China, Oil and the Risks of Conflict in Asia



            HALL GARDNER


[Based upon American Global Strategy and the War on Terrorism (Ashgate, forthcoming: Copyright 2005, Paris, France) by Hall Gardner]


In April 2005 major acts of socio-political protest broke out in major cities throughout China against Japanese interests. Beijing demanded that Tokyo apologize more sincerely for crimes against humanity that it had committed in China during World War II. The new Japanese government had approved a school textbook that downplays the war crimes that Japan had committed in China, Korea and throughout Asia during World War II. The Chinese also protested against Japan's desire to obtain a permanent seat on the UN Security Council. Japanese Prime Minister Junichiro Koizumi then expressed Japan's ''deep remorse'' and ''heartfelt apology'' when he addressed the Asia-Africa summit in Jakarta in April 2005. As was the case with Japan’s previous apology by Prime Minister Tomiichi Murayama in 1995,[i] whether China will accept these apologies may depend on whether they are regarded as personal, or backed by the Japanese government and society as a whole.

Concurrently, in pointing the finger at the Japanese, Chinese President Hu Jintao attempted to use the April 2005 Asia-Africa summit to calm fears that China poses a threat to the region. Hu was quoted as stating, "I am firmly convinced that a stable, open and prosperous China which adheres to its road of peaceful development will surely contribute more to world peace and common development."[ii] Fears of China’s claims to regional hegemony, however, were exacerbated after the passing of the “anti-secession law” in March 2005 that stipulates the right to use force in case Taiwan seeks to formally declare “independence” from the People’s Republic. China has additionally regarded both the US and Japan as attempting to block its quest for unification along the lines of “one China, two systems.”

In the background of these disputes over Taiwanese secession and Japanese textbooks accordingly lies the fear of China’s quest for regional hegemony and the challenge it presents to both the US and Japan. The Chinese quest for hegemony, and its efforts to rapidly develop its population of more than one billion two hundred million into a western style consumer society, is likewise accompanied by an increasing thirst for oil, so that China has become the second largest consumer of oil after the United States, with Japan third in line. Moreover, Chinese demand for oil will possibly double by the year 2020 if the Chinese economy continues to grow.[iii] Burgeoning world oil demand, and increasing difficulties in obtaining supplies, have consequently begun to pit major oil consumer states against one another, raising the threat of renewed regional - if not major power - conflict, in which the 2003 Iraq war could well be the precursor.

China has likewise become a net importer of oil. The fact that much of its oil supply comes from the politically unstable Middle East means that China (along with all oil dependent states) needs to diversify its supplies. Beijing has consequently begun to look for oil reserves or for investment and development projects in Canada, Venezuela, Brazil, Ecuador, Iran, Saudi Arabia, Angola, Sudan (not to overlook Iraq), as well as in Russia, with subsidized capital from its government institutions. It is accordingly not surprising that increasing Russian-Chinese defense collaboration (raising US-Japanese fears of a Sino-Russian alliance) could possibly include a Chinese share of 20% of Yukos, the second largest Russian oil company. Yukos, with major financial problems angering stockholders, has been facing bankruptcy, and wants to become a significant supplier to China through a major oil pipeline. At the same time, however, both Japan and China seek Russian oil deals.[iv]

     The demand for access to Russian oil has intensified rivalry between Japan and China. This is true despite the fact that China is Japan's biggest trading partner, and that Chinese trade in 2004 was worth roughly US$167billion, and as Japan has invested in more than 20,000 projects in China with total actual investment of more than US$32 billion.[v] In its December 2004 National Defense Program, Japan for the first time identified China as a potential security threat. Tensions have begun to mount over the possibility of conflict over oil and natural resources in the disputed East China Sea, and over the status of the Senkaku or Diaoyu Tai islands (rich fishing islands claimed by Japan after the 1895 Sino-Japanese war). Both Japan and China have self-proclaimed this region as part of their Exclusive Economic Zones. Sino-Japanese tensions have also been evident in respect to increasing US-Japanese defence ties—if the People’s Republic should attempt to prevent Taiwanese “secession” by force.


