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From: Million Woldabzgi (wolda002@umn.edu)
Date: Wed Oct 13 2010 - 00:45:45 EDT
Published on *The Nation* (http://www.thenation.com)
------------------------------
China's Pipelineistan 'War'
Pepe Escobar | October 12, 2010
*This piece originally appeared at
TomDispatch<http://www.tomdispatch.com/post/175306/tomgram%20percent3A_pepe_escobar%20percent2C_pipelineistan%20percent27s_new_silk_road__/>
[1].*
Future historians may well agree that the twenty-first-century Silk Road
first opened for business on December 14, 2009. That was the day a crucial
stretch of pipeline officially went into operation linking the fabulously
energy-rich state of Turkmenistan (via Kazakhstan and Uzbekistan) to
Xinjiang Province in China's far west. Hyperbole did not deter the
spectacularly named Gurbanguly Berdymukhamedov, Turkmenistan's president,
from bragging, "This project has not only commercial or economic value. It
is also political. China, through its wise and farsighted policy, has become
one of the key guarantors of global security."
The bottom line is that, by 2013, Shanghai, Guangzhou and Hong Kong will be
cruising to ever more dizzying economic heights courtesy of natural gas
supplied by the 1,833-kilometer Central Asia Pipeline, then projected to be
operating at full capacity. And to think that, in a few more years, China's
big cities will undoubtedly also be getting a
taste<http://www.atimes.com/atimes/Middle_East/KL16Ak02.html>
[2] of Iraq's fabulous, barely tapped oil reserves, conservatively estimated
at 115 billion barrels, but possibly closer to 143 billion
barrels<http://www.bloomberg.com/news/2010-10-04/iraq-lifts-oil-reserves-estimate-overtakes-iran-update1-.html>
[3], which would put it ahead of Iran. When the Bush administration's
armchair generals launched their "Global War on Terror," this was not
exactly what they had in mind.
China's economy is thirsty, and so it's drinking deeper and planning deeper
yet. It craves Iraq's oil and Turkmenistan's natural gas, as well as oil
from Kazakhstan. Yet instead of spending more than a trillion dollars on an
illegal war in Iraq or setting up military bases all over the Greater Middle
East and Central Asia, China used its state oil companies to get some of the
energy it needed simply by bidding for it in a perfectly legal Iraqi oil
auction.
Meanwhile, in the New Great Game in Eurasia, China had the good sense not to
send a soldier anywhere or get bogged down in an infinite quagmire in
Afghanistan. Instead, the Chinese simply made a direct commercial deal with
Turkmenistan and, profiting from that country's disagreements with Moscow,
built itself a pipeline which will provide much of the natural gas it needs.
No wonder the Obama administration's Eurasian energy czar Richard
Morningstar was forced to admit at a congressional hearing that the United
States simply cannot compete with China when it comes to Central Asia's
energy wealth. If only he had delivered the same message to the Pentagon.
*That Iranian Equation*
In Beijing, they take the matter of diversifying oil supplies very, very
seriously. When oil reached $150 a barrel in 2008—before the US-unleashed
global financial meltdown hit—Chinese state media had taken to calling
foreign Big Oil "international petroleum crocodiles," with the implication
that the West's hidden agenda was ultimately to stop China's relentless
development dead in its tracks.
Twenty-eight percent of what's left of the world's proven oil reserves are
in the Arab world. China could easily gobble it all up. Few may know that
China itself is actually the world's fifth-largest oil producer, at 3.7
million barrels per day (bpd), just below Iran and slightly above Mexico. In
1980, China consumed only 3 percent of the world's oil. Now, its take is
around 10 percent, making it the planet's second largest consumer. It has
already surpassed Japan in that category, even if it's still way behind the
United States, which eats up 27 percent of global oil each year. According
to the International Energy Agency (IEA), China will account for over 40
percent of the increase in global oil demand until 2030. And that's assuming
China will grow at "only" a 6 percent annual rate which, based on present
growth, seems unlikely.
Saudi Arabia controls 13 percent of world oil production. At the moment, it
is the only swing producer—one, that is, that can move the amount of oil
being pumped up or down at will—capable of substantially increasing output.
It's no accident, then, that, pumping 500,000 bpd, it has become one of
Beijing's major oil suppliers. The top three, according to China's Ministry
of Commerce, are Saudi Arabia, Iran and Angola. By 2013–14, if all goes
well, the Chinese expect to add Iraq to that list in a big way, but first
that troubled country's oil production needs to start cranking up. In the
meantime, it's the Iranian part of the Eurasian energy equation that's
really nerveracking for China's leaders.
