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.
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nightmare scenario of Washington. 
