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China
lays down gauntlet in energy war
By F William Engdahl
On December 15, the state-owned China National
Petroleum Corp (CNPC) inaugurated an oil
pipeline running from Kazakhstan to northwest
China. The pipeline will undercut the
geopolitical significance of the
Washington-backed Baku-Tbilisi-Ceyhan (BTC)oil
pipeline which opened this past summer amid big
fanfare and support from Washington.
The geopolitical chess game for the control of
the energy flows of Central Asia and overall of
Eurasia from the Atlantic to the China Sea is
sharply evident in the latest developments.
Making the Kazakh-China oil pipeline link even
more politically interesting, from the
standpoint of an emerging Eurasian move towards
some form of greater energy independence from
Washington, is the fact that China is reportedly
considering asking Russian companies to help it
fill the pipeline with oil, until Kazakh supply
is sufficient.
Initially, half the oil pumped through the new
200,000 barrel-a-day pipeline will come from
Russia because of insufficient output from
nearby Kazakh fields, Kazakhstan's Vice Energy
Minister Musabek Isayev said on November 30 in
Beijing. That means closer
China-Kazakhstan-Russia energy cooperation - the
nightmare scenario of Washington.
Simply put, the United States stands to lose
major leverage over the entire strategic
Eurasian region with the latest developments.
The Kazakh developments also have more than a
little to do with the fact that the Washington
war drums are beating loudly against Iran.
The new China pipeline runs 962 kilometers (598
miles) and will take China a third of the way to
Kashagan in the Caspian Sea, one of the world's
largest accessible oil reserves. Kashagan is the
largest new oil discovery in decades and exceeds
the size of the North Sea. This is a major
reason Washington has such a strong interest in
supporting democratic regime change in the
Central Asia region of late.
In the next 10 years, Kazakhstan plans to almost
triple oil production, prompting the landlocked
nation to seek new export routes because the
country wants to avoid pipelines through Russia
and excessive Russian dependence. China is now
among Kazakhstan's major target markets.
Best public estimates are that Kazakhstan has 35
billion barrels of discovered oil reserves,
twice the amount in the North Sea, and may hold
about three times more, according to a Kazakh
government report released on November 18 in
London. German oil engineers have privately
reported that recent drilling by Italy's AGIP,
the current oil consortium leader for Kashagan,
a huge field offshore Kazakhstan southwest of
Tengiz, has confirmed enormous oil deposits
there.
The government of President Nursultan Nazarbayev
plans to produce 3.6 million barrels a day of
oil from all fields in Kazakhstan, onshore and
off, by 2015. For 2005, they expect to average
about 1.3 million barrels a day, making
Kazakhstan far larger than Azerbaijan, and
second in oil production of the former Soviet
states only to Russia.
The December 15 opening of the new Kazakh-China
pipeline was a major event for Beijing. Zhang
Guobao, vice chairman of the National
Development and Reform Commission, China's top
economic planning agency, attended the opening.
CNPC has invested more than $2.6 billion in
Kazakhstan since 1997.
Beijing takes the geopolitical prize
In October, Beijing scored a second major
geopolitical coup when China completed a $4.18
billion takeover of PetroKazakhstan Inc. It was,
in a sense, revenge on Washington for the
blocking of the China acquisition of Unocal. US
oil majors had made major efforts to lock up
Kazakhstan oil after discovery of major oil
offshore in the Kashagan field. They failed.
ExxonMobil was charged with bribery of Kazakh
officials to win a presence in the Kazakh oil
business, and a senior Mobil executive was later
jailed on US tax evasion in New York tied to the
Kazakh bribery payments.
Nazarbayev enjoys good relations with Russia's
President Vladimir Putin. He was general
secretary of the Communist Party when Kazakhstan
was part of the USSR, and is regarded as a sly
fox in terms of dealing with Moscow, while also
keeping a clear distance from Moscow.
In October, Russia's Lukoil failed in its bid to
buy up the Kazakh state oil company,
PetroKazakhstan, in a privatization. Nazarbayev
indicated a major geopolitical shift in
strategy, compared with a decade or more ago,
when it appeared that Washington was to be the
major foreign ally of Nazarbayev. At that time
Secretary of State Condoleezza Rice's company,
Chevron, became the lead oil contractor and
operator in the Kazakh Tengiz oil field. That
was just after the breakup of the Soviet Union
and the US oil presence in Kazakhstan was a
major US political priority supported by the
Bill Clinton administration.