Chinese companies have
invested<http://www.tehrantimes.com/index_View.asp?code=223937>
[4] a staggering $120 billion in Iran's energy sector over the past five
years. Already Iran is China's number-two oil supplier, accounting for up to
14 percent of its imports; and the Chinese energy giant Sinopec has
committed an additional $6.5 billion to building oil refineries there. Due
to harsh UN-imposed and American sanctions and years of economic
mismanagement, however, the country lacks the high-tech know-how to provide
for itself, and its industrial structure is in a shambles. The head of the
National Iranian Oil Company, Ahmad Ghalebani, has publicly admitted that
machinery and parts used in Iran's oil production still have to be imported
from China.
Sanctions can be a killer, slowing investment, increasing the cost of trade
by over 20 percent, and severely constricting Tehran's ability to borrow in
global markets. Nonetheless, trade between China and Iran grew by 35 percent
in 2009 to $27 billion. So while the West has been slamming Iran with
sanctions, embargos, and blockades, Iran has been slowly evolving as a
crucial trade corridor for China—as well as Russia and energy-poor India.
Unlike the West, they are all investing like crazy there because it's easy
to get concessions from the government; it's easy and relatively cheap to
build infrastructure; and being on the inside when it comes to Iranian
energy reserves is a necessity for any country that wants to be a crucial
player in Pipelineistan, that contested chessboard of crucial energy
pipelines over which much of the New Great Game in Eurasia takes place.
Undoubtedly, the leaders of all three countries are offering thanks to
whatever gods they care to worship that Washington continues to make it so
easy (and lucrative) for them.
Few in the United States may know that last year Saudi Arabia—now
(re)arming<http://ipsnorthamerica.net/news.php?idnews=3277>
[5] to the teeth, courtesy of Washington, and little short of paranoid about
the Iranian nuclear program—offered to supply the Chinese with the same
amount of oil the country currently imports from Iran at a much cheaper
price. But Beijing, for whom Iran is a key long-term strategic ally,
scotched the deal.
As if Iran's structural problems weren't enough, the country has done little
to diversify its economy beyond oil and natural gas exports in the past
thirty years; inflation's running at more than 20 percent; unemployment at
more than 20 percent; and young, well-educated people are fleeing abroad, a
major brain drain for that embattled land. And don't think that's the end of
its litany of problems. It would like to be a full member of the Shanghai
Cooperation Organization (SCO)—the multi-layered economic/military
cooperation union that is a sort of Asian response to NATO—but is only an
official SCO observer because the group does not admit any country under UN
sanctions. Tehran, in other words, would like some Great Power protection
against the possibility of an attack from the US or Israel. As much as Iran
may be on the verge of becoming a far more influential player in the Central
Asian energy game thanks to Russian and Chinese investment, it's extremely
unlikely that either of those countries would actually risk war against the
US to "save" the Iranian regime.
*The Great Escape*
>From Beijing's point of view, the title of the movie version of the
intractable US v. Iran conflict and a simmering US v. China strategic
competition in Pipelineistan could be: "Escape from Hormuz and Malacca."
The Strait of Hormuz is the definition of a potential strategic bottleneck.
It is, after all, the only entryway to the Persian Gulf and through it now
flow roughly 20 percent of China's oil imports. At its narrowest, it is only
36 kilometers wide, with Iran to the north and Oman to the south. China's
leaders fret about the constant presence of US aircraft carrier battle
groups on station and patrolling nearby.
With Singapore to the North and Indonesia to the south, the Strait of
Malacca is another potential bottleneck if ever there was one—and through it
flow as much as 80 percent of China's oil imports. At its narrowest, it is
only 54 kilometers wide and like the Strait of Hormuz, its security is also
of the made-in-USA variety. In a future face-off with Washington, both
straits could quickly be closed or controlled by the US Navy.
Hence, China's increasing emphasis on developing a land-based Central Asian
energy strategy could be summed up as, Bye-bye, Hormuz! Bye-bye, Malacca!
And a hearty welcome to a pipeline-driven new Silk Road from the Caspian Sea
to China's Far West in Xinjiang.
Kazakhstan has 3 percent of the world's proven oil reserves, but its largest
oil fields are not far from the Chinese border. China sees that country as a
key alternative oil supplier via future pipelines that would link the Kazakh
oil fields to Chinese oil refineries in its far west. In fact, China's first
transnational Pipelineistan adventure is already in place: the 2005
China-Kazakhstan oil project, financed by Chinese energy giant CNPC.
