What is China’s Global Energy Strategy?

Chinese Energy Policy

Energy is the cornerstone of modern economies, without reliable power factories are inoperable, transport systems break down and all the amenities and luxuries we are accustomed to become inaccessible. It’s an obvious statement but energy supplies are an Achilles Heel for many countries as a cut or disruption their oil or gas supply would cause serious damage to their economies. All this is why so much time and effort is spent by governments thinking about energy sources, analysing potential and actual threats to these routes and looking for a diverse supply of energy avoid the trap of over-dependence.

All these factors would have guided the Chinese Government in the form of the National Development and Reform Commission (NDRC) and National Energy Administration (NEA) as they created a new vision for Chinese energy strategy in this new plan. China plans to build this vision through its Belt and Road Initiative and there is talk of a Belt and Road Energy Cooperation Club.

Chinese Demand for Oil

China remains dependent on oil imports, largely from the Middle East and Africa, because of this the country is vulnerable to the US in two ways, firstly most of this trade goes via the Straits of Malacca. If the US threaten or block this route it would cause war but China would soon be running low on supplies of oil and its economy would be left painfully exposed. While attempts at diversification such as buying more oil from Central Asia or building a supply route via Pakistan might mitigate this but will not eliminate the risk.

Conversely as the US has become more energy dependent through its domestic supplies of shale oil it could withdraw from the Middle East creating a power vacuum which could result in regional wars such as a Saudi – Iran confrontation. This would disrupt energy supplies and push up the cost of oil which would be a costly expense for the Chinese economy. In this scenario China could then be persuaded to take a regional security role, acting as a mediator and peacekeeper, far fetched now perhaps, but already the first Chinese Naval base has been opened in the region, officially to support anti-piracy missions, but also one suspects with longer term ambitions in mind.

Shift to Renewables

Of course the elegant and environmentally sound solution to these energy problems is to turn to renewables, indeed this is what the Chinese have been doing, and investment has rocketed in this sector which hand in hand with environmental technology promises electric cars, more efficient energy use and much else besides. However given the scale of China’s energy use this remains a gargantuan task and it will take years before renewables can topple fossil fuels from their throne.

In the meantime China is developing relations with its Eurasian neighbours to take advantage of their ample energy supplies new gas pipelines connect Russia and Central Asian states like Turkmenistan to supply China with an energy source which produces carbon but at least is “cleaner” than coal and oil.

Middle Eastern Power?

Right now China is the world’s biggest energy importer and user, but remains vulnerable to supply disruption, the next decade will I believe see China become a leader in renewable energy technology, both exporting the like of solar panels and wind turbines and investing in the sector overseas investing in the sector overseas. At the same time China will look to protect the oil rich kingdoms in the Middle East which provide so much of its oil, any indication of a US drawdown and China will be waiting in the wings to fill the gap.

Many would argue that the US would not give up its position of power, but consider the scenario of a disastrous US war waged against Iran which would make the debacle in Iraq look tame in comparison. The US appetite for overseas intervention would dry up which along with ample domestic supplies of energy meaning the Middle East is longer as strategically important and suddenly the scenario looks a whole lot more viable.