China may rethink energy security–argument by Matt Ferchen

Some notes on Matt Ferchen’s speech

Drop in oil sparks energy security discussion in China?

Oil “is a cause of deep anxiety, despite the drop in oil prices in China, which is helpful for China, overall it is an importer of oil. China’s exposure and dependence on oil imports will only increase: 2012-2040 consumption projection: predicted to have large increases of demand, a large growing gap vis-a-vis domestic production, which means China will depend more on oil.

China’s policy makers: China is becoming weary of U.S. energy security vis-a-vis China’s as their imports are increasing while the U.S. declines.

Before the oil price dropped, they were "looking at the primary partner/ competitor the U.S. and seeing the opposite kind of trend that exists in China, in terms of of energy security. Over the last few years, with shale oil and gas developments in the U.S., there is an overall perception in China that U.S. is becoming energy-independent, while China becoming increasingly energy dependent– that is in some general way benefitting American energy security and probably freeing up US policy tools domestically and globally in terms of affecting energy and politics that China does not have.”

In the long run dramatic drop in oil prices don’t provide China with energy security

Cheaper oil prices benefit China, in terms of being able to import them at a lower price, stock up reserves, and potentially relief pressure off CHina’s economic growth speed. But in the long run that drop in oil prices dramatically will not provide China with energy security in terms of thinkinig about how markets function, or in terms of transportation. 

China is a big element contributing to the end of the commodity boom

“I think that the oil price drop highlights how there is a new challenge for Chinese foreign policy as is related to commodity rich countries who have been a key part of Chinese of foreign policy, especially in the developing world, in LatAm, Africa, Middle East to an extent. Much of the rise of China’s relations with commodity-rich countries in Africa, LatAm, has corresponded with this commodity boom. So a ten-11 year process, where CHina has dramatically increased its imports of a range of raw materials from commodity-rich regions.

The boom is over, [pause] and the dramatic fall in oil prices captures this more clearly than anything else. But we also see it in a variety of minerals…you see a basket of commodities from commodity-rich countries…this has been the key aspect of south-south, win-win, mutually beneficial language and diplomacy that China has used as the centrepiece of its engagement with a lot of countries in these regions, and that period of at least relative high prices, as well as demand from China is over, and there is a very interesting way in which China is at the centre of the drop of these prices, or at least could be perceived as playing a major part in it… But clearly one of the elements of change in commodity demand and prices has to do with China’s own changing development model.”

This is a challenge for China: “how will China continue to talk about what are the key elements of the win-win, mutually beneficial parts of this relations?”

Venezuela:

The whole rationale for CHina’s very special relationship with Venezuela was built on this idea that China needs a raw material that Venezuela has in abundance, no country has more oil in the ground than Venenzuela, so it is a perfect idea in terms of this complimentary, win-win, mutually beneficial relations, and it just so happens that Venezuela being in Latin America, being part of the ‘south’, so it fits into all these elements of CHinese peaceful development diplomacy, so it should be match-made in heaven. There should be nothing wrong with this relationship. 

Clearly last week, with the president of Venezuela showing up here in Beijing to ask for CHina’s assistance with venezuela’s ongoing and deepening crisis that is obviously exasperbated by the dramatic fall in the prices of oil. I think if it wasn’t clear before, it should be very clear now, that something is deeply wrong, or can go wrong. China now finds itself in a very difficult position of having to either make a choice about putting more money into venezuela, to ensure that there is the possibility that it is able to recoup its investments and maintain a position in Venezuela, maybe washing its hands of the place. This is a real problem, we can’t afford to put in more money, who knows what’s going to happen, we don’t know if people we’re dealing with today are going to be there int he future. So China’ is in a very difficult position, as we saw a little bit of tap dancing happening here last week. And it’s still unclear what the actual deals ended up being. 

U.S. faced simliar turn around during the 1970s oil shock:

1970s Oil-shocks in the U.S. triggered thinking about energy security

There were interesting discussions about how multinational corporations in particular and alot of these involved in energy, but also in extractive industries. How they were effecting U.S. foreign policy. So You started to see alot of govenrment but also civil society organizations and disucssions, about how the country should think, about how its own companies abroad impacted foreign policy, also impacted energy security. And there was alot of discussion about whether or not multinational corporations, whether what they were doing in their own personal interest, was something that could have potential negative effects on the overall foreign policy or position of a country in the world. There are ways in which, China today can be thought of as facing a similar set of challenges. And its captured by some of the oil companies, and banks. And venezuela again highlights, what was originally perceived as a necessary way of having Chinese banks and national oil companies engaging, being at the forefront of securing energy resources around the world.

Photo by Flickr user “
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