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China's Oil Overture to the West By: Anthony Gancarski
FrontPageMagazine.com | Wednesday, January 19, 2005

The Washington Times disclosed yesterday that the Chinese are projecting their power by maintaining strategic sea lanes, primarily in southern Asia. While alarming, another threat has emerged closer to home: China is attempting to (literally) buy influence in the Western hemisphere, securing material resources and markets for the emergent Chinese world presence while establishing regimes that are beholden to Beijing.

Venezuela presents an example of the price of inaction. The nation’s slide to the far-Left is well-known: Venezuela has embraced an extremist brand of collectivist ideology and found a patron in Beijing. According to the Heritage Foundation’s “2005 Index of Economic Freedom,” Chavez's nation ranks as one of the ten least economically free countries on earth. Indeed, the only nations Venezuela edges out are Uzbekistan, Iran, Cuba, Laos, Turkmenistan, Zimbabwe, Libya, Burma, and North Korea. Chavez has spoken positively of Fidel Castro; now he is putting out feelers with the People’s Republic of China.


Recent news items speak to the trend of increased cooperation between Beijing and Caracas. Christmas 2004 found President Chavez in China, conducting an unsurprisingly productive visit. In addition to overseeing a signing of energy cooperation pacts between Venezuela and China, Chavez promised to grant Chinese companies production permits to explore oil in Venezuela. Furthermore, the countries, in the interest of “bilateral cooperation,” talked of a future trans-Pacific pipeline.


We are seeing Chinese incursions via PetroChina International and the state-owned China National Petroleum Company in more places than Venezuela – like Alberta, Canada. A recent piece in the Financial Times addresses the emergent power's strategies and motivations for attempting to corner the oil market in a time of peak dollar-denominated costs. “The mooted takeover bid by China National Offshore Oil Corp, the country's third-largest oil and gas group, for Unocal shows little is off limits for ambitious Chinese companies in their search for secure resources,” begins the dispatch from the FT's Richard McGregor, Enid Tsui and Andrew Yeh. The authors claim, “China's strategic search for overseas resources and its own rising short-term demand is driving up prices for oil and other resources, and providing an incentive for the present owners to hang on to their assets.” That much is true; the approach China takes here is that of someone buying distressed assets, counterintuitive to Western eyes. But one has to understand that China is aware that they are bidding against themselves in some respects.


China has demonstrated an ability to pay above-market prices for commodities. There are many good reasons for this, one of which is that overpaying foreign nations may serve as a down payment on something even more important: political leverage.


FT's troika buries the significance of this course of action at the end of the piece. “Each new Chinese deal overseas also ratchets up the global political dimensions of such purchases. With China reportedly preparing to sign a framework agreement for investment in Canadian resources this month, including the oil sands project in Alberta, Chinese investments have roused debate in Ottawa about the sale of strategic assets. The purchase of Unocal would be the first by the Chinese of a large, listed U.S. resources company, and might attract the attention of regulators and politicians.”


Beijing is attempting to throw an economic spear into the heart of the Monroe Doctrine. China seems all too willing to flex its muscles in ways that President Reagan would have seen as provocative. Can you imagine Reagan, who opposed the Panama Canal Treaty in the 1970s, countenancing the Red Chinese company Hutchison Whampoa's control of ports on both ends of the Panama Canal? As Congressman Dana Rohrabacher put it:


The issue is whether or not the United States government should stay mute while a company that is basically a front company for the Chinese government and run by someone who is in the inner circle of the Communist Chinese Party leadership takes control and possession of the ports on either side of the Panama Canal, thus putting themselves in a position to dominate the Panama Canal once the United States has totally left the scene.


Back in 1999, the Sinophilic Bill Clinton dismissed such national security concerns. Can we afford to do so now? Some understand that China's strategy vis-a-vis the West is actually unified and coherent – and that we must counter it immediately. The American Enterprise Institute's Tom Donnelly wrote a recent piece in the Weekly Standard recently speaking to this very issue:


The Bush administration, which had campaigned for office in 2000 by casting China as a “strategic competitor,” reversed course 180 degrees under the winds of the “global war on terrorism.” Arms sales to Taiwan, once a priority for the White House, have been all but cancelled, while the plucky democrats of Taipei have been reviled by President Bush and his lieutenants as independence-obsessed troublemakers. From Beijing, the future looks better than it has for some time. China is a great power, not only in its own mind but increasingly in the minds of the rest of the world.


Donnelly alludes to Beijing's recently released white paper, “China's National Defense in 2004,” as a “36-page-wide smirk” from the Cheshire cats of Beijing. It is in this White Paper, more so than previous ones, that a “China 2020” strategy becomes clear. A few excerpts:


Firmly seizing and taking full advantage of the important strategic opportunities presented in the first two decades of this century, China sticks to keeping its development in pace with its security and makes great efforts to enhance its national strategic capabilities by using multiple security means to cope with both traditional and non-traditional security threats so as to seek a comprehensive national security in the political, economic, military and social areas.


All of this will allow China to “guard against and resist aggression, and defend national sovereignty, territorial integrity and maritime rights and interests.” It's left unsaid who might be threatening China's national sovereignty, but as Donnelly says, the entire White Paper “is equivalent to a middle-finger salute. The argument is essentially that the United States is a slipping superpower, leading to a ‘multipolar’ world in which Beijing's interests will be given great weight.”


Failure to do something about that will be interpreted as a sign of America's loss of mettle – and of vulnerability. The longer the Bush administration waits to check this aggressive gambit and enforce the spirit of the Monroe Doctrine, the less likely it will be that Washington will be able to deter China’s influence on the energy policy of our neighbors.

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