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SEPTEMBER 4, 2006
By Erica S. Downs How Oil Fuels Sino-U.S. Fires Energy is inextricably linked to other policy issues that divide the two powers The emergence of China over the past decade as a major importer of oil has catapulted energy toward the top of the list of issues -- up there with trade and Taiwan -- that are major sources of friction in Sino-American relations. China's rapidly rising demand for energy is stoking anxiety in Washington that there is not enough oil in the world to satisfy the appetites both of America's 300 million gas-guzzling citizens and of 1.3 billion Chinese. In turn, America's unease has raised concerns in Beijing that the U.S. might deny China access to the oil it needs for continued economic growth. Much has been made over this looming fight. Yet the real conflict brewing between the two powers isn't because of direct competition for physical barrels of crude, but rather because oil is inextricably linked to other foreign policy issues on which Beijing and Washington don't see eye to eye. Oil's increasing role in China's foreign policy reflects a surging demand. China is second only to the U.S. in world consumption, and it's No. 3 in imports, following the U.S. and Japan. Its demand has more than doubled in the past decade. China consumes 7 million barrels a day, one-third the U.S. level, and it imports 3.3 million bbl. a day, one-quarter the U.S. level. But the International Energy Agency projects Chinese demand in 2011 will be 9.1 million bbl. a day, with imports of 5.3 million bbl. CHINA'S GROWING DOMESTIC oil deficit has prompted it to follow in the footsteps of other major importers to ensure access to oil. China is diversifying its suppliers, encouraging its national oil companies to acquire assets abroad, and cultivating closer diplomatic relations with exporting nations. Although these are moves long employed by other countries, their adoption by China has sounded alarm bells in Washington. (Remember the furor over CNOOC's ill-fated bid for Unocal last year?) The two most prominent spots where China's search for oil collides with American interests are the Sudan (the largest source of foreign production for Chinese companies) and Iran (China's No. 3 supplier of crude imports). While Washington sees a major power using its permanent seat on the U.N. Security Council to frustrate efforts to halt genocide in Darfur and to slow international action to curb Iran's nuclear ambitions, Beijing sees international policies of limited efficacy that might jeopardize its oil supply. So far, China has weighed its oil interests against the interests of the international community on a case-by-case basis. In the case of Sudan, the scales have tipped in favor of oil. Beijing weakened the language of at least one Security Council resolution to punish the Sudanese government for the atrocities in Darfur, but recently agreed to the deployment of U.N. forces there if supported by the African Union. In the case of Iran, which requires balancing competing interests such as oil, regional stability, and the Sino-American relationship, Beijing has sided with the international community to date. China voted as a member of the board of governors of the International Atomic Energy Agency in February, under pressure from Washington, to report the Iran nuclear issue to the U.N. and supported the July 31 Security Council resolution threatening sanctions if Iran does not halt uranium enrichment. However, deeper energy ties to Iran (the No. 2 holder of global oil and gas reserves) might tempt Beijing to tip the scales in the other direction. Indeed, the risk for Washington is that China's growing dependence on imported oil will increasingly prompt Beijing to give higher priority to oil than to international issues such as the protection of human rights, nuclear nonproliferation, and good governance. So the challenge for America is to persuade Beijing to satisfy its oil demand in ways that do not support states whose behavior violates international norms. This is easier said than done. Oil plays an ever more prominent role in China's diplomacy. And Beijing's assessment of what constitutes bad behavior by other states and how it should be dealt with often differs from Washington's. The best bet for the U.S. is to encourage China to act like the responsible emerging power it claims to be. Time may be on Washington's side. As China's global influence continues to grow, the international community will expect China to back up its words with actions. Views expressed in Outside Shot are solely those of contributors.  Erica S. Downs, a former analyst for the CIA, is China Energy Fellow in the China Initiative at the Brookings Institution
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