Much more is to come, and Chinese leaders expect energy-rich Russia to play
a significant part in China's escape-hatch planning as well. Strategically,
this represents a crucial step in regional energy integration, tightening
the Russia/China partnership inside the SCO as well as at the UN Security
Council.
When it comes to oil, the name of the game is the immense Eastern
Siberia-Pacific Ocean (ESPO) pipeline. Last August, a 4,000-kilometer-long
Russian section from Taishet in eastern Siberia to Nakhodka, still inside
Russian territory, was begun. Russian Premier Vladimir Putin
hailed<http://www.iraqwar.mirror-world.ru/article/232898>
[6] ESPO as "a really comprehensive project that has strengthened our energy
cooperation." And in late September, the Russians and the Chinese
inaugurated a 999-kilometer
pipeline<http://www.chinadaily.com.cn/china/2010-09/27/content_11355283.htm>
[7] from Skovorodino in Russia's Amur region to the petrochemical hub Daqing
in northeast China.
Russia is currently delivering up to 130 million tons of Russian oil a year
to Europe. Soon, no less than 50 million tons may be heading to China and
the Pacific region as well.
There are, however, hidden tensions between the Russians and the Chinese
when it comes to energy matters. The Russian leadership is understandably
wary of China's startling strides in Central Asia, the former Soviet Union's
former "near abroad." After all, as the Chinese have been doing in Africa in
their search for energy, in Central Asia, too, the Chinese are building
railways and introducing high-tech trains, among other modern wonders, in
exchange for oil and gas concessions.
Despite the simmering tensions between China, Russia and the United States,
it's too early to be sure just who is likely to emerge as the victor in the
new Great Game in Central Asia, but one thing is clear enough. The Central
Asian "stans" are becoming ever more powerful poker players in their own
right as Russia tries not to lose its hegemony there, Washington places all
its chips on pipelines meant to bypass Russia (including the
Baku-Tbilisi-Ceyhan (BTC) pipeline that pumps oil from Azerbaijan to Turkey
via Georgia) and China antes up big time for its Central Asian future.
Whoever loses, this is a game that the "stans" cannot but profit from.
Recently, our man Gurbanguly, the Turkmen leader, chose China as his go-to
country for an extra $4.18 billion loan for the development of South
Yolotan, his country's largest gas field. (The Chinese had already shelled
out $3 billion to help develop it.) Energy bureaucrats in Brussels were
devastated. With estimated reserves of up to 14 trillion cubic meters of
natural gas, the field has the potential to flood the energy-starved
European Union with gas for more than 20 years. Goodbye to all that?
In 2009, Turkmenistan's proven gas reserves were estimated at a staggering
8.1 trillion cubic meters, fourth largest in the world after Russia, Iran,
and Qatar. Not surprisingly, from the point of view of Ashgabat, the
country's capital, it invariably seems to be raining gas. Nonetheless,
experts doubt that the landlocked, idiosyncratic Central Asian republic
actually has enough blue gold to supply Russia (which absorbed 70 percent of
Turkmenistan's supply before the pipeline to China opened), China, Western
Europe and Iran, all at the same time.
Currently, Turkmenistan sells its gas to: China via the world's largest gas
pipeline, 7,000 kilometers long and designed for a capacity of 40 billion
cubic meters per year; Russia (10 billion cubic meters per year, down from
30 billion per year until 2008); and Iran (14 billion cubic meters per
year). Iranian President Mahmoud Ahmadinejad always gets a red-carpet
welcome from Gurbanguly, and the Russian energy giant Gazprom, thanks to an
improved pricing policy, is treated as a preferred customer.
At present, however, the Chinese are atop the heap, and more generally,
whatever happens, there can be little question that Central Asia will be
China's major foreign supplier of natural gas. On the other hand, the fact
that Turkmenistan has, in practice, committed its entire future gas exports
to China, Russia and Iran means the virtual death of various trans-Caspian
Sea pipeline plans long favored by Washington and the European Union.
*IPI vs. TAPI All Over Again*
On the oil front, even if all the "stans" sold China every barrel of oil
they currently pump, less than half of China's daily import needs would be
met. Ultimately, only the Middle East can quench China's thirst for oil.
According to the International Energy Agency, China's overall oil needs will
rise to 11.3 million barrels per day by 2015, even with domestic production
peaking at 4.0 million bpd. Compare that to what some of China's alternative
suppliers are now producing: Angola, 1.4 million bpd; Kazakhstan, 1.4
million as well; and Sudan, 400,000.
