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Building New Silk Roads to Avert an
Energy Crisis in 2010
by James Finch 16-08-2006 |
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Are China's New Silk Roads Filled with Pot Holes?
China's creation of new silk roads of energy sources has been challenging.
Emerging in the mid 1990s as an economic powerhouse to be taken seriously, in
the wake of Japan's economic slowdown and the collapse of the Soviet Union,
China has all but dictated world commodity prices in a frustrating drive to
continue fueling the country's rapid growth. Unfortunately, both Russia's
resolve to monopolize energy assets in Central Asia and U.S. political paranoia
about China's global ambitions have led to a number of disappointments and
setbacks.
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Remember China's failed attempt to takeover of UNOCAL? Had China National
Offshore Oil Corporation (CNOOC) bought UNOCAL, the acquisition would have
impaired U.S. economic influence in both Thailand and Burma. Despite this
setback, China continued investing heavily in Burma. The Chinese hope to someday
export their neighbor's hydroelectric power, by helping the Burmese build a dam
across the Salween River.
By acquiring rights to Daewoo's recently discovered offshore oil and natural
gas in Burma, China will probably build another pipeline into its country. With
each major stride forward, China is frequently pushed back a step. China has
grown accustomed to the habit of settling for less in order to meet the
country's demand for energy security. Meanwhile, China has been criticized for
buying marginally producing oil fields, overpaying for commodities and doing
business with unsavory nations.
Trouble in Central Asia
In Kazakhstan, China was delayed for seven years in building an 1800-mile oil
pipeline across the Kazak border into neighboring Xinjiang province. After
China's acquisition of PetroKazakhstan, an oil company whose assets were in
Kazakhstan but which was registered in Canada, the Kazak government passed
legislation declaring strategic control of the oil assets would be determined by
its lawmakers.
China began developing its relationship with the Kazaks in the wake of the
Soviet Union's disintegration into several sovereign countries. After an initial
meeting with Kazak president Nursultan Nazarbayev, China helped create the
Shanghai Cooperative Organization (SCO) in 1996 signing a "mutual trust"
agreement with Russia, Kazakhstan, Kyrgyzstan and Tajikistan. Pejoratively known
as the Shanghai Five mechanism, the bombastic Nazarbayev called the pact, "the
most substantial political move in the Asia-Pacific region of this century."
How long does a handshake with Nazarbayev last? On January 11, 2006,
Nazarbayev and Chinese Vice President Zeng Qinghong celebrated the completion of
the Sino-Kazakh pipeline, vowing to strategically partner in future energy
deals. But before China's Premier Wen Jiabao inked a deal with Australian Prime
Minister John Howard to buy Australian uranium in early April, Russia quietly
began negotiations with uranium-rich Kazakhstan.
It was evident China would reach for Central Asia's uranium, second only to
Australia's known recoverable reserves. In June, three weeks before the G-8
Summit in St. Petersburg, Russia, Kazakhstan's president and Russian President
Putin announced a uranium production deal, worth about $1 billion and lasting
through 2020. A month later, on July 25th, the two countries announced a $10
billion joint venture to build three nuclear reactors in Kazakhstan and a joint
venture for further uranium exploration at the Zarechnoye deposit in southern
Kazakhstan near Kyrgyzstan and Uzbekistan.
After more than a decade of China's cultivating a relationship with President
Nursultan Nazarbayev, Russian President Putin has somewhat undone China's
diplomacy for energy security from this country in a matter of months. On
January 13th, the Moscow Times reported Vladimir Putin was rebuilding the
nuclear energy ties of the old Soviet states, having first invited the Ukraine
and Kazakhstan into the fold. Putin has also built up the Eurasian Economic
Community, which is comprised of Russia, Kazakhstan, Uzbekistan, Kyrgyzstan,
Belarus and Tajikistan. All are former Soviet states.
The same members also belong to the Collective Security Treaty Organization,
of which Uzbekistan's Islam Karimov announced his country would soon join. His
country's large natural gas fields are being developed in the western part of
the country by Russia's Gazprom to help satisfy European demand. In other words,
Russia is slowly edging China out of Central Asia's prolific oil and gas assets.
One might expect China's hopes for Kazakh uranium are fairly well dashed.
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