Friday, June 24, 2005

China Kicks Off Cold War II

Yesterday, State-owned China National Offshore Oil Corporation (CNOOC), China's third-biggest oil producer, offered $18.5 billion bid for U.S. oil company Unocal Corporation. This comes after Unocal already agreed to the terms of the Chevron $16.6 billion takeover, but will now reconsider with CNOOC's offer on the table. Also yesterday, Iowa-based appliance maker Maytag Corp. said is also considering a $1.28 billion buyout offer from China's Haier Group.

These moves highlight a startling trend of aggressive competition between the established economy of the United States and the speeding locomotive of the Chinese economy. China's dependence on petroleum imports (already 40% of its demand) is rapidly growing. With the likelihood that all domestic oil production will peak by 2020 or sooner, industry pushes China and the rest of the world into a cold war of finite resources.

China is currently buying oil rights from Canada, courting America's big supplier Venezuela, and making offers to many other Latin American countries. Africa and the Middle East are also in Chinese sights, with troops deployed in Southern Sudan and many diplomatic posts recently opened in the Middle East. The January "Energy Futures in Asia" State Department report explains this "string of pearls" strategy:
China is building strategic relationships along the sea lanes from the Middle East to the South China Sea in ways that suggest defensive and offensive positioning to protect China's energy interests, but also to serve broad security objectives.

China is looking not only to build a blue-water navy to control the sea lanes, but also to develop undersea mines and missile capabilities to deter the potential disruption of its energy supplies from potential threats, including the U.S. Navy, especially in the case of a conflict with Taiwan.

Wood Mackenzie, China manager at Gavin Thompson describes this recent phenomenon of Chinese capitalism:
There's definitely a coming-of-age thing with Chinese companies -- they are now bold enough, switched-on enough and rich enough to go out and start buying $18 billion and $19 billion-dollar companies.

Going forward as Chinese demand goes up and the Chinese become more aggressive overseas, that (competition) will emerge.

Should we heed the outrage of US lawmakers and prohibit CNOOC's takeover of Unocal? I doubt that could do any good and would probably provoke China enough to look elsewhere for some of its imports.

Should America simply let the current situation alone and do nothing? There is no doubt the demand for energy will only escalate and the national interests of the US and China will inevitably collide. Doing nothing would only be an acceptance of China's tryanical politics and trade policies.

What should America do, then?

One, the US must hold China to the same standards of decency in its trade negotiations and pressure other countries to follow suite. There needs to be give and take, requiring political, economic and social reforms in exchange for economic good will and increased trade benefits. It is ridiculous that neo-liberalist policy has made American businesses compete against state-funded oligarchies, slave labor and hidden currencies. Globalization cannot come close to achieving equality if every nation does not follow the rules.

Two, the US must become less dependent on outmoded fossil fuels. This would circumvent the major upcoming conflict with China and other quickly developing nations. It would also reduce the flawed international policies that prop up America's current energy needs. There is more than the type of energy at stake here; it also the amount that must be reduced. Energy conservation must become more than political catchphrase. The government and its citizens must embrace principles of conservation and recycling wholeheartedly.

But until all of that happens, the initial phases of this energy war seem to be leading into a second Cold War. Combined with the uncertainty of international terrorism, the outcome of this cold war seems bleak for the US.


At 12:06 PM GMT-5, Blogger Jude Nagurney Camwell said...

Used a quote from your post here


At 1:41 PM GMT-5, Blogger the prisoner said...

Thanks. Always glad to be a source.


Post a Comment

<< Home