The Chevron Tengizchevoil consortium formed the
Caspian Pipeline Consortium (CPC) in 1993 amid
great fanfare. After years of haggling with the
Kazakh government, Chevron finally constructed a
pipeline from Tengiz on the Caspian's
northeastern shore to the Russian port of
Novorossiysk on the Black Sea. Following years
of pressure, most members of the CPC group,
including Chevron and Oman Oil Co, decided to
not pursue future expansions of the CPC line.
Now, a decade later and with the scope of Kazakh
oil deposits dwarfing any in the region, with
its recent confirmed drillings in the Kashagan
field, Nazarbayev has scored a political balance
of power coup by turning to Beijing.
In October, Nazarbayev announced that CNPC had
won the bid to buy PetroKazakhstan. What will be
important to watch, now that Nazarbayev won
re-election on December 4, further extending his
14-year reign, is to what extent Washington
begins to play up "human rights abuses" by
Nazarbayev.
A fledgling "Orange" revolution a la Ukraine has
sprung up behind opposition candidate Zharmakhan
Tuyakbai and his party, For a Just Kazakhstan.
He came in second with 6.6% of the vote and
cried fraud, but Washington's and the US media
response were muted this time. Rice, in a major
trip to shore up sagging US influence in Central
Asia on October 10-13, held a private meeting
with Tuyakbai. He is clearly being groomed for a
possible future role, but clearly not yet.
Washington suffers strategic setback
A major setback for Washington's Eurasian
encirclement strategy vis-a-vis China and Russia
came several months ago when Uzbekistan's
autocratic president Islam Karimov told
Washington it could no longer use the
Karshi-Khanabad military air base in southeast
Uzbekistan, a major piece in Washington's
Eurasian chess board play, put into place after
September 11, 2001.
Since strong US protest over the government's
bloody suppression of protests against a state
trial of alleged Islamic fundamentalists in
Andijan last May, Karimov's relations with
Washington have deteriorated. Karimov's decision
to move so aggressively was no doubt influenced
by the successful March "Tulip" revolution which
toppled Askar Akayev in neighboring Kyrgystan
and set the stage for the July election of
opposition and US-backed candidate Kurmanbek
Bakiev.
On July 29, Karimov announced he was evicting
the US entirely from the airbase with a January
2006 exit date. In October, the US Senate, as
retaliation, voted not to pay $23 million in
base user fees to Uzbekistan for past use.
Moscow and Beijing have both moved into the
vacuum. A look at the map will indicate why.
Uzbekistan is strategic for control or to
prevent control by foreign powers such as
Washington, of Central Asia and pipeline routes
linking Russia, China and Kazakhstan. In October
2004, Moscow secured a long-term military base
agreement to station troops in Dushanbe, the
capital of nearby Tajikistan, a move by Russia
to limit the spread of Washington-backed "color
revolutions" in the region.
That appeared to redraw the Eurasian
geostrategic map in Moscow's favor, with the
recent US loss of Uzbekistan. Uzbekistan is now
effectively Russia's main ally in Central Asia.
Washington's position in Eurasia and its future
relations with Kazakhstan suddenly assumed high
priority. Clearly, the Bush administration
decided the time was not ripe to try a
full-blown "Orange" revolution in Kazakhstan
this month, at least not until Washington's
position in the region was stronger. That was a
clear purpose of the October Rice visit.
But now with the strong geopolitical turn of
Nazarbayev toward playing Beijing to offset
potential Washington domination in the region,
the situation has begun to change dramatically.
A year ago, China attempted to buy out a 16%
share in the Kashagan consortium from British
Gas, which was willing to sell. That sale was
blocked by US consortium member ExxonMobil, the
company subsequently charged with bribery and
convicted. Now China has opened an oil flow out
of Kazakhstan to the East, not the West.
This has major strategic implications for the
future of the Washington-backed BTC oil
pipeline. That pipeline was built by the Caspian
Oil Consortium headed by British Petroleum, and
was backed by both Clinton and George W Bush,
despite the fact that it was the most costly and
least viable oil route out of the Caspian.
