Cooperation and Competition: The two sides of China’s and the Geopolitics of Energy [In]security

Energy, renewable and non-renewable, plays a central role in modern societies as energy security and supply inextricably are associated with the overall economic performance of a country. China, being the world’s largest energy producer and consumer, its intensified interest and engagement with energy resources and the way it reflects on its foreign policy becomes key. As such, this article examines how China has been reacting to and confronting its increasing energy demands and geopolitical vulnerabilities in the 21st century. The author suggests that China’s energy [in]security drives both cooperation and conflict, implying that on one hand energy does create shared interests, which encourage and sustain multilateral institutions and clean energy programs, and on the other hand, energy has become a pre-eminent security issue and predominant factor for economic growth also incites geopolitical rivalries, race for energy supplies and influence, and exploitative measures with implications for exporting nations.

INTRODUCTION

Having adopted an open-door policy in 1978, China’s energy market has expanded remarkably. With the largest share in the world population (1.82 percent) amounting to 1.39 billion, China is also the world’s largest energy consumer and producer. Simultaneously, China has phenomenally, over the last two decades, expanded its supply capacity with a constant focus on optimizing energy utility and systems¹. Contrastingly, rapid economic growth coupled with high consumption of energy threatens to widen the supply-demand gap, which would explain China’s increasing dependence on energy imports (See Figure 1). Due to its historic reliance on traditional sources of energy contributing directly to an overall lowered energy efficiency², and renewable energy, conversely, having a great promise for increased production and consumption³, China has been committed to an inter-industrial approach to mitigate climate change, ameliorate energy efficiency, and risks of socioeconomic instability, to create an “ecological civilization” characterised of “putting people first”⁴. Leading the way in electricity production, generated from coal and hydroelectricity, China has also emerged as the largest producer of renewable energy in the world. As of 2020, its installed capacity for renewable energy generation was the highest at 925,199.112 MW (See Figure 2)⁵. In essence, an unreliable or insufficient energy supply, which could lead to higher prices, and thus prove detrimental to its competitiveness, and discourage its energy consumption, ultimately having a negative effect on its economic growth, drives China’s energy [in]security.

THE GEOPOLITICAL NATURE OF ENERGY:

The current energy resources, distributed unevenly throughout the global geography, make some states and regions aggregate consumers, while others aggregate producers and net exporters. The energy market characterizes of particular features like the quality of governances and market, geographical concentration and affiliated implications, interdependence on economic growth and development, and ecological footprint⁶. Therefore, concerns relating to perennial access to energy, internal security, and stability of transit countries, energy transportation routes, and storage take priority. Energy security concept, as such, could have different meanings for different countries— for instance, energy suppliers aim to maintain energy demand for exports, which sustain government revenues; Russia’s focus is on sustaining control of ‘strategic’ resources, transportation routes (pipelines), and market channels; investment, trade, and diversification are key to Japan’s energy security due to lack of domestic resources; India and the US energy security concerns may entail dealing with unreal expectations of self-sufficiency and ‘energy independence. Consequently, energy security and foreign policy become interlinked. While energy security may become the basis of international cooperation with major energy-exporting countries, it also leads to tensions among consumer countries that try to ensure sufficient energy supplies and to maintain or widen their supply base among exporter countries.   

The assumptions here are— (1) access to and control of energy (natural) resources are primary to national security and power positioning; (2) energy resources are exhaustible, which also drives energy ‘insecurity’ and competition for resources in the international arena; and (3) conflicts and cooperation for access to resources are probable.

CHINA’S ENERGY POLICY AND [IN]SECURITY

Recent fluctuations⁷ in prices of the energy products have shown that economic, political, and social events can rapidly alter energy prices (See Figures 3 & 4), triggering energy-related strategic and political tensions between countries. Over the decades, China has also focussed on creating for itself a huge profile through transcontinental energy corridors, trade deals, engagement with international organizations, and military arrangements. While China’s increasing imports (see Figure 5) make it susceptible to fluctuations in the international energy markets, it’s “global energy diplomacy”⁸ enables diverse energy supplies despite international political instabilities and makes exporting states dependent on the energy demands of China. China currently has southwest (China-Myanmar), sea-lane (Marine energy corridor), northwest (China-Kazakhstan, Turkmenistan, Uzbekistan), and northeast (China-Russia) operational energy corridors (See Figure 6).

China’s ambitions to expand its energy market and become a net exporter, simultaneously satiating its domestic consumption, might face ‘geopolitical’ challenges:

• To take the energy productions to the world market in which the geographical position of states is not necessarily closer to the use-ends markets.
• The lack of adequate pipeline structure to export. With other players involved in the energy market, pipeline construction is not without competition.⁹ Construction of pipelines also requires political support, including that of non-state actors, capital, and technical assistance.
• The interdependence between energy and security is complicated and multifarious. Hence, the features of the energy market— geography, supply and demand, price— may cause inter-state tensions (or conflicts) ⁷.
• Resource country’s deliberate disruption of supply may hinder China’s growth, thereby creating an urgent need for new energy corridors. For instance, The ‘Malacca Dilemma’.¹⁰

Accordingly, energy [in]security becomes both, a juncture for cooperation and a cause of conflict. Correspondingly, with respect to China’s energy security or insecurity, the article evinces overview of two case studies of bilateral Chinese rivalries, one of which, China and India, has elements both of cooperation and competition.

