : the great paradox
Jean-François Di MeglioPresident of Asia Centre
The Middle Kingdom no doubt does not bear this name — an exact translation of the characters $$.# — because its inhabitants understood early on that they were “in the middle of the world”. This misleading name perhaps comes from a sentiment formed very early on that the Chinese territory was naturally subject to isolation, which offered protection but also was a source of various kinds of dependence. It was under the Western Zhou dynasty at the beginning of the 8th century B.C. that the name “Middle Kingdom” first appeared 1 , a term which was then borrowed by several western writers. 2 The Chinese coastline is not truly a gateway, for it does not lead to “open” waters. In order to open up China through sea routes, straights must be crossed. On land, the presence of “barbarians” surrounding the Chinese territory often led Chinese leaders to be self-sufficient and protective. But this security, which until the mid-20th century was often hard-won, has been put to the test by the developments of the past 40 years and the issue of energy security has naturally arisen, an issue which was raised relatively soon after the birth of the People’s Republic following the launch of the Four Modernizations under Deng Xiaoping in November 1978, during the Third Plenary Session of the Communist Party’s Eleventh Congress. 3
At one time self-sufficient in hydrocarbons, at a time when its GDP per capita was less than 200 dollars, China has been confronted with the need to develop its supply chain strategies since 1993. 4 After beginning to import in 1993, China has had to import crude oil and refined products since 1996 as its needs have grown. Since then, its dependence has only increased.
At 101,598 billion yuan (about 15,660 billion dollars), China now has the world’s second largest GDP in absolute value. However, per capita income barely exceeds 10,000 dollars. 5 This has implications for its energy needs, with average growth still sitting above 5% for at least the next few years as laid out in the Fourteenth Five-Year Plan (2021-2025) adopted by the National People’s Congress in March. Since the 1990s, energy efficiency has been improving, even if it is not yet to the level of larger, more developed countries. 6 According to the International Energy Agency, the energy/GDP ratio (tonne of oil equivalent/GDP) went from 0.9 in 1990 to 0.2 in 2019. This is in comparison to the United Kingdom at 0.12 and 0.05, respectively.
The issue of energy security can therefore be considered as a guiding principle for China’s strategic thinking and geopolitical vision in the 21st century. It is, in effect, an issue which challenges the traditional conceptions of a restrained China, whose ambitions were beginning to bring its shortcomings to light, in order to bring about the concept of a “proactive” China in terms of energy security policy.
Without a doubt, the very idea of the New Silk Roads — inventing a reverse dynamic from the one which prevailed at the time of the “invention” of the “west-east” routes of antiquity — would have never emerged without this awareness that the Chinese territory was not only limited by its perceived isolation, but also had “boundaries” that needed to be overcome.
Observing recent changes in the “Chinese line” regarding domestic, regional, and international policy, we can see shifts and splits which can be explained by regime and leadership changes. But these changes and shifts are not solely based on new ways of thinking or political ambitions; they also reflect internal political games. It is true that Xi Jinping has brought about a new understanding of China’s international role and increased the visibility of his country’s ambitions. However, apart from the overall strategy that has been pursued since its adoption at the 18th Party Congress in 2012, there have been gradual or drastic transformations in the way energy issues are resolved. These transformations are probably as much due to the changing pressures on the country and the changes in its energy partners — not only suppliers, but also those with whom China undertakes global concerns about resources to develop or protect together — as to changes in the direction of domestic policy. This article therefore proposes a historical rereading of the Chinese perception and reality in terms of energy security. A comprehensive analysis by energy source of the questions and answers that China has faced and identified is presented first, followed by some new perspectives. The challenges faced are domestic, but naturally also global, for anything that affects China quickly becomes a global issue. Conversely, any significant challenge in the modern world is also felt in a China which, nolens volens, has no other choice but to continue with its “globalization”.
The obsession with perceived energy insecurity in the 1990s
The People’s Republic of China functions in a centralized and planned way. The existence of a Ministry of Energy which coordinates needs, strategies, prices, and appoints operators is, in such a context, the most logical expression of State intervention. Since the Planning Commission (NDRC in China) sets the five-year growth targets from the top, it is important to coordinate the impacts of these energy targets. However, the Ministry of Energy disappeared in China in 1993, only five years after its creation leaving a number of different entities with sometimes similar or overlapping roles. This is a direct reflection of the inconclusive struggles for influence within the energy field in China and could be seen as a sign of less State influence over energy issues. It could also be compared to India’s situation, where five ministers contribute to energy policy with each being responsible for a different energy source in addition to the different bodies responsible for distribution and price. But in China, this institutional cohabitation reveals more about the ability of opposing forces to coexist, sometimes in an effort to make the most of concealed competition, in order to bring about the best policy choices.
