July 28, 2010

What an Energy-Hogging China May Mean for the U.S. and Global Politics

This post, written by CNAS colleague Matt Acocella, was originally posted on Tom Ricks's The Best Defense blog. Thanks Matt!

The International Energy Agency announced last week that China had overtaken the U.S. as the world's largest consumer of energy, citing data showing that "China consumed the equivalent of 2.25 billion tons of oil last year, slightly above U.S. consumption of 2.17 billion tons. The measure includes all types of energy: oil, nuclear energy, coal, natural gas and renewable energy sources." Chinese officials moved quickly to dispute this assertion and questioned the IEA's calculations.


This pushback is predictable, according to Fereidun Fesharaki, Senior Fellow at the East-West Center and Senior Associate at CSIS. At a talk at the Center for Strategic and International Studies last week on "China and India's Energy Policy Directions," Ferashaki explained that China is loathe to take on the title of World's #1 energy user because it prefers the U.S. to be in the global hot seat.  One fact particularly struck me: according to Dr. Fesharaki, China purposely waits until a lull occurs in the price of oil before it buys up large amounts for its strategic petroleum reserves, in order to avoid being accused of spiking the price of crude.


China's energy use is projected to continue skyrocketing over the next decade.  It is currently the world's top emitter of global warming gases, but simultaneously investing the most of any nation into developing green technology. Whether this investment will yield any substantial emissions reductions over the next decade is up for debate. Critics note that China's efforts at carbon-capture and sequestration, a process that strips out harmful elements in released gases to be stored underground, is very expensive and requires a large usage of coal to fuel the process. With China's economy still developing, even substantial investments in clean technology may fail to bend the curve of its pollution.


Of course, China's energy needs have other geopolitical effects. When it comes to China's relationship with Iran in the wake of recent US sanctions and forthcoming EU ones... well, there's not much top surprising there. China will continue to do business with Iran, even with delays and setbacks caused by sanctions. "Despite political pressures, Chinese contractors could invest more than $10 billion dollars in the Iranian oil and gas sectors in the next few years," stated Ferekashi. Chinese corporations are also heavily invested in other of Iran's domestic industries.  Iran is fortunate in that 60% of its energy use is domestically produced, continued Ferekashi, which perhaps will allows it to withstand sanctions longer.  With China so heavily invested in Iran, will Sino-Iranian ties make Iran sanction-proof?


In sum, there is plenty here for Western nations to grapple with. China's insatiable thirst for oil and other energy sources will make shedding any pretense of modesty necessary as it becomes an increasingly aggressive player in the Middle East, Africa, and South America.  Furthermore, its willingness to partner with rogue states even in the face of international pressure has the potential to undercut efforts to impose sanctions on bad actors. If a superpower like China has no qualms entering into agreements with the likes of Hugo Chavez and Mahmoud Ahmadinejad, the U.S. will need in the coming years to develop policies and incentives to counter these marriages of convenience.