WORLD ECONOMY: US outflanked in Eurasian energy politics


William Engdahl

Curiously and quietly the United States is being outflanked in its now-obvious strategy of controlling major oil and energy sources of the Persian Gulf, Central Asia's Caspian Basin, Africa and beyond.

The US's global energy control strategy, it's now clear to most, was the actual reason for the highly costly regime change in Iraq, euphemistically dubbed "democracy" by Washington.

The quest for energy control has informed Washington's support for high-risk "colour revolutions" in Georgia, Ukraine, Uzbekistan, Belarus and Kyrgyzstan in recent months. It lies behind US activity in the west-African Gulf of Guinea states, as well as in Sudan. It lies behind US policy vis-a-vis Hugo Chavez's Venezuela and Evo Morales'a Bolivia.

In recent months, however, this strategy of global energy dominance, a strategic US priority, has shown signs of producing just the opposite, a kind of "coalition of the unwilling" — states that increasingly see no other prospect but to cooperate to oppose what they see as a US push to control their future energy security.

The White House denied visiting Chinese President Hu Jintao the honour of a full state dinner when he visited in April, serving instead a short lunch. Hu was publicly humiliated by a well-known Falun Gong heckler at the White House press conference and by other obvious humiliations. In other words, the White House welcomed Hu with a diplomatic slap in the face.

At the same time, US Vice-President Dick Cheney slapped Russian President Vladimir Putin with the most open attack yet on Moscow's internal human rights policy as well as its energy policy. In a speech in the Baltic state of Lithuania in early May, Cheney accused Russia of energy "intimidation and blackmail".

Washington has repeatedly accused China of "not playing by the rules", in terms of its oil politics, declaring that China is guilty of "seeking to control energy at the source", as though that has not been US energy policy for the past century or so.

Eurasian energy bloc

The significance of taking aim simultaneously at both Russia and China, the two Eurasian giants (with China being the largest investor in US Treasury securities, and Russia being the world's second most developed military nuclear power), reflects the realisation in Washington that all may not be as seamless in the quest for global domination as originally promised by various strategists in and around the Bush administration.

This month, member-nations of the Shanghai Co-operation Organisation (SCO), led by China and Russia, will reportedly consider inviting observer Iran to full membership. Even if full membership is postponed as has been mooted, the fact remains that Russia and China both want to seal closer cooperation with Iran.

The SCO was founded in June 2001 by China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. It is beginning to look like an energy-financial bloc in Central Asia consciously being developed to serve as a counter-pole to US hegemony.

Russia's state-owned natural gas transport company, Transneft, has consolidated its pipeline control to become the sole exporter of Russian natural gas. Russia has by far the world's largest natural gas reserves and Iran the second largest.

With Iran, the SCO would control the vast majority of the world's natural gas reserves, as well as a significant portion of its oil reserves, not to mention potential control of the Strait of Hormuz, the narrow corridor for a majority of Persian Gulf oil-tanker shipments to Japan and the West.

China's energy geopolitics are also in high gear. China's booming economy, with 9% growth, requires massive natural resources to sustain its growth. China became a net importer of oil in 1993. By 2045, China will depend on imported oil for 45% of its energy needs.

On May 26, crude oil from Kazakhstan began to flow into China from a newly completed 1000-kilometre pipeline. It marked the first time oil began being pumped directly into China.

Kazakhstan had been regarded by Washington since the collapse of the Soviet Union as its sphere of influence, with ChevronTexaco, US Secretary of State Condoleezza Rice's old oil company, the major oil developer. In 2005, China's CNPC state oil company bought PetroKazakhstan for US$4.2 billion and will use it to develop oilfields in Kazakhstan.

China is also in negotiations with Russia for a pipeline to deliver Siberian oil to northeast China, a project that could be completed by 2008, and a natural gas pipeline from Russia to Heilongjiang, in China's northeast. China just passed Japan to rank as world's second largest oil importer behind the US.

Beijing and Moscow are also integrating their electricity economies. In late May, the China State Grid Corporation announced it plans to increase imports of Russian electricity fivefold by 2010.

China's push into Africa

In its relentless quest to secure future oil supplies "at the source", China has also moved into traditional US, British and French oil domains in Africa. In addition to being the major developer of Sudan's oil pipeline, which ships some 7% of total China oil imports, Beijing has become more active in the states bordering the oil-rich Gulf of Guinea.