While the situation with the Ministry of Energy was very characteristic of a planned economy, the situation which followed not only had a profound effect on the mindsets of Chinese leaders at the highest levels of the State and Party, but also on the regime’s evolution concerning the hold that the “oil lobby” had gained over the system. Two symbolic elements characterize this period in which oil played a predominant role in China’s energy security strategy. First was the abortive attempt by China National Offshore Oil Corporation (CNOOC), China’s third largest state-owned oil company, to take control of the American company UNOCAL. In the summer of 2005, executives of the California-based oil company UNOCAL (the seventh largest in the U.S.) said they were considering the Chinese firm’s proposal to take over their company for a total of $18.5 billion. 7 The announcement created great surprise in the United States and made American politicians aware of China’s growing economic strength. The move, which countered competing American proposals, was naturally reviewed and then halted by the American authorities which oversee foreign investments. This initiative should be viewed against the backdrop of China’s joining the World Trade Organization (WTO) in 2001, only four years earlier. Through one of its oil companies, China launched a capital operation by outbidding the American oil company Chevron. Only the threat of a veto by the U.S. Senate was able to halt this bold move. China’s commercial “aggressiveness” in the oil sector indicates the importance the Chinese State places on this energy source for its overall energy security, as oil ranks second in the country’s energy mix.
Xi Jinping has expanded the notion of energy security
Following a period of very high visibility for China among governments and markets, Xi Jinping’s first years in power signaled the beginning of a new chapter characterized by sweeping reorganization of energy governance, of which the arrest of politician Zhou Yongkang on corruption charges in 2014 was one of the most significant events.
In the second half of 2014, two years after Xi Jinping’s rise to power, Zhou was accused of corruption and was stripped of all his political positions. He had most notably been General Director of the state-owned oil company China National Petroleum Company (CNPC), head of the Ministry of Land and Resources, and chief of national security, among other positions. He was arrested and expelled from the CCP and put on trial. Zhou was sentenced to life imprisonment for corruption, particularly for his links to the Chinese oil industry.
This incident is not simply part of the anti-corruption plan put in place by Xi Jinping when he came to power. It is also a sign that this fight against corruption has gone hand in hand with a re-evaluation of the counter-powers and strategies developed outside the central power.
Since the 2010s, the Chinese and international energy situation has been evolving in such a way that concerns other than securing oil supplies and the feelings of energy insecurity have increasingly come to the forefront of the country’s energy policy. In this respect, the growing interest in natural gas, energy efficiency, and the development of renewable energies illustrate the policy shift from a strictly security-based approach to a more complex, diplomatic one. This shift is all the more significant as it is taking place within the context of the COP 21 and the signing of the Paris Agreement as well as China’s recent, proactive rhetoric on the fight against climate change.
From a quantitative to a qualitative energy security
If the years 2000 to 2015 were marked by China’s exponential appetite for energy resources and the implementation of political and economic strategies to quantitatively combat a perceived form of energy insecurity, the years from 2015 onwards mark the beginning of a qualitative period of securing energy supplies. China is no longer simply ensuring quantity but securing safe and diverse routes.
Without denying the importance of Venezuelan oil — which supplied China with around 200,000 barrels of oil per day in 2020 8 — or of Middle Eastern oil which depends on the Straits of Hormuz and Malacca, the Chinese government has worked to diversify supply routes. This has been the case with the New Silk Roads and the plan to transport oil through the Pakistani and Burmese pipelines in order to at least partially overcome the “Malacca dilemma” 9 . Similarly, the signing of a contract with Russia for the purchase of Siberian gas, partly paid for in Chinese currency 10 , as well as the growing power of Chinese players in Turkmenistan and Kazakhstan, illustrate this qualitative research.
This goes hand in hand with a change in China’s energy mix 11 , and thus allows for a doubly virtuous redefinition of Chinese strategic thinking on energy. On the one hand, alternative supply routes that compete less with other major consumers such as Japan and Korea — who remain highly dependent on Malacca and Hormuz — slightly alleviate the pressure on traditional concerns of strategic insecurity. On the other hand, the increasing use of alternative resources is helping to reduce China’s carbon footprint at equivalent GDP growth rates.
