Windfall
Page 51
In 2004, Li Junru, the vice president: Quoted in Erica Downs, “The Energy Security Series: China,” Brookings, December 2006, 13, https://www.brookings.edu/wp-content/uploads/2016/06/12china.pdf.
And one year later, Zheng Bijian: Bijian, “China’s ‘Peaceful Rise’ to Great-Power Status.”
True, the prospects for greater: See “World Shale Resource Assessments,” U.S. Energy Information Administration, September 24, 2015, https://www.eia.gov/analysis/studies/worldshalegas/. The EIA published this study on global shale resources first in 2011, and updated it in 2013.
But difficulties in extracting this gas: At least initially, the Chinese government had great ambitions to tap this resource to feed domestic markets. In 2012, the government announced its goal of producing 2.1 tcf to 3.5 tcf of shale gas by 2020. It launched many initiatives to support this goal, including opening up the sector to some foreign investment, creating incentives for shale development, and supporting technological research related to shale. Yet, only two years later in 2014, China’s State Council—the country’s highest administrative body—publicly scaled back the 2020 target to the production of only 1.1 tcf of shale gas in a rare downward revision of the earlier goal. Speaking to Reuters in 2014, a Chinese government source admitted, “The previous targets were more of a vague prospect, a hope. Thirty bcm is a more realistic goal.” A year later, the government announced that it would scale back the subsidy it provides to shale gas developers, even as it continues to encourage the production of the resource. See Zhongmin Wang, “China’s Elusive Shale Gas Boom,” The Paulson Institute, March 2015, 6–9, www.paulsoninstitute.org/wp-content/uploads/2015/04/PPEE_China-Shale-Gas_English.pdf; Chen Aizhu and Judy Hua, “China Finds Shale Gas Challenging, Halves 2020 Output Target,” Reuters, August 7, 2014, www.reuters.com/article/2014/08/07/us-china-shale-target-idUSKBN0G71FX20140807; Aibing Guo, “China Cuts Subsidies for Shale Gas Developers Through to 2020,” Bloomberg, April 29, 2015, www.bloomberg.com/news/articles/2015-04-29/china-cuts-subsidies-for-shale-gas-developers-through-to-2020;
While China may well become: The U.S. Energy Information Administration assesses that “Chinese shale basins are tectonically complex with numerous faults—some seismically active—which is not conducive to shale development.” See U.S. Energy Information Administration, “Technically Recoverable Shale Oil and Shale Gas Resources: China” (Washington, D.C.: U.S. Department of Energy, September 2015), xx-8, www.eia.gov/analysis/studies/worldshalegas/pdf/China_2013.pdf. David Sandalow et al. predict that, after 2020, either high or low production scenarios could be realized for China’s shale development. David Sandalow et al., “Meeting China’s Shale Gas Goals” (working draft for public release, Center on Global Energy Policy, School of International and Public Affairs, Columbia University, New York, NY, September 2014), http://energypolicy.columbia.edu/sites/default/files/energy/China%20Shale%20Gas_WORKING%20DRAFT_Sept%2011.pdf.
China’s shale oil resources: The EIA study ranks China as having the third largest shale oil reserves in the world, after Russia and the United States. “World Shale Resource Assessments,” Analysis and Projections, U.S. Energy Information Administration, September 24, 2015, https://www.eia.gov/analysis/studies/worldshalegas/.
In this positive economic environment: China’s LNG imports rose from 158 bcf in 2008 to 864 bcf in 2013. Anthony Fensom, “China: the Next Shale-Gas Superpower?” The National Interest, October 9, 2014, http://nationalinterest.org/feature/china-the-next-shale-gas-superpower-11432.
The oil price plunge of 2014–2015: LNG spot prices to Asia fell by 60 percent from 2014 to 2015. Longer-term contract prices were also affected, as most were indexed to the oil price. “Asian LNG Price Faces Steep Fall,” Reuters, August 31, 2015, www.cnbc.com/2015/08/31/asian-lng-price-to-plunge-as-local-demand-wanes-supply-jumps.html; “Platts: August LNG Spot Prices to Asia Slide,” LNG World News, July 23, 2015, https://www.lngworldnews.com/platts-august-lng-spot-prices-to-asia-slide/.