Since the creation of the China-Africa Forum in 2000, China has scrapped tariffs on 190 imported goods from 28 of the least developed African countries, and cancelled $1.2 billion in debt.

Indicative of the way China is doing an end-run around the customary International Monetary Fund-led Western control of African states, China's export-import bank recently gave a $2 billion soft loan to Angola. In return, the Luanda government gave China a stake in oil exploration in shallow waters off the coast. The loan is to be used for infrastructure projects.

In contrast, US interest in war-torn Angola has rarely gone beyond the well-fortified oil enclave of Cabinda, where ExxonMobil, along with Shell Oil, has dominated until recently. That is apparently about to change with the growing Chinese interest.

Chinese infrastructure projects underway in Angola include railways, roads, a fibre-optic network, schools, hospitals, offices and 5000 units of housing developments. A new airport with direct flights from Luanda to Beijing is also planned.

Indirectly, through its support of the Sudan government, China is also a contender in a high-stakes game of potential regime change in neighbouring, oil-rich Chad. Earlier this year, World Bank "tough guy" Paul Wolfowitz was forced to back down from plans to cut off World Bank aid, after a threat of an oil export cut-off by Chad.

ExxonMobil is currently the major oil company active in Chad. But Sudan backs Chadian rebels, who were only prevented from toppling the notoriously corrupt and unpopular regime of President Idriss Deby by the intervention of 1500 French soldiers. Washington has joined with Paris in backing Deby.

A new Sudan-backed regime in Chad would jeopardise the presence of Western oil firms. One can imagine that China just might be willing to step into such a vacuum and help Chad develop its oil exports, especially if the lion's share went to China.

And immediately after his unpleasant diplomatic visit to Washington in April, Hu went on to Nigeria, long regarded by the US as its "oil sphere of interest".

Hu signed a deal under which Nigeria, Africa's largest oil producer, will give China four oil drilling licences in exchange for a commitment to invest $4 billion in infrastructure. China will buy a controlling stake in Nigeria's 110,000-barrel per day Kaduna oil refinery and build railways and power stations, as well as take a 45% stake in developing Nigeria's giant OML-130 offshore oil and gas field.

US hawks alarmed

The curious charge against China of "not playing by the rules" and "trying to secure energy at the source" begins to assume real dimension when these and recent Russian energy moves are taken as a totality.

It's little wonder that some Washington hawks are getting alarmed. Suddenly, the world of potential "enemies" is no longer restricted to the Islam-centred "war on terror". Leading neo-conservative ideologue Robert Kagan wrote a prominent opinion piece on it in the April 30 Washington Post.

Kagan is privy to pretty high-level thinking in Washington. His wife, Victoria Nuland, worked as Cheney's deputy national security adviser until being named US ambassador to NATO. Kagan also co-founded the hawkish Project for the New American Century (PNAC) in the late 1990s to, among other things, advocate a major US military build-up and forced regime change in Iraq.

Kagan charged that China and Russia have emerged as the protectors of "an informal league of dictators" that currently includes the leaders of Belarus, Uzbekistan, Sudan, Venezuela, Iran and Angola, among others, who, like the leaders of Russia and China themselves, resist any efforts by the West to interfere in their domestic political affairs.

"The question is what the United States and Europe decide to do in response", wrote Kagan. "Unfortunately, al Qaeda may not be the only challenge liberalism faces today, or even the greatest."

The mainstream US foreign policy organisation, the New York-based Council on Foreign Relations, has also weighed in on the question of Chinese energy pursuits. In an April 5 report, Sino-Russian Energy Ties, the CFR accused the Bush administration of lacking any comprehensive long-term strategy for Africa. The CFR criticised the US focus on "humanitarian issues" such as in Darfur, in western Sudan, demanding instead that the US "act on its rising national interests on the continent". Those interests? The CFR lists oil and gas number one, and growing competition with China as number two.

[Abridged from <>. William Engdahl, a US economist and free-lance journalist, is the author of the best-selling book, A Century of War: Anglo-American Oil Politics and the New World Order, published by Pluto Press (2004). He may be contacted through his website, <>].

From Green Left Weekly, June 21 2006.
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