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The Sino-Saudi Connection

| 17 Comments | 1 TrackBack
Back on June 27, 2003, we talked about 12 under-rated global trends. Trend #11, complete with link: China's race into the oil market. bq. "Growing wealth is prompting millions of Chinese to abandon bicycles and overcrowded mass transit in favor of private cars. Last year, China's domestic automobile sales increased by a staggering 69 percent. By 2010, the country is expected to have 90 times more cars on the road than it did in 1990; by 2030, it may have more than the U.S. Such a gigantic fleet requires fuel. But China’s domestic oil production is declining..." Now Gal Luft of IAGS pens an article that covers the growing relationships between China and Saudi Arabia, the possibility that the Saudis themselves may seek to replace the U.S. as their primary benefactor, and the implications for WMD proliferation and global geopolitics. Trent Telenko has been talking about China's role in Pakistan's nuclear program (and others) for some time now. For me, the question is not whether China will attempt to become a player in the Middle East - as Luft points out, it is already beginning to do so in Sudan. What's left is only the timing of China's entry, its manner, and the extent to which its coming role as a major source of support for the region's dictators hinders both U.S. goals in the War on Terror and the possibility of a better, freer future for the region.

1 TrackBack

Tracked: March 11, 2004 12:02 PM
Excerpt: The myopic, almost ink-blot, way Americans view China is worthless when it comes to Beijing and oil. Bloggers can transfer all their warm, fuzzy feelings or my frustrated visions of existential frisson, but in a world of declining reserves and

17 Comments

it's going to be tough going for china when they have to deal with democratic governments in the middle east instead of all the backhanded deals they are doing now.

oops. i hope i didn't just expose karl rove's plan.

Actually, I suspect it won't prove to be much of a barrier. A democratic Middle East will be very happy to sell to China, and to use them as counter-leverage against America and the EU when convenient.

But what if that isn't what they're dealing with, Captain? A Middle East where despotisms are still the rule is very possible even 10-15 years from now, and failure to make progress in this area means China becomes the dictators' ally of choice and a key source of support. The terrorist fallout will still strike America, for the most part, and Uighur agitation can easily be suppressed as brutally as necessary.

Bottom line: America does not have unlimited time to execute its strategy in the War on Terror. Trends are afoot that could enable the Middle East to remain much the same sort of place in future, albeit with more nukes.

And China's emergence on the world stage is unquestionably going to be one of THE defining geopolitical and diplomatic issues of the 21st century.

Yes Cap'n, you just did.

On a more serious note, I am worried about China's attempts to set itself up as America's rival. This pattern of behavior is taking the US and China closer to war, as the Power Transition theory of Ogranski points out. The closer the Chinese come to America in terms of power, the liklihood of war increases.

The most disturbing element to me is that at some point the Wahabbis will need to be defunded. This will need to be done before China moves on in.

We were in China 2 years ago, and the traffic was the awful to insane. If cars were doubled, there would be no room for any car to move. So I don't believe that there would be 90 times the cars in 2010.

FH, the possibility that China would go to war with the US is very close to none, except on the possible subject of Taiwan (but even that is relatively unlikely).

China does not seek to rival the US, but sees itself as growing into its natural dominant position on the world stage. That might happen to rival the US, but it is not a deliberate tête-à-tête, and China will seek good relations with the US, richer as we are. Nevertheless, underestimate China and its (due) pride at your own peril.

Very good point. China's economy is growing. Since it's starting out from far behind, it can grow rapidly for a long time.

There's a direct connection between a growing economy and its oil consumption. Your opening quote brings out one aspect of that.

So if China's economy is going to use increasing amounts of the oil supply, where does that leave us? In competition, that's where.

We should scrap the Mars program (as much as I favor it), start drilling in ANWR, and start a crash program for energy independence. ANWR will probably keep us going for a few more years, and we can use that time for the independence projects. NASA would be an obvious choice as a technology driver.

Crude oil is running short. The sooner we get out from under the oil umbrella, the better. It may already be too late, but better late than never.

Regarding China's economic challenge, I had a post tied to a relatively decent NYT article on the subject a couple weeks ago. Ther's also this StrategyPage item on China's military modernization.

If we are really serious about energy independence, we should tax every barrel of petroleum or petroleum based product regardless of source $5.00 per barrel or equivalent with decreases in other regressive taxes to make the efect revenue neutral. Any other policy is not serious or betrays a lack of confidence in the market to arrive at better solutions than central government planners.

Jeez.. unstable monarchy, billions in oil revenues, possible nuclear ambitions, and a couple million Islamicists. That made my day.

As for China, I really don't understand what's in it for them- theres a world market for oil, so their low price is essentially our low price.

Mike,

I agree with everthingg you say except for the fact that oil is running short. It is not.

What we are running short of is oil at the current price. There is enough oil sands in Canada and America to supply us with oil for another 100 years. Currently mining the stuff gets oil produced at around $11 a bbl.

Since we are not running out of oil your crash program makes no sense. We have hybrid vehicles that aproximately double gas mileage over the autos that make up most of the market. They don't sell well. Why? Because at $4,000 extra a vehicle at current gas prices the savings do not even come close to paying for the extra capital invested.

Let the market do it's thing. When "shortages" (i.e. price hikes) are real and sustained auto efficiency will go up.

A transition over time will be more efficient than a crash program. Of course government control and not efficiency may be your real goal when in which case your hysteria is entirely justified. Wrong. But justified.

BTW Mike,

Energy independence is not a "few years" project. It is not even a few decades project. It is a project that will take 50 to 100 years. At the fastest most wasteful acceleration it can't be done in much under 30 years.

Problem #1. We have the technology to do it but it costs too much.