Australia and the United States together: From 2015 to 2021, global export LNG capacity is expected to increase by 45 percent, nearly all (90 percent) of which is anticipated to come from the United States and Australia. Stephen Letts, “LNG Glut Will Continue for Years as Demand Falls and Supply Surges: IEA,” ABC News, June 8, 2016, http://www.abc.net.au/news/2016-06-09/lng-glut-will-continue-as-demand-falls-and-supply-surges/7494850.
Looking out two more decades: International Energy Agency, World Energy Outlook 2015 (Paris: OECD Publishing, 2015), 219–20, http://www.worldenergyoutlook.org/weo2015/.
Lower than expected increases: See “Asian LNG Price Faces Steep Fall,” Reuters.
After detailing the situation there: See Situation in Sudan, Before the Senate Foreign Relations Committee, 108th Congress. (September 9, 2004, testimony of Colin Powell, secretary of state of the United States); C-SPAN video, 04:28:07, https://www.c-span.org/video/?183435-1/situation-sudan.
This was the first time the executive branch: See Rebecca Hamilton, “Inside Colin Powell’s Decision to Declare Genocide in Darfur,” Atlantic, August 17, 2011, www.theatlantic.com/international/archive/2011/08/inside-colin-powells-decision-to-declare-genocide-in-darfur/243560/.
The title of the U.N. press release: Security Council, “Security Council Declares Intention to Consider Sanctions to Obtain Sudan’s Full Compliance with Security, Disarmament Obligations on Darfur,” United Nations, September 18, 2004, www.un.org/press/en/2004/sc8191.doc.htm.
China’s position toward Sudan: For a detailed account of China’s involvement with Sudan, see Luke Patey, The New Kings of Crude: China, India, and the Global Struggle for Oil in Sudan and South Sudan (London: Hurst Publishers, 2014).
Equally important, China aimed to protect: For an account of the experience of the Canadian company Talisman in Sudan, see Stephen J. Kobrin, “Oil and Politics: Talisman Energy and Sudan,” International Law and Politics 36 (2004): 425–56, https://faculty.wharton.upenn.edu/wp-content/uploads/2012/05/nyujilp.pdf.
By 2004, China had invested: Chinese imports of Sudanese oil accounted for nearly half (47 percent) Sudan’s export revenues exports in 2004. “UN Comtrade: International Trade Statistics,” United Nations, https://comtrade.un.org/data/.
“Business is business,” he stated: Quoted in Howard W. French, “China in Africa: All Trade, with No Political Baggage,” New York Times, August 8, 2004, www.nytimes.com/2004/08/08/international/asia/08china.html.
While China’s approach to Sudan: See Lydia Polgreen, “China, in New Role, Presses Sudan on Darfur,” New York Times, February 23, 2008, www.nytimes.com/2008/02/23/world/africa/23darfur.html?n=Top%2FReference%2FTimes%20Topics%2FSubjects%2FO%2FOlympic%20Games; Daniel Hemel, “Darfur’s Other Culprits,” Forbes, April 27, 2008, www.forbes.com/2008/04/26/olympics-darfur-boycott-oped-cx_dhe_0427darfur.html.
First articulated in 1997: For an extensive analysis of China’s “going out” policy as it relates to oil, see Bo Kong, China’s International Petroleum Policy (Westport, Conn.: Praeger, 2009). Also see Xiaojie Xu, “Chinese NOCs’ Overseas Strategies: Background, Comparison and Remarks,” The James A. Baker III Institute for Public Policy, Rice University, March 2007, http://bakerinstitute.org/media/files/page/94235e0c/noc_chinesenocs_xu.pdf.