Former US national security advisor Zbigniew
Brzezinski had been the chief Washington
lobbyist advocating the BTC route to circumvent
Russia. Its construction was undertaken on the
assumption that it would carry not only Baku
oil, but also a major share of Kazakh oil from
Tengiz and offshore Kashagan oil fields. Oops!
A larger China energy strategy
The December China-Kazakhstan pipeline opening
is one part of a massive Chinese plan to secure
as much Kazakh oil riches as possible.
The Chinese plan to connect several pieces of
infrastructure - part Soviet-built, part
Chinese-built - then reverse the flow of some of
them and forge a new export corridor stretching
from Kazakhstan's oil-rich Caspian basin,
including Kashagan, through a series of western
and central-Kazakh oil zones, and ultimately
into China. With completion of this major
project, China will for the first time have
secured a source of imported energy not
vulnerable to US aircraft carrier battle groups,
as is the case with present oil deliveries from
the Persian Gulf and Sudan.
Before opening the new pipeline, China imported
only 25,000 bpd from Kazakhstan. Once the link
between Kenkiyak and Kumkol is finished,
connecting existing infrastructure near the
Caspian with the portion inaugurated on December
15, the project will pump 1 million bpd. That
would be about 15% of China's crude oil needs.
China then plans to tap into production from
dozens of Kazakh sites it has acquired during
the past several years. This is oil that
currently goes west, or north through Russia.
Beijing still prefers the color 'red'
Beijing has also studied the Washington-backed
series of regime changes across Central Asia and
the "color revolutions" from Georgia to Ukraine
and most recently Kyrgystan, and has evidently
decided to "nip in the bud" any similar
non-governmental organization efforts within
China, or in areas strategic to long-term China
energy security.
Kyrgystan's "Tulip" revolution last July sounded
alarm bells in Beijing. Possible Chinese
pipeline links to Kazakhstan, Turkmenistan, Iran
and or Russia would clearly be threatened by a
ring of new pro-North Atlantic Treaty
Organization neighbors and states between
western China and its potential oil sources.
Their alarm led to warmer ties between
Uzbekistan's Karimov and Beijing in recent
months, as well as an invitation from
Moscow-tied Belarus President Yuri Lukashenko.
The Washington journal Foreign Policy ran a
short item in its October edition by an apparent
Chinese dissident. The article, titled, "China's
Color-Coded Crackdown", is worth quoting:
In China's halls of power, the fall of
post-Soviet authoritarian regimes has raised
the uncomfortable specter of a Chinese popular
uprising. According to the Hong Kong-based
Open magazine, a report by Chinese President
Hu Jintao, titled "Fighting the People's War
Without Gunsmoke", is guiding the Chinese
Communist Party's "counterrevolution"
offensive. The report, disseminated inside the
party, outlines a series of measures aimed at
nipping a potential Chinese "color revolution"
in the bud.
Some Chinese apparently call it the Battle of
the Two Georges - George Bush and global
financier George Soros. The Foreign Policy piece
continues:
Perhaps the most telling sign of China's
concern has been its crackdown on
non-governmental organizations (NGOs). Beijing
believes that international organizations,
especially advocacy NGOs, have acted as
Washington's "black hands" behind the recent
regime changes in Central Asia. A recent issue
of a biweekly journal run by the Communist
Party Propaganda Department referred to
Washington's "$1 billion annual budget for
global democratization" and identified NGOs
such as the International Republican
Institute, the National Endowment for
Democracy (NED), the US Institute of Peace and
the Open Society Institute as organizations
that "brainwash" local people and train
political oppositions.
In late August, ahead of a visit by the UN
high commissioner for human rights, Chinese
police raided the office of the Empowerment
and Rights Institute, a human rights group
supported by the NED. A new regulation
offering more freedom to NGOs was initially
expected later this year. No longer. The
Ministry of Civil Affairs has now stopped
processing registration applications,
effectively freezing many groups' operations.
Instead, the only government offices taking an
interest in NGOs are the national security
agency [China's secret police] and public
security forces.