In other signs of increasing tensions, China and Japan
confronted one another in November 2004 when
Chinese nuclear-powered submarine “accidentally” moved into Japanese waters off the Okinawa islands.
 In addition to North Korean nuclear and missile threats, Chinese actions have led Tokyo to change the laws governing the 
Japanese Self-Defense Force (JSDF) and to give the latter an expanded role. 
The JSDF has recently engaged in non-combat and logistical support operations, 
such as providing medical support and provisions to U.S. forces.
 Despite popular Japanese opposition, the JSDF also contributed peacekeepers to Iraq,
 probably to gain US
 support for Japanese defense, and to help establish US-Japanese cooperation in building 
Ballistic Missile Defenses.
       According to an internal report prepared 
for Defense Secretary Donald H. Rumsfeld. “China is building
 strategic relationships along the sea lanes from the Middle East to the South China Sea in ways that suggest defensive
 and offensive positioning to protect China’s energy interests,
 but also to serve broad security objectives.”[vi]
 Beijing is building a new naval base at the Pakistani port of Gwadar, which can monitor ship traffic through the Strait of Hormuz and the Arabian Sea, and is “seeking much more extensive naval and
 commercial access” in Bangladesh. China is upgrading
 its ability to “project air and sea power” from the mainland and Hainan Island. 
China is also looking at the possibility of oil pipelines that would traverse Pakistan, Bangladesh or Thailand,
 but most likely Myanmar—as part of its "string of pearls" strategy to bypass the narrow Straits of Malacca,
 which is also seen as a strategy intended to encircle India.[vii] 
       Despite its stated intent to find diplomatic solutions,
 China has been mixed up
 in disputes with Malaysia, the Philippines, Taiwan, Vietnam, and Brunei over control of the Spratly (Nansha) and Paracel Islands, as well as with Indonesia over the Natuna archipelago, which has some of the largest gas reserves in the world. 
And, as previously mentioned, not only the People’s Republic, but also Taiwan, have asserted claims to the Senkakus (Diaoyu Tai), controlled by Japan.[viii]
 Although China has tried to dispel fears
 and engage in diplomacy, its threats to use force against Taiwan continue to raise fears
 that it seeks hegemony over the entire region.
       Perhaps more importantly in strategic terms,
 has established a military alliance with Myanmar/Burma, one of the “outposts of tyranny” 
as defined by US Secretary of State Condoleezza Rice. China maintains monitoring 
stations on islets belonging to Myanmar/Burma in the Bay of Bengal, close to the Strait of Malacca, through which 80 percent of 
China’s imported oil passes. 
The Straits handle between one-fifth and one quarter of the world's sea trade and half of all the world’s oil shipments. 
Oil-tanker traffic through the Malacca Strait has increasingly become
 a focus of piracy and terrorist activities since 2000 (an estimated 40 per cent of the world's piracy); oil tanker traffic is projected to grow from 10 million barrels a day in 2002 to 20 million barrels a day by 2020.
 China believes the U.S. military would attempt to disrupt China’s energy imports in case of conflict over Taiwan. Following the “accidental bombing” 
of the Chinese embassy in Belgrade, US bombing of 
Iraq in 1998 (which targeted Chinese assisted projects), 
and then US military intervention in 
Iraq, Beijing regards the 
US as unpredictable and seeking to “encircle” 

     Chinese-Taiwanese relations turned sour in April 2001 when George Bush, Jr. had approved the sale of the largest arms package to Taiwan since 1992. Relations turned sour once again, when Taiwanese President Chen Shui-bian announced in September 2003 that he wanted to draft a new constitution by 2006, to be passed by referendum and then enacted by 2008. Chen then announced that he would hold a referendum in conjunction with the presidential election on 20 March 2004. The referendum asked the Taiwanese whether Taiwan should bolster its defense capabilities on the assumption that China refuses to remove the ballistic missiles aimed at Taiwan and undertake to renounce the use of force; the referendum also wanted to ascertain if there was support for a negotiated ‘peace’. While the United States tried to downplay the referendum issue, it did attempt to pressure the People’s Republic to reduce its missile deployments. Concurrently, however, President Chen appeared to flip-flop on the question as to whether he would seek “independence” if re-elected President.[ix]


     While the US has attempted to “contain” China, the Europeans have begun to pierce the barriers to trade. In April 2003, French Prime Minister Jean-Pierre Raffarin had made a spectacular visit to China during the SARS crisis, to establish commercial and high technology cooperation with China. This trip, coupled with Franco-German overtures to open arms sales to Beijing, raised questions as to the extent of the security relationship that might be established with China involving possible sales of advanced weapons systems and dual use technology. The prospect of Franco-German arms sales to China could likewise put pressure on the US to break the arms embargo—imposed after the Tiananmen Square repression in June 1989.[x]



     Then, in a sign of a burgeoning EU “Red Eiffel Tower” alliance with China, the French have taken a policy stance in direct opposition to the American position. French President Jacques Chirac bluntly stated at a banquet in honour of Chinese President Hu Jintao who was visiting Paris on 26 January 2004 (the day the Eiffel Tower glowed red in welcoming the country’s Chinese guests) that the Taiwan referendum plan was “a grave error.”  In February 2004, the EU announced that it would lift the arms embargo on China, after formulating a general “code of conduct” to regulate future arms sales to China. However, it does not appear at all plausible that EU influence through the sales of arms and Airbus passenger planes will somehow help to moderate Chinese aims in respect to Taiwan.