The Chinese government and China’s: China National Petroleum Corporation (CNPC), China Petroleum & Chemical Corporation (Sinopec), and China National Offshore Oil Corporation (CNOOC) have played leading roles in this neo-mercantilist strategy. Headed by senior officials of the Chinese Communist Party, but also listed on the stock exchange, the NOCs are neither entirely independent of the government nor beholden to it. For a detailed history of China’s oil industry, and the unfolding of the “going out” strategy, see Michal Meidan, “The Structure of China’s Oil Industry: Past Trends and Future Prospects” (OIES Paper: WPM 66, Oxford Institute for Energy Studies, University of Oxford, Oxford, U.K., May 2016), https://www.oxfordenergy.org/wpcms/wp-content/uploads/2016/05/The-structure-of-Chinasoil-industry-past-trends-and-future-
prospects-WPM-66.pdf.
In 2010 alone, Chinese NOCs: Julie Jiang and Jonathan Sinton, Overseas Investments by Chinese National Oil Companies: Assessing the Drivers and the Impacts (Paris: International Energy Agency, 2011), 38, www.iea.org/publications/freepublications/publication/PartnerCountrySeriesUpdateonOverseasInvestmentsbyChinasNationalOilCompanies.pdf. Also see ibid., Annex 2, p. 41.
In the decade following 2004: Ibid., 35–39.
China seemed to believe: For more on the objectives Chinese NOCS cite as motivating their overseas investment, see Julie Jiang and Jonathan Sinton, “Overseas Investment by Chinese National Oil Companies,” International Energy Agency, February 2011, 12, https://www.iea.org/publications/freepublications/publication/overseas_china.pdf.
Anticipating an ever-more-competitive: Michal Meidan points out that this was an “untested theory.” Meidan, “The Structure of China’s Oil Industry,” 54.
In late 2004, Venezuelan president: Juan Forero, “China’s Oil Diplomacy in Latin America,” New York Times, March 1, 2005, www.nytimes.com/2005/03/01/business/worldbusiness/chinas-oil-diplomacy-in-latin-america.html. Similarly, although Zimbabwe’s wealth comes from diamonds and minerals, not oil, the country’s regime has been able to withstand political and economic pressure in part as a result of Chinese unconditional backing. When Western powers and other African countries were pressing for talks between Zimbabwean president Robert Mugabe and Zimbabwe’s opposition in August 2005 amid a devastating economic crisis, Mugabe was clear about his sources of support. “I am aware there are shrill calls from many quarters [for talks],” he said in a televised address. “I am happy to announce that our Look East policies are beginning to assume a concrete form and yield quantifiable economic results for our nation. My recent state visit to China was most beneficial and is set to transform our economy in a fundamental way.” “Mugabe Rejects Call for Dialogue; Looks to China for Help,” Voice of America, October 30, 2009, http://m.voanews.com/a/a-13-2005-08-08-voa32/395061.html.
Perhaps the most oft-cited example: Henry Lee and Dan Shalmon, however, have a different view, concluding that China is only hampering the promotion of good governance “on the margin.” See Henry Lee and Dan Shalmon, “Searching for Oil: China’s Oil Strategies in Africa,” in Robert I. Rotberg, ed., China into Africa: Trade, Aid, and Influence (Washington, DC: Brookings Institution Press, 2008), 124, http://belfercenter.ksg.harvard.edu/files/Lee%20China%20into%20Africa.pdf.
In 2002, Angola emerged: Adam Taylor, “A 27-Year Civil War, for No Reason At All,” Washington Post, October 14, 2015, https://www.washingtonpost.com/news/worldviews/wp/2015/10/14/a-27-year-civil-war-for-no-reason-at-all/.
Once an exporter of food: James Brooke, “War Status in Angola Is Status Quo,” New York Times, December 27, 1987, www.nytimes.com/1987/12/27/world/war-status-in-angola-is-status-quo.html.
Angola was already a significant: Lee and Shalmon, “Searching for Oil: China’s Oil Strategies in Africa,” 119.
Angola would repay the loan: Ibid., 119–120.