Both have launched investigations into local
NGOs. Some senior Chinese managers working for
international NGOs have been called in for
"private talks" with authorities, though no
related arrests or detentions have been
reported. Some NGO offices have had
plainclothes security officers show up in an
effort to clandestinely ferret out information
on foreign staff and organizations.
Environmental groups have been singled out for
a massive government survey, most likely
because they have angered powerful agencies by
successfully initiating public debates on
controversial issues, such as genetically
modified foods and huge dam projects, and
because only around 10% of green groups are
currently registered with the state.
Meanwhile, Beijing has commissioned
researchers from several provincial academies
of social science to study the activities of
NGOs in China. NGO publications such as
directories experienced unexpectedly strong
sales in recent months, as they no doubt
became convenient study tools. Likewise,
experts have been dispatched to Central Asia
to study how those color revolutions first
sprung roots. In a May 19 Politburo meeting,
senior administrators from the Chinese Academy
of Social Sciences, where foreign research
funds are usually well received, were reminded
of the "acute and complicated struggle in the
ideological realm in the new millennium". In
other words, be careful about the political
implications of your research.
According to sources in Beijing, final
decisions on the government's approach to NGOs
will be made in a November meeting of the
State Council, China's highest executive body.
As long as the clouds of color revolution are
hovering over Central Asia - some, for
example, expect storms in Belarus - the
Chinese government will stay on high alert ...
Beijing's moves against the country's NGO
community remain largely unnoticed outside
China. If the international community wants an
open and democratic China, it should pay more
attention to the survival and growth of
Chinese liberal institutions. Otherwise, the
country will be destined to remain the same
shade of red.
Beijing-Tehran-Moscow
At the end of 2004, Beijing signed a $70 billion
energy agreement with Tehran, China's largest
Organization of Petroleum Exporting Countries
energy deal to date. China's state Sinopec
agreed to buy 250 million tons of LNG over 30
years from Iran, as well as to develop the giant
Yadavaran field. That agreement covered the
comprehensive development by Sinopec of the
giant Yadavaran gas field, construction of a
related petrochemical and gas industry including
pipelines.
As part of the huge Iran-China economic
cooperation agreement, China's state-run
military construction company, NORINCO, will
expand the Tehran Metro underground.
A second phase in the Iran-China strategic
energy cooperation will involve constructing a
pipeline in Iran to take oil some 386 kilometers
to the Caspian Sea, there to link up with the
planned pipeline from China into Kazakhstan.
On signing the deal, Iran's Petroleum Minister
announced that Tehran would like to see China
replace Japan as Iran's largest oil importer. As
well, Iran has what are estimated to be the
world's second largest reserves of natural gas
after Russia. Iran is a place of enormous
strategic importance to China, to Japan, to
Russia, to the European Union, and for all these
reasons, to Washington as well.
Iran supplies about 14% of China's oil. Along
with Russia, China has been involved since the
late 1990s in supplying nuclear technology to
Tehran. In 1997, Beijing, under Washington
pressure, nominally agreed to stop
nuclear-related shipments to Iran, but the flows
are believed continuing as the Iran relation is
strategic and critical to China's energy
security.
China, a veto member of the UN Security Council,
has repeatedly called for the issue of Iranian
nuclear development to be dealt with by the
International Atomic Energy Agency (IAEA). The
IAEA's chief, Nobel Peace Prize awardee, Mohamed
ElBaradei, has earned the enmity of Washington
war hawks for his open declarations of lack of
evidence in both Iraq and now of Iranian atomic
bomb capability.
Given the nature of the Bush administration's
rush to war in Iraq in 2003, where China had a
major stake in oil development, and the
subsequent US blocking of other Chinese attempts
at securing energy independence, including
Unocal, it is not surprising that Beijing is
taking extraordinary measures to secure its
long-term oil and gas supply.
Energy is the Achilles' heel of China's economic
growth. Beijing knows that only too well. So
does Washington. A decision by Washington to
take military action against Iran now would pull
a far larger cast of actors into the fray than
Iraq.
F William Engdahl is author of the
book, A Century of War: Anglo-American Oil
Politics and the New World Order from Pluto
Press Ltd. He can be contacted via his website,
www.engdahl.oilgeopolitics.net.
(Copyright 2005 F William Engdahl)
From:
http://www.atimes.com/atimes/China/GL21Ad01.html
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