On the other hand, Saudi Arabia produces 10.9 million bpd, Iran around 4.0
million, the United Arab Emirates (UAE) 3.0 million, Kuwait 2.7 million—and
then there's Iraq, presently at 2.5 million and likely to reach at least 4.0
million by 2015. Still, Beijing has yet to be fully convinced that this is a
safe supply, especially given all those US "forward operating sites" in the
UAE, Bahrain, Kuwait, Qatar and Oman, plus those roaming naval battle groups
in the Persian Gulf.
On the gas front, China definitely counts on a South Asian game changer.
Beijing has already spent $200 million on the first phase in the
construction of a deepwater port at Gwadar in Pakistan's Balochistan
Province. It wanted, and got from Islamabad, "sovereign guarantees to the
port's facilities." Gwadar is only 400 kilometers from Hormuz. With Gwadar,
the Chinese Navy would have a homeport that would easily allow it to monitor
traffic in the strait and someday perhaps even thwart the US Navy's
expansionist designs in the Indian Ocean.
But Gwadar has another infinitely juicier future role. It could prove the
pivot in a competition between two long-discussed pipelines: TAPI and IPI.
TAPI stands for the Turkmenistan-Afghanistan-Pakistan-India pipeline, which
can never be built as long as US and NATO occupation forces are fighting the
resistance umbrella conveniently labeled "Taliban" in Afghanistan. IPI,
however, is the Iran-Pakistan-India pipeline, also known as the "peace
pipeline" (which, of course, would make TAPI the "war pipeline"). To
Washington's immeasurable distress, last June, Iran and Pakistan finally
closed <http://www.atimes.com/atimes/South_Asia/LF15Df02.html> [8] the deal
to build the "IP" part of IPI, with Pakistan assuring Iran that either India
or China could later be brought into the project.
Whether it's IP, IPI or IPC, Gwadar will be a key node. If, under pressure
from Washington, which treats Tehran like the plague, India is forced to
pull out of the project, China already has made it clear that it wants in.
The Chinese would then build a Pipelineistan link from Gwadar along the
Karakorum highway in Pakistan to China via the Khunjerab Pass—another
overland corridor that would prove immune to US interference. It would have
the added benefit of radically cutting down the 20,000-kilometer tanker
route around the southern rim of Asia.
Arguably, for the Indians it would be a strategically sound move to align
with IPI, trumping a deep suspicion that the Chinese will move to outflank
them in the search for foreign energy with a "string of pearls" strategy:
the setting up of a series of "home ports" along its key oil supply routes
from Pakistan to Myanmar. In that case, Gwadar would no longer simply be a
"Chinese" port.
As for Washington, it still believes that if TAPI is built, it will help
keep India from fully breaking the US-enforced embargo on Iran.
Energy-starved Pakistan obviously prefers its "all-weather" ally China,
which might commit itself to building all sorts of energy infrastructure
within that flood-devastated country. In a nutshell, if the unprecedented
energy cooperation between Iran, Pakistan and China goes forward, it will
signal a major defeat for Washington in the New Great Game in Eurasia, with
enormous geopolitical and geo-economic repercussions.
For the moment, Beijing's strategic priority has been to carefully develop a
remarkably diverse set of energy suppliers—a flow of energy that covers
Russia, the South China Sea, Central Asia, the East China Sea, the Middle
East, Africa and South America. If China has so far proven masterly in the
way it has played its cards in its Pipelineistan "war," the US hand—bypass
Russia, elbow out China, isolate Iran—may soon be called for what it is: a
bluff.
------------------------------
*Source URL:*
http://www.thenation.com/article/155334/chinas-pipelineistan-war
*Links:*
[1] http://www.tomdispatch.com/post/175306/tomgram percent3A_pepe_escobar
percent2C_pipelineistan percent27s_new_silk_road__/
[2] http://www.atimes.com/atimes/Middle_East/KL16Ak02.html
[3]
http://www.bloomberg.com/news/2010-10-04/iraq-lifts-oil-reserves-estimate-overtakes-iran-update1-.html
[4] http://www.tehrantimes.com/index_View.asp?code=223937
[5] http://ipsnorthamerica.net/news.php?idnews=3277
[6] http://www.iraqwar.mirror-world.ru/article/232898
[7] http://www.chinadaily.com.cn/china/2010-09/27/content_11355283.htm
[8] http://www.atimes.com/atimes/South_Asia/LF15Df02.html
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