Around the same time, negotiations: For more on this story, see Tom Burgis, Demetri Sevastopulo, and Cynthia O’Murchu, “China in Africa: How Sam Pa Became the Middleman,” Financial Times, August 8, 2014, https://www.ft.com/content/308a133a-1db8-11e4-b927-00144feabdc0.
Two years later, in June 2006: Stephanie Hanson, “Angola’s Politicial and Economic Development,” Council on Foreign Relations, July 21, 2008, http://www.cfr.org/world/angolas-political-economic-development/p16820.
Soon thereafter, China’s EximBank: Ibid.
As of 2017, Angola was China’s: Sharon Cho, “Russia Reemerges as China’s Top Oil Supplier Before OPEC Meet,” Bloomberg, April 25, 2017, https://www.bloomberg.com/news/articles/2017-04-25/russia-reemerges-as-chinas-top-oil-supplier-before-opec-meet.
By far the largest financer: “China in Africa,” Ide-Jetro, October 2009, www.ide.go.jp/English/Data/Africa_file/Manualreport/cia_10.html; Vivien Foster et al., “Building Bridges: China’s Growing Role as Infrastructure Financier for Sub-Saharan Africa: Executive Summary,” The World Bank, July 2008, http://siteresources.worldbank.org/INTAFRICA/Resources/BB_Final_Exec_summary_English_July08_Wo-Embg.pdf.
a 2014 Pew poll found that: “Chapter 2: China’s Image,” Pew Research Center, July 14, 2014, http://www.pewglobal.org/2014/07/14/chapter-2-chinas-image/.
Writing in 2013, Nigeria’s central bank governor: Lamido Sanusi, “Africa Must Get Real About Chinese Ties,” Financial Times, March 11, 2013, www.ft.com/intl/cms/s/0/562692b0-898c-11e2-ad3f-00144feabdc0.html#axzz3tRD2NLg2.
African civil society groups: See Carola McGiffert, ed., Chinese Soft Power and Its Implications for the United States: Competition and Cooperation in the Developing World (Washington, D.C.: Center for Strategic and International Studies, March 2009), 42, http://www.voltairenet.org/IMG/pdf/Chinese_Soft_Power.pdf.
The more than one million: “One Among Many,” Economist, January 15, 2015, www.economist.com/news/middle-east-and-africa/21639554-china-has-become-big-africa-nowbacklash-one-among-many.
Sata stirred up crowds: Howard W. French, “In Africa, an Election Reveals Skepticism of Chinese Involvement,” Atlantic, September 29, 2011, www.theatlantic.com/international/archive/2011/09/in-africa-an-election-reveals-skepticism-of-chinese-involvement/245832/.
He reviled the Chinese for: Ibid.
Rumors circulated that his opponent’s campaign: Kristin Palitza, “Why Zambia’s Elections Will Be All About China,” Time, September 19, 2011, http://content.time.com/time/world/article/0,8599,2093381,00.html.
Speaking in Beijing in 2012: Leslie Hook, “Zuma Warns on Africa’s Ties to China,” Financial Times, July 19, 2012, https://next.ft.com/content/33686fc4-d171-11e1-bbbc-00144feabdc0?siteedition=uk&_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F33686fc4-d171-11e1-bbbc-00144feabdc0.html%3Fsiteedition%3Duk&_i_referer=&classification=conditional_standard&iab=barrier-app#axzz3sgg1SWSH.
Increasingly, observers concluded that NOCs: See Bo Kong, “China’s Quest for Oil in Africa Revisited” (Working Papers in African Studies, Paul H. Nitze School of Advanced International Studies, Johns Hopkins University, Washington, D.C., January 2011), http://www.sais-jhu.edu/sites/default/files/BoKongWP1-11_1.pdf.
One industry insider shared with me: Former CNOOC official, in-person conversation with author, Beijing, September 21, 2014.
While the equity oil investments: Jiang and Sinton report that “No evidence suggests that the Chinese government currently imposes a quota on the NOCs regarding the amount of their equity oil that they must ship to China.” Julie Jiang and Jonathan Sinton, “Overseas Investments by Chinese National Oil Companies,” 7.