One example of this approach’s effectiveness can be seen in China’s management of the diplomatic crisis with Australia. As China’s second-largest foreign supplier of coal, which accounts for one-third of total imports 12 , Australia has simultaneously sought closer ties with China since the 1990s and established regular supplies of coal. The diplomatic crisis between the two states, preceded by Australia’s banning of Huawei from its 5G infrastructure deployment contracts, was revived in 2020 after the Australian Prime Minister demanded an official investigation into the origin of the coronavirus and threatened China with economic retaliation if it refused. Since October 2020, China has been informally boycotting Australian coal. Global commodity markets have been affected by this decision as China has turned to other suppliers such as Indonesia, Mongolia, and Russia. But the flexible management of coal supply contracts in a highly globalized market characterized by the predominance of “spot” contracts has meant that China’s diplomatic actions have not been contingent on what might have been seen as insurmountable dependence.
China’s energy flexibility
The question now is what does China’s new energy landscape look like? It is one in which China has the influence and potential for flexibility that puts it in a prime position when it comes to global energy supply. This flexibility relies on understanding the different tools available such as diversification of energy sources and an increase in the number of international partners. China is even considering abolishing one of the most striking symbols of the previous era: the monopoly on crude oil imports previously reserved for the large state-owned oil companies.
In terms of natural gas, this adaptation is also reflected in the construction of numerous gas terminals which require major investments and the mastery of sophisticated technology. This adaptation can also be illustrated by the fading obsession with “coal liquefaction”. Typical of countries at risk of collapse — such as Germany in the 1930s or South Africa during the apartheid era — this costly and polluting process seemed to illustrate China’s concern that it would find itself in a position of falling back on its own resources and running out of hydrocarbons. Both the difficulty of carrying out this project, piloted by the large state-owned coal company Shenhua, along with the decreasing relevance of such a system, led to its gradual suspension.
What chance of success for China’s energy security policy?
China’s energy policy is perfectly in line with its changing role in the regional and global geopolitical game. Forced to behave aggressively to the detriment of its image — until the strategic reversals brought about by the Xi era — China nevertheless continues to go it alone, regardless of its ability to assert its voice and views. In the Asia Pacific region, China is certainly one of the countries that has deliberately given the most lip service to multilateral dialogues on energy, climate, and the environment, making climate commitments that are surprising in light of the “security” strategy that dominated previous decades.
However, many ambiguities remain regarding its capacity to become a benevolent power. For the West, it is not a matter of asking its Chinese counterparts to abandon their domestic priorities in favor of a philanthropic diplomacy that would accommodate the global demands of preserving natural and energy resources with the demands of Chinese economic growth. Yet we can still expect greater transparency and a more palatable and sincere rhetoric on China’s own energy strategy as we measure how far it has come from the days of self-centered “security everything”. Given the significant role that fossil fuels still play in its energy strategy, China is still far from being able to ensure the viability of its climate commitments through the implementation of its energy security policy.
- See the work of O.Venture, research director at the École Pratique des Hautes Études.
- E. Maisonneuve, “La Chine au milieu du monde”, Agir magazine, 2011
- The Four Modernizations, designed to establish China’s economic power and independence, focused on agriculture, industry, science and technology, and defense. These reforms aimed to open China to the foreign market and to close the industrial gap that had opened up since the beginning of the Cultural Revolution.
- See A. Payette and G. Mascotto, Monde chinois, Spring 2010
- “GDP per capita (current US$) – China”, the World Bank data. Accessed on 30 May 2021
- “Country profiles: China, United Kingdom”, International Energy Agency (accessed on 31 May 2021).
- E. Leser, “L’offre de rachat du chinois Cnooc sur le pétrolier Unocal crée un débat aux États-Unis”, Le Monde, June 2005
- “China’s crude oil imports surpassed 10 million barrels per day in 2019”, US Energy Information Administration, March 2020
- “Birmanie : un gazoduc qui renforce la stratégie d’approvisionnement énergétique chinoise en Asie du Sud-Est”, Monde chinois, 2013
- B. Spegele, W. Ma, G. L. White, “Russia and China Agree on Long-Sought Natural Gas Supply Contract”, Wall Street Journal, May 2014.
- [ndlr] See in the issue “Infography • Preface: Chinese Statistics” page 6.
- “China Is Said to Mull More US Coal Imports to Cut Deficit”, Bloomberg Quint, 29 May 2018
To cite the article
Jean-François Di Meglio, Energetic security in China and vertuous climatic diplomacy : the great paradox, Sep 2021.
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