     The US has thus far opposed lifting of arms sales to Taiwan citing continuing human rights concerns since the 1989 Tiananmen Square repression, coupled by Beijing’s continuing threats to Taiwan. In February 2004, however, the US renewed military to military talks that had been cut off in 2001 when a Chinese F-8 fighter jet tipped into a slow flying U.S. EP-3E Aries surveillance aircraft, which was then forced into an emergency landing onto the Chinese island of Hainan.[xi]


     According to the 2004 Chinese White Paper, Taiwan represents a major “threat” in that it appears to be moving toward greater “independence.” Taiwanese analysts see the Chinese as engaging in a ‘sweet and sour’ policy, by attempting to speak softly to Japan and the US to gain their trust, then putting pressure on Taiwan to unify. Taiwanese analysts argue that the mainland believes that time is on its side, although circumstances might impel it to intervene sooner rather than later.


     China has consequently reserved the “right” to use force, if need be. Chinese objectives appear to be: (1) prevent the Taiwanese “independence” movement from instigating new movements of secession within the People’s Republic; (2) to eliminate Taiwan’s export competition with the People’s Republic; (3) to assert control over the Spratly islands and other off-shore oil reserves; (4) to eliminate a potential strategic-military threat from the island and to be in a better position to defend China from potential rivals. Chinese threats to control Taiwan militarily furthermore represent a challenge to sea lines of communication and oil routes to Japan from the Persian Gulf. These factors have put pressure on Washington to engage in defense talks; but it remains to be seen if these talks can result in confidence building measures and help resolve the key geopolitical disputes.[xii]


     By 2005, China stated that it would augment its publicly stated defense spending (its real defense spending is purportedly much greater than its publicly announced spending). With great media attention, China’s National People’s Assembly then passed an “anti-secession” law designed to threaten Taiwan and to check the US-Japanese defense measures in support of Taipei—in a façade of “democracy” that appeared designed to co-opt domestic Chinese support.[xiii]


     With as many as five hundred Intermediate Range Ballistic Missiles targeting Taiwan, Beijing has warned that it will increase its nuclear arsenal ten times from roughly 16–20 inter-continental ballistic missiles (ICBMs) to 200–250 ICBMs—if the United States persists with the deployment of ballistic missile defenses (BMD) to protect the island, in coordination with Japan. Given Beijing’s over-inflated economy, its undervalued currency, heavy oil consumption and increasing need for oil imports, if it cannot diversify its energy supplies, its high internal debt, its imbalanced overpopulation (with a much higher proportion of males over females), and its fixation on Taiwan, then it does not augur well for the future…




[i] See “Murayama’s Personal Apology”


[ii]   Reuters (21 April 2005)


[iii]  Paul Samuelson, “The Dawn of a New Oil Era?” Newsweek (4 April 2005). Americans consume almost 21 million barrels of oil a day, a quarter of the world total of 84 million barrels a day. China is now second at 6.4 million barrels a day, and its demand could double by 2020, Moreover, China will import most of its new needs; its domestic output is steady at about 3.5 million barrels a day.


[iv]    Beijing seeks a 2,400 kilometre route from Angarsk in Siberia to Daqing in China's northeast Heilongjiang province. Tokyo is pushing for a 4,000–km pipeline from Taishet to the Pacific port of Nakhodka. Chietigj Bajpaee, "China’s quest for energy security” Power and Interest News Report (2 February 2005)


[v]     ISN Security Watch (22 April 2005)

[vi]    Bill Gertz, The Washington Times (18 January 2005).


[vii]   Chietigj Bajpaee, “India recovers lost ground in energy game” Power and Interest News Report (16 March 2005)


[viii]   John C. K. Daly, Jamestown Foundation (20 December 2004). 

[ix]    International Crisis Group, “Taiwan Strait IV: How an Ultimate Political Settlement Might Look,” Appendix A (26 February 2004).


[x]     Frank Umbach, “EU’s Links with China Pose New Threat to Transatlantic Relations”
European Affairs, Spring 2004.


[xi] In addition to checking for Chinese naval advances, the American spy plane may also have been checking out Chinese air defenses and the growing capability of Chinese facilities for military space programs and signals intelligence on Hainan island, which is home to China's South Sea Fleet. "The U.S.-China: Why the Game Is Really Just Starting" “13 April 2001.” www. See also Hall Gardner, “China: From World Revolution To Raw Pan-National InterestGeostrategics April 2003


[xii]   ISN Security Watch (2 February 2005). US and Chinese talks touched on the issues of counter-terrorism, regional security, tensions in the Taiwan Strait and North Korea.

[xiii]   “World reacts to Chinese Anti-Secession Law,” Christian Science Monitor (15 March 2005).