Ever hear of those fuel cells for laptops? We have seen them promised as almost market ready every year since 2000. Latest projections are that we will have them in late 2004 early 2005. My guess is late 2006 early 2007. At the earliest.

With huge demand. Lots of capital. And the promise of early commercial success the companies still can't do it. Why? It is a very hard problem to solve. Very hard.

And that is just one small niche that is willing to pay quite a premium for delivered energy. How the heck do we get from that point (which we are not even at yet) to the point where hybrid vehicles or hydrogen powered cars are cost effective?

Clue: it is not easy and the rate of progress can't be legislated. After a certain amount of investment more money doesn't gain you much time but costs a lot of money.

You might want to read my article on logistics archived at this site.

joe,
all good points and i hope karl's plan is in overdrive.

IMO, i think the newly democratic governments would be more friendly to america because we liberated them and china is still dominated by dictators. if we eliminate the need for these countries to develop nukes ala "you are under our umbrella" then i think they will go along especially since having nukes are actually more trouble then they are worth. because you get the full gaze of america.

m. simon,
there is only one problem with your post. the market doesn't work when the market isn't free. OPEC cuts production to drive up the price and so do american oil companies.

I suspect that perceptions of this as a piece of grand strategy are premature.

More likely it's just business. The Saudis like the idea of having IRBMs, the Chinese are willing to sell them, and provide support staff. Absent WMD warheads (or high-tech PGM)IRBMs aren't a major threat.
And WMD proliferation is a concern in any case. So long as China doesn't act recklessly, it doesn't alter the current WMD concerns one way or the other. Just reinforces the need to deal with existing and potential WMD proliferators.

If there is anything more to it then-
China might be looking at a point decades away when oil shortages may occur, possibly hoping for a cut-price deal from the Saudis. In which case I suspect they'll be sadly disillusioned.

Or the Saudi's might be looking for a new protector. China simply doesn't have the military capabilities for that, and won't for some time. So maybe the Saudis are thinking long-term too? (If so, it's very optimistic of them to assume they have a long-term to worry about.)

Also, diplomatic considerations:
1) Put enough Chinese technicians in place, and just maybe it might deter the US in a crisis.
2) Old diplomatic game: threaten to poke the other player in the eye, then maintain you're doing him a favour if you don't.

As for energy independence: build enough nuclear plants to minimise hydrocarbon burning for electricity, and get the research and pilot plants in place for a switch to syn-oil (and tar sands, oil shale etc) when oil prices going up meet coal-for-syn-oil prices coming down.

I agree that our nation's, as well as the world's, oil supplies are NOT running out despite the best propaganda of the power-mad Lefty enviromentalist whackos. The problem for American consumers is that automobiles for all practical purposes operate on the same or familiar designs or methodisms as like 50-100 years ago. All of the modern NT/HT proposals such as building electricity-powered autos, interior televisions, GPS use, etc. all the way to President Bush's recent proposed development of "hydrogen-based fuel cells",basically amount to changing or building a better entertainment and battery powersource for the same old, "traditional", four-wheeled or four-spoke roadbound design. I say Detroit etal. is well-past due for developing, producing, and marketing cars that can go VTOL! President Bush is wanting of America to return to the Moon and later towards Mars - a "technology gap" and "ambition gap" exists between hyperpower, "space-minded" America and American consumers, versus the current satisfactory but BORING level of [convenience]goods and services. ITS TIME FOR THE AMERICAN EVERYMAN AND AL BUNDY TO BECOME GEORGE JETSON, FLYING TO HOME, WORK, AND FAMILY ON HIS VTOL-CAPABLE, FUEL- OR NUCLEAR-EFFICIENT, FAMILY AND DOG CARRYING SPACE CAR, WITH OF COURSE NO GUARANTEE JANE JETSON WON'T STILL TAKE HIS WALLET WHEN HE COMES HOME! This, amongst other reasons, is why the Failed Left is desperate to force SOCIALISM and anti-sovereign SOCIALIST OWG upon free, capitalist, hyperpower America - if the Left can't be as rich or powerful as America and the West, THEN BETTER FOR AMERICA AND THE WEST TO BECOME AS [PERENIALLY]POOR AND REGRESSED AS THEY ARE!

Who knows what the future will bring? Discover magazine offers a clue.

It seems there's a lot, in a jaw dropping way, of methane down there. And it renews itself.

Aside from that, America is the Saudi Arabia of coal. The Fischer-Tropsch process converts coal to oil. The Germans used it during WWII and South Africa developed a reliance on it during the apartheid era. Sasol is a world leader.
The chemistry.
Pros and cons.
Current trials.
Oil's been so cheap, the process has been largely ignored. We still don't know all what the Germans knew in 1945.

It's not about oil. It's about cheap oil. I doubt if America would grind to a halt if gas was $5/gal. For example, a far reaching reform of America's bloated public sector could easily pay for it. If nothing else, Americans have, as they always have had, the ingenuity to overcome challenges.

Thought provoking article. China is beginning to feel her oats as a great power. The oil is secondary. America guarantees open world trade, so China doesn't need to control anything to buy mideast oil any more than the Japanese do. Her interest in Mideast despots is that they can be used as a cat's paw to remake the world order more to her liking. In extremis, the real threat is that the briefcase from Allah that incinerates Cincinatti will have Chinese characters on it. How would America retaliate? Where's Herman Kahn when you need him?

I hadn't considered that the war in Iraq might have a significant Chinese dimension. No strongmen, no cat's paw and it'll be much easier to keep tabs on what Jihadists remain, and the Chinese would have to compete with America in a framework set by America.

Unless the Chinese are up to something completely different.

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