●       CHINA and USA

From a realist perspective, the fossil fuel sources are a zero-sum-game, for they continue to diminish as the energy demand grows. Additionally, the primary role of energy in ameliorating and sustaining a state’s global standing, economic growth, and national security motivates the state actors to engage in energy security. These factors explain the fierce competition, strategic cooperation, and the exacerbated energy [in]security in the international energy market. There appears to be a ‘new great game’ for energy in play, and two of the main players are China and the USA (see Figure 7).¹¹ Beijing not only poses a challenge to the US-led liberal world order by its financial and ideational under-participation and limited engagement with the Western international institutions, including the OPEC and IEA but also threatens US’s national security by its energy acquisitions and expansions concatenated with bilateral ties with states having pre-established relations with the US¹². Another sporadic and ‘strategic’ dimension of the game is China’s presence in the Caspian states (Kazakhstan and Turkmenistan) as the leading trade partner, by amassing a plethora of energy agreements¹³. China’s Silk Road Economic Belt would make the region an energy hub for the world market and China an alternative to the Middle East.

To counter the rising regional energy actors and security in Asia in the last two decades, Emre Iseri¹⁴ argues that the US has imposed “anti-geopolitics”. With this logic, the US ensures (1) energy security; and (2) keeps in check the rise of regional powers that may challenge its influence in the region.

●       CHINA and INDIA

Beijing’s strong strategic, military, and economic linkages to Pakistan, in the shape of road and railways networks, and energy corridors have been a source of concern for New Delhi¹⁵. Like in the US, China’s BRI poses a threat to India’s natural and energy security. The Initiative involves expanding maritime energy transportation corridors through Pakistan to Sri Lanka to Myanmar. It is noteworthy that (approximately) 90 percent of India’s energy trade passes through the Indian Ocean, where China appears to be actively altering power dynamics and gaining control— China’s “String of Pearls”¹⁶ theory.¹⁷ Both the countries have been vying for ‘strategic’ energy resources, which has accentuated mistrust in the South-Asian region. For instance, subsequent to delay in the Myanmar-Bangladesh-India pipeline in 2005, China endeavored to construct a gas pipeline with Myanmar (from Rakhine to Yunnan)¹⁸. The two states have actively been engaged in bidding wars for offshore energy assets, for instance, an oil field in Angola, 2005¹⁹, Kashgan oil field in Kazakhstan, 2013²⁰. Additionally, both states have also emerged as leading powers under the Paris agreement as they endeavor to up-scale their inclination towards alternative energy (See Figure 8).

Interestingly, both states recognize the economic cost of competing. As such, despite the ongoing competition, especially for access to resources and regional and global political influence, occasionally, China and India have undertaken joint measures to obtain better resource outputs. For instance, their acquisition of energy assets in Sudan, Peru, Syria, Iran, and Columbia through joint bidding and holding in 2006.²¹ In 2015, PM Narendra Modi of India announced bilateral trade deals with China worth the US $23.5 billion.²² Another proof of cooperation is the ‘Oil Buyers’ Club” announced in 2018, with the aim to combat the market access of the OPEC countries.²³

Similarly, China has had territorial and diplomatic energy-related disputes (1995, 1996, 2001, 2003, 2004, 2005) with Japan concerning offshore natural and oil gas reserves in the south of the East China Sea²⁴. However, China and Japan have a history of multilateral and bilateral initiatives. For instance, Japan’s ‘Green Aid Plan’, initiated in 1992, enabling the adoption of desulphurization technology in its coal-powered plants.²⁵

CONCLUSION

China’s energy security comprises of three main factors: (1) ensuring sustained energy resources and supplies; (2) managing the prices of resource supplies and maintain them at acceptable prices; and (3) ability to transfer the resources to preferred locations for production or consumption. To overcome the energy security challenges and those of expansion, the PRC appears to be creating alliances, pursuing initiatives, and implementing its own rules, while concurrently competing with regional powers. It is noteworthy that there also persists a paradox in China’s behaviours towards certain states, such as China-India and Japan.

APPENDICES:

Figure 1: Energy Imports, net (% of energy used)— China (1971-2014)

Note:

1. Net energy imports are estimated as energy use less production, both measured in oil equivalents.
2. A negative value indicates that the country is a net exporter.
3. Energy use refers to use of primary energy before transformation to other end-use fuels, which is equal to indigenous production plus imports and stock changes, minus exports and fuels supplied to ships and aircraft engaged in international transport.

Figure 2: Countries ranked according to their installed renewable energy power capacity— 2020.

Figure 3: Global Fuel Price changes— 2005-2019

Figure 4: Annual Fuel Price changes in select major economies— 2017-2019

Figure 5: China’s domestic natural gas production and imports— 2010-2018

Figure 6: China’s energy corridors— (as of) May 2019

Figure 7: Annual Change in primary energy consumption— China and the U.S.

Figure 8: Share of primary energy from low-carbon (renewable) sources— China and India (2000-2019)

Note:

1. Renewable sources include hydropower, solar, wind, geothermal, tidal and wave, and bioenergy.
2. Traditional Biofuels are not included in the graph.

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