Other critics have focused: See “The Chinese Oil Sector: Beijing’s Latest Anti-Corruption Target,” Stratfor, September 10, 2013, https://www.stratfor.com/analysis/chinese-oil-sector-beijings-latest-anti-corruption-target.
For example, Chinese NOC Sinopec: Meidan, “The Structure of China’s Oil Industry,” 55.
Zhou had been an aggressive promoter: See Patey, The New Kings of Crude, a book that traces Zhou’s support for CNPC investments in Sudan.
Sentenced in 2015 to life in prison: Michael Forsythe, “Zhou Yongkang, Ex-Security Chief in China, Gets Life Sentence for Graft,” New York Times, June 11, 2015, www.nytimes.com/2015/06/12/world/asia/zhou-yongkang-former-security-chief-in-china-gets-life-sentence-for-corruption.html.
Chinese consumers especially chafe: “The Chinese Oil Sector: Beijing’s Latest Anti-Corruption Target,” Stratfor.
The loans-for-oil arrangements: In 2013, Venezuela reportedly shipped more than 600,000 barrels of oil a day to China, receiving little or no payment for close to half the volume. Peitro D. Pitts and Nathan Crooks, “Venezuela Oil Sales to U.S. at 1985-Low Shows China Cost,” Bloomberg, January 31, 2014, www.bloomberg.com/news/articles/2014-01-30/venezuela-oil-salesto-u-s-at-1985-low-shows-china-cost; Jonathan Kaiman, “China Agrees to Invest $20bn in Venezuela to Help Offset Effects of Oil Price Slump,” Guardian, Ja
nuary 8, 2015, www.theguardian.com/world/2015/jan/08/china-venezuela-20bn-loans-fancing-nicolas-maduro-beijing.
Dr. Xue Li from the Chinese Academy of Sciences: Xue Li and Xu Yanzhuo, “Why China Shouldn’t Get Too Invested in Latin America,” The Diplomat, March 31, 2015, http://thediplomat.com/2015/03/why-china-shouldnt-get-too-invested-in-latin-america/. Also see Michal Meidan, “China’s Loans for Oil: Asset or Liability?” (OIES Paper: WPM 70, Oxford Institute for Energy Studies, University of Oxford, Oxford, U.K., December 2016), 11–14, https://www.oxfordenergy.org/wpcms/wp-content/uploads/2016/12/Chinas-loans-for-oil-WPM-70.pdf.
Chinese officials insist Xi Jinping’s: Xie Tao, “Is China’s ‘Belt and Road’ a Strategy?,” The Diplomat, December 16, 2015, http://thediplomat.com/2015/12/is-chinas-belt-and-road-a-strategy/
The “road” loosely retraces the maritime: See Frank Viviano, “China’s Great Armada,” National Geographic, July 2005, http://ngm.nationalgeographic.com/ngm/0507/feature2/.
Although there is considerable uncertainty: The Economist anticipates more than $1 trillion in government money will be spent on this initiative. “The New Silk Road,” Economist, September 12, 2015, www.economist.com/news/special-report/21663326-chinas-latest-wave-globalisers-will-enrich-their-countryand-world-new-silk-road.
Rather than being limited to tangible infrastructure: See National Development and Reform Commission, Ministry of Foreign Affairs, Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road (Beijing, People’s Republic of China, March 28, 2015), http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html.
Booming infrastructure projects: While many scholars see the One Belt, One Road initiative as partially motivated by the need to absorb overcapacity, others are skeptical that the initiative can provide nearly enough stimulus. See David Dollar, “China’s Rise as a Regional and Global Power: The AIIB and the ‘One Belt, One Road,’ ” Brookings Institution, July 15, 2015, www.brookings.edu/research/papers/2015/07/china-regional-global-power-dollar; Bert Hofman, “China’s One Belt One Road Initiative: What We Know So Far,” The World Bank, December 4, 2015, http://blogs.worldbank.org/eastasiapacific/china-one-belt-one-road-initiative-what-we-know-thus-far.